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U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the fiscal year
ended December 31, 2004
    
    Commission file number
000-21329
 TIB FINANCIAL CORP.  Florida
(State of Incorporation)
    
    65-0655973
(I.R.S. Employer
Identification No.)
  599 9th Street North
Naples, Florida
(Address of Principal Executive Offices)
    
    34102
(Zip Code)
 (239) 263-3344
(Registrants telephone number) Securities Registered pursuant to Section 12(b) of the Act: None Securities Registered pursuant to Section 12(g) of the Act: Common stock, par value $0.10 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the issuer was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. þ o
 Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
contained in this form, and will not be contained, to the best of issuers knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. þ Indicate by check mark whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes þ or No o The aggregate market value of the voting stock held by non-affiliates of the registrant at February
28, 2005 was $144,907,000 based on $25.50 per share as of February 28, 2005. The number of shares outstanding of issuers class of common stock at February 28, 2005 was
5,682,639 shares of common stock. Documents Incorporated By Reference: Portions of the Proxy Statement for the 2005 Annual Meeting
of Shareholders to be filed with the Securities and Exchange Commission within 120 days of the
Registrants 2004 fiscal year end are incorporated by reference into Part III of this report.




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TABLE OF CONTENTS PagePART IITEM 1. BUSINESS
    
    
    1ITEM 2. PROPERTIES
    
    
    11ITEM 3. LEGAL PROCEEDINGS
    
    
    11ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    11PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    12ITEM 6. SELECTED FINANCIAL DATA
    
    
    13ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    39ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    40ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    78ITEM 9A. CONTROLS AND PROCEDURES
    
    
    78ITEM 9B. OTHER INFORMATION
    
    
    78PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    79ITEM 11. EXECUTIVE COMPENSATION
    
    
    79ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
    
    
    79ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    79ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    80




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PagePART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENTS
    
    
    80SIGNATURES
    
    
    82Ex-10.14 Form of Salary Continuation Agreement- First AmendmentEx-21.1 Subsidiaries of the CompanyEx-23.1 Crowe Chizek ConsentEx-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification




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CAUTIONARY NOTICE REGARDING 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 Annual Report on Form 10-K 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. 
 PART I 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 terms
Bank and TIB Bank mean TIB Bank and its subsidiaries (unless the context indicates another
meaning). 
 ITEM 1. BUSINESS General We are a financial holding company whose business is conducted primarily through our
wholly-owned subsidiary, TIB Bank. TIB Bank, which was formed in 1974, serves the Southern Florida
market, principally Monroe, Collier, Lee and South Miami-Dade Counties, Florida. TIB Bank is
headquartered in Key Largo, Florida. We operate 16 banking offices and 17 ATMs throughout South
Florida. At December 31, 2004, we had approximately $829.3 million in total assets, $687.9 million
in total deposits, $653.5 million in total loans and shareholders equity of $68.1 million. TIB
Banks deposits are insured by the Federal Deposit Insurance Corporation, up to applicable limits. Through our subsidiaries, we offer a wide range of commercial and retail banking and financial
services to businesses and individuals. Our account services include checking, interest-bearing
checking, money market, savings, certificates of deposit and individual retirement accounts. We
offer all types of commercial loans to include: owner-occupied commercial real estate; acquisition,
development and construction; income-producing properties; short-term working capital; inventory
and receivable facilities; and equipment loans. We also offer a full complement of consumer loan
products to include residential real estate, installment loans, home equity, home equity lines, and
indirect auto dealer loans. Our lending focus is predominantly on small to medium-sized business
and consumer borrowers. Most importantly, we provide our customers with access to local TIB Bank
officers who are empowered to act with flexibility to meet customers needs in an effort to foster
and develop long-term loan and deposit relationships. TIB
Bank also engages in the origination and sale of the governmentguaranteed portion of
loans, such as those offered by the Small Business Administration and the U.S. Department of
Agricultures Rural Development Business and Industry Program. We are subject to examination and regulation by the Board of Governors of the Federal Reserve
System, the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation
(FDIC). This regulation is intended for the protection of our depositors, not our shareholders. 1




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In October 2000, we purchased Keys Insurance Agency of Monroe County, Inc. Keys Insurance
Agency, Inc. (the new name subsequent to the purchase) had three offices in the Florida Keys and
one office in Naples and brokered a full line of commercial and residential hazard insurance
coverage as well as life and health insurance and annuities. In August 2003, we sold the assets of
Keys Insurance Agency, Inc., and exited this line of business. In 2004, we eliminated TIB
Government Loan Specialists, Inc. as a subsidiary, but continue to conduct its
government-guaranteed loan program through TIB Bank. In December 2004, we sold internally
developed intangible assets, primarily comprised of the book of business of our investment center. Business Strategy Our business strategy is to operate as a profitable, diversified financial services company
providing a variety of banking and other financial services, with an emphasis on consumer and
residential mortgage lending and commercial business loans to small
and mediumsized businesses. As
a result of the consolidation of small and mediumsized financial institutions, we believe there is
a significant opportunity for a community-focused bank to provide a full range of financial
services to small and middle-market commercial and retail customers. We emphasize comprehensive
retail and small business products and responsive, decentralized decision-making which reflects our
knowledge of our local markets and customers. To continue asset growth and profitability, our marketing strategy is targeted to:  
    Provide customers with access to our local executives who make key credit and
account decisions;
    Pursue commercial lending opportunities with small to mid-sized businesses
which we believe are underserved by our larger competitors;
    Continue originating indirect auto dealer loans to enhance margins, effectively
utilizing our funding sources;
    Cross-sell our products and services to our existing customers to leverage our
relationships and enhance profitability; and
    Adhere to safe and sound credit standards to maintain the continued quality of
assets as we implement our growth strategy. Banking services Commercial Banking.TIB Bank focuses its commercial loan originations on small and mid-sized
businesses, professionals and professional organizations (generally up to $5 million in annual sales) and such loans are usually accompanied by
significant related deposits. Commercial underwriting is driven by cash flow analysis supported by
collateral analysis and review. Commercial loan products include commercial real estate
construction and term loans; working capital loans and lines of credit; demand, term and time
loans; and equipment, inventory and accounts receivable financing. TIB Bank offers a range of cash
management services and deposit products to its commercial customers. Computerized banking is
currently available to TIB Banks commercial and retail customers. Retail Banking.TIB Banks retail banking activities emphasize consumer deposit and checking
accounts. An extensive range of these services is offered by TIB Bank to meet the varied needs of
its customers from young persons to senior citizens. In addition to traditional products and
services, TIB Bank offers contemporary products and services, such as debit cards, Internet banking
and electronic bill payment services. Consumer loan products offered by TIB Bank include home
equity lines of credit, second mortgages, new and used auto loans, including indirect loans through
auto dealers, new and used boat loans, overdraft protection, and unsecured personal credit lines. Mortgage Banking.TIB Banks mortgage banking business is structured to provide a source of
fee income largely from the process of originating product for sale on the secondary market
(primarily fixed rate loans), as well as the origination of primarily adjustable rate loans to be
held in TIB Banks loan portfolio. Mortgage banking capabilities include conventional and
nonconforming mortgage underwriting; and construction and permanent financing. 2




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Lending activities Loan Portfolio Composition.At December 31, 2004, TIB Banks loan portfolio totaled $653.5
million, representing approximately 78.8% of our total assets of $829.3 million. For a discussion
of our loan portfolio, see Managements Discussion of Financial Condition and Results of Operation
- Loan Portfolio. The composition of TIB Banks loan portfolio at December 31, 2004 and 2003 is indicated below,
along with the growth from the prior year. % IncreaseTotal Loans
    
    
    
    
    
    
    Total Loans
    
    
    
    
    
    
    (Decrease) fromDecember 31,
    
    
    % of Total
    
    
    December 31,
    
    
    % of Total
    
    
    December 31, 2003(dollars in thousands)
    
    2004
    
    
    Loans
    
    
    2003
    
    
    Loans
    
    
    to 2004Real estate mortgage loans:Commercial
    
    $
    351,346
    
    
    
    53.7
    
    
    $
    297,221
    
    
    
    55.2
    
    
    
    18.2Residential
    
    
    67,204
    
    
    
    10.3
    
    
    
    60,104
    
    
    
    11.2
    
    
    
    11.8Farmland
    
    
    4,971
    
    
    

    0.8
    
    
    
    2,317
    
    
    
    0.4
    
    
    
    114.5Construction
    
    
    49,815
    
    
    
    7.6
    
    
    
    32,089
    
    
    
    6.0
    
    
    
    55.2Commercial and agricultural loans
    
    
    64,622
    
    
    
    9.9
    
    
    
    63,624
    
    
    
    11.8
    
    
    
    1.6Indirect auto dealer loans
    
    
    91,890
    
    
    
    14.1
    
    
    
    59,437
    
    
    
    11.0
    
    
    
    54.6Home equity loans
    
    
    13,856
    
    
    
    2.1
    
    
    
    12,574
    
    
    
    2.3
    
    
    
    10.2Other consumer loans
    
    
    9,817
    
    
    
    1.5
    
    
    
    11,232
    
    
    
    2.1
    
    
    
    (12.6
    )TOTAL
    
    $
    653,521
    
    
    
    100
    
    
    $
    538,598
    
    
    
    100
    
    
    
    21.3
 Our non-performing loans as a percentage of gross loans increased from 0.07% at December 31,
2003 to 0.11% at December 31, 2004. Commercial Real Estate Mortgage Loans.At December 31, 2004, TIB Banks commercial real
estate loan portfolio totaled $351.3 million. The Bank also has $5.0 million in loans outstanding
that are secured by farmland. TIB Bank originates mortgage loans secured by commercial real estate.
Such loans are primarily secured by hotels, guesthouses, restaurants, retail buildings, and general
purpose business space. Although terms may vary, TIB Banks commercial mortgages generally are long
term in nature, owner-occupied, and variable-rate loans. TIB Bank seeks to reduce the risks
associated with commercial mortgage lending by generally lending in its market area and obtaining
periodic financial statements and tax returns from borrowers. It is also TIB Banks general policy
to obtain personal guarantees from the principals of the borrowers and assignments of all leases
related to the collateral. In conjunction with above, TIB Bank also engages in the origination and
sale of the governmentguaranteed portions of loans such as those offered by the Small Business
Administration and the U.S. Department of Agriculture Rural Development Business and Industry
Program. Commercial Loans.At December 31, 2004, TIB Banks commercial loan portfolio totaled $64.6
million. TIB Bank originates secured and unsecured loans for business purposes. Loans are made for
acquisition, expansion, and working capital purposes and may be secured by real estate, accounts
receivable, inventory, equipment or other assets. The financial condition and cash flow of
commercial borrowers are closely monitored by the submission of corporate financial statements,
personal financial statements and income tax returns. The frequency of submissions of required
financial information depends on the size and complexity of the credit and the collateral that
secures the loan. It is TIB Banks general policy to obtain personal guarantees from the principals
of the commercial loan borrowers. Construction Loans. At December 31, 2004, TIB Banks construction loan portfolio totaled $49.8
million. TIB Bank provides interim real estate acquisition development and construction loans to
builders, developers, and persons who will ultimately occupy the building. Real estate development
and construction loans to provide interim financing on the property are based on acceptable
percentages of the appraised value of the property securing the loan in each case. Real estate
development and construction loan funds are disbursed periodically at pre-specified stages of
completion. Interest rates on these loans are generally adjustable. TIB Bank carefully monitors
these loans with on-site inspections and control of disbursements. 3




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Development and construction loans are secured by the properties under development or
construction and personal guarantees are typically obtained. Further, to assure that reliance is
not placed solely in the value of the underlying property, TIB Bank considers the financial
condition and reputation of the borrower and any guarantors, the
amount of the borrowers equity in
the project, independent appraisals, costs estimates and pre-construction sale information. Loans to individuals for the construction of their primary or secondary residences are secured
by the property under construction. The loan to value ratio of construction loans is based on the
lesser of the cost to construct or the appraised value of the completed home. Construction loans
have a maturity of 12 months. These construction loans to individuals may be converted to permanent
loans upon completion of construction. Residential Real Estate Mortgage Loans.At December 31, 2004, TIB Banks residential loan
portfolio totaled $67.2 million. TIB Bank originates adjustable and fixed-rate residential mortgage
loans. Such mortgage loans are generally originated under terms, conditions and documentation
acceptable to the secondary mortgage market. TIB Bank will place some of these, primarily
adjustable rate, loans into its portfolio, although the substantial majority are sold to investors. Indirect Auto Dealer Loans.At December 31, 2004, TIB Banks indirect auto dealer loans
portfolio totaled $91.9 million. The Bank buys loans that have been originated by automobile
dealerships - this is commonly referred to as indirect lending. We predominately buy loans from
auto dealers in Southwest Florida and they are for the purchase of new or late model used cars. We
serve customers over a broad range of creditworthiness and the required terms and rates are
reflective of those risk profiles. The balance of outstanding indirect loans grew quickly in 2004 since it was still a relatively
new product for us and, therefore, the payoffs and paydowns were not significant. This allowed the
majority of the new production to remain as outstanding balances. Since the expected life of these
loans is approximately two years, the level of outstanding indirect loans is expected to level off
as this program matures. We therefore expect that indirect loans will not exceed 15% of total loans
outstanding. We anticipate being able to deliver strong results while maintaining credit quality in our
indirect lending operations due to a combination of factors including:  
    Business with a limited number of dealers - The dealerships we do
business with are characterized by being very sound financially and
trade predominately in vehicles which retain market value reasonably
well over time. We continually monitor dealers for compliance with our
lending guidelines. We endeavor to be one of the main buyers of loans
from every dealer we do business with which allows us to have a
cooperative relationship with that dealer.
    Thorough underwriting of applicants - We evaluate credit scores and
other pertinent information such as the stability of the applicants
job, home ownership, and the nature of any credit issues which may
give us a better indication of creditworthiness than just the credit
score.
    Effective collections - We get to customers quickly and more often as
payment issues arise. We begin contacting the customer once their
payment is 10 days past due. After an account is 15 days past due, it
is referred to a collection company for resolution including field
contacts as necessary.
    Sale of repossessed automobiles at retail price - We sell most of the
repossessed automobiles we acquire on a retail less commission basis
instead of wholesale through auctions. We are able to do this because
we have an established relationship with a dealer who sells the
automobiles for us. This has helped reduce our loss per vehicle. Other Consumer Loans and Home Equity Loans. At December 31, 2004, TIB Banks consumer loan
portfolio totaled $9.8 million, and its home equity portfolio totaled $13.9 million. TlB Bank
offers a variety of consumer loans. These loans are typically secured by residential real estate or
personal property, including automobiles and boats. Home equity loans (closed-end and lines of
credit) are typically made up to 85% of the appraised value of the property securing the loan, in
each case, less the amount of any existing liens on the property. Closed-end loans have terms of up
to 15 years. Lines of credit have an original maturity of 10 years. The interest rates on
closed-end home equity loans are fixed, while interest rates on home equity lines of credit are
variable. 4




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Credit administration TIB Banks lending activities are subject to written policies approved by the board of
directors to ensure proper management of credit risk. Loans are subject to a defined credit process
that includes credit evaluation of borrowers, risk-rating of credits, establishment of lending
limits and application of lending procedures, including the holding of adequate collateral and the
maintenance of compensating balances, as well as procedures for on-going identification and
management of credit deterioration. Regular portfolio reviews are performed to identify potential
underperforming credits, estimate loss exposure, and to ascertain compliance with TIB Banks
policies. Management review consists of evaluation of the financial strengths of the borrower and
the guarantor, the related collateral and the effects of economic conditions. TIB Bank generally does not make commercial or consumer loans outside its market area unless
the borrower has an established relationship with TIB Bank and conducts its principal business
operations within TIB Banks market area. Consequently, TIB Bank and its borrowers are affected by
the economic conditions prevailing in its market area. Merchant Bankcard Processing The Bank processes credit card transactions for merchants primarily in the Florida Keys. As a
vacation destination, merchants in the Florida Keys typically generate a high volume of credit card
transactions. The Bank competes for merchant bankcard processing business primarily on the basis of
customer service. In the typical merchant bankcard transaction, the Bank pays the merchant the
amount of the charge less a negotiated fee which is reflected as merchant bankcard processing
income in our financial statements. In order to obtain payment of the charge from the issuing bank
or its processor, the Bank must pay interchange fees, which are deducted from the payment and
reflected as a part of merchant bankcard processing expenses. As a merchant bankcard processor, the
Bank bears the risk of loss if a credit card customer disputes a charge and the Bank cannot recover
from the merchant. Investment and insurance activities Through
December 15, 2004, TIB Bank engaged through a whollyowned subsidiary, TIB Investment
Center, Inc., in the retail sale of non-deposit investment products such as variable and fixed rate
annuities, mutual funds and other products. TIB Bank has entered into an agreement with Raymond
James Financial Services, Inc., a third party provider which audits and provides support services
to make sure we comply with all NASD regulations as they pertain to Bank investment programs. On
December 15, 2004, the Company closed the sale of certain intangible assets which primarily
comprised the book of business which served as the foundation of the investment center operations. Employees As of December 31, 2004, the Bank employed 309 full-time employees and 13 part-time employees.
Except for certain officers of the Bank who presently serve as officers of the Company, the Company
does not have any employees. The Company and its subsidiaries are not a party to any collective
bargaining agreement, and management believes the Company and its subsidiaries enjoy satisfactory
relations with its employees. Related Party Transactions At December 31, 2004, we had $653.5 million in total loans outstanding, of which $1.9 million
was outstanding to certain of our executive officers, directors, and security holders who own more
than 10% of our voting securities, and their related business interests. In the ordinary course of
business, TIB Bank makes loans to our directors and their affiliates and to policy-making officers,
all of which are made on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions and do not involve more than the normal
risk of collectibility. 5




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SUPERVISION AND REGULATION General We are extensively regulated under federal and state law. Generally, these laws and
regulations are intended to protect depositors, not shareholders. The following is a summary
description of certain provisions of certain laws that affect the regulation of bank holding
companies and banks. The discussion is qualified in its entirety by reference to applicable laws
and regulations. Changes in such laws and regulations may have a material effect on our business
and prospects, as well as those of TIB Bank. Federal Bank Holding Company Regulation and Structure We are a bank holding company within the meaning of the Bank Holding Company Act of 1956, as
amended, and, as such, we are subject to regulation, supervision, and examination by the Federal
Reserve. We are required to file annual and quarterly reports with the Federal Reserve and to
provide the Federal Reserve with such additional information as it may require. The Federal Reserve
may examine us and our subsidiaries. With certain limited exceptions, we are required to obtain prior approval from the Federal
Reserve before acquiring direct or indirect ownership or control of more than 5% of any voting
securities or substantially all of the assets of a bank or bank holding company, or before merging
or consolidating with another bank holding company. In acting on applications for such approval,
the Federal Reserve must consider various statutory factors, including among others, the effect of
the proposed transaction on competition in the relevant geographical and product markets, each
partys financial condition and management resources and record of performance under the Community
Reinvestment Act. Additionally, with certain exceptions any person proposing to acquire control
through direct or indirect ownership of 25% or more of any of our voting securities is required to
give 60 days written notice of the acquisition to the Federal Reserve, which may prohibit the
transaction, and to publish notice to the public. Generally, a bank holding company may not engage in any activities other than banking,
managing or controlling its bank and other authorized subsidiaries, and providing services to these
subsidiaries. With prior approval of the Federal Reserve, we may acquire more than 5% of the assets
or outstanding shares of a company engaging in nonbank activities determined by the Federal Reserve
to be closely related to the business of banking or of managing or controlling banks. In recent
years, changes in law have significantly increased the right of an eligible bank holding company,
called a financial holding company, to engage in a full range of financial activities, including
insurance and securities activities, as well as merchant banking and other financial services. We
are a financial holding company and thus have expanded financial affiliation opportunities as long
as TIB Bank remains a well-capitalized bank under the standards discussed below, and also meets
certain other requirements. As of December 31, 2004, TIB Bank met these requirements for our
continued qualification as a financial holding company. Subsidiary banks of a bank holding company are subject to certain quantitative and qualitative
restrictions on extensions of credit to the bank holding company or its subsidiaries, investments
in their securities, and the use of their securities as collateral for loans to any borrower. These
regulations and restrictions may limit our ability to obtain funds from TIB Bank for our cash
needs, including funds for the payment of dividends, interest and operating expenses. Further, a
bank holding company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of property or furnishing of
services. For example, TIB Bank may not generally require a customer to obtain other services from
itself or us, and may not require that a customer promise not to obtain other services from a
competitor as a condition to and extension of credit to the customer. The Federal Reserve has ended
the anti-tying rules for bank holding companies and their non-banking subsidiaries. Such rules were
retained for banks. Under Federal Reserve policy, a bank holding company is expected to act as a source of
financial strength to its subsidiary banks and to make capital injections into a troubled
subsidiary bank, and the Federal Reserve may charge the bank holding company with engaging in
unsafe and unsound practices for failure to commit resources to a subsidiary bank when required. A
required capital injection may be called for at a time when the holding company does not have the
resources to provide it. In addition, depository institutions insured by the FDIC can be held
liable for any losses incurred by, or reasonably anticipated to be incurred by, the FDIC in
connection with the default of, or assistance provided to, a commonly controlled FDIC-insured
depository institution. 6




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Federal and State Bank Regulation TIB Bank is a Florida state-chartered bank, with all the powers of a commercial bank regulated
and examined by the Florida Office of Financial Regulation and the FDIC. The FDIC has extensive
enforcement authority over the institutions it regulates to prohibit or correct activities that
violate law, regulation or written agreement with the FDIC. Enforcement powers also regulate
activities that are deemed to constitute unsafe or unsound practices. Enforcement actions may
include the appointment of a conservator or receiver, the issuance of a cease and desist order, the
termination of deposit insurance, the imposition of civil money penalties on the institution, its
directors, officers, employees and institution-affiliated parties, the issuance of directives to
increase capital, the issuance of formal and informal agreements, the removal of or restrictions on
directors, officers, employees and institution-affiliated parties, and the enforcement of any such
mechanisms through restraining orders or other court actions. In its lending activities, the maximum legal rate of interest, fees and charges that a
financial institution may charge on a particular loan depends on a variety of factors such as the
type of borrower, the purpose of the loan, the amount of the loan and the date the loan is made.
Other laws tie the maximum amount that may be loaned to any one customer and its related interest
to capital levels. TIB Bank is also subject to certain restrictions on extensions of credit to
executive officers, directors, principal shareholders or any related interest of such persons which
generally require that such credit extensions be made on substantially the same terms as are
available to third persons dealing with TIB Bank and not involve more than the normal risk of
repayment. TIB Bank is also subject to federal laws establishing certain record keeping, customer
identification and reporting requirements with respect to certain large cash transactions, sales
and travelers checks or other monetary instruments, and international transportation of cash or
monetary instruments. Further, under the USA Patriot Act of 2001, financial institutions,
including TIB Bank, are required to implement additional policies and procedures with respect to,
or additional measures designed to address, any or all of the following matters, among others:
money laundering, suspicious activities and currency transaction reporting, and currency crimes. The Community Reinvestment Act requires that, in connection with the examination of financial
institutions within their jurisdictions, the FDIC evaluates the record of the financial institution
in meeting the credit needs in its communities including low and moderate income neighborhoods,
consistent with the safe and sound operation of those banks. These factors are also considered by
all regulatory agencies in evaluating mergers, acquisitions and applications to open a branch or
facility. As of the date of its most recent examination report, TIB Bank has a Community
Reinvestment Act rating of Satisfactory. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, each federal banking
agency is required to prescribe, by regulation, noncapital safety and soundness standards for
institutions under its authority. The federal banking agencies, including the FDIC, have adopted
standards covering internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees
and benefits. An institution that fails to meet those standards may subject the institution to
regulatory sanctions if required by the agency to develop a plan acceptable to the agency,
specifying the steps that the institution will take to meet the standards. We, on behalf of TIB
Bank, believe that we meet substantially all standards that have been adopted. This law also
imposes capital standards on insured depository institutions. See Capital Requirements below. The Federal Deposit Insurance Corporation Improvement Act of 1991 also provides for, among
other things, (i) publicly available annual financial condition and management reports for
financial institutions, including audits by independent accountants, (ii) the establishment of
uniform accounting standards by federal banking agencies, (iii) the establishment of a prompt
corrective action system of regulatory supervision and intervention, based on capitalization
levels with more scrutiny and restrictions placed on depository institutions with lower levels of
capital, (iv) additional grounds for the appointment of a conservator or receiver, and (v)
restrictions or prohibitions on accepting brokered deposits, except for institutions which
significantly exceed minimum capital requirements. FDICIA also provides for increased funding of
the FDIC insurance funds and the implementation of risked-based premiums. 7




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Deposit Insurance As a FDIC member institution, deposits of TIB Bank are currently insured to a maximum of
$100,000 per category of ownership of depositor through the Bank Insurance Fund, which is
administered by the FDIC. Limits on Dividends and Other Payments Our current ability to pay dividends is largely dependent upon the receipt of dividends from
TIB Bank. Both federal and state laws impose restrictions on the ability of TIB Bank to pay
dividends. Federal law prohibits the payment of a dividend by an insured depository institution
like TIB Bank if the depository institution is considered undercapitalized or if the payment of
the dividend would make the institution undercapitalized. See Capital Requirements below. The
Federal Reserve has issued a policy statement that provides that bank holding companies should pay
dividends only out of the prior years net income, and then only if their prospective rate of
earnings retention appears consistent with their capital needs, asset quality, and overall
financial condition. For a Florida state-chartered bank, dividends may be paid out of the banks
aggregate net profits for the current year combined with its retained earnings for the preceding
two years as the board deems appropriate. No dividends may be paid at a time when a banks net
income from the preceding two years is a loss or which would cause
the capital accounts of the bank
to fall below the minimum amount required by law. In addition to these specific restrictions, bank
regulatory agencies also have the ability to prohibit proposed dividends by a financial institution
that would otherwise be permitted under applicable regulations if the regulatory body determines
that such distribution would constitute an unsafe or unsound practice. Capital Requirements The Federal Reserve and FDIC have adopted certain risk-based capital guidelines to assist in
the assessment of the capital adequacy of a banking organizations operations for both transactions
reported on the balance sheet as assets and transactions, such as letters of credit and recourse
arrangement which are recorded as off balance sheet items. Under these guidelines, nominal dollar
amounts of assets and credit equivalent amounts of off balance sheet items are multiplied by one of
several risk adjustment percentages, which range from 0% for assets with low credit risk, such as
certain U.S. Treasury securities to 100% for assets with relatively high credit risk, such as
business loans. A banking organizations risk-based capital ratio is obtained by dividing its qualifying
capital by its total risk adjusted assets. The regulators measure risk-adjusted assets, which
include off balance sheet items, against both total qualifying capital (the sum of Tier 1 capital
and limited amounts of Tier 2 capital) and Tier 1 capital. Tier 1, or core capital includes
common equity, perpetual preferred stock (excluding auction rate issues), trust preferred
securities (subject to certain limitations), and minority interest in equity accounts of
consolidated subsidiaries (less goodwill and other intangibles), subject to certain exceptions.
Tier 2, or supplementary capital, includes, among other things limited-life preferred stock,
hybrid capital instruments, mandatory convertible securities and trust preferred securities,
qualifying and subordinated debt, and the allowance for loan and lease losses, subject to certain
limitations and less required deductions. The inclusion of elements of Tier 2 capital is subject to
certain other requirements and limitations of the federal banking agencies. The federal banking agencies are required to take prompt corrective action with respect to
depository institutions that do not meet minimum capital requirements. As a result, the federal
bank regulatory authorities have adopted regulations setting forth a five tiered system for
measuring the capital adequacy of the depository institutions that they supervise. Under these
regulations, a depository institution is classified in one of the following capital categories:
well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized,
and critically undercapitalized. An institution may be deemed by the regulators to be in a
capitalization category that is lower than is indicated by its actual capital position if, among
other things, it receives an unsatisfactory examination rating with respect to asset quality,
management, earnings or liquidity. As of December 31, 2004, TIB Bank met the
definition of a well-capitalized institution. A depository institution generally is prohibited from making any capital distribution
(including payment of a cash dividend) or paying any management fees to its holding company if the
depository institution would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations and are required to submit capital restoration
plans. If a depository institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. Significantly undercapitalized depository institutions may be
subject to a number of other requirements and restrictions including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total assets and stop
accepting deposits from correspondent banks. Critically undercapitalized institutions are subject
to the appointment of a receiver or conservator, generally within 90 days of the date such
institution is determined to be critically undercapitalized. 8




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The federal banking agencies also have significantly expanded powers to take enforcement
action against institutions that fail to comply with capital or other standards. Such action may
include limitations on the right to pay dividends, the issuance by the applicable regulatory
authority of a capital directive to increase capital and, in the case of depository institutions,
the termination of deposit insurance by the FDIC. The circumstances under which the FDIC is
permitted to provide financial assistance to an insured institution before appointment of a
conservator or receiver also is limited under law. In addition, future changes in regulations or
practices could further reduce the amount of capital recognized for purposes of capital adequacy.
Such a change could affect the ability of TIB Bank to grow and could restrict the amount of
profits, if any, available for the payment of dividends to us. Interstate Banking Legislation The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal),
subject to certain restrictions, allows adequately capitalized and managed bank holding companies
to acquire existing banks across state lines, regardless of state statutes that would prohibit
acquisitions by out-of-state institutions. Further, a bank holding company may consolidate
interstate bank subsidiaries into branches and a bank may merge with an unaffiliated bank across
state lines to the extent that the applicable states authorize such transactions. Florida has
enacted a law which permits interstate branching through merger transactions under the federal
interstate laws. Under the Florida law, with the prior approval of the Florida Office of Financial
Regulation, a Florida bank may establish, maintain and operate one or more branches in a state
other than the State of Florida pursuant to a merger transaction in which the Florida bank is the
resulting bank. In addition, Florida law provides that one or more Florida banks may enter into a
merger transaction with one or more out-of-state banks, and an out-of-state bank resulting from
such transaction may maintain and operate branches of a Florida bank that participated in such
merger. Financial Services Modernization Enacted in 1999, the Graham-Leach-Bliley Act reforms and modernizes certain areas of financial
services regulations and repeals the affiliation provisions of the federal Glass-Steagall Act of
1933, which, taken together, limited the securities, insurance and other non-banking activities of
any company that controls a FDIC insured financial institution. The Act provides that a financial
holding company may engage in a full range of financial activities, including insurance and
securities sales and underwriting activities, real estate development, and, with certain
exceptions, merchant banking activities, with new expedited notice procedures. The Act also
permits certain qualified national banks to form financial subsidiaries, which have broad
authority to engage in all financial activities except insurance underwriting, insurance
investments, real estate investment or development, and merchant banking, and expands the potential
financial activities of subsidiaries of state banks, subject to applicable state law. The range of
activities in which bank holding companies and their subsidiaries may engage is not as broad, and
the Act may increase the competition that we face. The law also includes substantive requirements
for maintenance of customer financial privacy. Sarbanes-Oxley Act In 2002, the Sarbanes-Oxley Act was enacted which imposes a myriad of corporate governance and
accounting measures designed so that shareholders have full and accurate information about the
public companies in which they invest. All public companies are affected by the Act. Some of the
principal provisions of the Act include:  
    the creation of an independent accounting oversight board to oversee the audit
of public companies and auditors who perform such audits;
    auditor independence provisions which restrict non-audit services that
independent accountants may provide to their audit clients; 9




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
    additional corporate governance and responsibility measures which (a) require
the chief executive officer and chief financial officer to certify financial
statements and to forfeit salary and bonuses in certain situations, and (b) protect
whistleblowers and informants;
    expansion of the authority and responsibilities of the companys audit,
nominating and compensation committees;
    mandatory disclosure by analysts of potential conflicts of interest; and
    enhanced penalties for fraud and other violations. Other Legislative Considerations The United States Congress and the Florida Legislature periodically consider and may adopt
legislation that results in additional deregulation, among other matters, of banks and other
financial institutions. Such legislation could modify or eliminate current prohibitions with other
financial institutions, including mutual funds, securities, brokerage firms, insurance companies,
banks from other states, and investment banking firms. The effect of any such legislation on our
business or that of TIB Bank cannot be accurately predicted. We cannot predict what legislation
might be enacted or what other implementing regulations might be adopted, and if enacted or
adopted, the effect on us. Competition The banking business is highly competitive. Banks generally compete with other financial
institutions through the banking products and services offered, the pricing of services, the level
of service provided, the convenience and availability of services, and the degree of expertise and
the personal manner in which services are offered. The Bank encounters strong competition from
most of the financial institutions in the Banks primary service area. In the conduct of certain
areas of its banking business, the Bank also competes with credit unions, consumer finance
companies, insurance companies, money market mutual funds and other financial institutions, some of
which are not subject to the same degree of regulation and restrictions imposed upon the Bank.
Many of these competitors have substantially greater resources and lending limits than the Bank has
and offer certain services, such as trust services, that the Bank does not provide presently.
Management believes that personalized service and competitive pricing is a sustainable competitive
advantage that will provide it with a method to compete effectively in our primary service area. Monetary Policy Our earnings are affected by domestic and foreign economic conditions, particularly by the
monetary and fiscal policies of the United States government and its agencies. The Federal Reserve
has an important impact on the operating results of banks and other financial institutions through
its power to implement national monetary policy. The methods used by the Federal Reserve include
setting the reserve requirements of banks, establishing the discount rate on bank borrowings and
conducting open market transactions in United States Government securities. FDIC Insurance Assessments The FDIC insures the deposits of the Bank up to prescribed limits for each depositor. The
amount of FDIC assessments paid by each Bank Insurance Fund (BIF) member institution is based on
its relative risks of default as measured by regulatory capital ratios and other factors.
Specifically, the assessment rate is based on the institutions capitalization risk category and
supervisory subgroup category. An institutions capitalization risk category is based on the
FDICs determination of whether the institution is well capitalized, adequately capitalized or less
than adequately capitalized. An institutions supervisory subgroup category is based on the FDICs
assessment of the financial condition of the institution and the probability that FDIC intervention
or other corrective action will be required. The FDIC may terminate insurance of deposits upon a
finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law, regulation, rule,
order, or condition imposed by the FDIC. 10




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Statistical Information Certain statistical information is found in Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations of this Annual Report on Form 10-K. 
 ITEM 2. PROPERTIES The Companys executive offices are now located at 599 9th Street North,
Naples, Florida. The Bank owns the first floor of this building. The
Banks executive offices are located at 99451 Overseas Highway, Key Largo, Florida. This is a
two-story building owned by the Bank that contains approximately 13,275 square feet of finished
space. The building is used for office space and the operation of a branch facility. The Banks other fifteen branches are located at 600 North Homestead Boulevard in Homestead,
777 North Krome Avenue in Homestead, 103330 Overseas Highway in Key Largo, 91980 Overseas Highway
in Tavernier, 80900 Overseas Highway in Islamorada, 11401 Overseas Highway in Marathon Shores, 2348
Overseas Highway in Marathon, 30400 Overseas Highway in Big Pine Key, 330 Whitehead Street in Key
West, 3618 North Roosevelt Boulevard in Key West, 8100 Health Center Boulevard in Bonita Springs,
599 9th Street North in Naples, 3940 Prospect Avenue  Suite 105 in Naples, 1720 J & C Boulevard 
Suite 1 in Naples, and 12205 Metro Parkway in Fort Myers, Florida. The main office and branch
properties are owned by the Bank, with the exception of the 8100 Health Center Boulevard, 1720 J &
C Boulevard and 3940 Prospect Avenue locations which are leased. The Bank also owns three other Florida properties consisting of: i) a three-story building
located at 228 Atlantic Boulevard, Key Largo utilized for its loan operations and human resources
departments; ii) a building located at 12195 Metro Parkway, Fort Myers used for its indirect
lending department, and iii) a building located at 28 N.E. 18th Street, Homestead used
for office space. The Bank leases office space at 9915 Tamiami Trail North  Suite 1 and 2 in Naples, and at
1119 US Highway 27 South in Sebring, Florida for the Banks residential lending operations. Office
space is also leased at 5800 Overseas Highway Suite 41 in Marathon, Florida for its commercial
lending department and at 630 Washington Avenue in Homestead, Florida for office space, including
its customer service operations department. In 2004, the Bank purchased two parcels of land located at the Pine Air Lakes Subdivision in
Naples, Florida and in the Miami Land & Development Subdivision in Homestead, Florida, where it
plans to construct two new branches. 
 ITEM 3. LEGAL PROCEEDINGS While the Company and the Bank are from time to time parties to various legal proceedings
arising in the ordinary course of their business, management believes after consultation with legal
counsel that there are no proceedings threatened or pending against the Company or the Bank that
will, individually or in the aggregate, have a material adverse effect on the consolidated results
of operations or financial condition of the Company. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the Companys fourth quarter
of the fiscal year ended December 31, 2004. 11




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##### Table of Contents



PART II 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES Our common stock trades on the NASDAQ National Market under the symbol TIBB. As of
December 31, 2004, there were 451 registered shareholders of record and 5,679,239 shares of our
common stock outstanding. The following table sets forth, for the periods indicated, the high and
low sale prices per share for our common stock on the NASDAQ National Market: 2004
    
    
    2003Quarter Ended
    
    High
    
    
    Low
    
    
    High
    
    
    LowMarch 31
    
    $
    25.00
    
    
    $
    20.15
    
    
    $
    17.17
    
    
    $
    14.91June 30
    
    
    22.85
    
    
    
    20.20
    
    
    
    18.50
    
    
    
    15.50September 30
    
    
    22.25
    
    
    
    19.62
    
    
    
    18.60
    
    
    
    16.75December 31
    
    
    25.67
    
    
    
    21.90
    
    
    
    24.99
    
    
    
    18.32
 For the year ended December 31, 2004, we paid cash dividends to our shareholders in the amount
of $.1125 per share for the first three quarters and $.115 per share for the last quarter ($.4525
in the aggregate). For the year ended December 31, 2003, we paid cash dividends to our
shareholders in the amount of $.11 per share for the first three quarters and $.1125 per share for
the last quarter ($.4425 in the aggregate). Our ability to continue to pay cash dividends to our
shareholders is primarily dependent on the earnings of the Bank. Payment of dividends by the Bank
to us is limited by dividend restrictions in capital requirements imposed by Bank regulators.
Information regarding restrictions on the ability of the Bank to pay dividends to us is contained
in Note 14 of the Notes to Consolidated Financial Statements contained in Item 8 hereof. In
general, future dividend policy is subject to the discretion of the board of directors and will
depend upon a number of factors, including the future earnings, capital requirements, regulatory
constraints, and our financial condition as well as that of the Bank. We did not repurchase any shares of our common stock in 2004. 12




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data presented below as of and for the years ended
December 31, 2004, 2003, 2002, 2001, and 2000 is unaudited and has been derived from our
Consolidated Financial Statements and from our records. The information presented below should be
read in conjunction with the Consolidated Financial Statements and related notes, and Managements
Discussion and Analysis of Financial Condition and Results of Operations. Balance Sheet Data:
    
    (Dollars in thousands, except per share data)As of December 31,
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Total Assets
    
    $
    829,325
    
    
    $
    669,298
    
    
    $
    567,149
    
    
    $
    494,111
    
    
    $
    439,320Investment Securities
    
    
    77,807
    
    
    
    52,557
    
    
    
    54,268
    
    
    
    52,354
    
    
    
    68,019Gross Loans
    
    
    653,521
    
    
    
    538,598
    
    
    
    441,743
    
    
    
    379,104
    
    
    
    315,574Allowance for loan losses
    
    
    6,243
    
    
    
    5,216
    
    
    
    4,272
    
    
    
    3,675
    
    
    
    3,268Deposits
    
    
    687,859
    
    
    
    553,813
    
    
    
    482,683
    
    
    
    415,736
    
    
    
    392,427Shareholders Equity
    
    
    68,114
    
    
    
    41,246
    
    
    
    33,506
    
    
    
    28,672
    
    
    
    26,237
 Statement of Income Data:Year ended December 31,
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Interest and dividend income
    
    $
    40,916
    
    
    $
    34,606
    
    
    $
    31,316
    
    
    $
    33,717
    
    
    $
    32,189Interest expense
    
    
    10,730
    
    
    
    9,839
    
    
    
    10,329
    
    
    
    15,797
    
    
    
    14,775Net interest income
    
    
    30,186
    
    
    
    24,767
    
    
    
    20,987
    
    
    
    17,920
    
    
    
    17,414Provision for loan losses
    
    
    2,455
    
    
    
    1,586
    
    
    
    791
    
    
    
    1,005
    
    
    
    332Net interest income after
provision for loan losses
    
    
    27,731
    
    
    
    23,181
    
    
    
    20,196
    
    
    
    16,915
    
    
    
    17,082Non-interest income
    
    
    12,063
    
    
    
    12,037
    
    
    
    10,428
    
    
    
    9,998
    
    
    
    7,484Non-interest expense
    
    
    31,924
    
    
    
    27,569
    
    
    
    23,632
    
    
    
    20,916
    
    
    
    17,830Income tax expense
    
    
    2,672
    
    
    
    2,672
    
    
    
    2,386
    
    
    
    2,058
    
    
    
    2,482Income from continuing operations
    
    
    5,198
    
    
    
    4,977
    
    
    
    4,606
    
    
    
    3,939
    
    
    
    4,254Income (loss), net of taxes,
from discontinued operations
    
    
    
    
    
    
    125
    
    
    
    129
    
    
    
    (45
    )
    
    
    (32
    )Net income
    
    
    5,198
    
    
    
    5,102
    
    
    
    4,735
    
    
    
    3,894
    
    
    
    4,222
 Per Share Data:Year ended December 31,
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Book value per share at year end
    
    $
    11.99
    
    
    $
    9.31
    
    
    $
    8.30
    
    
    $
    7.27
    
    
    $
    6.72Basic earnings per share from continuing operations
    
    $
    0.98
    
    
    $
    1.17
    
    
    $
    1.15
    
    
    $
    1.00
    
    
    $
    1.03Basic earnings per share from discontinued operations
    
    
    
    
    
    
    0.03
    
    
    
    0.04
    
    
    
    (0.01
    )
    
    
    (0.01
    )Basic earnings per share
    
    $
    0.98
    
    
    $
    1.20
    
    
    $
    1.19
    
    
    $
    0.99
    
    
    $
    1.02Diluted earnings per share from continuing operations
    
    $
    0.95
    
    
    $
    1.12
    
    
    $
    1.11
    
    
    $
    0.96
    
    
    $
    1.00Diluted earnings per share from discontinued
operations
    
    
    
    
    
    
    0.03
    
    
    
    0.03
    
    
    
    (0.01
    )
    
    
    (0.01
    )Diluted earnings per share
    
    $
    0.95
    
    
    $
    1.15
    
    
    $
    1.14
    
    
    $
    0.95
    
    
    $
    0.99Basic weighted average common equivalent shares
outstanding
    
    
    5,309,860
    
    
    
    4,257,224
    
    
    
    3,992,775
    
    
    
    3,923,763
    
    
    
    4,140,234Diluted weighted average common equivalent shares
outstanding
    
    
    5,479,696
    
    
    
    4,435,861
    
    
    
    4,144,855
    
    
    
    4,096,767
    
    
    
    4,274,155Dividends declared per share
    
    $
    0.4525
    
    
    $
    0.4425
    
    
    $
    0.4325
    
    
    $
    0.43
    
    
    $
    0.4225
 13




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##### Table of Contents



Ratios
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Return on average assets
    
    
    0.70
    %
    
    
    0.82
    %
    
    
    0.89
    %
    
    
    0.82
    %
    
    
    1.05
    %Return on average equity
    
    
    8.77
    %
    
    
    13.56
    %
    
    
    15.21
    %
    
    
    14.15
    %
    
    
    15.54
    %Average equity/average assets
    
    
    8.01
    %
    
    
    6.05
    %
    
    
    5.82
    %
    
    
    5.79
    %
    
    
    6.74
    %Net interest margin
    
    
    4.51
    %
    
    
    4.43
    %
    
    
    4.39
    %
    
    
    4.22
    %
    
    
    4.74
    %Dividend payout ratio
    
    
    46.22
    %
    
    
    36.92
    %
    
    
    36.47
    %
    
    
    43.32
    %
    
    
    41.43
    %Allowance for loan losses/total loans
    
    
    0.96
    %
    
    
    0.97
    %
    
    
    0.97
    %
    
    
    0.97
    %
    
    
    1.04
    %Non-performing assets/total assets
    
    
    0.60
    %
    
    
    0.55
    %
    
    
    0.65
    %
    
    
    0.90
    %
    
    
    0.57
    %Non-performing loans/gross loans
    
    
    0.11
    %
    
    
    0.07
    %
    
    
    0.12
    %
    
    
    0.42
    %
    
    
    0.80
    %Allowance for loan losses/non-performing loans
    
    
    886.79
    %
    
    
    1,336.33
    %
    
    
    783.19
    %
    
    
    231.07
    %
    
    
    129.84
    %Non-interest expense/net interest income and
non-interest income from continuing
operations
    
    
    75.56
    %
    
    
    74.91
    %
    
    
    75.22
    %
    
    
    74.92
    %
    
    
    71.61
    %
 14




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview TIB Bank operates primarily as an owner-occupied real estate secured commercial lender,
focusing on middle-market businesses in our Southern Florida markets. TIB Bank was formed in and
has a substantial market presence in the Florida Keys. In recent years, the Bank has expanded into
the adjacent Florida counties of Miami-Dade, Collier and Lee. The Bank funds its lending activity
by gathering retail and commercial deposits from our service area. Significant economic growth in
the southern portion of Miami-Dade County and along the southwest coast of Florida (Naples, Bonita
Springs, and Ft. Myers area) offers tremendous opportunities for us to grow our core banking
franchise in these contiguous markets. We are utilizing a de novo branching strategy of evaluating and selecting sites and building
new bank branch locations to enter and grow in these new markets. We believe that due to the cost
of acquiring existing facilities, de novo expansion is the most economical method for us to build
market share in many of the areas where we seek to have a presence. While we expect to experience
short-term earnings dilution as a result of the increased costs of developing and expanding our
branch system, we believe the resulting growth will add significant value to our franchise.
Although organic growth has been the method of choice to date, growth through acquisition would be
considered if pricing, market and culture fit were advantageous to our growth and expansion plans. 2004 Performance Overview TIB Financial Corp. is a financial services holding company focused on growth and expansion in
the Florida marketplace and the parent company of TIB Bank. For the year ended December 31, 2004,
net income was $5.2 million, or $0.98 per basic share and $0.95 per diluted share, compared with
$5.1 million, or $1.20 per basic share and $1.15 per diluted share, for the prior year. Earnings
per share for the current year include 1,150,000 new common shares issued in a successful public
offering of common stock in April 2004 that raised $23.2 million in new capital. This offering
increased basic and diluted weighted average shares outstanding during 2004 to 5,309,860 and
5,479,696, respectively, compared to 4,257,224 and 4,435,861 in 2003. The results of operations and accomplishments of 2004 reflect the successful execution of our
growth strategy into new markets outside of the Florida Keys and the extensive investments we have
been making to rapidly achieve our goals. This years results included the costs of opening new
branch offices, increased expenses associated with SEC and regulatory compliance, and the addition
of exceptional personnel across the entire organization including a variety of experienced
personnel who became available as a result of the in-market bank sales. Now that we have put the
infrastructure in place, we believe that we are well-positioned to harvest our previous investments
at an accelerated pace. These investments provide the capacity necessary for TIB to ramp up our
revenue production and market share over the foreseeable future. Despite numerous hurricane threats and evacuations and the related business disruptions in
South Florida during 2004, TIB suffered no physical damage from the storms. In addition, total
revenue increased 14.8 % to $42.2 million compared to $36.8 million during 2003. Net interest income on a tax-equivalent basis was $30.5 million, an increase of 22% over $25.0
million a year ago. Non-interest income, which includes real estate fees, credit card fees and
other operating income, totaled $12.1 million, a slight increase over $12.0 million a year ago. Our interest margin increased from 4.43% in 2003 to 4.51% in 2004. Margins have been slightly
higher over the recent years due to a number of factors. First, a substantial portion of our
commercial loans are at their interest rate floors. Second, we have increased the relative portion
of loans to the total earning assets of the Bank. 15




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##### Table of Contents



Finally, indirect auto lending, which has become
a larger component of our portfolio, has somewhat higher yields than other loans generally. Going
forward, we expect our margins to remain fairly stable as indirect loans become a smaller component
of our portfolio due to our expectations of commercial loan growth in Southwest Florida coupled
with an increasing interest rate environment where many of our loans will begin to adjust past
their floors. Non-interest income increased slightly, to $12.1 million in 2004 primarily due to continued
growth in merchant bankcard processing income. Merchant bankcard processing income increased
16.2%, from $5.0 million in 2003 to $5.8 million in 2004. This was attributable to increased processing
volumes over the prior year. We expect merchant bankcard processing income growth to moderate in
2005 due to its maturity. Fees on mortgage loans sold decreased 15.9% from $2.2 million in 2003 to
$1.9 million in 2004. The current year decrease is primarily due to increased competition in the
local market place combined with lower volume due to the interruption in transaction closings
caused by the frequency of local severe weather threats. Non-interest expense for 2004 was $31.9 million, compared with $27.6 million a year ago. The
increase in non-interest expense for 2004 is primarily attributable to expenses associated with
increased regulatory and securities law compliance and the Companys ongoing expansion activities
in the Southwest Florida market. We expect growth in non-interest expenses to continue at a
relatively constant level in dollar terms and become a proportionately smaller percentage of the
total business in the future. Total assets increased 23.9% to $829.3 million as of December 31, 2004, compared with $669.3
million a year ago. Total loans grew 21.3% to $653.5 million as of December 31, 2004, compared with
$538.6 million a year ago. Commercial real estate mortgage loans accounted for the largest
categorical dollar increase during 2004, representing $54.1 million of the total increase. Asset
growth was funded by an increase in total deposits to $687.9 million as of December 31, 2004,
representing core deposit growth of 24.2% from $553.8 million the prior year. Credit quality remained strong as of December 31, 2004 with the allowance for loan losses
totaling $6.2 million, or 0.96% of total loans and 887% of non-performing loans. These figures
compare with 0.97% and 1337%, respectively, as of December 31, 2003. Annual net charge-offs
represented 0.24% of average loans as of December 31, 2004, compared with 0.13% as of December 31,
2003. The considerable growth in our balance sheet and operations reflects the success of our
strategic customer shift to newer, more dynamic growth markets in South Florida. By the end of
2004, more than 33% of the Companys customer deposit base was located outside the mature core
business market of the Florida Keys, compared with just 25% at the beginning of the year. We have
been able to generate significant internal organic growth of new deposits and loans in our markets
outside of the Keys, while maintaining high quality assets and a stellar compliance record. During
2004, the depth of the disruption in the market from big bank mergers and acquisitions created
unprecedented opportunities for TIB to move quickly to attract customers who prefer to conduct
business with a locally managed company. To capitalize on the current environment, the Company has been aggressively adding senior
lenders and de novo branches in the growth markets in Southwest Florida. In August 2004, the Bank
opened its third branch location in Naples, Collier County, Florida and in October, the Bank opened
a new branch office in Fort Myers, Florida. This office represents the Banks 16th location overall
and the second in the Lee County market. Economic and Operating Environment Overview During 2004, business activity in our primary markets reflected the national trends of
economic expansion with limited increases in overall employment due to productivity gains and the
desire to reduce excess capacity. In turn, the Federal Reserve elected to raise short-term
interest rates 25 basis points five times during the year. Specifically, the target Federal Funds
Rate began 2004 at 1.00% and ended the year at 2.25%. The Prime lending rate continued its recent
pattern of staying 300 basis points, 3%, above the Federal Funds Rate. The effect of the low interest rates is to contract our net interest margin in two ways.
First, a low Prime rate directly affects yields on loans tied to that index and even loans not
indexed to Prime are priced reflective of overall low asset yields. Second, deposit liabilities
can only be priced down so far before the interest rate is too low to attract the volume of
required funding. The net effect of this rate environment is a larger reduction in asset yields,
generally, than the corresponding reduction in liability costs. 16




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##### Table of Contents



We were able to manage the effects of the interest rate environment of 2004 in the following
ways. First, even though we are still at low relative levels of interest rates, net interest
margins have increased again this year as we were able to increase asset yields to a greater extent
than liability costs. Second, our continued practice of requiring interest rate floors on many
commercial loans has kept asset yields at higher levels despite the low interest rate environment.
However, as rates began to increase in the latter half of 2004, asset yields increased less than
proportionally due to the number of loans still priced at interest rate floors. This tactic proved
effective in slowing the average decline in loan yields during the past declining rate environment.
In our current increasing rate environment, however, it slows asset yield growth until rates
surpass the floors. Finally, we continue to manage our asset portfolio to target slightly
increased percentages of higher yielding loans while managing risk. During 2004, the Bank significantly expanded its indirect automobile lending program, in an
effort to generate higher relative yielding assets. As of December 31, 2004, we had approximately
$91.9 million of indirect auto loans outstanding. Coupled with the appropriate safeguards, we
believe this product continues to offer the Bank an opportunity to increase asset yields while not
sacrificing our primary objective of maintaining strong asset quality. We believe that during 2005,
this growth will peak below 15% of the total loan portfolio composition and begin to decrease as a
percentage of the loan portfolio. In 2004, we relocated our holding company headquarters from Key Largo to our Southwest Florida
office at 599 9th Street North in Naples, Florida. This office is located in a new three-story
office building near the central business district. During 2004, we also celebrated the opening of
two additional branches in the Southwest Florida region. These investments were made as part of our
de novo branching strategy targeting selected growth markets of Southern Florida. Our plan assumes
that these new branches will take about three years to break even, and that when these facilities
become profitable, accumulated losses incurred will be less than the premiums required to purchase
similar branches. We also recently announced the acquisition of land in Naples, Florida for the construction of
a 16,000-square-foot banking office. Construction is expected to begin on the building later this
year with an opening in the first quarter of 2006. Additional branch sites will continue to be
explored in the high-growth markets throughout South Florida. Analysis of Financial Condition Our assets totaled $829.3 million at December 31, 2004 compared to $669.3 million at the end
of 2003, an increase of $160.0 million or 23.9%. The growth in assets was primarily a result of
increased lending activity as the Bank invested funds provided by significant deposit growth and
the public offering of common stock which infused $23.2 million of additional capital. Total loans increased $114.9 million or 21.3%, to $653.5 million at December 31, 2004. The
growth in the loan portfolio was primarily attributed to increases in commercial real estate and
farmland loans of $56.8 million, indirect auto dealer loans of $32.5 million, construction loans of
$17.7 million, and residential loans of $7.1 million. Total deposits increased $134.0 million or 24.2%, from $553.8 million at the end of 2003 to
$687.9 million on December 31, 2004. Non-interest-bearing deposits increased $30.3 million or
24.9%, while interest-bearing deposits increased $103.7 million or 24.0%. Borrowed funds, consisting of Federal Home Loan Bank (FHLB) advances, short-term borrowings,
notes payable, and subordinated debentures, totaled $65.4 million at year end 2004 compared to
$67.3 million at the end of 2003. During 2004, we reduced our FHLB advances by $10.0 million. On
January 3, 2005 we repaid $1.25 million of the notes payable at a 3% premium. 17




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##### Table of Contents



Shareholders equity increased $26.9 million or 65.1%, from $41.2 million on December 31, 2003
to $68.1 million at the end of 2004. On April 15, 2004, we closed the sale of 1,000,000 shares of
our common stock at a price of $22.00 per share before commissions and expenses. The shares were
sold on a firm commitment basis through Advest, Inc who subsequently purchased an additional
150,000 shares on May 6, 2004, at $22.00 per share before commissions and expenses providing total
proceeds of $23.2 million. Book value per share increased to $11.99 at December 31, 2004 from $9.31 at December 31, 2003. Results of Operations NET INCOME 2004 compared with 2003: The Companys 2004 net income of $5.2 million increased 1.9% compared to $5.1 million in 2003.
Basic and diluted earnings per share for 2004 were $0.98 and $0.95, respectively, as compared to
$1.20 and $1.15 per share in 2003. Net income from continuing operations was $5.2 million for 2004, compared to $5.0 million for
2003, an increase of 4.4%. As discussed in Note 20 of the accompanying Notes to Consolidated
Financial Statements, the Company closed the sale of the assets of its wholly owned subsidiary,
Keys Insurance Agency, Inc., in the third quarter of 2003. Return on average assets was 0.70% and 0.82% for 2004 and 2003, while return on average
shareholders equity was 8.77% and 13.56% over the same two years, respectively. 2003 compared with 2002: The Companys net income of $5.1 million for 2003 represented a 7.8% increase compared to $4.7
million for 2002. Basic and diluted earnings per share for 2003 were $1.20 and $1.15,
respectively, as compared to $1.19 and $1.14 per share in 2002. Net income from continuing operations was $5.0 million for year end 2003, compared to $4.6
million for 2002, an increase of 8.1%. As discussed in Note 20 of the accompanying Notes to
Consolidated Financial Statements, the Company closed the sale of the assets of its wholly owned
subsidiary, Keys Insurance Agency, Inc., in the third quarter of 2003. Return on average assets was 0.82% and 0.89% for 2003 and 2002, while return on average
shareholders equity was 13.56% and 15.21% over the same two years, respectively. NET INTEREST INCOME Net interest income represents the amount by which interest income on interest-earning assets
exceeds interest expense incurred on interest-bearing liabilities. Net interest income is the
largest component of our income, and is affected by the interest rate environment, and the volume
and the composition of interest-earning assets and interest-bearing liabilities. Our
interest-earning assets include loans, federal funds sold, interest-bearing deposits in other
banks, and investment securities. Our interest-bearing liabilities include deposits, federal funds
purchased, notes payable related to Company shares repurchased, subordinated debentures, FHLB
advances, and other short-term borrowings. 2004 compared with 2003: Net interest income was $30.2 million for the year ended December 31, 2004, compared to $24.8
million for the same period in 2003. The 21.9% increase was mainly attributable to increased
lending volume. Partially offsetting this increase was an increase in interest expense on time
deposits, our highest cost deposit category as a percentage share of total deposits. 18




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##### Table of Contents



The decrease
in the average cost of interest-bearing liabilities from 2.13% in 2003 to 2.02% in 2004 partially
offset higher volumes resulting in an increase in interest expense from $9.8 million in 2003 to
$10.7 million in 2004. The increased loan volumes and lower costs for liabilities more than offset
the decrease in asset yields. Our success in managing asset yields through interest rate floors
became evident during 2004 as our tax equivalent net interest margin increased to 4.51% from 4.43%
in 2003. Going forward, we expect further market rate increases to more directly affect loan yields
and deposit costs as more adjustable loans move through their floor levels and competitive
pressures result in deposit rates increasing more rapidly. We believe the predominant driver in the
increase in 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 be considerably less in extent than the relative impact of asset
growth. 2003 compared with 2002: Net interest income was $24.8 million for the year ended December 31, 2003, compared to $21.0
million for the same period in 2002. The 18.0% increase was mainly attributable to increased
lending volume. Partially offsetting this increase was an increase in interest expense on time
deposits, our highest cost deposit category as a percentage share of total deposits. The decrease
in the average cost of interest-bearing liabilities from 2.57% in 2002 to 2.13% in 2003 overcame
the larger volumes to produce a decrease in interest expense from $10.3 million in 2002 to $9.8
million in 2003. Finally, our ability to lower our funding cost in proportion to our lowered
yields resulted in essentially stable margins. Our tax equivalent net interest margin increased to
4.43% in 2003 from 4.39% in 2002. The following table sets forth information with respect to the average balances, interest
income and average yield by major categories of interest-earning assets; the average balances,
interest expense and average rate by major categories of interest-bearing liabilities; the average
balances of noninterest-earning assets, noninterest-bearing liabilities and shareholders equity;
and net interest income, interest rate spread, and net interest margin for the years ended December
31, 2004, 2003 and 2002. 19




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##### Table of Contents



AVERAGE BALANCE SHEETS 2004
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    2002AVERAGE
    
    
    INCOME/
    
    
    YIELDS/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELDS/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELDS/(Dollars in thousands)
    
    BALANCES
    
    
    EXPENSE
    
    
    RATES
    
    
    BALANCES
    
    
    EXPENSE
    
    
    RATES
    
    
    BALANCES
    
    
    EXPENSE
    
    
    RATESASSETSInterest-earning assets:Loans (a)(b)
    
    $
    590,167
    
    
    $
    37,724
    
    
    
    6.39
    %
    
    $
    484,147
    
    
    $
    31,669
    
    
    
    6.54
    %
    
    $
    402,575
    
    
    $
    27,803
    
    
    
    6.91
    %Investment securities-taxable
    
    
    58,308
    
    
    
    2,344
    
    
    
    4.02
    %
    
    
    47,729
    
    
    
    2,250
    
    
    
    4.71
    %
    
    
    51,165
    
    
    
    2,861
    
    
    
    5.59
    %Investment securities 
tax exempt (b)
    
    
    9,990
    
    
    
    615
    
    
    
    6.16
    %
    
    
    7,608
    
    
    
    499
    
    
    
    6.56
    %
    
    
    5,458
    
    
    
    393
    
    
    
    7.21
    %Investment securities 
tax exempt (b) (d)
    
    
    3,497
    
    
    
    368
    
    
    
    10.52
    %
    
    
    748
    
    
    
    89
    
    
    
    11.88
    %
    
    
    
    
    
    
    
    
    
    
    Interest bearing deposits in
other banks
    
    
    852
    
    
    
    11
    
    
    
    1.29
    %
    
    
    309
    
    
    
    3
    
    
    
    0.85
    %
    
    
    302
    
    
    
    5
    
    
    
    1.69
    %FHLB stock
    
    
    1,635
    
    
    
    57
    
    
    
    3.49
    %
    
    
    1,667
    
    
    
    59
    
    
    
    3.53
    %
    
    
    1,465
    
    
    
    78
    
    
    
    5.32
    %Federal funds sold
    
    
    11,438
    
    
    
    127
    
    
    
    1.11
    %
    
    
    21,106
    
    
    
    242
    
    
    
    1.14
    %
    
    
    20,180
    
    
    
    330
    
    
    
    1.64
    %Total interest-earning assets
    
    
    675,887
    
    
    
    41,246
    
    
    
    6.10
    %
    
    
    563,314
    
    
    
    34,811
    
    
    
    6.18
    %
    
    
    481,145
    
    
    
    31,470
    
    
    
    6.54
    %Non-interest-earning assets:Cash and due from banks
    
    
    18,866
    
    
    
    
    
    
    
    
    
    
    
    15,562
    
    
    
    
    
    
    
    
    
    
    
    13,297Investment in ERAS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    227Premises and equipment, net
    
    
    24,295
    
    
    
    
    
    
    
    
    
    
    
    19,576
    
    
    
    
    
    
    
    
    
    
    
    17,429Allowances for loan losses
    
    
    (5,735
    )
    
    
    
    
    
    
    
    
    
    
    (4,642
    )
    
    
    
    
    
    
    
    
    
    
    (3,932
    )Other assets
    
    
    26,452
    
    
    
    
    
    
    
    
    
    
    
    27,749
    
    
    
    
    
    
    
    
    
    
    
    26,330Total non-interest-earning assets
    
    
    63,878
    
    
    
    
    
    
    
    
    
    
    
    58,297
    
    
    
    
    
    
    
    
    
    
    
    53,351Total assets
    
    $
    739,765
    
    
    
    
    
    
    
    
    
    
    $
    621,611
    
    
    
    
    
    
    
    
    
    
    $
    534,496LIABILITIES & SHAREHOLDERS EQUITYInterest-bearing liabilities:Interest bearing deposits:NOW accounts
    
    $
    76,068
    
    
    $
    330
    
    
    
    0.43
    %
    
    $
    59,389
    
    
    
    218
    
    
    
    0.37
    %
    
    $
    50,481
    
    
    
    266
    
    
    
    0.53
    %Money market
    
    
    130,172
    
    
    
    1,189
    
    
    
    0.91
    %
    
    
    125,410
    
    
    
    1,103
    
    
    
    0.88
    %
    
    
    131,384
    
    
    
    1,791
    
    
    
    1.36
    %Savings deposits
    
    
    44,380
    
    
    
    174
    
    
    
    0.39
    %
    
    
    35,475
    
    
    
    170
    
    
    
    0.48
    %
    
    
    29,891
    
    
    
    223
    
    
    
    0.75
    %Time deposits
    
    
    227,834
    
    
    
    6,878
    
    
    
    3.02
    %
    
    
    198,162
    
    
    
    6,444
    
    
    
    3.25
    %
    
    
    149,061
    
    
    
    6,003
    
    
    
    4.03
    %Total interest-bearing deposits
    
    
    478,454
    
    
    
    8,571
    
    
    
    1.79
    %
    
    
    418,436
    
    
    
    7,935
    
    
    
    1.90
    %
    
    
    360,817
    
    
    
    8,283
    
    
    
    2.30
    %Notes payable
    
    
    5,250
    
    
    
    482
    
    
    
    9.18
    %
    
    
    5,250
    
    
    
    481
    
    
    
    9.16
    %
    
    
    5,250
    
    
    
    481
    
    
    
    9.16
    %Short-term borrowings and FHLB
advances
    
    
    35,585
    
    
    
    558
    
    
    
    1.57
    %
    
    
    25,455
    
    
    
    314
    
    
    
    1.23
    %
    
    
    22,855
    
    
    
    425
    
    
    
    1.86
    %Subordinated debentures
    
    
    13,000
    
    
    
    1,119
    
    
    
    8.61
    %
    
    
    13,000
    
    
    
    1,109
    
    
    
    8.53
    %
    
    
    13,000
    
    
    
    1,140
    
    
    
    8.77
    %Total interest-bearing liabilities
    
    
    532,289
    
    
    
    10,730
    
    
    
    2.02
    %
    
    
    462,141
    
    
    
    9,839
    
    
    
    2.13
    %
    
    
    401,922
    
    
    
    10,329
    
    
    
    2.57
    %Non-interest-bearing liabilities
and shareholders equity:Demand deposits
    
    
    139,939
    
    
    
    
    
    
    
    
    
    
    
    114,344
    
    
    
    
    
    
    
    
    
    
    
    95,324Other liabilities
    
    
    8,266
    
    
    
    
    
    
    
    
    
    
    
    7,493
    
    
    
    
    
    
    
    
    
    
    
    6,121Shareholders equity
    
    
    59,271
    
    
    
    
    
    
    
    
    
    
    
    37,633
    
    
    
    
    
    
    
    
    
    
    
    31,129Total non-interest-bearing
liabilities and shareholders
equity
    
    
    207,476
    
    
    
    
    
    
    
    
    
    
    
    159,470
    
    
    
    
    
    
    
    
    
    
    
    132,574Total liabilities and
shareholders equity
    
    $
    739,765
    
    
    
    
    
    
    
    
    
    
    $
    621,611
    
    
    
    
    
    
    
    
    
    
    $
    534,496Interest rate spread
    
    
    
    
    
    
    
    
    
    
    4.08
    %
    
    
    
    
    
    
    
    
    
    
    4.05
    %
    
    
    
    
    
    
    
    
    
    
    3.97
    %Net interest income
    
    
    
    
    
    $
    30,516
    
    
    
    
    
    
    
    
    
    
    $
    24,972
    
    
    
    
    
    
    
    
    
    
    $
    21,141Net interest margin (c)
    
    
    
    
    
    
    
    
    
    
    4.51
    %
    
    
    
    
    
    
    
    
    
    
    4.43
    %
    
    
    
    
    
    
    
    
    
    
    4.39
    %
 20




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##### Table of Contents



(a)
    
    Average loans include non-performing loans. Interest on loans includes loan fees of $394
in 2004, $265 in 2003 and $116 in 2002.(b)
    
    Interest income and rates include the effects of a tax equivalent adjustment using a Federal
tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans
to a fully taxable basis.(c)
    
    Net interest margin is net interest income divided by average total interest-earning assets.(d)
    
    Investment securities indicated hereon were 90% and 96% tax deductible during 2004 and 2003,
respectively. CHANGES IN NET INTEREST INCOME The table below details the components of the changes in net interest income for the last two
years. 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. 2004 compared to 2003
    
    
    2003 compared to 2002Due to changes in
    
    
    Due to changes inNet
    
    
    
    
    
    
    
    
    
    
    NetAverage
    
    
    Average
    
    
    Increase
    
    
    Average
    
    
    Average
    
    
    Increase(In thousands)
    
    Volume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)INTEREST INCOMELoans (a)
    
    $
    6,793
    
    
    $
    (737
    )
    
    $
    6,056
    
    
    $
    5,415
    
    
    $
    (1,549
    )
    
    $
    3,866Investment securities (a)
    
    
    881
    
    
    
    (392
    )
    
    
    489
    
    
    
    50
    
    
    
    (466
    )
    
    
    (416
    )Interest-bearing deposits in other
banks
    
    
    7
    
    
    
    1
    
    
    
    8
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Federal funds sold
    
    
    (108
    )
    
    
    (7
    )
    
    
    (115
    )
    
    
    15
    
    
    
    (103
    )
    
    
    (88
    )FHLB stock
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    10
    
    
    
    (29
    )
    
    
    (19
    )Total interest income
    
    
    7,572
    
    
    
    (1,136
    )
    
    
    6,436
    
    
    
    5,490
    
    
    
    (2,149
    )
    
    
    3,341INTEREST EXPENSENOW accounts
    
    
    68
    
    
    
    44
    
    
    
    112
    
    
    
    42
    
    
    
    (90
    )
    
    
    (48
    )Money market
    
    
    43
    
    
    
    43
    
    
    
    86
    
    
    
    (78
    )
    
    
    (610
    )
    
    
    (688
    )Savings deposits
    
    
    38
    
    
    
    (34
    )
    
    
    4
    
    
    
    37
    
    
    
    (90
    )
    
    
    (53
    )Time deposits
    
    
    918
    
    
    
    (484
    )
    
    
    434
    
    
    
    1,743
    
    
    
    (1,302
    )
    
    
    441Notes payable
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    
    
    
    
    (31
    )
    
    
    (31
    )Short-term borrowings and FHLB
advances
    
    
    99
    
    
    
    145
    
    
    
    244
    
    
    
    44
    
    
    
    (155
    )
    
    
    (111
    )Total interest expense
    
    
    1,166
    
    
    
    (275
    )
    
    
    891
    
    
    
    1,788
    
    
    
    (2,278
    )
    
    
    (490
    )Change in net interest income
    
    $
    6,406
    
    
    $
    (861
    )
    
    $
    5,545
    
    
    $
    3,702
    
    
    $
    129
    
    
    $
    3,831
   (a)
    
    Interest income includes the effects of a tax equivalent adjustment using a federal tax
rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans
to a fully taxable basis. 21




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##### Table of Contents



NON-INTEREST INCOME The following table presents the principal components of non-interest income for the years ended
December 31: (In thousands)
    
    2004
    
    
    2003
    
    
    2002Merchant bankcard processing income
    
    $
    5,757
    
    
    $
    4,953
    
    
    $
    4,387Gain on sale of government guaranteed loans
    
    
    
    
    
    
    117
    
    
    
    28Fees on mortgage loans sold
    
    
    1,852
    
    
    
    2,201
    
    
    
    1,583Dividend income from ERAS Joint Venture
    
    
    
    
    
    
    
    
    
    
    33Servicing income
    
    
    117
    
    
    
    119
    
    
    
    126Service charges on deposit accounts
    
    
    2,547
    
    
    
    2,452
    
    
    
    2,240Gain on sale of investment in ERAS Joint Venture
    
    
    
    
    
    
    202
    
    
    
    211Investment securities gains, net
    
    
    106
    
    
    
    289
    
    
    
    218Retail investment services
    
    
    333
    
    
    
    420
    
    
    
    206Debit card income
    
    
    422
    
    
    
    388
    
    
    
    350Earnings on bank owned life insurance policies
    
    
    404
    
    
    
    433
    
    
    
    350Other
    
    
    525
    
    
    
    463
    
    
    
    697Total non-interest income
    
    $
    12,063
    
    
    $
    12,037
    
    
    $
    10,429
 Over the past three years, we have increased non-interest income from $10.4 million to $12.1
million. Fees on residential loans sold at origination have grown due to a favorable interest rate
environment and increasing staff in new markets. The component of growth due to favorable rates
will most likely be reduced in 2005 as we expect interest rates to continue to increase at a modest
pace. Additionally, we intend to maintain current staffing levels with respect to the residential
mortgage origination process and expect organic growth from our expanding core customer base and
the residential real estate market and population growth trends in the Southwest Florida and South
Miami-Dade county markets to offset the expected decreases in the volume of refinance activity.
Merchant bankcard growth should moderate a little in the future since it is a mature product and
large percentage growth from this base will be challenging, as we expect a growth rate similar to
that of the organization. 2004 compared to 2003: Non-interest income increased slightly in 2004. The increase in merchant bankcard processing
income came primarily from continued penetration of our traditional market of the Florida Keys
combined with our expansion into Southwest Florida. Fees on mortgage loans sold result from the
sale of residential loans (primarily fixed rate loans) to the secondary market. In 2004, our
volumes of residential loans decreased as a result of the increasing interest rates and local
economic and real estate environment conditions. Retail investment services income decreased
during 2004 and is expected to be nominal during 2005 due to the December 15, 2004 sale of
internally developed intangibles, primarily the investment centers book of business. The sale of
these intangibles resulted in a gain of $50,000 and is included in other income. Debit card income
rose slightly due primarily to increasing volume despite a reduction in the interchange rate paid
to us. 2003 compared to 2002: Non-interest income increased $1.6 million in 2003. The increase in merchant bankcard
processing income came primarily from our traditional market of the Florida Keys. Fees on mortgage
loans sold result from the sale of residential loans to the secondary market. In 2003, we
continued to experience increased volumes of residential loans as a result of the low rate
environment, and our expansion into Southwest Florida. Retail investment services income also
increased in 2003. Debit card income rose despite a reduction in the interchange rate paid to us
because of increasing volume. In 2002, we recognized a gain of $211,000 from the sale of 5.1% of
our 10% interest in ERAS Joint Venture. In 2003, we recognized a gain of $202,000 from the sale of
our remaining interest in ERAS Joint Venture. 22




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##### Table of Contents



NON-INTEREST EXPENSES The following table represents the principal components of non-interest expenses for the years
ended December 31: (In thousands)
    
    2004
    
    
    2003
    
    
    2002Salary and employee benefits
    
    $
    14,686
    
    
    $
    12,878
    
    
    $
    10,602Net occupancy expense
    
    
    4,964
    
    
    
    4,326
    
    
    
    3,680Merchant bankcard processing expenses
and other merchant charges
    
    
    4,437
    
    
    
    3,656
    
    
    
    3,242Accounting, legal, and other professional
    
    
    1,223
    
    
    
    845
    
    
    
    749Computer services
    
    
    1,773
    
    
    
    1,533
    
    
    
    1,627Postage, courier and armored car
    
    
    620
    
    
    
    700
    
    
    
    590Marketing and community relations
    
    
    866
    
    
    
    851
    
    
    
    865Operating supplies
    
    
    553
    
    
    
    495
    
    
    
    428Directors fees
    
    
    438
    
    
    
    233
    
    
    
    199FDIC and state assessments
    
    
    213
    
    
    
    189
    
    
    
    170Amortization of intangibles
    
    
    295
    
    
    
    292
    
    
    
    297Repossessed asset expenses
    
    
    64
    
    
    
    390
    
    
    
    177Operational charge-offs
    
    
    69
    
    
    
    82
    
    
    
    153Other operating expenses
    
    
    1,723
    
    
    
    1,099
    
    
    
    853Total non-interest expenses
    
    $
    31,924
    
    
    $
    27,569
    
    
    $
    23,632
 Over the past three years, non-interest expenses have increased from $23.6 million to $31.9
million. The increases in this category are due primarily to the increases in employees,
facilities and infrastructure necessary to enable and facilitate the expected future growth of the
organization. It is anticipated that this may moderate as a constant level of growth should
translate to a smaller percentage of our cost increases in future years. 2004 compared to 2003: Non-interest expenses increased $4.4 million in 2004. Approximately $1.8 million of the
increase was related to salary and employee benefits. At December 31, 2004, the Bank had 309
full-time employees and 13 part-time employees, compared to 261 full-time employees and 15
part-time employees at December 31, 2003. The increased staffing was attributable to the opening
of two branches in Southwest Florida in the second half of 2004, additions to the indirect lending
department, additions to manage growth throughout the Company, and additions to assist in security
and regulatory compliance. The majority of the increases in the non-interest expense category are
the result of costs associated with the growth of our business. 2003 compared to 2002: Non-interest expenses increased $3.9 million in 2003. Approximately $2.3 million of the
increase was related to salary and employee benefits. At December 31, 2003, the Bank had 261
full-time employees and 15 part-time employees, compared to 230 full-time employees and 15
part-time employees at December 31, 2002. The increased staffing was attributable to a full year
of operations at the City Center branch opened late in 2002 in Southwest Florida, additions to the
indirect lending department, additions to manage growth throughout the Company, and additions to
assist in security and regulatory compliance. The majority of the increases in the non-interest
expense category are the result of costs associated with the growth of our business. PROVISION FOR INCOME TAXES The provision for income taxes includes federal and state income taxes. The effective income
tax rates for the years ended December 31, 2004, 2003, and 2002 were 34.0%, 35.0%, and 34.2%,
respectively. The fluctuations in effective tax rates reflect the effect of the differences in
deductibility of certain income and expenses. 23




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##### Table of Contents



Loan Portfolio Prior to our entrance into the Southwest Florida market in 2001, our primary locations were in
the Florida Keys (Monroe County) and south Miami-Dade County. As this regions primary industry is
tourism, commercial loan demand is primarily for resort, hotel, restaurant, marina, and related
real estate secured property loans. We serve this market by offering long-term, adjustable rate
financing to the owners of these types of properties for acquisition and improvements. These loans
are often $1 million or larger and may be eligible for government guarantee programs or traditional
participation agreements. The government-funded programs such as the Small Business Administration
are generally geared toward long-term, adjustable rate financing. As our business expands in
Southwest Florida, we believe the loan portfolio will benefit from the resulting geographic
diversification which is expected to provide more industry-based diversity to our loan portfolio.
As of December 31, 2004, we had approximately $96.0 million of loans outstanding (excluding
indirect auto loans) in Southwest Florida, where we had also generated approximately $114.8 million
in total deposits. The cost of living in Monroe County is higher in comparison to other counties in Florida due
in large part to the scarce and expensive real estate with various construction restrictions and
environmental considerations. Accordingly, collateral values on loans secured by property in this
market are greater. We have grown our commercial loan portfolio by aggressively serving this
market. The quality of our credit administration along with stable real estate values has kept
loan losses at low levels. Loans are expected to produce higher yields than investment securities and other
interest-earning assets (assuming that credit losses are not excessive). The absolute volume of
loans and the volume as a percentage of total earning assets are important determinants of the net
interest margin. Gross loans outstanding increased to $653.5 million at the end of 2004 as
compared to $538.6 million at year end 2003, an increase of 21.3%. Of this amount, real estate
mortgage loans increased 20.8% from $391.7 million to $473.3 million. Commercial real estate
mortgage loans accounted for much of this increase, growing from $297.2 million to $351.3 million
at the respective year ends. Another loan type that increased significantly in 2004 was indirect
auto dealer loans. This portfolio increased from $59.4 million at December 31, 2003 to $91.9
million at December 31, 2004. We originate commercial loans with rates that fluctuate with the
prime lending rate and residential loans with rates that fluctuate with the one year treasury
index. At December 31, 2004, 73.6% of the total loan portfolio had floating or adjustable rates. 24




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##### Table of Contents



The following table presents the composition our loan portfolio at December 31: (In thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Real estate mortgage loans:Commercial
    
    $
    351,346
    
    
    $
    297,221
    
    
    $
    265,113
    
    
    $
    232,759
    
    
    $
    170,285Residential
    
    
    67,204
    
    
    
    60,104
    
    
    
    68,389
    
    
    
    68,373
    
    
    
    76,980Farmland
    
    
    4,971
    
    
    
    2,317
    
    
    
    443
    
    
    
    267
    
    
    
    Construction
    
    
    49,815
    
    
    
    32,089
    
    
    
    14,893
    
    
    
    6,434
    
    
    
    7,619Commercial and agricultural loans
    
    
    64,622
    
    
    
    63,624
    
    
    
    49,212
    
    
    
    46,927
    
    
    
    38,762Indirect auto dealer loans
    
    
    91,890
    
    
    
    59,437
    
    
    
    16,854
    
    
    
    
    
    
    
    Home equity loans
    
    
    13,856
    
    
    
    12,574
    
    
    
    17,475
    
    
    
    14,707
    
    
    
    12,813Other consumer loans
    
    
    9,817
    
    
    
    11,232
    
    
    
    9,364
    
    
    
    9,637
    
    
    
    9,115Subtotal
    
    
    653,521
    
    
    
    538,598
    
    
    
    441,743
    
    
    
    379,104
    
    
    
    315,574Less: deferred loan costs (fees)
    
    
    2,157
    
    
    
    1,815
    
    
    
    784
    
    
    
    (157
    )
    
    
    (488
    )Less: allowance for loan losses
    
    
    (6,243
    )
    
    
    (5,216
    )
    
    
    (4,272
    )
    
    
    (3,675
    )
    
    
    (3,268
    )Net loans
    
    $
    649,435
    
    
    $
    535,197
    
    
    $
    438,255
    
    
    $
    375,272
    
    
    $
    311,818
 The contractual maturity distribution of our loan portfolio at December 31, 2004 is indicated
in the table below. The vast majority of these are amortizing loans. Loans maturingWithin
    
    
    1 to 5
    
    
    After 5(In thousands)
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    TotalReal estate mortgage loans:Commercial
    
    $
    22,300
    
    
    $
    35,582
    
    
    $
    293,464
    
    
    $
    351,346Residential
    
    
    29
    
    
    
    2,987
    
    
    
    64,188
    
    
    
    67,204Farmland
    
    
    
    
    
    
    1,332
    
    
    
    3,639
    
    
    
    4,971Construction (a)
    
    
    21,099
    
    
    
    11,364
    
    
    
    17,352
    
    
    
    49,815Commercial and
agricultural loans
    
    
    31,339
    
    
    
    20,696
    
    
    
    12,587
    
    
    
    64,622Indirect auto dealer loans
    
    
    186
    
    
    
    72,476
    
    
    
    19,228
    
    
    
    91,890Home equity loans
    
    
    1,560
    
    
    
    1,226
    
    
    
    11,070
    
    
    
    13,856Other consumer loans
    
    
    511
    
    
    
    5,570
    
    
    
    3,736
    
    
    
    9,817Total Loans
    
    $
    77,024
    
    
    $
    151,233
    
    
    $
    425,264
    
    
    $
    653,521
   (a)
    
    $6,964 of this amount relates to residential real estate construction loans that have been
approved for permanent financing but are still under construction. The remaining amount
relates to commercial real estate construction loans, some of which have been approved for
permanent financing but are still under construction. Loans maturingWithin
    
    
    1 to 5
    
    
    After 5(In thousands)
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    TotalLoans with:Predetermined interest rates
    
    $
    27,768
    
    
    $
    95,892
    
    
    $
    48,963
    
    
    $
    172,623Floating or adjustable rates
    
    
    49,256
    
    
    
    55,341
    
    
    
    376,301
    
    
    
    480,898Total Loans
    
    $
    77,024
    
    
    $
    151,233
    
    
    $
    425,264
    
    
    $
    653,521
 25




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##### Table of Contents



Allowance and Provision for Loan Losses The allowance for loan losses is a valuation allowance for probable incurred credit losses in
the loan portfolio. Our formalized process for assessing the adequacy of the allowance for loan
losses and the resultant need, if any, for periodic provisions to the allowance charged to income,
includes both individual loan analyses and loan pool analyses. Individual loan analyses are
periodically performed on loan relationships of a significant size, or when otherwise deemed
necessary, and primarily encompass commercial real estate and other commercial loans. The result
is that commercial real estate loans and commercial loans are divided into the following risk
categories: Pass, Special Mention and Substandard or worse. When appropriate, a specific reserve
will be established for individual loans. Otherwise, we allocate an allowance for each risk
category. The allocations are based on factors including historical loss rate, perceived economic
conditions (local, national and global), perceived strength of our management, recent trends in
loan loss history, and concentrations of credit. Home equity loans, indirect auto dealer loans, residential loans and consumer loans generally
are not analyzed individually. These loans are grouped into pools and assigned risk categories
based on their current payment status and managements assessment of risk inherent in the various
types of loans. As above, when appropriate, a specific reserve will be established for individual
loans. Otherwise, we allocate an allowance for each loan classification. The allocations are
based on the same factors mentioned above. Since most of the factors that we use in constructing our estimate for the allowance have been
relatively stable in recent years, the provisions we have used to fund this allowance have been
necessitated primarily by the overall level of loan growth and to replenish the allowance for
specific charge-offs. Because we are principally a commercial bank and have a loan to deposit
ratio greater than 90%, any estimate that is used as a multiplier on loan balances reflecting our
best perception of a particular type of risk has the potential to have significant income effects
if these multipliers change. Increases in volume and concentration of commercial real estate and
indirect auto dealer loans relative to the overall composition of the loan portfolio translate to a
greater than average increase in the provision for loan losses as our risk management policies
dictate generally higher allocations of such provisions for these categories of loans. During 2004, as the indirect auto dealer loan portfolio begins to mature, the loss history has
approached expected levels and the management processes, controls and monitoring and risk
management tools implemented throughout recent years indicate that higher multipliers were
necessary for the indirect loan portfolio. Contemporaneously, as the Florida economy has grown at
an accelerated pace compared to other markets, real estate prices have escalated and local
economies have benefited resulting in diminishing historical and expected loss factors. Analysis of
these events results in these same tools indicating that lower multipliers were necessary for
commercial loans collateralized by real estate. Looking forward, although the concentration of
indirect auto dealer loan category has increased rapidly since the inception of this program,
management believes that this growth will peak below 15% of the total loan portfolio composition
during 2005. This category should then begin to decrease as a percentage of the loan portfolio as
we expect overall asset and loan growth to continue. As this occurs, if we make the assumption,
however unlikely, that all other factors were to remain constant, we would expect that the
allowance for loan losses would decrease as a percentage of gross loans in the near term. Further, since the net result of our calculation for the allowance results in this amount
being 0.96% of outstanding loans, the risks associated with changes in the underlying factors of
this calculation have an asymmetrical risk to the extent of possible negative as opposed to
positive consequences. In other words, the current allowance reflects factors whose history has
indicated and justified a relatively low allowance in percentage terms. These factors have limited
capacity for improvement since associated risks cannot go to zero. However, for example, factors
such as economic conditions and loan loss history could conceivably deteriorate dramatically. If
that were to happen, the effect on the allowance calculation would be significant and, therefore,
require a large provision to absorb higher potential losses. 26




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##### Table of Contents



Senior management and the Board of Directors review this calculation and the underlying
assumptions on a routine basis not less frequently than quarterly. The allowance for loan losses amounted to $6.2 million and $5.2 million at December 31, 2004
and December 31, 2003, respectively. Based on an analysis performed by management at December 31,
2004, the allowance for loan losses is considered to be adequate to cover estimated loan losses in
the portfolio as of that date. However, managements judgment is based upon a number of
assumptions about future events, which are believed to be reasonable, but which may or may not
prove valid. Thus, there can 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. The provision for loan losses is a charge to income in the current period to replenish the
allowance and maintain it at a level that management has determined to be adequate to absorb
estimated losses in the loan portfolio. Our provision for loan losses was $2.5 million, $1.6
million, and $0.8 million for the years ended December 31, 2004, 2003, and 2002, respectively 27




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##### Table of Contents



Changes affecting the allowance for loan losses are summarized for the years ended December 31, (In thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Analysis of allowance for loan losses:Balance at beginning of year
    
    $
    5,216
    
    
    $
    4,272
    
    
    $
    3,675
    
    
    $
    3,268
    
    
    $
    2,997Charge-offs:Real estate mortgage loans:Commercial
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    372
    
    
    
    Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    Farmland
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial and agricultural loans
    
    
    92
    
    
    
    183
    
    
    
    14
    
    
    
    200
    
    
    
    27Indirect auto dealer loans
    
    
    1,313
    
    
    
    370
    
    
    
    16
    
    
    
    
    
    
    
    Home equity loans
    
    
    
    
    
    
    53
    
    
    
    15
    
    
    
    
    
    
    
    7Other consumer loans
    
    
    82
    
    
    
    61
    
    
    
    46
    
    
    
    30
    
    
    
    27Total charge-offs
    
    
    1,487
    
    
    
    667
    
    
    
    302
    
    
    
    623
    
    
    
    61Recoveries:Real estate mortgage loans:Commercial
    
    
    
    
    
    
    6
    
    
    
    84
    
    
    
    
    
    
    
    Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    Farmland
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial and agricultural loans
    
    
    38
    
    
    
    1
    
    
    
    
    
    
    
    4
    
    
    
    Indirect auto dealer loans
    
    
    3
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    Home equity loans
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Other consumer loans
    
    
    16
    
    
    
    9
    
    
    
    24
    
    
    
    11
    
    
    
    Total recoveries
    
    
    59
    
    
    
    25
    
    
    
    108
    
    
    
    25
    
    
    
    Net charge-offs
    
    
    1,428
    
    
    
    642
    
    
    
    194
    
    
    
    598
    
    
    
    61Provision for loan losses
    
    
    2,455
    
    
    
    1,586
    
    
    
    791
    
    
    
    1,005
    
    
    
    332Allowance for loan losses at end of year
    
    $
    6,243
    
    
    $
    5,216
    
    
    $
    4,272
    
    
    $
    3,675
    
    
    $
    3,268Ratio of net charge-offs to average
net loans outstanding
    
    
    0.24
    %
    
    
    0.13
    %
    
    
    0.05
    %
    
    
    0.17
    %
    
    
    0.02
    %
 28




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##### Table of Contents



The following table represents managements best estimate of the allocation of the allowance
for loan losses to the various segments of the loan portfolio based on information available as of
December 31. Due to the ongoing evaluation and changes in the basis for the allowance for loan
losses, actual future charge offs will not necessarily follow the allocations described below. (In thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofTotal
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    TotalAllowance
    
    
    Loans
    
    
    Allowance
    
    
    Loans
    
    
    Allowance
    
    
    Loans
    
    
    Allowance
    
    
    Loans
    
    
    Allowance
    
    
    LoansReal estate mortgage
loans:Commercial
    
    $
    2,513
    
    
    
    53.7
    
    
    $
    2,608
    
    
    
    55.2
    
    
    $
    2,656
    
    
    
    60.0
    
    
    $
    2,120
    
    
    
    61.4
    
    
    $
    1,778
    
    
    
    54.0Residential
    
    
    144
    
    
    
    10.3
    
    
    
    151
    
    
    
    11.2
    
    
    
    178
    
    
    
    15.5
    
    
    
    183
    
    
    
    18.0
    
    
    
    706
    
    
    
    24.4Farmland
    
    
    34
    
    
    
    0.8
    
    
    
    20
    
    
    
    0.4
    
    
    
    4
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    Construction
    
    
    312
    
    
    
    7.6
    
    
    
    217
    
    
    
    6.0
    
    
    
    87
    
    
    
    3.4
    
    
    
    26
    
    
    
    1.7
    
    
    
    43
    
    
    
    2.4Commercial and
agricultural loans
    
    
    737
    
    
    
    9.9
    
    
    
    901
    
    
    
    11.8
    
    
    
    740
    
    
    
    11.1
    
    
    
    917
    
    
    
    12.4
    
    
    
    414
    
    
    
    12.3Indirect auto dealer loans
    
    
    2,312
    
    
    
    14.1
    
    
    
    1,095
    
    
    
    11.0
    
    
    
    169
    
    
    
    3.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity loans
    
    
    67
    
    
    
    2.1
    
    
    
    78
    
    
    
    2.3
    
    
    
    216
    
    
    
    4.0
    
    
    
    259
    
    
    
    3.9
    
    
    
    190
    
    
    
    4.0Other consumer loans
    
    
    124
    
    
    
    1.5
    
    
    
    146
    
    
    
    2.1
    
    
    
    222
    
    
    
    2.1
    
    
    
    170
    
    
    
    2.5
    
    
    
    137
    
    
    
    2.9$
    6,243
    
    
    
    100
    %
    
    $
    5,216
    
    
    
    100
    %
    
    $
    4,272
    
    
    
    100
    %
    
    $
    3,675
    
    
    
    100
    %
    
    $
    3,268
    
    
    
    100
    %
 Non-Performing Assets Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days
or more, repossessed personal property, and other real estate. Loans are placed on nonaccrual
status when management has concerns relating to the ability to collect the loan principal and
interest and generally when such loans are 90 days or more past due. A loan is considered impaired
when it is probable that not all principal and interest amounts will be collected according to the
loan contract. Non-performing assets were as follows for the periods ending December 31: (In thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Total nonaccrual loans
    
    $
    704
    
    
    $
    390
    
    
    $
    546
    
    
    $
    1,590
    
    
    $
    503Accruing loans delinquent 90 days or more (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,014Total non-performing loans
    
    $
    704
    
    
    $
    390
    
    
    $
    546
    
    
    $
    1,590
    
    
    $
    2,517Repossessed personal property (indirect auto
dealer loans)
    
    
    688
    
    
    
    598
    
    
    
    70
    
    
    
    
    
    
    
    Other real estate owned (b)
    
    
    882
    
    
    
    193
    
    
    
    550
    
    
    
    550
    
    
    
    Other assets (b)
    
    
    2,665
    
    
    
    2,472
    
    
    
    2,519
    
    
    
    2,290
    
    
    
    Total non-performing assets
    
    $
    4,939
    
    
    $
    3,653
    
    
    $
    3,685
    
    
    $
    4,430
    
    
    $
    2,517Allowance for loan losses
    
    $
    6,243
    
    
    $
    5,216
    
    
    $
    4,272
    
    
    $
    3,675
    
    
    $
    3,268Non-performing assets as a percent of total
assets
    
    
    0.60
    %
    
    
    0.55
    %
    
    
    0.65
    %
    
    
    0.90
    %
    
    
    0.57
    %Non-performing loans as a percent of gross
loans
    
    
    0.11
    %
    
    
    0.07
    %
    
    
    0.12
    %
    
    
    0.42
    %
    
    
    0.80
    %Allowance for loan losses as a percent of
non-performing loans
    
    
    886.79
    %
    
    
    1,336.33
    %
    
    
    783.19
    %
    
    
    231.07
    %
    
    
    129.84
    %
    29




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##### Table of Contents



(b) The Bank made a $10.0 million loan to construct a lumber mill in northern Florida. Of
this amount, $6.4 million had been sold by the Bank to other lenders. The loan was partially
guaranteed as to principal and interest by the 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. During 2001, upon completion of foreclosure on the underlying collateral, the non-guaranteed
portion of this loan and interest accrued through the foreclosure date was reclassified into other
real estate ($550,000) and other assets (approximately $1.9 million) based on the fair value of the
underlying-collateral. The portion of this loan guaranteed by the USDA was approximately $1.6
million at December 31, 2004 and December 31, 2003, and is accruing interest. Accrued interest on
this loan totals approximately $677,000 and $590,000 at December 31, 2004 and December 31, 2003,
respectively. The Bank is pursuing a sale of the property and equipment and 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. Other real estate recorded on the Banks
books totaled approximately $190,000 and $192,000 at December 31, 2004 and December 31, 2003,
respectively. The non-guaranteed principal and interest ($2.0 million at December 31, 2004 and
December 31, 2003) and the reimbursable capitalized liquidation costs and protective advance costs
totaling approximately $704,000 and $511,000 at December 31, 2004 and December 31, 2003,
respectively, are included as other assets in the financial statements. The Bank sold certain pieces of equipment associated with the lumber mill property. Proceeds
from the sales were used to reduce the other real estate amount and liquidation cost amounts
recorded on the Banks books. In 2003, the Bank wrote down the carrying amount of the other real
estate by $262,000 based upon anticipated proceeds from the sale of the property and remaining
equipment. Florida law requires a bank to liquidate or charge off repossessed real property within five
years, and repossessed personal property within six months. The Bank was awarded title to the real
property on June 12, 2001, and an adjudicated interest in the owners trust proceeds. The time
constraints imposed by Florida law required that the personal property be disposed of or charged
off by December 2001. The Bank applied to the State of Florida for an extension to carry the
personal property on the Banks books and was granted an extension to carry the personal property
on its books until June 11, 2003. Since the property had not been liquidated as of June 11th, 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. Liquidity and Rate Sensitivity Liquidity represents the ability to provide steady sources of funds for loan commitments and
investment activities, as well as to provide sufficient funds to cover deposit withdrawals and
payments of debt, off-balance sheet obligations and operating obligations. Funds can be obtained
from operations by converting assets to cash, by attracting new deposits, by borrowing, by raising
capital and other ways. Major sources of increases in cash and cash equivalents are as follows for the three years ending
December 31: (In thousands)
    
    2004
    
    
    2003
    
    
    2002Provided by operating activities
    
    $
    6,801
    
    
    $
    9,574
    
    
    $
    5,328Used by investing activities
    
    
    (151,336
    )
    
    
    (98,767
    )
    
    
    (67,199
    )Provided by financing activities
    
    
    153,792
    
    
    
    98,804
    
    
    
    64,671Net increase in cash and cash
equivalents
    
    $
    9,257
    
    
    $
    9,611
    
    
    $
    2,800
 30




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##### Table of Contents



As discussed in Note 16 of the Consolidated Financial Statements, the Company had unfunded
loan commitments and unfunded letters of credit totaling $109.0 million at December 31, 2004. The
Company believes the likelihood of these commitments either needing to be totally funded or funded
at the same time is low. However, should significant funding requirements occur, the Company has
available borrowing capacity from various sources as discussed below. The Bank has an unsecured overnight federal funds purchased accommodation up to a maximum of
$12.0 million from its principal correspondent bank. Further, the Bank has invested in FHLB stock
for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is
equal to 20% of the Banks total assets as reported on the December 31, 2004 financial information
submitted to the Banks regulators. The credit availability from the FHLB approximated $165.6
million at December 31, 2004 under which $35 million was outstanding. Borrowings against this line
of credit are collateralized by the Banks one-to-four family residential mortgage loans. Scheduled maturities and paydowns of loans and investment securities are a continued source of
liquidity. Also, many adjustable rate residential real estate loans originated are salable in the
secondary mortgage market at par or better and therefore provide a secondary source for liquidity. At December 31, 2004, our gross loan to deposit ratio was 95.0% compared to a ratio of 97.3%
at December 31, 2003. Management monitors and assesses the adequacy of our liquidity position on a
monthly basis to ensure that sufficient sources of liquidity are maintained and available. Under state banking law, regulatory approval will be required if the total of all dividends
declared in any calendar year by the Bank exceeds the Banks net profits to date for that year
combined with its retained net profits for the preceding two years. Retained earnings of the Bank
available for payment of dividends to us without prior regulatory approval at December 31, 2004 is
approximately $16.6 million. These dividends represent the Companys primary source of liquidity
on a stand alone basis. Closely related to liquidity management is the management of interest-earning assets and
interest-bearing liabilities. The Company manages its rate sensitivity position to avoid wide
swings in net interest margins and to minimize risk due to changes in interest rates. 31




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##### Table of Contents



Our interest rate sensitivity position at December 31, 2004 is presented in the table below. 3 Months
    
    
    4 to 6
    
    
    7 to 12
    
    
    1 to 5
    
    
    Over 5(Dollars in thousands)
    
    or Less
    
    
    Months
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalInterest-earning assets:Loans
    
    $
    281,781
    
    
    $
    27,888
    
    
    $
    40,524
    
    
    $
    236,191
    
    
    $
    67,137
    
    
    $
    653,521Investment securities-taxable
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    37,963
    
    
    
    25,890
    
    
    
    64,004Investment securities-tax exempt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,844
    
    
    
    6,972
    
    
    
    9,816Marketable equity securities
    
    
    3,987
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,987Federal funds sold
    
    
    15,528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,528FHLB stock
    
    
    2,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,910Interest-bearing deposit in other
banks
    
    
    203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203Total interest-bearing assets
    
    
    304,560
    
    
    
    27,888
    
    
    
    40,524
    
    
    
    276,998
    
    
    
    99,999
    
    
    
    749,969Interest-bearing liabilities:NOW accounts
    
    
    92,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,402Money market
    
    
    146,009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,009Savings deposits
    
    
    46,231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,231Time deposits
    
    
    42,045
    
    
    
    40,773
    
    
    
    86,099
    
    
    
    82,260
    
    
    
    5
    
    
    
    251,182Notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,250
    
    
    
    5,250Subordinated debentures
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    13,000Other borrowings
    
    
    47,157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,157Total interest-bearing liabilities
    
    
    378,844
    
    
    
    40,773
    
    
    
    86,099
    
    
    
    82,260
    
    
    
    13,255
    
    
    
    601,231Interest sensitivity gap
    
    $
    (74,284
    )
    
    $
    (12,885
    )
    
    $
    (45,575
    )
    
    $
    194,738
    
    
    $
    86,744
    
    
    $
    148,738Cumulative interest sensitivity gap
    
    $
    (74,284
    )
    
    $
    (87,169
    )
    
    $
    (132,744
    )
    
    $
    61,994
    
    
    $
    148,738
    
    
    $
    148,738Cumulative sensitivity ratio
    
    
    (9.9
    %)
    
    
    (11.6
    %)
    
    
    (17.7
    %)
    
    
    8.3
    %
    
    
    19.8
    %
    
    
    19.8
    %
 We are cumulatively liability sensitive through the one-year time period, and asset sensitive
in the over one year timeframes above. Certain liabilities such as NOW and passbook savings
accounts, while technically subject to immediate repricing in response to changing market rates,
historically do not reprice as quickly nor to the extent as other interest-sensitive accounts.
Nevertheless, if market interest rates should decrease, it is anticipated that our net interest
margin would decrease due to many interest-bearing liabilities with current rates so low that
further reductions could not be significant. Because of non-interest-bearing liabilities, total
interest-earning assets are substantially greater than the total interest-bearing liabilities and
therefore it is anticipated that over time the effects on net interest income from changes in asset
yield will be greater than the change in expense from liability cost. Therefore, if rates increase
it is anticipated that the net interest margin would over time increase and this is particularly
true over longer time horizons since we have more total assets subject to rate changes than total
liabilities that are rate sensitive. Even in the near term, we believe the $132.7 million one year cumulative negative sensitivity
gap may exaggerate the probable effects on earnings in a rising rate environment for two reasons.
First, the liabilities subject to repricing are predominately not indexed to any specific market
rate and therefore offer us the opportunity to delay or diminish any rate repricings. Further, in
this current rate environment, the Bank has been originating loans with interest rate floors. The
effect of this has been to decrease the volatility of net interest margin and decrease asset
sensitivity due to the fact that these loans behave similar to fixed rate loans in periods over a
significant range of interest rate changes. Interest-earning assets and time deposits are presented based on their contractual terms. It
is anticipated that run off in any deposit category will be approximately offset by new deposit generation.
Since we have experienced steady growth in deposits, no net run off in any deposit category is
assumed in the interest rate sensitivity table. It is our policy to maintain our cumulative one
year gap ratio in the -20% to +10% range. At December 31, 2004, the Company was within this range
with a one year cumulative sensitivity ratio of -17.7%. 32




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##### Table of Contents



Investment Portfolio Contractual maturities of investment securities at December 31, 2004 are shown below.
Expected maturities differ from contractual maturities because borrowers may have the right to call
or repay obligations without call or prepayment penalties. MortgageBackedSecurities &MarketableAfter 1 Year
    
    
    After 5 Years
    
    
    
    
    
    
    
    
    
    
    EquityWithin 1 Year
    
    
    Within 5 Years
    
    
    Within 10 Years
    
    
    After 10 Years
    
    
    Securities(Dollars in thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    AmountSecurities Available for Sale:U.S. Treasury Securities
    
    $
    
    
    
    
    
    
    
    $
    5,154
    
    
    
    3.30
    %
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    U.S. Govt agencies and
corporations
    
    
    
    
    
    
    
    
    
    
    32,396
    
    
    
    3.38
    %
    
    
    21,067
    
    
    
    4.41
    %
    
    
    
    
    
    
    
    
    
    
    States and political
subdivisions  tax exempt (a)
    
    
    
    
    
    
    
    
    
    
    2,845
    
    
    
    6.03
    %
    
    
    4,793
    
    
    
    6.12
    %
    
    
    2,178
    
    
    
    5.53
    %
    
    
    States and political
subdivisions  taxable
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    7.29
    %
    
    
    
    
    
    
    
    
    
    
    2,444
    
    
    
    6.10
    %
    
    
    Marketable equity securities (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,987Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,531Total
    
    $
    
    
    
    
    
    
    
    $
    40,807
    
    
    
    3.58
    %
    
    $
    25,860
    
    
    
    4.71
    %
    
    $
    4,622
    
    
    
    5.83
    %
    
    $
    6,518
 Yield by classification of investment securities at December 31, 2004 was as follows: (Dollars in thousands)
    
    Yield
    
    
    TotalsSecurities Available for Sale:U.S. Treasury Securities
    
    
    3.30
    %
    
    $
    5,154U.S. Govt agencies and corporations
    
    
    3.79
    %
    
    
    53,463States and political subdivisions  tax exempt (a)
    
    
    5.96
    %
    
    
    9,816States and political subdivisions  taxable
    
    
    6.26
    %
    
    
    2,856Marketable equity securities (a)
    
    
    9.60
    %
    
    
    3,987Mortgage-backed securities
    
    
    5.04
    %
    
    
    2,531Total
    
    
    4.38
    %
    
    $
    77,807
   (a)
    
    Weighted average yields on tax exempt obligations and marketable equity securities have
been computed by grossing up actual tax exempt income (90% for marketable equity
securities) to a fully taxable equivalent basis using a federal tax rate of 34%. 33




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##### Table of Contents



The following table presents the amortized cost, market value, unrealized gains, and unrealized
losses for the major categories of our investment portfolio for each reported period: (In thousands) Available for Sale  December 31, 2004 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury Securities
    
    $
    5,178
    
    
    $
    5
    
    
    $
    29
    
    
    $
    5,154U.S. Government agencies and corporations
    
    
    54,228
    
    
    
    104
    
    
    
    869
    
    
    
    53,463States and political subdivisions-tax
exempt
    
    
    9,596
    
    
    
    246
    
    
    
    26
    
    
    
    9,816States and political subdivisions-taxable
    
    
    2,862
    
    
    
    17
    
    
    
    23
    
    
    
    2,856Marketable equity securities
    
    
    3,000
    
    
    
    987
    
    
    
    
    
    
    
    3,987Mortgage-backed securities
    
    
    2,473
    
    
    
    58
    
    
    
    
    
    
    
    2,531$
    77,337
    
    
    $
    1,417
    
    
    $
    947
    
    
    $
    77,807
 Available for Sale  December 31, 2003 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury Securities
    
    $
    209
    
    
    $
    9
    
    
    $
    
    
    
    $
    218U.S. Government agencies and corporations
    
    
    31,357
    
    
    
    425
    
    
    
    663
    
    
    
    31,119States and political subdivisions-tax
exempt
    
    
    8,838
    
    
    
    378
    
    
    
    59
    
    
    
    9,157States and political subdivisions-taxable
    
    
    3,559
    
    
    
    42
    
    
    
    101
    
    
    
    3,500Marketable equity securities
    
    
    3,000
    
    
    
    395
    
    
    
    
    
    
    
    3,395Mortgage-backed securities
    
    
    5,041
    
    
    
    128
    
    
    
    1
    
    
    
    5,168$
    52,004
    
    
    $
    1,377
    
    
    $
    824
    
    
    $
    52,557
 Available for Sale  December 31, 2002 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury Securities
    
    $
    213
    
    
    $
    11
    
    
    $
    
    
    
    $
    224U.S. Government agencies and corporations
    
    
    28,333
    
    
    
    884
    
    
    
    
    
    
    
    29,217States and political subdivisions-tax
exempt
    
    
    5,172
    
    
    
    382
    
    
    
    
    
    
    
    5,554States and political subdivisions-taxable
    
    
    4,380
    
    
    
    89
    
    
    
    9
    
    
    
    4,460Mortgage-backed securities
    
    
    14,383
    
    
    
    430
    
    
    
    
    
    
    
    14,813$
    52,481
    
    
    $
    1,796
    
    
    $
    9
    
    
    $
    54,268
 34




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##### Table of Contents



Deposits The following table presents the average amount outstanding and the average rate paid on
deposits by us for the years ended December 31, 2004, 2003, and 2002. 2004
    
    
    2003
    
    
    2002Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average(Dollars in thousands)
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    RateNoninterest-bearing deposits
    
    $
    139,939
    
    
    
    
    
    
    $
    114,344
    
    
    
    
    
    
    $
    95,324Interest-bearing depositsNOW Accounts
    
    
    76,068
    
    
    
    0.43
    %
    
    
    59,389
    
    
    
    0.37
    %
    
    
    50,481
    
    
    
    0.53
    %Money market
    
    
    130,172
    
    
    
    0.91
    %
    
    
    125,410
    
    
    
    0.88
    %
    
    
    131,384
    
    
    
    1.36
    %Savings deposit
    
    
    44,380
    
    
    
    0.39
    %
    
    
    35,475
    
    
    
    0.48
    %
    
    
    29,891
    
    
    
    0.75
    %Time deposits
    
    
    227,834
    
    
    
    3.02
    %
    
    
    198,162
    
    
    
    3.25
    %
    
    
    149,061
    
    
    
    4.03
    %Total
    
    $
    618,393
    
    
    
    1.39
    %
    
    $
    532,780
    
    
    
    1.49
    %
    
    $
    456,141
    
    
    
    1.82
    %
 The following table presents the maturity of our time deposits at December 31, 2004: Deposits
    
    
    Deposits$100,000
    
    
    Less than(In thousands)
    
    and Greater
    
    
    $100,000
    
    
    TotalMonths to maturity:3 or less
    
    $
    20,692
    
    
    $
    20,138
    
    
    $
    40,8304 to 6
    
    
    18,953
    
    
    
    22,042
    
    
    
    40,9957 through 12
    
    
    42,935
    
    
    
    43,625
    
    
    
    86,560Over 12
    
    
    43,627
    
    
    
    39,170
    
    
    
    82,797Total
    
    $
    126,207
    
    
    $
    124,975
    
    
    $
    251,182
 Off-Balance Sheet Arrangements and Contractual Obligations Our off-balance sheet arrangements and contractual obligations at December 31, 2004 are
summarized in the table that follows. The amounts shown for commitments to extend credit and
letters of credit are contingent obligations, some of which are expected to expire without being
drawn upon. As a result, the amounts shown for these items do not necessarily represent future
cash requirements. We believe that our current sources of liquidity are more than sufficient to
fulfill the obligations we have as of December 31, 2004 pursuant to off-balance sheet arrangements
and contractual obligations. 35




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Amount of Commitment Expiration Per PeriodOver ThreeOver One
    
    
    YearsTotal Amounts
    
    
    One Year or
    
    
    Year Through
    
    
    Through Five
    
    
    Over Five(in thousands)
    
    Committed
    
    
    Less
    
    
    Three Years
    
    
    Years
    
    
    YearsCommitments to extend
credit
    
    $
    106,933
    
    
    $
    66,219
    
    
    $
    15,052
    
    
    $
    4,941
    
    
    $
    20,721Standby letters of credit
    
    
    2,085
    
    
    
    2,085
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    3,052
    
    
    
    591
    
    
    
    1,041
    
    
    
    760
    
    
    
    660Purchase obligations
    
    
    10,661
    
    
    
    1,826
    
    
    
    4,086
    
    
    
    4,749
    
    
    
    Long-term debt
    
    
    18,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,250Other long-term
liabilities reflected on
the balance sheet under
GAAP
    
    
    3,525
    
    
    
    
    
    
    
    27
    
    
    
    76
    
    
    
    3,422Total
    
    $
    144,506
    
    
    $
    70,721
    
    
    $
    20,206
    
    
    $
    10,526
    
    
    $
    43,053
 The Bank is a party to financial instruments with off-balance sheet risk in the normal course
of business to meet the financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the consolidated balance
sheets. The Banks exposure to credit loss in the event of nonperformance by the other party to
financial instruments for commitments to extend credit and standby letters of credit is represented
by the contractual notional amount of these instruments. The Bank uses the same credit policies in
making commitments to extend credit and generally uses the same credit policies for letters of
credit as it does for on-balance sheet instruments. Commitments to extend credit are legally binding agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since some of these
commitments are expected to expire without being drawn upon, the total commitment amount does not
necessarily represent future cash requirements. Unused home equity lines which comprise a
substantial portion of these commitments, generally expire five years from their date of
origination. Other loan commitments generally expire in 30 days. The amount of collateral
obtained, if any, by the Bank upon extension of credit is based on managements credit evaluation
of the borrower. Collateral held varies but may include security interests in business assets,
mortgages on commercial and residential real estate, deposit accounts with the Bank or other
financial institutions, and securities. Standby letters of credit are conditional commitments issued by the Bank to assure the
performance or financial obligations of a customer to a third party. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in extending loans to
customers. The Bank generally holds collateral and/or obtains personal guarantees supporting these
commitments. The Bank is obligated under operating leases for office and banking premises which expire in
periods varying from one to thirteen years. Future minimum lease payments, before considering
renewal options that generally are present, total $3.1 million. Purchase obligations consist of computer and item processing services, and debit and ATM card
processing and support services contracted by the Company under long term contractual
relationships. 36




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##### Table of Contents



Long term debt consists of subordinated debentures totaling $13 million and notes payable
totaling $5.25 million. These are further described in Note 10 of the Consolidated Financial
Statements. Other long-term liabilities represent obligations under the non-qualified retirement plan for
Bank directors and the non-qualified deferred compensation arrangement with certain of the
Companys executive officers. Under the director retirement plan, the Company pays each
participant, or their beneficiary, the amount of board compensation fees that the director has
elected to defer and interest in 120 equal monthly installments, beginning the month following the
directors normal retirement date. The amount presented above reflects the future obligation to be
paid, assuming no future fee deferrals. Under the executive deferred compensation plan, the
Company pays each participant, or their beneficiary, 40% of the executives highest compensation
level in the three years immediately preceding the date of termination of employment in 180 equal
monthly installments, beginning the month following the executives normal retirement date. The
amount presented reflects the amount vested in this plan as of December 31, 2004. Capital Adequacy There are various primary measures of capital adequacy for banks and financial holding
companies such as risk based capital guidelines and the leverage capital ratio. See Note 14 to the
Consolidated Financial Statements. As of December 31, 2004, the Bank exceeded its required levels of capital for a bank
categorized by the FDIC as well capitalized under the regulatory framework for prompt corrective
action. The Banks risk-based capital ratio of Tier 1 capital to risk-weighted assets was 11.4%,
its risk-based ratio of total capital to risk-weighted assets was 12.4%, and its leverage ratio was
10.5%. As of December 31, 2004, the Company exceeded its required levels of capital for a Company
categorized as well capitalized under the regulatory framework for prompt corrective action. The
Companys risk-based capital ratio of Tier 1 capital to risk-weighted assets was 10.9%, its
risk-based ratio of total capital to risk-weighted assets was 12.6%, and its leverage ratio was
10.0%. Inflation Inflation has an important impact on the growth of total assets in the banking industry and
causes a need to increase equity capital higher than normal levels in order to maintain an
appropriate equity to assets ratio. We have been able to maintain an adequate level of equity, as
previously mentioned and cope with the effects of inflation by managing our interest rate
sensitivity gap position through our asset/liability management program, and by periodically
adjusting our pricing of services and banking products to take into consideration current costs. Recent Accounting Policies During 2004, the FASB revised Statement No. 123, Accounting for Stock-Based Compensation
(SFAS 123R) which established accounting requirements for share-based compensation to employees
and carries forward prior guidance on accounting for awards to non-employees. The provisions of
this statement will become effective for reporting periods beginning after June 15, 2005 for all
equity awards granted after the effective date and for the subsequent vesting of previously granted
awards. SFAS 123R requires an entity to recognize compensation expense based on an estimate of the
fair value and number of awards expected to actually vest, exclusive of awards expected to be
forfeited. Currently, the Company accounts for stock options granted to employees according to the
provisions of APB Opinion No. 25, whereby compensation expense is recorded based upon the intrinsic
value method. The stock-based compensation table in Note 1 to the consolidated financial statements
illustrates the effect on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS 123 to stock-based employee compensation The Company is required to
and will adopt SFAS 123R on July 1, 2005. 37




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In December 2004, the FASB issued Statement No. 153, Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions. This statement amends
the principle of APB No. 29 that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged and more broadly provides for exceptions regarding exchanges of
nonmonetary assets that do not have commercial substance. This Statement is effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption
of this standard is not expected to have a material impact on the financial condition, the results
of operations, or liquidity of the Company. In March 2004, the FASB Emerging Issues Task Force (EITF) released Issue 03-1, Meaning of
Other Than Temporary Impairment and Its Application to Certain Investments, which addressed
other-than-temporary impairment for certain debt and equity investments. The recognition and
measurement requirements of Issue 03-1, and other disclosure requirements not already implemented,
were effective for periods beginning after June 15, 2004. In September 2004, the FASB staff issued
FASB Staff Position (FSP) EITF 03-1-1, which delayed the effective date for certain measurement and
recognition guidance contained in Issue 03-1. The FSP requires the application of pre-existing
other-than-temporary guidance during the period of delay until a final consensus is reached.
Management does not anticipate the issuance of the final consensus will have a material impact on
the financial condition, the results of operations, or liquidity of the Company. In March 2004, the SEC issued Staff Accounting Bulletin No. 105, Application of Accounting
Principles to Loan Commitments (SAB 105). This bulletin was issued to inform registrants of the
SECs view that the fair value of the recorded loan commitments, which are required to follow
derivative accounting under FAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, should not consider the expected future cash flows related to the associated servicing
of the future loan. The provisions of SAB 105 must be applied to loan commitments accounted for as
derivatives that are entered into after March 31, 2004. The adoption of this Staff Accounting
Bulletin did not have a material impact on the financial condition, the results of operations, or
liquidity of the Company. In December 2003, The American Institute of Certified Public Accountants issued Statement of
Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP
03-3 requires acquired loans, including debt securities, to be recorded at the amount of the
purchasers initial investment and prohibits carrying over valuation allowances from the seller for
these loans that have evidence of deterioration in credit quality since origination, and it is
probable all contractual cash flows on the loan will be unable to be collected. The provisions of
this SOP are effective for loans acquired in fiscal years beginning after December 15, 2004 and
their adoption is not expected to have a material impact on the financial condition, the results of
operations, or liquidity of the Company. Critical Accounting Policies In reviewing and understanding financial information for the Company, you are encouraged to
read and understand the significant accounting policies which are used in preparing the
consolidated financial statements of the Company. These policies are described in Note 1 to the
Consolidated Financial Statements. Of these policies, management believes that the accounting for
the allowance for loan losses is the most critical. Losses on loans result from a broad range of causes from borrower specific problems, to
industry issues, to the impact of the economic environment. The identification of these factors
that lead to default or non-performance under a borrower loan agreement and the estimation of loss
in these situations are very subjective. In addition, a dramatic change in the performance of one
or a small number of borrowers can have a significant impact on the estimate of losses. As
described above under the Allowance and Provision for Loan Losses heading, management has
implemented a process that has been applied consistently to systematically consider the many
variables that impact the estimation of the allowance for loan losses. 38




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##### Table of Contents



ITEM 7A. 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 following interest rate sensitivity analysis information as of December 31, 2004 was
developed using simulation analysis of the Companys sensitivity to changes in net interest income
under varying assumptions for changes in market interest rates. Specifically, the model derives
expected interest income and interest expense resulting from an immediate and parallel shift in the
yield curve in the amounts shown. These rate changes are matched with known repricing intervals and assumptions for new growth
net of expected prepayments. The assumptions are based primarily on experience in the Companys
market under varying rate environments. The imbedded options that the Companys loan customers
possess to refinance are considered for purposes of this analysis and cause the larger decreases in
income in a declining rate scenario versus the income increases in the same size rising rate
scenario. This analysis intentionally exaggerates interest sensitivity. For the sake of simplicity and
comparability, an immediate change in rates is assumed. However, any significant change in actual
market rates would probably be phased in over an extended period of time. This phase in would
reduce the net interest income effects for any absolute change in rates. Also, the Company has
been originating adjustable rate commercial loans with interest rate floors that are currently at
rates higher than the index and margin on the loans would indicate. An example would be a loan at
Prime plus 1% but with a 7.0% floor. The Company currently has in excess of $200.3 million of
these types of loans where the loan rates are at the floors. The effects of this are twofold.
First, this has benefited our margins currently since we have assets earning yields higher than
would be the case absent the floor rates. Second, in a declining rate environment and in a limited
rising rate environment those adjustable rate loans act like fixed rate loans. This limits the
Companys loss of interest income when rates decline but does constrain income gains in a rising
rate market. In general, having this significant amount of loans at their floors reduces the
Companys overall rate sensitivity. We attempt to retain interest rate neutrality by generating mostly adjustable rate loans and
managing the securities, wholesale funding, and Fed Funds positions to offset the repricing
characteristics of the deposit liabilities. (In thousands)
    
    Interest Rates Decrease
    
    
    Interest Rates
    
    
    Interest Rates Increase200 BP
    
    
    100 BP
    
    
    Remain Constant
    
    
    100 BP
    
    
    200 BP2005 Interest Income
    
    $
    46,440
    
    
    $
    49,783
    
    
    $
    53,126
    
    
    $
    56,182
    
    
    $
    59,7762005 Interest Expense
    
    
    9,080
    
    
    
    11,882
    
    
    
    15,362
    
    
    
    18,841
    
    
    
    22,321Net Interest Income
    
    
    37,360
    
    
    
    37,901
    
    
    
    37,764
    
    
    
    37,341
    
    
    
    37,455Change in net income after tax vs. budget
    
    $
    (252
    )
    
    $
    85
    
    
    
    
    
    
    $
    (264
    )
    
    $
    (193
    )
 39




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements, notes thereto and report of independent certified
public accountants thereon included on the following pages are incorporated herein by reference. Index to Consolidated Financial Statements PageReport of Independent Registered Public Accounting Firm
    
    
    41Consolidated Balance Sheets for the Years Ended December 31, 2004 and 2003
    
    
    42Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002
    
    
    43Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31, 2004, 2003 and 2002
    
    
    45Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002
    
    
    47Notes to Consolidated Financial Statements for the Years Ended December 31, 2004, 2003 and 2002
    
    
    49
 40




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TIB Financial Corp.
Key Largo, FL. We have audited the accompanying balance sheets of TIB Financial Corp. as of December 31, 2004 and
2003, and the related statements of operations, stockholders equity, and cash flows for each of
the three years in the period ended December 31, 2004. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2004 and 2003, and the results
of its operations and its cash flows for each of the three years in the period ended December 31,
2004, in conformity with U.S. generally accepted accounting principles. Fort Lauderdale, FL
February 1, 2005 41




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##### Table of Contents



TIB Financial Corp. and Subsidiaries 
 Consolidated Balance
Sheets
(dollars in thousands, except per share amounts) December 31,
    
    2004
    
    
    2003AssetsCash and due from banks
    
    $
    27,410
    
    
    $
    17,197Federal funds sold
    
    
    15,528
    
    
    
    16,484Cash and cash equivalents
    
    
    42,938
    
    
    
    33,681Investment securities available for sale
    
    
    77,807
    
    
    
    52,557Loans, net of deferred loan costs and fees
    
    
    655,678
    
    
    
    540,413Less: Allowance for loan losses
    
    
    6,243
    
    
    
    5,216Loans, net
    
    
    649,435
    
    
    
    535,197Premises and equipment, net
    
    
    27,559
    
    
    
    21,073Goodwill
    
    
    155
    
    
    
    155Intangible assets, net
    
    
    1,392
    
    
    
    1,687Accrued interest receivable and other assets
    
    
    30,039
    
    
    
    24,948Total Assets
    
    $
    829,325
    
    
    $
    669,298Liabilities and Shareholders EquityLiabilitiesDeposits:Noninterest-bearing demand
    
    $
    152,035
    
    
    $
    121,728Interest-bearing
    
    
    535,824
    
    
    
    432,085Total deposits
    
    
    687,859
    
    
    
    553,813Federal Home Loan Bank (FHLB) advances
    
    
    35,000
    
    
    
    45,000Short-term borrowings
    
    
    12,157
    
    
    
    4,041Long-term borrowings
    
    
    18,250
    
    
    
    18,250Accrued interest payable and other liabilities
    
    
    7,945
    
    
    
    6,948Total liabilities
    
    
    761,211
    
    
    
    628,052Shareholders equityPreferred stock  no par value: 5,000,000 and 0 shares
authorized, 0 and 0 shares issued
    
    
    
    
    
    
    Common stock
 $.10 par value: 20,000,000 and
7,500,000 shares authorized, 5,679,239 and
4,431,328 shares issued
    
    
    568
    
    
    
    443Additional paid in capital
    
    
    38,284
    
    
    
    14,255Retained earnings
    
    
    28,968
    
    
    
    26,203Accumulated other comprehensive income
    
    
    294
    
    
    
    345Total shareholders equity
    
    
    68,114
    
    
    
    41,246Total Liabilities and Shareholders Equity
    
    $
    829,325
    
    
    $
    669,298
 See accompanying notes to consolidated financial statements. 42




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##### Table of Contents



TIB Financial Corp. and Subsidiaries 
 Consolidated Statements
of Income
(dollars in thousands, except per share amounts) Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Interest and dividend incomeLoans, including fees
    
    $
    37,720
    
    
    $
    31,664
    
    
    $
    27,783Investment securities:U.S. Treasury securities
    
    
    124
    
    
    
    7
    
    
    
    124U.S. Government agencies and corporations
    
    
    2,023
    
    
    
    2,003
    
    
    
    2,309States and political subdivisions, tax-exempt
    
    
    406
    
    
    
    329
    
    
    
    260States and political subdivisions, taxable
    
    
    197
    
    
    
    240
    
    
    
    381Other investments
    
    
    251
    
    
    
    59
    
    
    
    46Interest-bearing deposits in other banks
    
    
    11
    
    
    
    3
    
    
    
    5Federal Home Loan Bank stock
    
    
    57
    
    
    
    59
    
    
    
    78Federal funds sold
    
    
    127
    
    
    
    242
    
    
    
    330Total interest and dividend income
    
    
    40,916
    
    
    
    34,606
    
    
    
    31,316Interest expenseInterest-bearing demand and money market
    
    
    1,519
    
    
    
    1,321
    
    
    
    2,057Savings
    
    
    174
    
    
    
    170
    
    
    
    223Time deposits of $100,000 or more
    
    
    3,507
    
    
    
    3,165
    
    
    
    2,721Other time deposits
    
    
    3,371
    
    
    
    3,279
    
    
    
    3,282Long-term debt-subordinated debentures
    
    
    1,119
    
    
    
    1,109
    
    
    
    1,140Federal Home Loan Bank advances
    
    
    475
    
    
    
    276
    
    
    
    383Short-term borrowings
    
    
    83
    
    
    
    38
    
    
    
    42Notes payable
    
    
    482
    
    
    
    481
    
    
    
    481Total interest expense
    
    
    10,730
    
    
    
    9,839
    
    
    
    10,329Net interest income
    
    
    30,186
    
    
    
    24,767
    
    
    
    20,987Provision for loan losses
    
    
    2,455
    
    
    
    1,586
    
    
    
    791Net interest income after provision for loan losses
    
    
    27,731
    
    
    
    23,181
    
    
    
    20,196Non-interest incomeService charges on deposit accounts
    
    
    2,547
    
    
    
    2,452
    
    
    
    2,240Investment securities gains, net
    
    
    106
    
    
    
    289
    
    
    
    218Merchant bankcard processing income
    
    
    5,757
    
    
    
    4,953
    
    
    
    4,387Dividend income from ERAS Joint Venture
    
    
    
    
    
    
    
    
    
    
    33Gain on sale of investment in ERAS Joint Venture
    
    
    
    
    
    
    202
    
    
    
    211Gain on sale of government guaranteed loans
    
    
    
    
    
    
    117
    
    
    
    28Fees on mortgage loans sold
    
    
    1,852
    
    
    
    2,201
    
    
    
    1,583Retail investment services
    
    
    333
    
    
    
    420
    
    
    
    206Other income
    
    
    1,468
    
    
    
    1,403
    
    
    
    1,522Total non-interest income
    
    
    12,063
    
    
    
    12,037
    
    
    
    10,428Non-interest expenseSalaries and employee benefits
    
    
    14,686
    
    
    
    12,878
    
    
    
    10,602Net occupancy and equipment expense
    
    
    4,964
    
    
    
    4,326
    
    
    
    3,680Other expense
    
    
    12,274
    
    
    
    10,365
    
    
    
    9,350Total non-interest expense
    
    
    31,924
    
    
    
    27,569
    
    
    
    23,632Income before income tax expense
    
    
    7,870
    
    
    
    7,649
    
    
    
    6,992Income tax expense
    
    
    2,672
    
    
    
    2,672
    
    
    
    2,386Income from continuing operations
    
    
    5,198
    
    
    
    4,977
    
    
    
    4,606
 43




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TIB Financial Corp. and Subsidiaries Consolidated Statements
of Income
(dollars in thousands, except per share amounts) Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Discontinued operationsIncome from Keys Insurance Agency, Inc. operations
    
    
    
    
    
    
    200
    
    
    
    206Income tax expense
    
    
    
    
    
    
    75
    
    
    
    77Income from discontinued operations
    
    
    
    
    
    
    125
    
    
    
    129Net income
    
    $
    5,198
    
    
    $
    5,102
    
    
    $
    4,735Basic earnings per common shareContinuing operations
    
    $
    0.98
    
    
    $
    1.17
    
    
    $
    1.15Discontinued operations
    
    
    
    
    
    
    .03
    
    
    
    .04Basic earnings per share
    
    $
    0.98
    
    
    $
    1.20
    
    
    $
    1.19Diluted earnings per common shareContinuing operations
    
    $
    0.95
    
    
    $
    1.12
    
    
    $
    1.11Discontinued operations
    
    
    
    
    
    
    .03
    
    
    
    .03Diluted earnings per share
    
    $
    0.95
    
    
    $
    1.15
    
    
    $
    1.14
 See accompanying notes to consolidated financial statements. 44




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TIB Financial Corp. and Subsidiaries 
 Consolidated Statements
of Changes in Shareholders Equity
(dollars in thousands, except per share amounts) AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance,January 1, 2002
    
    
    3,946,100
    
    
    $
    395
    
    
    $
    8,222
    
    
    $
    20,019
    
    
    $
    36
    
    
    $
    28,672Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,735
    
    
    
    
    
    
    
    4,735Other comprehensive income, net of tax expense of $650:Unrealized holding gain on securities transferred into the available for
sale category from the held to maturity category
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271Net market valuation adjustment on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    944Less: reclassification adjustment for gains
included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,079Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,814Exercise of stock options
    
    
    89,525
    
    
    
    8
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    592Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    160Cash dividends declared, $.4325 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,732
    )
    
    
    
    
    
    
    (1,732
    )Balance,December 31, 2002
    
    
    4,035,625
    
    
    $
    403
    
    
    $
    8,966
    
    
    $
    23,022
    
    
    $
    1,115
    
    
    $
    33,506Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,102
    
    
    
    
    
    
    
    5,102Other comprehensive income, net of tax
benefit of $464:Net market valuation adjustment on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (590
    )Less: reclassification adjustment for gains
included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,332Exercise of stock options
    
    
    115,050
    
    
    
    12
    
    
    
    723
    
    
    
    
    
    
    
    
    
    
    
    735Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    251
    
    
    
    
    
    
    
    
    
    
    
    251Private placement of common shares
    
    
    280,653
    
    
    
    28
    
    
    
    4,315
    
    
    
    
    
    
    
    
    
    
    
    4,343Cash dividends declared, $.4425 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,921
    )
    
    
    
    
    
    
    (1,921
    )Balance,December 31, 2003
    
    
    4,431,328
    
    
    $
    443
    
    
    $
    14,255
    
    
    $
    26,203
    
    
    $
    345
    
    
    $
    41,246
 45




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Consolidated Statements
of Changes in Shareholders Equity
(dollars in thousands, except per share amounts) AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance,December 31, 2003
    
    
    4,431,328
    
    
    $
    443
    
    
    $
    14,255
    
    
    $
    26,203
    
    
    $
    345
    
    
    $
    41,246Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,198
    
    
    
    
    
    
    
    5,198Other comprehensive income, net of tax
benefit of $32:Net market valuation adjustment on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Less: reclassification adjustment for gains
included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,147Public offering of common shares
    
    
    1,150,000
    
    
    
    115
    
    
    
    23,115
    
    
    
    
    
    
    
    
    
    
    
    23,230Exercise of stock options
    
    
    97,911
    
    
    
    10
    
    
    
    668
    
    
    
    
    
    
    
    
    
    
    
    678Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    246Cash dividends declared, $.4525 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,433
    )
    
    
    
    
    
    
    (2,433
    )Balance,December 31, 2004
    
    
    5,679,239
    
    
    $
    568
    
    
    $
    38,284
    
    
    $
    28,968
    
    
    $
    294
    
    
    $
    68,114
 See accompanying notes to consolidated financial statements. 46




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##### Table of Contents



TIB Financial Corp. and Subsidiaries 
 Consolidated Statements of Cash Flows
(in thousands) Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Cash flows from operating activitiesNet income
    
    $

    5,198
    
    
    $
    5,102
    
    
    $
    4,735Adjustments to reconcile net income to net cash provided by
operating activities:Net amortization of investments
    
    
    62
    
    
    
    59
    
    
    
    100Amortization of intangible assets
    
    
    295
    
    
    
    292
    
    
    
    297Depreciation of premises and equipment
    
    
    1,950
    
    
    
    1,756
    
    
    
    1,528Loss on sale of servicing rights
    
    
    
    
    
    
    
    
    
    
    3Loss on sale of assets of Keys Insurance Agency, Inc.
    
    
    
    
    
    
    15
    
    
    
    Gain on sale of investment in ERAS Joint Venture
    
    
    
    
    
    
    (202
    )
    
    
    (211
    )Provision for loan losses
    
    
    2,455
    
    
    
    1,586
    
    
    
    791Provision for losses on unfunded loan commitments
    
    
    47
    
    
    
    39
    
    
    
    25Deferred income tax benefit
    
    
    (90
    )
    
    
    (852
    )
    
    
    (249
    )Deferred net loan costs and fees
    
    
    (342
    )
    
    
    (1,031
    )
    
    
    (941
    )Investment securities net gains
    
    
    (106
    )
    
    
    (289
    )
    
    
    (218
    )Gain on sales/disposition of premises and equipment, net
    
    
    (2
    )
    
    
    (2
    )
    
    
    (8
    )Gains on sales of government guaranteed loans, net
    
    
    
    
    
    
    (117
    )
    
    
    (28
    )Gain on sale of Investment Center intangible
    
    
    (50
    )
    
    
    
    
    
    
    Mortgage loans originated for sale
    
    
    (108,543
    )
    
    
    (111,011
    )
    
    
    (83,233
    )Proceeds from sales of mortgage loans
    
    
    108,543
    
    
    
    119,345
    
    
    
    85,096Fees on mortgage loans sold
    
    
    (1,852
    )
    
    
    (2,201
    )
    
    
    (1,583
    )Increase in accrued interest receivable and other assets
    
    
    (1,756
    )
    
    
    (1,690
    )
    
    
    (3,309
    )Increase (decrease) in accrued interest payable and
other liabilities
    
    
    992
    
    
    
    (1,225
    )
    
    
    2,533Net cash provided by operating activities
    
    
    6,801
    
    
    
    9,574
    
    
    
    5,328Cash flows from investing activitiesPurchases of investment securities available for sale
    
    
    (38,368
    )
    
    
    (27,846
    )
    
    
    (24,404
    )Sales of investment securities available for sale
    
    
    9,281
    
    
    
    4,000
    
    
    
    14,343Repayments of principal and maturities of investment
securities available for sale
    
    
    3,797
    
    
    
    24,553
    
    
    
    9,994Net (purchase) sale of FHLB stock
    
    
    (660
    )
    
    
    (890
    )
    
    
    140Proceeds from sales of government guaranteed loans
    
    
    569
    
    
    
    2,241
    
    
    
    542Proceeds from sale of Investment Center intangible
    
    
    50
    
    
    
    
    
    
    
    Proceeds from sale of investment in ERAS JV
    
    
    
    
    
    
    327
    
    
    
    340Proceeds from sale of assets of Keys Insurance Agency, Inc.
    
    
    
    
    
    
    184
    
    
    
    Payment on note receivable from sale of option
    
    
    
    
    
    
    
    
    
    
    300Net proceeds received from servicing rights sales
    
    
    
    
    
    
    
    
    
    
    33Loans originated or acquired, net of principal repayments
    
    
    (115,910
    )
    
    
    (97,599
    )
    
    
    (63,348
    )Purchase of life insurance policies
    
    
    (700
    )
    
    
    (250
    )
    
    
    (1,795
    )Purchases of premises and equipment
    
    
    (9,495
    )
    
    
    (3,492
    )
    
    
    (3,375
    )Sales of premises and equipment
    
    
    100
    
    
    
    5
    
    
    
    31Net cash used by investing activities
    
    
    (151,336
    )
    
    
    (98,767
    )
    
    
    (67,199
    )
 -Continued- 47




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Consolidated Statements of Cash Flows
(in thousands) Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Cash flows from financing activitiesNet increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase
    
    
    8,116
    
    
    
    (538
    )
    
    
    3,845Net increase (decrease) in FHLB short-term advances
    
    
    (5,000
    )
    
    
    15,000
    
    
    
    (5,000
    )Proceeds from FHLB long-term advances
    
    
    25,000
    
    
    
    30,000
    
    
    
    Repayments of FHLB long-term advances
    
    
    (30,000
    )
    
    
    (20,000
    )
    
    
    Net increase in demand, money market and savings
accounts
    
    
    87,894
    
    
    
    25,716
    
    
    
    39,081Net increase in time deposits
    
    
    46,152
    
    
    
    45,414
    
    
    
    27,866Proceeds from exercise of stock options
    
    
    678
    
    
    
    735
    
    
    
    592Proceeds from public offering of common stock
    
    
    23,230
    
    
    
    
    
    
    
    Proceeds from private placement of common stock
    
    
    
    
    
    
    4,343
    
    
    
    Cash dividends paid
    
    
    (2,278
    )
    
    
    (1,866
    )
    
    
    (1,713
    )Net cash provided by financing activities
    
    
    153,792
    
    
    
    98,804
    
    
    
    64,671Net increase in cash and cash equivalents
    
    
    9,257
    
    
    
    9,611
    
    
    
    2,800Cash and cash equivalents at beginning of year
    
    
    33,681
    
    
    
    24,070
    
    
    
    21,270Cash and cash equivalents at end of year
    
    $
    42,938
    
    
    $
    33,681
    
    
    $
    24,070Supplemental disclosures of cash paid:Interest
    
    $
    10,542
    
    
    $
    9,211
    
    
    $
    10,790Income taxes
    
    
    1,945
    
    
    
    3,775
    
    
    
    2,741
 See accompanying notes to consolidated financial statements. 48




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##### Table of Contents



TIB Financial Corp. and Subsidiaries 
 Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 1 - Summary of Significant Accounting Policies Principles of Consolidation and Nature of Operations TIB Financial Corp. is a financial holding company
headquartered in Naples, Florida. The
consolidated financial statements include the
accounts of TIB Financial Corp. (Parent Company)
and its wholly-owned subsidiaries, TIB Bank (Bank), Keys Insurance Agency, Inc. (assets
sold in August 2003  see Note 20), and TIB
Software and Services, Inc. (assets sold in 2003 
see Note 2), collectively known as the Company.
All significant intercompany accounts and
transactions have been eliminated in
consolidation. TIBFL Statutory Trust I and TIBFL
Statutory Trust II were formed in conjunction with
the issuance of trust preferred securities as
further discussed in Note 10. TIB Bank is the Companys primary
operating subsidiary. The Bank provides banking
services from its sixteen branch locations in
Monroe, Miami-Dade, Collier and Lee counties,
Florida. The accounting and reporting policies of TIB
Financial Corp. and subsidiaries conform to
generally accepted accounting principles and to
general practices within the banking industry. The
following is a summary of the more significant of
these policies. Use of Estimates and Assumptions To prepare financial statements in conformity with
accounting principles generally accepted in the
United States of America, management makes
estimates and assumptions based on available
information. These estimates and assumptions
affect the amounts reported in the financial
statements and the disclosures provided, and
actual results could differ. A material estimate
that is particularly susceptible to significant
change in the near term is the allowance for loan
losses. Another material estimate is the fair
value of financial instruments. Changes in
assumptions or in market conditions could
significantly affect the fair value estimates. Cash and Cash Equivalents For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash
on hand, amounts due from banks, federal funds
sold, and interest-bearing deposits at the Federal
Home Loan Bank of Atlanta. Net cash flows are
reported for loan and deposit transactions. Investment Securities Investment securities which management has the
ability and intent to hold to maturity are
reported at amortized cost. Securities available
for sale 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. Interest income includes amortization of purchase
premium or discount. Premiums and discounts on
securities are amortized on the level-yield method
without anticipating prepayments. 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. 49




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Loans Loans are reported at the principal balance
outstanding, net of deferred loan fees and costs,
and an allowance for loan losses. Interest income
is reported on the interest method and includes
amortization of net deferred loan fees and costs
over the loan term. If the collectibility of
interest appears doubtful, the accrual of interest
is discontinued and all unpaid interest is
reversed. Loans are returned to accrual status
when all the principal and interest amounts
contractually due are brought current and future
payments are reasonably assured.

          Gains on sales of government guaranteed loans are
recognized as income when the sales occur. Loans Held for Sale The majority of fixed rate mortgage loans are
originated by the Bank and sold servicing released
to a third party immediately without recourse.
All fees are recognized as income at the time of
the sale. Mortgage loans originated and intended
for sale in the secondary market are carried at
the lower of aggregate cost or market, as
determined by outstanding commitments from
investors. Net unrealized losses, if any, are
recorded as a valuation allowance and charged to
earnings. 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 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 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 loan is reported net, 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, indirect, and
residential real estate loans, are collectively
evaluated for impairment, and accordingly, they
are not separately identified for impairment
disclosures. Premises and Equipment Land is carried at cost. Premises and equipment
are reported at cost less accumulated
depreciation. For financial reporting purposes,
depreciation is computed using the straight-line
method over the estimated useful lives of the
assets. Expenditures for maintenance and repairs
are charged to operations as incurred, while major
renewals and betterments are capitalized. For
Federal income tax reporting purposes,
depreciation is computed using primarily
accelerated methods. 50




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Foreclosed Assets Assets acquired through, or in lieu of, loan
foreclosure are held for sale and are initially
recorded at fair value when acquired, establishing
a new cost basis. If fair value declines
subsequent to foreclosure, a valuation allowance
is recorded through expense. Costs after
acquisition are expensed. Goodwill and Other Intangible Assets Goodwill results from business acquisitions and
represents the excess of the purchase price over
the fair value of acquired tangible assets and
liabilities and identifiable intangible assets.
Upon adopting new accounting guidance in 2002, the
Company ceased amortizing goodwill. Goodwill is
assessed at least annually for impairment and any
such impairment will be recognized in the period
identified. Other intangible assets include amounts for servicing
rights on government guaranteed loans and core deposit
base premiums arising from branch acquisitions and are
initially measured at fair value. Servicing rights are
being amortized over the expected life of the related
loan. The deposit base premiums are being amortized
using the straightline method over an estimated life
of 10 years. Long-term Assets Long-lived assets, including premises and
equipment, core deposit and other intangible
assets, are reviewed for impairment when events
indicate their carrying amount may not be
recoverable from future undiscounted cash flows.
If impaired, the assets are recorded at fair
value. Loan Commitments and Related Financial Instruments Financial instruments include off-balance sheet
credit instruments, such as commitments to make
loans and letters of credit, issued to meet
customer financing needs. The face amount for
these items represents the exposure to loss,
before considering customer collateral or ability
to repay. Such financial instruments are recorded
when they are funded. Company Owned Life Insurance The Company has purchased life insurance polices
on certain key executives. Company owned life
insurance is recorded at its cash surrender value,
or the amount that can be realized, and included
in other assets on the balance sheet. Income Taxes Income tax expense is the total of the current
year income tax due or refundable and the change
in deferred tax assets and liabilities. Deferred
income tax assets and liabilities are determined
using the liability (or balance sheet) method.
Under this method, the net deferred tax asset or
liability is determined based on the tax effects
of the temporary differences between the book and
tax basis of the various balance sheet assets and
liabilities and gives current recognition to
changes in tax rates and laws. 51




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##### Table of Contents



Earnings Per Common Share
  TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Basic earnings per share is net income divided by
the weighted average number of common shares
outstanding during the period. Diluted earnings
per share includes the dilutive effect of
additional potential common shares issuable under
stock options. Earnings per share have been computed based on the following
for the years ended December 31: 2004
    
    
    2003
    
    
    2002Weighted average number of common shares outstanding:Basic
    
    
    5,309,860
    
    
    
    4,257,224
    
    
    
    3,992,775Dilutive effect of options outstanding
    
    
    169,836
    
    
    
    178,637
    
    
    
    152,080Diluted
    
    
    5,479,696
    
    
    
    4,435,861
    
    
    
    4,144,855
 Stock options for 29,720, 5,027, and 152,955
shares of common stock were not considered in
computing diluted earnings per common share for
2004, 2003, and 2002 because they were
anti-dilutive. The effect of stock options, as
described in Note 15, is the sole common stock
equivalent for purposes of calculating diluted
earnings per common share. Stock-Based Compensation Employee compensation expense under stock options
is reported using the intrinsic value method. No
stock-based compensation cost is reflected in net
income, as all options granted had an exercise
price equal to or greater than the market price of
the underlying common stock at date of grant. The
following table illustrates the effect on net
income and earnings per share if expense was
measured using the fair value recognition
provisions of FASB Statement No. 123, Accounting
for Stock-Based Compensation. 2004
    
    
    2003
    
    
    2002Net income, as reported
    
    $
    5,198
    
    
    $
    5,102
    
    
    $
    4,735Stock-based compensation expense determined under fair value
based method, net of tax
    
    
    215
    
    
    
    173
    
    
    
    157Pro forma net income
    
    
    4,983
    
    
    $
    4,929
    
    
    $
    4,578Basic earnings per share as reported
    
    $
    0.98
    
    
    $
    1.20
    
    
    $
    1.19Pro forma basic earnings per share
    
    
    0.94
    
    
    
    1.16
    
    
    
    1.15Diluted earnings per share as reported
    
    
    0.95
    
    
    
    1.15
    
    
    
    1.14Pro forma diluted earnings per share
    
    
    0.91
    
    
    
    1.11
    
    
    
    1.10
 The fair value of each option is
estimated as of the date of grant
using the Black-Scholes Option
Pricing Model and the following
weighted average assumptions for
options granted in the years ended
December 31, : 2004
    
    
    2003
    
    
    2002Dividend yield
    
    
    2.3
    %
    
    
    2.7
    %
    
    
    3.2
    %Risk-free interest rate
    
    4.0% to 4.1%
    
    4.0% to 4.2%
    
    4.4% to 5.4%Expected option life
    
    9 years
    
    9 years
    
    9.2 yearsVolatility
    
    
    .33
    
    
    
    .31
    
    
    
    .29Weighted average fair value of options granted during year
    
    $
    8.16
    
    
    $
    5.83
    
    
    $
    3.69
 52




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Comprehensive Income Comprehensive income consists of net income and
other comprehensive income. Other comprehensive
income includes unrealized gains and losses on
securities available for sale which are also
recognized as separate components of equity. Loss Contingencies Loss contingencies, including claims and legal
actions arising in the ordinary course of
business, are recorded as liabilities when the
likelihood of loss is probable and an amount or
range of loss can be reasonably estimated.
Management does not believe there are now such
matters that will have a material effect on the
financial statements. Operating Segments Internal financial information is primarily
reported and aggregated in three lines of
business: community banking, merchant bankcard,
and parent and other. Fair Value of Financial Instruments Fair values of financial instruments are estimated
using relevant market information and other
assumptions, as more fully disclosed in Note 18.
Fair value estimates include uncertainties and
matters of significant judgment regarding interest
rates, credit risk, prepayments, and other
factors, especially in the absence of broad
markets for particular items. Changes in
assumptions or in market conditions could
significantly affect these estimates. Recent Accounting Pronouncements During 2004, the FASB revised Statement No. 123,
Accounting for Stock-Based Compensation (SFAS
123R) which established accounting requirements
for share-based compensation to employees and
carries forward prior guidance on accounting for
awards to non-employees. The provisions of this
statement will become effective for reporting
periods beginning after June 15, 2005 for all
equity awards granted after the effective date and
for the subsequent vesting of previously granted
awards. SFAS 123R requires an entity to recognize
compensation expense based on an estimate of the
fair value and number of awards expected to
actually vest, exclusive of awards expected to be
forfeited. Currently, the Company accounts for
stock options granted to employees according to
the provisions of APB Opinion No. 25, whereby
compensation expense is recorded based upon the
intrinsic value method. The stock-based
compensation table on the previous page
illustrates the effect on net income and earnings
per share if we had applied the fair value
recognition provisions of SFAS 123 to stock-based
employee compensation. The Company is required to
and will adopt SFAS 123R on July 1, 2005. In December 2004, the FASB issued Statement No.
153, Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions. This statement amends
the principle of APB No. 29 that exchanges of
nonmonetary assets should be measured based on the
fair value of the assets exchanged and more
broadly provides for exceptions regarding
exchanges of nonmonetary assets that do not have
commercial substance. This Statement is effective
for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. The
adoption of this standard is not expected to have
a material impact on the financial condition, the
results of operations, or liquidity of the
Company. In March 2004, the FASB Emerging Issues Task Force
(EITF) released Issue 03-1, Meaning of Other Than
Temporary Impairment and Its Application to
Certain Investments, which addressed
other-than-temporary impairment for certain debt
and equity investments. The recognition and
measurement requirements of Issue 03-1, and other
disclosure requirements not already implemented,
were effective for periods beginning after June
15, 2004. In September 2004, the FASB staff issued
FASB Staff Position (FSP) EITF 03-1-1, which
delayed the effective date for certain measurement
and recognition guidance contained in Issue 03-1. The FSP requires the application of pre-existing
other-than-temporary guidance during the period of
delay until a final consensus is reached.
Management does not anticipate the issuance of the
final consensus will have a material impact on the
financial condition, the results of operations, or
liquidity of the Company. 53




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) In March 2004, the SEC issued Staff Accounting
Bulletin No. 105, Application of Accounting
Principles to Loan Commitments (SAB 105). This
bulletin was issued to inform registrants of the
SECs view that the fair value of the recorded
loan commitments, which are required to follow
derivative accounting under FAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, should not consider the expected
future cash flows related to the associated
servicing of the future loan. The provisions of
SAB 105 must be applied to loan commitments
accounted for as derivatives that are entered into
after March 31, 2004. The adoption of this Staff
Accounting Bulletin did not have a material impact
on the financial condition, the results of
operations, or liquidity of the Company. In December 2003, The American Institute of
Certified Public Accountants issued Statement of
Position (SOP) 03-3, Accounting for Certain Loans
or Debt Securities Acquired in a Transfer. SOP
03-3 requires acquired loans, including debt
securities and loans acquired in a business
combination, to be recorded at the amount of the
purchasers initial investment and prohibits
carrying over valuation allowances from the seller
for these loans that have evidence of
deterioration in credit quality since origination,
and it is probable all contractual cash flows on
the loan will be unable to be collected. The
provisions of this SOP are effective for loans
acquired in fiscal years beginning after December
15, 2004 and their adoption is not expected to
have a material impact on the financial condition,
the results of operations, or liquidity of the
Company. Reclassifications Some items in the prior year financial statements
were reclassified to conform to the current
presentation. Note 2 - Acquisitions and Divestitures In 1998, the Parent Companys subsidiary, TIB Software and Services, Inc., acquired a 30
percent interest in ERAS Joint Venture (the Venture), a general partnership, in exchange
for consideration of $791. The Ventures primary business is item processing and the
design, development, installation and maintenance of accounting software for financial
institutions. Goodwill associated with the transaction totaled $638 and was being
amortized over a period of ten years through December 31, 2001, at which time the
amortization was discontinued. Through December 31, 2001, the investment in the Venture
was accounted for using the equity method. On December 31, 2001, the Company sold two
thirds of its ownership interest in the Venture for $1,333. The Company recognized a gain
of $820 on the transaction. This sale reduced the Companys ownership in the Venture to
10%. Beginning January 1, 2002, the investment in the Venture was accounted for using the
cost method. On October 4, 2002, the Company sold 5.1% of the Companys 10% interest in
the Venture for $340. The Company recognized a gain of $211 on the transaction. This
sale, accompanied by the additional transfer of assets by other owners into the Venture,
reduced the Companys ownership in the Venture to 4.53%. The Venture also made a dividend
distribution to the Company in 2002 in the amount of $33. On May 29, 2003, TIB Software
and Services, Inc. sold its remaining interest in the Venture for $327. The Company
recognized a pretax gain of $202 on the transaction. In March 2004, the Company filed
Articles of Dissolution dissolving TIB Software and Services, Inc. ERAS Joint Venture is the Banks item processor. Payments of approximately $577, $579 and
$483 were made by the Bank to the Venture in 2004, 2003, and 2002, respectively. Of the
amount paid in 2003, approximately $249 was paid to the Venture through the sale date of
May 29, 2003. 54




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) On October 31, 2000, the Company purchased Keys Insurance Agency of Monroe County, Inc.
which was 100% owned by a company director. Keys Insurance Agency, Inc. (the new name
subsequent to the purchase) had three offices in the Florida Keys and brokered a full line
of commercial and residential hazard insurance coverages as well as life and health
insurance and annuities. The purchase price for the net assets of the agency was $1,870
which consisted primarily of intangible assets. The consideration consisted of $220 of
Company common stock (21,463 shares) and $1,650 in cash (paid at closing). Under the
purchase agreement, annual cash payments of $110 were to be made following each of the
first three anniversaries of the closing date, subject to the agency achieving certain
earnings thresholds. Any of this additional consideration that was paid at the end of
each contingency period would at that time be recorded as goodwill and increase the total
recorded purchase price of the agency. No amount was required to be paid in 2002 or 2003.
This acquisition was recorded using the purchase method of accounting. On September 25, 2001, Keys Insurance Agency, Inc. purchased BonData Group Limited, Inc. a
Ft Myers, Florida based insurance agency specializing in surety bond underwriting and
placement. Total consideration paid at closing for the agency was $273. This was
comprised of approximately $68 in the Companys common stock (5,640 shares) and
approximately $205 in cash. Under the purchase agreement, annual cash payments of $24 were
to be made following each of the first two anniversaries of the closing date, subject to
the agency achieving certain earnings thresholds. Any of this additional consideration
that was paid at the end of each contingency period, would at that time be recorded as
goodwill and increase the total recorded purchase price of the agency. No amount was
required to be paid in 2002 or 2003. This acquisition was recorded using the purchase
method of accounting. On August 15, 2003, the Company closed the sale of Keys Insurance Agency, Inc., a wholly
owned subsidiary of the Company, to Derek Martin-Vegue and his partner. Mr. Martin-Vegue
is a former director of the Company and TIB Bank. The transaction was
structured as a sale of the agency assets. The buyer paid $2,205 in cash at the closing.
Of the cash payment at closing, proceeds of $2,021 were pursuant to a loan from TIB Bank
(a subsidiary of the Company) to the buyer. The Company recognized a loss of
$15 on the transaction. Therefore, the results of operations of Keys Insurance Agency,
Inc. are included in the Consolidated Statements of Income as discontinued operations
(Note 20). In March 2004, the Company filed Articles of Dissolution dissolving Keys
Insurance Agency, Inc. On December 15, 2004, the Company closed the sale of certain intangible assets which
primarily comprised a book of business which served as the foundation of the Companys
investment center operations. The buyer paid $50 in cash at the closing. The Company
recognized a gain of $50 on the transaction. Under the purchase agreement, additional cash
payments totaling up to $60 may be paid to the Company subject to the achievement of
certain production and customer and asset retention thresholds. Additionally, the Company
will receive monthly cash payments of 10% of production related to new referrals made
through December 31, 2005. Note 3 -  Cash and Due From Banks Cash on hand or on deposit with the Federal Reserve Bank of $3,979 and $3,769
was required to meet regulatory reserve and clearing requirements at December
31, 2004, and December 31, 2003, respectively. These balances do not earn
interest. The Bank maintains an interest bearing account at the Federal Home Loan Bank
of Atlanta. The total on deposit was approximately $203 and $170 at December
31, 2004 and December 31, 2003, respectively. 55




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 4 - Investment
Securities The amortized cost, estimated fair value, and the related gross unrealized gains and
losses recognized in accumulated other comprehensive income, are as follows for investment
securities available for sale: Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedDecember 31, 2004
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Treasury securities
    
    $
    5,178
    
    
    $
    5
    
    
    $
    29
    
    
    $
    5,154U.S. Government agencies and
corporations
    
    
    54,228
    
    
    
    104
    
    
    
    869
    
    
    
    53,463States and political subdivisions-
tax exempt
    
    
    9,596
    
    
    
    246
    
    
    
    26
    
    
    
    9,816States and political subdivision -
taxable
    
    
    2,862
    
    
    
    17
    
    
    
    23
    
    
    
    2,856Marketable equity securities
    
    
    3,000
    
    
    
    987
    
    
    
    
    
    
    
    3,987Mortgage-backed securities
    
    
    2,473
    
    
    
    58
    
    
    
    
    
    
    
    2,531$
    77,337
    
    
    $
    1,417
    
    
    $
    947
    
    
    $
    77,807
 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedDecember 31, 2003
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Treasury securities
    
    $
    209
    
    
    $
    9
    
    
    $
    
    
    
    $
    218U.S. Government agencies and
corporations
    
    
    31,357
    
    
    
    425
    
    
    
    663
    
    
    
    31,119States and political subdivisions-
tax exempt
    
    
    8,838
    
    
    
    378
    
    
    
    59
    
    
    
    9,157States and political subdivision -
taxable
    
    
    3,559
    
    
    
    42
    
    
    
    101
    
    
    
    3,500Marketable equity securities
    
    
    3,000
    
    
    
    395
    
    
    
    
    
    
    
    3,395Mortgage-backed securities
    
    
    5,041
    
    
    
    128
    
    
    
    1
    
    
    
    5,168$
    52,004
    
    
    $
    1,377
    
    
    $
    824
    
    
    $
    52,557
 56




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Securities with unrealized losses not recognized in income are as follows: December 31, 2004
    
    Less than 12 months
    
    
    12 months or longer
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. Treasury securities
    
    $
    5,046
    
    
    $
    29
    
    
    $
    
    
    
    $
    
    
    
    $
    5,046
    
    
    $
    29U.S. Government agencies
and corporations
    
    
    24,858
    
    
    
    201
    
    
    
    20,379
    
    
    
    668
    
    
    
    45,237
    
    
    
    869States and political
subdivisions  tax exempt
    
    
    2,421
    
    
    
    22
    
    
    
    230
    
    
    
    4
    
    
    
    2,651
    
    
    
    26States and political
subdivision - taxable
    
    
    2,312
    
    
    
    19
    
    
    
    131
    
    
    
    4
    
    
    
    2,443
    
    
    
    23Total temporarily impaired
    
    $
    34,637
    
    
    $
    271
    
    
    $
    20,740
    
    
    $
    676
    
    
    $
    55,377
    
    
    $
    947
 December 31, 2003
    
    Less than 12 months
    
    
    12 months or longer
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesU.S. Government agencies
and corporations
    
    $
    20,396
    
    
    $
    663
    
    
    $
    
    
    
    $
    
    
    
    $
    20,396
    
    
    $
    663States and political
subdivisions - tax exempt
    
    
    3,055
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    3,055
    
    
    
    59States and political
subdivision - taxable
    
    
    3,000
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    101Mortgage-backed securities
    
    
    132
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    1Total temporarily impaired
    
    $
    26,583
    
    
    $
    824
    
    
    $
    
    
    
    $
    
    
    
    $
    26,583
    
    
    $
    824
 The Company views the unrealized losses in the above table to be temporary in nature for the
following reasons. First, the decline in market values are mostly due to an increase in market
rates and are not credit related. These securities are mostly AAA rated securities and have
experienced no significant deterioration in value due to credit quality concerns. Second, the
magnitude of the unrealized losses at about 2% of the fair value of those securities with
losses is consistent with normal fluctuations of value due to the volatility of market interest
rates. Finally, the nature of what makes up the security portfolio is determined by the
overall balance sheet of the Company and currently it is suitable for the Companys security
portfolio to be primarily comprised of fixed rate securities. Fixed rate securities will by
their nature react in price inversely to changes in market rates and that is liable to occur in
both directions. The amortized cost and estimated fair value of investment securities available for
sale at December 31, 2004, by contractual maturity, are shown as follows. Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or repay obligations without call or prepayment penalties.
Securities not due at a single maturity date, primarily mortgage-backed
securities, are shown separately. 57




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Investment SecuritiesAvailable for SaleAmortized
    
    
    EstimatedDecember 31, 2004
    
    Cost
    
    
    Fair ValueDue in one year or less
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    41,010
    
    
    
    40,807Due after five years through ten years
    
    
    26,184
    
    
    
    25,860Due after ten years
    
    
    4,670
    
    
    
    4,622Marketable equity securities
    
    
    3,000
    
    
    
    3,987Mortgage-backed securities
    
    
    2,473
    
    
    
    2,531$
    77,337
    
    
    $
    77,807
 At December 31, 2004, securities with a fair value of approximately $25,561 are subject to call
during 2005. Sales of available for sale securities were as follows: 2004
    
    
    2003
    
    
    2002Proceeds
    
    $
    9,281
    
    
    $
    4,000
    
    
    $
    14,343Gross gains
    
    
    146
    
    
    
    280
    
    
    
    200Gross losses
    
    
    (43
    )
    
    
    
    
    
    
    
 The
tax provision related to net realized gains was $39, $105 and $75
during 2004, 2003 and 2002, respectively. Maturities, principal repayments, and calls of investment
securities available for sale during 2004, 2003 and 2002 were
$3,797, $24,553 and $9,994, respectively. Net gains (losses)
realized from calls and mandatory redemptions of securities during
2004, 2003 and 2002 were $3, $9 and $18, respectively. Investment securities having carrying values of approximately
$11,924 and $16,284 at December 31, 2004 and 2003, respectively,
were pledged to secure public funds on deposit, securities sold
under agreements to repurchase, and other purposes as required by
law. Note 5 -  Loans Major classifications of loans are as follows: December 31,
    
    2004
    
    
    2003Real estate mortgage loans:Commercial
    
    $
    351,346
    
    
    $
    297,221Residential
    
    
    67,204
    
    
    
    60,104Farmland
    
    
    4,971
    
    
    
    2,317Construction and vacant land
    
    
    49,815
    
    
    
    32,089Commercial and agricultural loans
    
    
    64,622
    
    
    
    63,624Indirect auto dealer loans
    
    
    91,890
    
    
    
    59,437Home equity loans
    
    
    13,856
    
    
    
    12,574Other consumer loans
    
    
    9,817
    
    
    
    11,232Total loans
    
    
    653,521
    
    
    
    538,598Net deferred loan costs
    
    
    2,157
    
    
    
    1,815Loans, net of deferred loan costs
    
    $
    655,678
    
    
    $
    540,413
 58




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Substantially all loans are made to borrowers in the Banks primary market area of Monroe,
South Miami-Dade, Collier and Lee counties. In 1998, the Bank made a $10,000 loan to construct a lumber mill in northern Florida. Of
this amount, $6,400 had been sold by the Bank to other lenders. The loan was partially
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. During 2001, upon completion of foreclosure on the underlying collateral, the
non-guaranteed portion of this loan and interest accrued through the foreclosure date was
reclassified into other real estate ($550) and other assets (approximately $1,886) based on
the fair value of the underlying-collateral. The portion of this loan guaranteed by the
USDA was approximately $1,600 at December 31, 2004 and December 31, 2003, and is accruing
interest. Accrued interest on this loan totals approximately $677 and $590 at December 31,
2004 and December 31, 2003, respectively. The Bank is pursuing a sale of the property and equipment and has incurred various
expenditures. The Bank capitalized the liquidation costs and the portion of the protective
advances which it expects will be fully reimbursed by the USDA. Other real estate recorded
on the Banks books totaled $190 and $192 at December 31, 2004 and December 31, 2003,
respectively. The non-guaranteed principal and interest ($1,961 at December 31, 2004 and
December 31, 2003) and the reimbursable capitalized liquidation costs and protective
advance costs totaling approximately $704 and $511 at December 31, 2004 and December 31,
2003, respectively are included as other assets in the financial statements. The Bank sold certain pieces of equipment associated with the lumber mill property.
Proceeds from the sales were used to reduce the other real estate amount and liquidation
cost amounts recorded on the Banks books. In 2003, the Bank wrote down the carrying
amount of the other real estate by $262 based upon anticipated proceeds from the sale of
the property and remaining equipment. Florida law requires a bank to liquidate or charge off repossessed real property within
five years, and repossessed personal property within six months. The Bank was awarded
title to the real property on June 12, 2001, and an adjudicated interest in the owners
trust proceeds. The time constraints imposed by Florida law required that the personal
property be disposed of or charged off by December 2001. The Bank applied to the State of
Florida for an extension to carry the personal property on the Banks books and was granted
an extension to carry the personal property on its books until June 11, 2003. Since the
property had not been liquidated as of June 11th, the Bank charged-off the non
guaranteed principal and interest totaling $1,961 at June 30, 2003, for regulatory
purposes. Since the Company believes this amount is ultimately realizable, it did not
write off this amount for financial statement purposes under generally accepted accounting
principles. Activity in the allowance for loan losses is as follows: Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Balance, beginning of year
    
    $
    5,216
    
    
    $
    4,272
    
    
    $
    3,675Provision for loan losses charged to expense
    
    
    2,455
    
    
    
    1,586
    
    
    
    791Loans charged off
    
    
    (1,487
    )
    
    
    (667
    )
    
    
    (302
    )Recoveries of loans previously charged off
    
    
    59
    
    
    
    25
    
    
    
    108Balance, end of year
    
    $
    6,243
    
    
    $
    5,216
    
    
    $
    4,272
 59




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Impaired loans are as follows: Years ended December 31,
    
    2004
    
    
    2003Year end loans with no allocated allowance for loan losses
    
    $
    2,018
    
    
    $
    2,737Year end loans with allocated allowance for loan losses
    
    
    
    
    
    
    Total
    
    $
    2,018
    
    
    $
    2,737Amount of the allowance for loan losses allocated
    
    $
    
    
    
    $
    
 2004
    
    
    2003
    
    
    2002Average of impaired loans during the year
    
    $
    1,005
    
    
    $
    1,088
    
    
    $
    416Interest income recognized during impairment
    
    
    64
    
    
    
    72
    
    
    
    6Cash basis interest income recognized
    
    
    
    
    
    
    
    
    
    
    3
 Non-performing loans include nonaccrual loans and accruing loans contractually past due 90
days or more. Nonaccrual loans are comprised principally of loans 90 days past due as well as
certain loans, which are current but where serious doubt exists as to the ability of the borrower
to comply with the repayment terms. Interest previously accrued and not yet paid on nonaccrual
loans is reversed during the period in which the loan is placed in a nonaccrual status.
Non-performing loans are as follows: Years ended December 31,
    
    2004
    
    
    2003Nonaccrual loans
    
    $
    704
    
    
    $
    390Loans past due over 90 days still on accrual (a)
    
    
    
    
    
    
    
 Non-performing loans and impaired loans are defined differently. Some loans may be included
in both categories, whereas other loans may only be included in one category. (a) Non-performing loans at December 31, 2004 and 2003, excludes the $1,600 loan discussed
previously that is guaranteed for both principal and interest by the USDA. Note 6 -  Premises and Equipment A summary of the cost and accumulated depreciation of premises and equipment follows: Estimated UsefulDecember 31,
    
    2004
    
    
    2003
    
    
    LifeLand
    
    $
    9,668
    
    
    $
    5,999Buildings and leasehold improvements
    
    
    17,227
    
    
    
    15,216
    
    
    
    4 to 40 yearsFurniture, fixtures and equipment
    
    
    13,354
    
    
    
    11,127
    
    
    
    1 to 40 yearsConstruction in progress
    
    
    151
    
    
    
    69140,400
    
    
    
    33,033Less accumulated depreciation
    
    
    (12,841
    )
    
    
    (11,960
    )Premises and equipment, net
    
    $
    27,559
    
    
    $
    21,073
 60




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) The Bank is obligated under operating leases for office and banking premises which expire in periods varying from one to
fourteen years. Future minimum lease payments, before considering renewal options that generally are present, are as follows at
December 31, 2004: Years ending December 31,2005
    
    $
    5912006
    
    
    5422007
    
    
    4992008
    
    
    4482009
    
    
    312Thereafter
    
    
    660$
    3,052
 Rental expense for the years ended December 31, 2004, 2003 and 2002, was approximately $561, $443 and $430, respectively. Note 7 -  Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the years ended December 31, are as follows: 2004
    
    
    2003Beginning of the year
    
    $
    155
    
    
    $
    2,234Goodwill associated with sale of remaining interest of Investment in ERAS JV
    
    
    
    
    
    
    (69
    )Goodwill associated with sale of Keys Insurance Agency, Inc.
    
    
    
    
    
    
    (2,010
    )Balance at end of year
    
    $
    155
    
    
    $
    155
 Amortized intangible assets at December 31, consist of the following: 2004
    
    
    2003Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Net Book
    
    
    Carrying
    
    
    Accumulated
    
    
    Net BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueCore deposit intangible
    
    $
    2,941
    
    
    $
    1,569
    
    
    $
    1,372
    
    
    $
    2,941
    
    
    $
    1,284
    
    
    $
    1,657Excess servicing fees
    
    
    89
    
    
    
    69
    
    
    
    20
    
    
    
    89
    
    
    
    59
    
    
    
    30Total
    
    $
    3,030
    
    
    $
    1,638
    
    
    $
    1,392
    
    
    $
    3,030
    
    
    $
    1,343
    
    
    $
    1,687
 Aggregate intangible asset amortization expense was $295, $292 and $297 for 2004, 2003, and 2002, respectively. 61




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Estimated amortization expense for each of the next five years is as follows: Years ending December 31,2005
    
    $
    2902006
    
    
    2902007
    
    
    2862008
    
    
    2492009
    
    
    141
 Note 8 - Time Deposits Time deposits of $100 or more were $126,207 and $97,873 at December 31, 2004 and 2003, respectively. At December 31, 2004, the scheduled maturities of time deposits are as follows: Years ending December 31,2005
    
    $
    168,3852006
    
    
    48,4022007
    
    
    10,3242008
    
    
    17,6692009
    
    
    6,397Thereafter
    
    
    5$
    251,182
 Note 9  Short-Term Borrowings and Federal Home Loan Bank Advances Short-term borrowings include federal funds purchased, securities sold under agreements to
repurchase, advances from the Federal Home Loan Bank, and a Treasury, tax and loan note option. The Bank has an unsecured overnight federal funds purchased accommodation up to a maximum of $12,000
from its principal correspondent bank. The Bank also has securities sold under agreements to
repurchase with commercial account holders whereby the Bank sweeps the customers accounts on a daily
basis and pays interest on these amounts. These agreements are collateralized by investment
securities chosen by the Bank. The Bank accepts Treasury, tax and loan deposits from certain commercial depositors and remits these
deposits to the appropriate government authorities. The Bank can hold up to $1,700 of these deposits
more than a day under a note option agreement with its regional Federal Reserve bank and pay interest
on those funds held. The Bank pledges certain investment securities against this account. The Bank invested in Federal Home Loan Bank stock for the purpose of establishing credit
lines with the Federal Home Loan Bank. The credit availability to the Bank is equal to
20% of the Banks total assets as reported on the most recent quarterly financial
information submitted to the regulators. The credit availability approximated $165,565
at December 31, 2004. At December 31, 2004, in addition to a $15,000 letter of credit
used in lieu of pledging securities to the State of Florida, there was $35,000 in
advances outstanding. At December 31, 2003, the amount of outstanding advances was
$45,000. The outstanding amount at December 31, 2004 consists of one $10,000 daily
advance and one $25,000 advance maturing in March 2006. On December 31, 2004 the rate
on the daily advance was 2.44% and the rate on the long term advance was 2.38%,
repricing quarterly. Advances are secured by the Banks one-to-four-family residential
mortgage loans. 62




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##### Table of Contents



TIB Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements
(in thousands except share and per share amounts)

The following table reflects the average daily outstanding, year-end outstanding,
maximum month-end outstanding and the weighted average rates paid for each of the four
categories of short-term borrowings: Years ended December 31,
    
    2004
    
    
    2003Federal funds purchased:Balance:Average daily outstanding
    
    $
    460
    
    
    $
    142Year-end outstanding
    
    
    
    
    
    
    Maximum month-end outstanding
    
    
    4,519
    
    
    
    Rate:Weighted average for year
    
    
    2.2
    %
    
    
    1.7
    %Weighted average interest rate at December 31
    
    
    n/a
    
    
    
    n/aSecurities sold under agreements to repurchase:Balance:Average daily outstanding
    
    $
    5,142
    
    
    $
    3,064Year-end outstanding
    
    
    9,947
    
    
    
    2,943Maximum month-end outstanding
    
    
    9,947
    
    
    
    4,579Rate:Weighted average for year
    
    
    1.3
    %
    
    
    1.0
    %Weighted average interest rate at December 31
    
    
    2.1
    %
    
    
    0.8
    %Treasury, tax and loan note option:Balance:Average daily outstanding
    
    $
    647
    
    
    $
    633Year-end outstanding
    
    
    2,210
    
    
    
    1,098Maximum month-end outstanding
    
    
    2,210
    
    
    
    1,700Rate:Weighted average for year
    
    
    1.1
    %
    
    
    0.9
    %Weighted average interest rate at December 31
    
    
    1.9
    %
    
    
    0.7
    %Advances from the Federal Home Loan Bank-Short Term:Balance:Average daily outstanding
    
    $
    9,090
    
    
    $
    4,647Year-end outstanding
    
    
    10,000
    
    
    
    15,000Maximum month-end outstanding
    
    
    25,000
    
    
    
    15,000Rate:Weighted average for year
    
    
    1.8
    %
    
    
    1.3
    %Weighted average interest rate at December 31
    
    
    2.4
    %
    
    
    1.2
    %Advances from the Federal Home Loan Bank-Long Term:Balance:Average daily outstanding
    
    $
    20,246
    
    
    $
    16,959Year-end outstanding
    
    
    25,000
    
    
    
    30,000Maximum month-end outstanding
    
    
    25,000
    
    
    
    30,000Rate:Weighted average for year
    
    
    1.6
    %
    
    
    1.3
    %Weighted average interest rate at December 31
    
    
    2.4
    %
    
    
    1.2
    %
 63




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 10  Other Borrowings Line of Credit The Company has a $3,000 revolving line of credit with Independent Bankers Bank of
Florida. Amounts outstanding under the line bear interest equal to the prime rate
published in The Wall Street Journal minus one half percent, which is subject to change
daily, and is subject to a 4.25% floor. Interest is payable monthly, and any principal
is due on demand, or if no demand is made, at maturity on April 30, 2005. This credit
facility is secured by 100 percent of the outstanding shares of the Bank and requires,
among other things, that the Bank maintain a minimum Tier 1 capital ratio of 6 percent.
There were no amounts outstanding under this line at December 31, 2004 or 2003. Notes Payable The Company entered into an agreement with the Companys largest shareholder effective
July 1, 2000, to purchase 525,000 shares of the Companys common stock in exchange for
four subordinated notes payable of the Company totaling $5,250. The interest rate on
these notes was 13% per annum, with interest payments required quarterly. The principal
balance was payable in full on October 1, 2010, the maturity date of the notes, and the
notes could be prepaid by the Company at par any time after July 1, 2003. Effective
January 1, 2002, the interest rate was reduced to 9%, the option to prepay was extended
to January 1, 2007, and the maturity date was extended to January 1, 2012. On January 3,
2005 the Company repaid $1,250 of these notes at a 3% premium. Subordinated Debentures On September 7, 2000, the Company participated in a pooled offering of trust preferred
securities. The Company formed TIBFL Statutory Trust I (the Trust) a wholly-owned
statutory trust subsidiary for the purpose of issuing the trust preferred securities.
The Trust used the proceeds from the issuance of $8,000 in trust preferred securities to
acquire junior subordinated debentures of the Company. The trust preferred securities
essentially mirror the debt securities, carrying a cumulative preferred dividend at a
fixed rate equal to the 10.6% interest rate on the debt securities. The debt securities
and the trust preferred securities each have 30-year lives. The trust preferred
securities and the debt securities are callable by the Company or the Trust, at their
respective option after ten years, and at varying premiums and sooner in specific events,
subject to prior approval by the Federal Reserve Board, if then required. The Company has
treated the trust preferred securities as Tier 1 capital up to the maximum amount
allowed, and the remainder as Tier 2 capital for federal regulatory purposes (see Note
14). On July 31, 2001, the Company participated in a pooled offering of trust preferred
securities. The Company formed TIBFL Statutory Trust II (the Trust II) a wholly-owned
statutory trust subsidiary for the purpose of issuing the trust preferred securities.
The Trust II used the proceeds from the issuance of $5,000 in trust preferred securities
to acquire junior subordinated debentures of the Company. The trust preferred securities
essentially mirror the debt securities, carrying a cumulative preferred dividend at a
variable rate equal to the interest rate on the debt securities (three month LIBOR plus
358 basis points). The initial rate in effect at the time of issuance was 7.29% and is
subject to change quarterly. The rate in effect at December 31, 2004 was 5.74%. The debt
securities and the trust preferred securities each have 30-year lives. The trust
preferred securities and the debt securities are callable by the Company or the Trust, at
their respective option after five years, and at varying premiums and sooner in specific
events, subject to prior approval by the Federal Reserve Board, if then required. The
Company has treated the trust preferred securities as Tier 1 capital up to the maximum
amount allowed, and the remainder as Tier 2 capital for federal regulatory purposes (see
Note 14). 64




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Contractual Maturities At December 31, 2004, the contractual maturities of long-term debt were as follows: Fixed Rate
    
    
    Floating Rate
    
    
    TotalDue in 2005
    
    $
    
    
    
    $
    
    
    
    $
    Due in 2006
    
    
    
    
    
    
    
    
    
    
    Due in 2007
    
    
    
    
    
    
    
    
    
    
    Due in 2008
    
    
    
    
    
    
    
    
    
    
    Due in 2009
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    13,250
    
    
    
    5,000
    
    
    
    18,250Total long-term debt
    
    $
    13,250
    
    
    $
    5,000
    
    
    $
    18,250
 Note 11- Income Taxes Income tax expense (benefit) was as follows: Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Current income tax provision:Federal
    
    $
    2,331
    
    
    $
    3,049
    
    
    $
    2,290State
    
    
    431
    
    
    
    550
    
    
    
    4222,762
    
    
    
    3,599
    
    
    
    2,712Deferred tax benefit:Federal
    
    
    (76
    )
    
    
    (722
    )
    
    
    (210
    )State
    
    
    (14
    )
    
    
    (130
    )
    
    
    (39
    )(90
    )
    
    
    (852
    )
    
    
    (249
    )Total
    
    $
    2,672
    
    
    $
    2,747
    
    
    $
    2,463
 A reconciliation of income tax computed at the 34% Federal statutory income tax rate to total income taxes
reported is as follows: Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Pretax income
    
    $
    7,870
    
    
    $
    7,849
    
    
    $
    7,198Income taxes computed at Federal statutory tax rate
    
    $
    2,676
    
    
    $
    2,669
    
    
    $
    2,448Effect of:Tax-exempt
income, net
    
    
    (340
    )
    
    
    (275
    )
    
    
    (213
    )State income
taxes, net
    
    
    275
    
    
    
    277
    
    
    
    253Other, net
    
    
    61
    
    
    
    76
    
    
    
    (25
    )Total
    
    $
    2,672
    
    
    $
    2,747
    
    
    $
    2,463
 65




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Year end deferred tax assets and liabilities were due to the following: December 31,
    
    2004
    
    
    2003Allowance for loan losses
    
    $
    2,475
    
    
    $
    1,959Core deposit intangible
    
    
    212
    
    
    
    179Deferred compensation
    
    
    555
    
    
    
    339Other
    
    
    116
    
    
    
    109Total gross deferred tax assets
    
    
    3,358
    
    
    
    2,586Accumulated depreciation
    
    
    (871
    )
    
    
    (594
    )Deferred loan costs
    
    
    (401
    )
    
    
    Goodwill
    
    
    (17
    )
    
    
    (11
    )Gain on building swap
    
    
    (68
    )
    
    
    (70
    )Net unrealized gains on securities available for sale
    
    
    (177
    )
    
    
    (208
    )Total gross deferred tax liabilities
    
    
    (1,534
    )
    
    
    (883
    )Net deferred tax asset
    

    $
    1,824
    
    
    $
    1,703
 Note 12  Employee Benefit Plans The Bank maintains an Employee Stock Ownership Plan with 401(k) provisions that covers all employees who are
qualified as to age and length of service. Three types of contributions can be made to the Plan by the Bank and
participants: basic voluntary contributions which are discretionary contributions made by all participants; a matching
contribution, whereby the Bank will match 50 percent of salary reduction contributions up to 4 percent of compensation,
not to exceed a maximum contribution of $1 per employee; and an additional discretionary contribution which may be made
by the Bank and allocated to the accounts of participants on the basis of total relative compensation. The Bank
contributed $94, $69 and $202 to the plan in 2004, 2003 and 2002, respectively. As of December 31, 2004, the Plan
contained approximately 151,000 shares of the Companys common stock. In 2001, the Bank entered into salary continuation agreements with three of its executive officers. Two additional
executive officers entered into salary continuation agreements in 2003 and another in 2004. The plan is a nonqualified
deferred compensation arrangement that is designed to provide supplemental retirement income benefits to participants.
The Bank expensed $309, $254 and $173 for the accrual of future salary continuation benefits in 2004, 2003 and 2002,
respectively. The Bank has purchased single premium life insurance policies on these individuals. Cash value income
(net of related insurance premium expense) totaled $202, $225 and $161 in 2004, 2003 and 2002, respectively. Other
assets included $5,729 and $4,827 in surrender value and other liabilities included salary continuation benefits payable
of $860 and $551 at December 31, 2004 and 2003, respectively. In 2001, the Bank established a non qualified retirement benefit plan for eligible Bank directors. Under the plan, the
Company pays each participant, or their beneficiary, the amount of fees deferred and interest in 120 equal monthly
installments, beginning the month following the directors normal retirement date. The Bank expensed $273, $165 and
$119 for the accrual of current and future retirement benefits in 2004, 2003 and 2002, respectively, which included
$236, $146 and $102 in 2004, 2003 and 2002 related to the annual director retainer fees and monthly meeting fees that
certain directors elected to defer. The Bank has purchased single premium split dollar life insurance policies on these
individuals. Cash value income (net of related insurance premium expense) totaled $138, $152 and $147 in 2004, 2003 and
2002. Other assets included $3,854 and $3,716 in surrender value in other assets and other liabilities included
retirement benefits payable of $616 and $351 at December 31, 2004 and 2003, respectively. 66




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##### Table of Contents



TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 13  Related Party Transactions The Bank had loans outstanding to certain of its executive
officers, directors, and their related business interests as
follows: Beginning balance, January 1, 2004
    
    $
    2,020New loans
    
    
    596Effect of changes in related parties
    
    
    (14
    )Repayments
    
    
    (697
    )Ending balance, December 31, 2004
    
    $
    1,905
 Unfunded loan commitments to these individuals and their related
business interests totaled $152 at December 31, 2004. Deposits
from these individuals and their related interests were $3,008 and
$3,583 at December 31, 2004 and 2003, respectively. Note 14  Shareholders Equity and Minimum Regulatory Capital Requirements The Company (on a consolidated basis) and the Bank 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 Bank 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. In order for the Bank to be considered well capitalized under the
regulatory framework for prompt corrective action and for the
Company and the Bank to be considered adequately capitalized under
capital adequacy guidelines, minimum Tier 1 leverage, Tier 1
risk-based, and total risk-based ratios must be maintained. These
minimum amounts and ratios along with the actual amounts and ratios
for the Company and the Bank as of December 31, 2004 and 2003 are
presented in the following tables. 67




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Well Capitalized
    
    
    Adequately CapitalizedDecember 31, 2004
    
    Requirement
    
    
    Requirement
    
    
    ActualAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTier 1 Capital (to Average Assets)Consolidated
    
    
    N/A
    
    
    
    N/A
    
    
    
    3$31,270
    
    
    
    3  4.0
    %
    
    $
    78,048
    
    
    
    10.0
    %Bank
    
    
    39,069
    
    
    
    3  5.0
    %
    
    
    31,255
    
    
    
    3  4.0
    %
    
    
    81,780
    
    
    
    10.5
    %Tier 1 Capital (to Risk Weighted Assets)Consolidated
    
    
    N/A
    
    
    
    N/A
    
    
    
    3$28,583
    
    
    
    3  4.0
    %
    
    $
    78,048
    
    
    
    10.9
    %Bank
    
    
    42,857
    
    
    
    3  6.0
    %
    
    
    28,571
    
    
    
    3  4.0
    %
    
    
    81,780
    

    
    
    11.4
    %Total Capital (to Risk Weighted Assets)Consolidated
    
    
    N/A
    
    
    
    N/A
    
    
    
    3$57,166
    
    
    
    3  8.0
    %
    
    $
    89,772
    
    
    
    12.6
    %Bank
    
    
    71,428
    
    
    
    310.0
    %
    
    
    57,143
    
    
    
    3  8.0
    %
    
    
    88,254
    
    
    
    12.4
    %
  Well Capitalized
    
    
    Adequately CapitalizedDecember 31, 2003
    
    Requirement
    
    
    Requirement
    
    
    ActualAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTier 1 Capital (to Average Assets)Consolidated
    
    
    N/A
    
    
    
    N/A
    
    
    
    3$26,006
    
    
    
    3  4.0
    %
    
    $
    50,807
    
    
    
    7.8
    %Bank
    
    
    32,483
    
    
    
    3  5.0
    %
    
    
    25,986
    
    
    
    3  4.0
    %
    
    
    55,472
    
    
    
    8.5
    %Tier 1 Capital (to Risk Weighted Assets)Consolidated
    
    
    N/A
    
    
    
    N/A
    
    
    
    3$23,148
    
    
    
    3  4.0
    %
    
    $
    50,807
    
    
    
    8.8
    %Bank
    
    
    34,676
    
    
    
    3  6.0
    %
    
    
    23,117
    
    
    
    3  4.0
    %
    
    
    55,472
    
    
    
    9.6
    %Total Capital (to Risk Weighted Assets)Consolidated
    
    
    N/A
    
    
    
    N/A
    
    
    
    3$46,296
    
    
    
    3  8.0
    %
    
    $
    61,456
    
    
    
    10.6
    %Bank
    
    
    57,793
    
    
    
    310.0
    %
    
    
    46,235
    
    
    
    3  8.0
    %
    
    
    60,871
    
    
    
    10.5
    %
 At year end 2004 and 2003, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. Management believes, as of December 31, 2004, that the Company and the Bank meet all capital requirements to which it is subject. Tier 1 Capital includes the trust preferred securities that
were issued in September 2000 and July 2001. Under state banking law, regulatory approval will be required if the total of all dividends declared in any calendar year by the Bank exceeds the Banks net profits to date for that year
combined with its retained net profits for the preceding two years. Retained earnings of the Bank available for payment of dividends to the Company without prior regulatory approval at December
31, 2004, is approximately $16,629. On April 15, 2004, we closed the sale of 1,000,000 shares of our common stock at a price of $22.00 per share before commissions and expenses. The shares were sold on a firm commitment basis
through Advest, Inc. Advest, Inc. also purchased an additional 150,000 shares from the Company on May 6, 2004, at $22.00 per share before commissions and expenses. The net proceeds of the
offering, totaling $23,230 after $2,070 in offering costs, provided additional capital necessary to support continued loan and deposit growth. 68




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 15  Stock Options As of
December 31, 2004, the Company has one compensation plan under which shares of its common stock are
issuable in the form of stock options, restricted shares, stock appreciation rights,
performance shares or performance units. This is its 2004 Equity Incentive Plan (the 2004 Plan),
which was approved by the Companys shareholders at the May 25, 2004 annual meeting.
Previously, the Company had granted stock options under the 1994 Incentive Stock Option and Nonstatutory Stock
Option Plan (the 1994 Plan) as amended and restated as of August 31, 1996. Under
the 2004 Plan, the Board of Directors of the Company may grant nonqualified stock options to any director,
and incentive stock options or nonqualified stock options to any officer, key
executive, administrative, or other employee including an employee who is a director of the Company. Subject
to the provisions of the 2004 Plan, the maximum number of shares of common stock of
the Company that may be optioned or sold through the 2014 expiration of the plan is 400,000 shares, no more
than 133,000 of which may be issued pursuant to awards granted in the form of
restricted shares. Such shares may be treasury, or authorized but unissued, shares of common stock of the
Company. If options granted under the Plan expire or terminate for any reason without
having been exercised in full, the shares not purchased shall again be available for option for the purposes
of the Plan. The exercise price for common stock must equal at least 100 percent of the fair market value of the stock at the time the option is granted. The exercise price under an incentive stock option
granted to a person owning stock representing more than 10 percent of the common stock must equal at least 110 percent of the fair market value at the date of grant, and such option is not
exercisable after five years from the date the incentive stock option was granted. The Board of Directors may, at its discretion, provide that an option not be exercised in whole or in part
for any period or periods of time as specified in the option agreements. No option may be exercised after the expiration of ten years from the date it is granted. A summary of the activity in the plans is as follows: Exercise Price
    
    
    Weighted AverageShares
    
    
    Range
    
    
    Exercise PriceBalance,December 31, 2001
    
    
    585,402
    
    
    $
    5.49
    
    
    
    
    
    
    $
    14.50
    
    
    $
    8.96Granted
    
    
    164,000
    
    
    
    11.21
    
    
    
    
    
    
    
    14.12
    
    
    
    12.54Exercised
    
    
    (89,525
    )
    
    
    5.49
    
    
    
    
    
    
    
    13.50
    
    
    
    6.63Expired or Forfeited
    
    
    (92,672
    )
    
    
    5.49
    
    
    
    
    
    
    
    13.55
    
    
    
    10.62Balance,December 31, 2002
    
    
    567,205
    
    
    
    5.49
    
    
    
    
    
    
    
    14.50
    
    
    
    10.09Granted
    
    
    44,500
    
    
    
    16.35
    
    
    
    
    
    
    
    19.40
    
    
    
    17.93Exercised
    
    
    (115,050
    )
    
    
    5.49
    
    
    
    
    
    
    
    14.12
    
    
    
    6.39Expired or Forfeited
    
    
    (19,150
    )
    
    
    5.49
    
    
    
    
    
    
    
    16.35
    
    
    
    11.46Balance,December 31, 2003
    
    
    477,505
    
    
    
    5.49
    
    
    
    
    
    
    
    19.40
    
    
    
    11.66Granted
    
    
    37,500
    
    
    
    22.74
    
    
    
    
    
    
    
    22.79
    
    
    
    22.76Exercised
    
    
    (97,911
    )
    
    
    5.49
    
    
    
    
    
    
    
    14.12
    
    
    
    6.92Expired or Forfeited
    
    
    (7,900
    )
    
    
    11.25
    
    
    
    
    
    
    
    22.74
    
    
    
    19.47Balance,December 31, 2004
    
    
    409,194
    
    
    $
    8.33
    
    
    
    
    
    
    $
    22.79
    
    
    $
    13.66
 Options exercisable at December 31, 2004
    
    
    181,944Options exercisable at December 31, 2003
    
    
    236,405Options exercisable at December 31, 2002
    
    
    282,305
 69




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Options outstanding at December 31, 2004 were as follows: Outstanding Options
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Contractual
    
    
    Exercise
    
    
    
    
    
    
    ExercisePrice
    
    Number
    
    
    Life
    
    
    Price
    
    
    Number
    
    
    Price$8.33    $10.50
    
    
    66,800
    
    
    
    3.75
    
    
    $
    9.64
    
    
    
    34,900
    
    
    $
    9.4211.00    11.75
    
    
    29,150
    
    
    
    4.05
    
    
    
    11.35
    
    
    
    11,050
    
    
    
    11.3912.40    12.40
    
    
    105,800
    
    
    
    6.48
    
    
    
    12.40
    
    
    
    23,600
    
    
    
    12.4012.65    13.45
    
    
    17,500
    
    
    
    5.03
    
    
    
    13.24
    
    
    
    14,000
    
    
    
    13.3213.50    13.50
    
    
    74,000
    
    
    
    2.73
    
    
    
    13.50
    
    
    
    49,900
    
    
    
    13.5013.55    14.50
    
    
    40,944
    
    
    
    5.71
    
    
    
    13.82
    
    
    
    34,744
    
    
    
    13.7616.35    19.40
    
    
    42,500
    
    
    
    8.57
    
    
    
    18.00
    
    
    
    8,750
    
    
    
    18.1022.74    22.74
    
    
    7,500
    
    
    
    9.15
    
    
    
    22.74
    
    
    
    
    
    
    
    22.76    22.76
    
    
    20,000
    
    
    
    9.11
    
    
    
    22.76
    
    
    
    
    
    
    
    22.79    22.79
    
    
    5,000
    
    
    
    9.07
    
    
    
    22.79
    
    
    
    5,000
    
    
    
    22.79$8.33    $22.79
    
    
    409,194
    
    
    
    5.47
    
    
    $
    13.66
    
    
    
    181,944
    
    
    $
    12.96
 Note 16  Loan Commitments and Other Related Activities Some financial instruments, such as loan commitments, credit lines, letters of credit, and
overdraft protection, are issued to meet customer financing needs. These are agreements to
provide credit or to support the credit of others, as long as conditions established in the
contract are met, and usually have expiration dates. Commitments may expire without being
used. Off-balance-sheet risk of credit loss exists up to the face amount of these
instruments, although material losses are not anticipated. The same credit policies are used
to make such commitments as are used for loans, including obtaining collateral at exercise of
the commitment.
The contractual amount of financial instruments with off-balance-sheet risk was as follows at December 31: 2004
    
    
    
    2003Fixed
    
    
    
    Variable
    
    
    
    Fixed
    
    
    
    VariableRate
    
    
    
    Rate
    
    
    
    Rate
    
    
    
    RateCommitments to make loans
    
    
    $
    7,866
    
    
    
    $
    26,567
    
    
    
    $
    15,190
    
    
    
    $
    4,593Unfunded commitments under lines of credit
    
    
    
    700
    
    
    
    
    71,800
    
    
    
    
    1,250
    
    
    
    
    51,569
 Commitments to make loans are generally made for periods of 30
days. The fixed rate loan commitments have interest rates ranging
from 3.95% to 18.00% and maturities ranging from 6 months to 20
years. At December 31, 2004 and 2003, commitments under standby letters of
credit aggregated approximately $2,085 and $1,543, respectively. 70




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 17  Supplemental Financial Data Components of other expense in excess of 1 percent of total interest and other income are as follows: Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Merchant bankcard processing expenses
    
    $
    3,869
    
    
    $
    3,153
    
    
    $
    2,780Other merchant charges
    
    
    568
    
    
    
    503
    
    
    
    461Operating supplies
    
    
    553
    
    
    
    495
    
    
    
    428Computer services
    
    
    1,773
    
    
    
    1,533
    
    
    
    1,627Legal and professional fees
    
    
    1,223
    
    
    
    845
    
    
    
    749Marketing and community relations
    
    
    866
    
    
    
    851
    
    
    
    865Postage, courier, and armored car
    
    
    620
    
    
    
    700
    
    
    
    590
 Note 18  Fair Values of Financial Instruments Carrying amount and estimated fair values of financial instruments were as follows at December 31: 2004
    
    
    2003Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    42,938
    
    
    
    42,938
    
    
    $
    33,681
    
    
    $
    33,681Investment securities available for sale
    
    
    77,807
    
    
    
    77,807
    
    
    
    52,557
    
    
    
    52,557Loans, net
    
    
    649,435
    
    
    
    650,119
    
    
    
    535,197
    
    
    
    537,099Federal Home Loan Bank and Independent
Bankers Bank stock
    
    
    3,035
    
    
    
    3,035
    
    
    
    2,376
    
    
    
    2,376Accrued interest receivable
    
    
    4,086
    
    
    
    4,086
    
    
    
    3,373
    
    
    
    3,373Financial liabilities:Noncontractual deposits
    
    
    436,677
    
    
    
    436,677
    
    
    
    348,783
    
    
    
    348,783Contractual deposits
    
    
    251,182
    
    
    
    251,159
    
    
    
    205,030
    
    
    
    209,085Federal Home Loan Bank Advances
    
    
    35,000
    
    
    
    35,000
    
    
    
    45,000
    
    
    
    45,000Short-term borrowings
    
    
    12,157
    
    
    
    12,157
    
    
    
    4,041
    
    
    
    4,041Notes payable
    
    
    5,250
    
    
    
    5,388
    
    
    
    5,250
    
    
    
    5,546Subordinated debentures
    
    
    13,000
    
    
    
    13,489
    
    
    
    13,000
    
    
    
    13,296Accrued interest payable
    
    
    3,692
    
    
    
    3,692
    
    
    
    3,504
    
    
    
    3,504
 The
methods and assumptions used to estimate fair value are described as follows: Carrying amount is the estimated fair value for cash and cash equivalents, Federal Home Loan Bank stock and other bankers bank stock, accrued interest receivable
and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes,
and if no such information is available, on the rate and term of the security and information about the issuer. For fixed rate loans or deposits and for variable rate loans or deposits
with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair values for
impaired loans are estimated using discounted cash flow analysis or underlying collateral values. Fair value of debt is based on current rates for similar financing. The fair value of
off-balance sheet items that includes commitments to extend credit to fund commercial, consumer, real estate construction and real estate-mortgage loans and to fund standby letters of
credit is considered nominal. 71




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 19  Segment Reporting TIB Financial Corp. has two reportable segments in their continuing operations: community banking and merchant bankcard processing. The community banking segments business is to
attract deposits from the public and to use such deposits to make real estate, business and consumer loans in its primary service area. The merchant bankcard processing segment processes
credit card transactions for local merchants. Parent and other is primarily comprised of the operations of the holding company. The results of Keys Insurance Agency, Inc. are not included in the segment reporting as they are classified separately as discontinued operations in the consolidated financial statements
(see Note 20). The Companys reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing
strategies. Intercompany transactions have been eliminated in preparing the segment reporting amounts below. Year ended
    
    Community
    
    
    Merchant
    
    
    Parent andDecember 31, 2004
    
    Banking
    
    
    Bankcard
    
    
    Other
    
    
    TotalInterest and dividend income
    
    $
    40,916
    
    
    $
    
    
    
    $
    
    
    
    $
    40,916Interest expense
    
    
    (9,129
    )
    
    
    
    
    
    
    (1,601
    )
    
    
    (10,730
    )Net interest and dividend
income (expense)
    
    
    31,787
    
    
    
    
    
    
    
    (1,601
    )
    
    
    30,186Other income
    
    
    5,916
    
    
    
    5,758
    
    
    
    389
    
    
    
    12,063Depreciation and amortization
    
    
    (2,202
    )
    
    
    (40
    )
    
    
    (3
    )
    
    
    (2,245
    )Other expense
    
    
    (26,432
    )
    
    
    (4,828
    )
    
    
    (874
    )
    
    
    (32,134
    )Pretax segment profit (loss)
    
    $
    9,069
    
    
    $
    890
    
    
    $
    (2,089
    )
    
    $
    7,870Segment assets
    
    $
    828,886
    
    
    $
    32
    
    
    $
    407
    
    
    $
    829,325
 Year ended
    
    Community
    
    
    Merchant
    
    
    Parent andDecember 31, 2003
    
    Banking
    
    
    Bankcard
    
    
    Other
    
    
    TotalInterest and dividend income
    
    $
    34,606
    
    
    $
    
    
    
    $
    
    
    
    $
    34,606Interest expense
    
    
    (8,249
    )
    
    
    
    
    
    
    (1,590
    )
    
    
    (9,839
    )Net interest and dividend
income (expense)
    
    
    26,357
    
    
    
    
    
    
    
    (1,590
    )
    
    
    24,767Other income
    
    
    6,461
    
    
    
    4,953
    
    
    
    623
    
    
    
    12,037Depreciation and amortization
    
    
    (1,963
    )
    
    
    (46
    )
    
    
    (4
    )
    
    
    (2,013
    )Other expense
    
    
    (22,428
    )
    
    
    (3,982
    )
    
    
    (732
    )
    
    
    (27,142
    )Pretax segment profit (loss)
    
    $
    8,427
    
    
    $
    925
    
    
    $
    (1,703
    )
    
    $
    7,649Segment assets
    
    $
    668,495
    
    
    $
    37
    
    
    $
    766
    
    
    $
    669,298
 72




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Year ended
    
    Community
    
    
    Merchant
    
    
    Parent andDecember 31, 2002
    
    Banking
    
    
    Bankcard
    
    
    Other
    
    
    TotalInterest and dividend income
    
    $
    31,287
    
    
    $
    
    
    
    $
    29
    
    
    $
    31,316Interest expense
    
    
    (8,706
    )
    
    
    
    
    
    
    (1,623
    )
    
    
    (10,329
    )Net interest and dividend
income (expense)
    
    
    22,581
    
    
    
    
    
    
    
    (1,594
    )
    
    
    20,987Other income
    
    
    5,594
    
    
    
    4,387
    
    
    
    447
    
    
    
    10,428Depreciation and amortization
    
    
    (1,718
    )
    
    
    (44
    )
    
    
    (5
    )
    
    
    (1,767
    )Other expense
    
    
    (18,486
    )
    
    
    (3,577
    )
    
    
    (593
    )
    
    
    (22,656
    )Pretax segment profit (loss)
    
    $
    7,971
    
    
    $
    766
    
    
    $
    (1,745
    )
    
    $
    6,992Segment assets
    
    $
    564,221
    
    
    $
    66
    
    
    $
    583
    
    
    $
    564,870
 The Company discontinued separate reporting of its Government Guaranteed Loan Sales and
Servicing segment in 2003. This segment is now included as part of the Community Banking
segment above. Note 20  Discontinued Operations On
August 15, 2003, the Company closed the sale of Keys Insurance
Agency, Inc., a wholly-owned subsidiary of the Company, to Derek
Martin-Vegue and his partner. Mr. Martin-Vegue is a former
director of the Company and TIB Bank. The transaction
was structured as a sale of the agency assets. The buyer paid
$2,205 in cash at the closing. Of the cash payment at closing,
proceeds of $2,021 were pursuant to a loan from TIB Bank
(a subsidiary of the Company) to the buyer. The Company
recognized a loss of $15 on the transaction. The results of Keys Insurance Agency, Inc. operations, which have
been classified as discontinued operations in the accompanying
consolidated financial statements, are summarized as follows: Years ended December 31:
    
    2004
    
    
    2003
    
    
    2002Other income
    
    $
    
    
    
    $
    1,255
    
    
    $
    1,801Depreciation and amortization
    
    
    
    
    
    
    (35
    )
    
    
    (57
    )Other expense
    
    
    
    
    
    
    (1,020
    )
    
    
    (1,538
    )Pretax income from discontinued operations
    
    $
    
    
    
    $
    200
    
    
    $
    206
 73




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 21  Condensed Financial Information of TIB Financial Corp. Condensed Balance Sheets
(Parent Only) December 31,
    
    2004
    
    
    2003AssetsCash on deposit with subsidiary
    
    $
    2,341
    
    
    $
    758Dividends and other receivables from subsidiaries
    
    
    10
    
    
    
    10Investment in bank subsidiary
    
    
    84,845
    
    
    
    58,910Investment in TIBFL Statutory Trust I
    
    
    248
    
    
    
    248Investment in TIBFL Statutory Trust II
    
    
    155
    
    
    
    155Income tax receivable
    
    
    
    
    
    
    338Other assets
    
    
    407
    
    
    
    424Total Assets
    
    $
    88,006
    
    
    $
    60,843Liabilities and Shareholders EquityLiabilitiesDividends payable
    
    $
    653
    
    
    $
    498Interest payable
    
    
    449
    
    
    
    440Notes payable
    
    
    18,653
    
    
    
    18,653Other liabilities
    
    
    137
    
    
    
    6Total liabilities
    
    
    19,892
    
    
    
    19,597Shareholders equityCommon stock
    
    
    568
    
    
    
    443Surplus
    
    
    38,284
    
    
    
    14,255Retained earnings
    
    
    28,968
    
    
    
    26,203Accumulated other comprehensive income
    
    
    294
    
    
    
    345Total shareholders equity
    
    
    68,114
    
    
    
    41,246Total Liabilities and Shareholders Equity
    
    $
    88,006
    
    
    $
    60,843
 74




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) 21. Condensed Financial Information of TIB Financial Corp. (continued) Condensed Statements of Income
(Parent Only) Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Operating incomeDividend from bank subsidiary
    
    $
    3,708
    
    
    $
    832
    
    
    $
    782Dividend from TIBFL Statutory Trust I
    
    
    26
    
    
    
    26
    
    
    
    26Dividend from TIBFL Statutory Trust II
    
    
    8
    
    
    
    8
    
    
    
    8Dividend from TIB Software & Services, Inc.
    
    
    
    
    
    
    126
    
    
    
    157Interest income on note receivable
    
    
    
    
    
    
    
    
    
    
    29Other income
    
    
    6
    
    
    
    
    
    
    
    Total operating income
    
    
    3,748
    
    
    
    992
    
    
    
    1,002Operating expenseInterest expense
    
    
    1,636
    
    
    
    1,624
    
    
    
    1,658Other expense
    
    
    553
    
    
    
    345
    
    
    
    305Total operating expense
    
    
    2,189
    
    
    
    1,969
    
    
    
    1,963Income (loss) before income tax benefit and
equity in undistributed earnings (losses) of
subsidiaries
    
    
    1,559
    
    
    
    (977
    )
    
    
    (961
    )Income tax benefit
    
    
    808
    
    
    
    728
    
    
    
    708Income (loss) before equity in undistributed earnings
(losses) of subsidiaries
    
    
    2,367
    
    
    
    (249
    )
    
    
    (253
    )Equity in undistributed earnings of bank subsidiary
    
    
    2,831
    
    
    
    5,226
    
    
    
    4,865Equity in undistributed losses of TIB Software &
Services, Inc.
    
    
    
    
    
    
    
    
    
    
    (6
    )Income from continuing operations
    
    
    5,198
    
    
    
    4,977
    
    
    
    4,606Discontinued operations:Dividend from Keys Insurance Agency, Inc.
    
    
    
    
    
    
    125
    
    
    
    Equity in undistributed earnings of Keys
Insurance Agency, Inc.
    
    
    
    
    
    
    
    
    
    
    129Income from discontinued operations
    
    
    
    
    
    
    125
    
    
    
    129Net income
    
    $
    5,198
    
    
    $
    5,102
    
    
    $
    4,735
 75




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts)  21.
    Condensed Financial Information of TIB Financial Corp. (continued) Condensed Statements of Cash Flows
(Parent Only) Years ended December 31,
    
    2004
    
    
    2003
    
    
    2002Cash flows from operating activitiesNet income
    
    $
    5,198
    
    
    $
    5,102
    
    
    $
    4,735Equity in undistributed earnings of bank subsidiary
    
    
    (2,831
    )
    
    
    (5,226
    )
    
    
    (4,865
    )Equity in undistributed losses of TIB Software &
Services, Inc.
    
    
    
    
    
    
    
    
    
    
    6Equity in undistributed (earnings) loss of Keys
Insurance Agency, Inc.
    
    
    
    
    
    
    
    
    
    
    (129
    )Amortization of intangibles and other assets
    
    
    17
    
    
    
    17
    
    
    
    37Increase in other assets
    
    
    
    
    
    
    (4
    )
    
    
    (29
    )Decrease in due to subsidiaries
    
    
    
    
    
    
    (3
    )
    
    
    (147
    )Increase (decrease) in interest payable
    
    
    9
    
    
    
    (5
    )
    
    
    (58
    )Increase in other liabilities
    
    
    6
    
    
    
    3
    
    
    
    3Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (89
    )Increase (decrease) in net income tax obligation
    
    
    709
    
    
    
    (3
    )
    
    
    (65
    )Net cash provided (used) by operating activities
    
    
    3,108
    
    
    
    (119
    )
    
    
    (601
    )Cash flows from investing activitiesInvestment in bank subsidiary
    
    
    (23,155
    )
    
    
    (5,500
    )
    
    
    Payment on note receivable from sale of option
    
    
    
    
    
    
    
    
    
    
    300Return of capital from Keys Insurance Agency, Inc.
    
    
    
    
    
    
    2,301
    
    
    
    Return of capital from TIB Software & Services, Inc.
    
    
    
    
    
    
    129
    
    
    
    130Net cash provided (used) in investing activities
    
    
    (23,155
    )
    
    
    (3,070
    )
    
    
    430Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    678
    
    
    
    735
    
    
    
    592Proceeds from stock issuance
    
    
    23,230
    
    
    
    4,343
    
    
    
    Cash dividends paid
    
    
    (2,278
    )
    
    
    (1,866
    )
    
    
    (1,713
    )Net cash provided (used) by financing activities
    
    
    21,630
    
    
    
    3,212
    
    
    
    (1,121
    )Net increase (decrease) in cash
    
    
    1,583
    
    
    
    23
    
    
    
    (1,292
    )Cash, beginning of year
    
    
    758
    
    
    
    735
    
    
    
    2,027Cash, end of year
    
    $
    2,341
    
    
    $
    758
    
    
    $
    735
 76




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TIB Financial Corp. and Subsidiaries Notes to Consolidated Financial Statements
(in thousands except share and per share amounts) Note 22  Quarterly Financial Data (Unaudited) The following is a summary of unaudited quarterly results for 2004 and 2003: 2004
    
    
    2003Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstCondensed income statements:Interest income
    
    $
    11,351
    
    
    $
    10,528
    
    
    $
    9,819
    
    
    $
    9,218
    
    
    $
    9,116
    
    
    $
    8,748
    
    
    $
    8,452
    
    
    $
    8,290Net interest income
    
    
    8,216
    
    
    
    7,781
    
    
    
    7,361
    
    
    
    6,828
    
    
    
    6,701
    
    
    
    6,345
    
    
    
    5,888
    
    
    
    5,833Income from
continuing
operations
    
    
    1,331
    
    
    
    1,337
    
    
    
    1,257
    
    
    
    1,273
    
    
    
    1,464
    
    
    
    1,141
    
    
    
    1,210
    
    
    
    1,162Net income
    
    $
    1,331
    
    
    $
    1,337
    
    
    $
    1,257
    
    
    $
    1,273
    
    
    $
    1,464
    
    
    $
    1,163
    
    
    $
    1,286
    
    
    $
    1,189Earnings per share:Income from
continuing
operations - Basic
    
    $
    0.23
    
    
    $
    0.24
    
    
    $
    0.23
    
    
    $
    0.29
    
    
    $
    0.33
    
    
    $
    0.26
    
    
    $
    0.29
    
    
    $
    0.29Income from
continuing
operations -
Diluted
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.32
    
    
    $
    0.25
    
    
    $
    0.28
    
    
    $
    0.27
 Due to the disposal of the assets of Keys Insurance Agency, Inc. in the third quarter of 2003,
all previous reported quarterly financial data has been adjusted above to reflect the results of
Keys Insurance Agency, Inc. as discontinued operations. 77




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE On June 10, 2003, the Company dismissed BDO Seidman, LLP as its accountants and retained
the accounting firm of Crowe Chizek and Company LLC. BDO Seidman, LLPs report on the financial
statements for the Company for 2002 did not contain an adverse opinion or disclaimer of
opinion nor was such report qualified or modified as to audit scope or accounting principle.
During such calendar years and the subsequent interim period preceding the change in its
accountants, there were no disagreements with the former accountants on any matter of accounting
principle or practices, financial statement disclosure or auditing scope or procedure, which
disagreement or disagreements, if not resolved to the satisfaction of the former accountants, would
have caused them to make a reference to the subject matter of the disagreement in conjunction with
their report. The decision to dismiss BDO Seidman, LLP was recommended and approved by the Board
of Directors of the Company. 
 ITEM 9A. 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 adequate in ensuring that material information related to the Corporation is
made known to them by others within the Corporation.  (b)
    Managements Annual Report on Internal Control Over Financial Reporting The Company has made no significant changes in its internal controls or in other factors which
may significantly affect these controls subsequent to the evaluation of these controls by the Chief
Executive Officer and Chief Financial Officer. In accordance with an order of the Securities and Exchange Commission under Section 36 of
Securities Exchange Act of 1934 granting an exemption from specified provisions of Exchange Act
Rules 13a-1 and 15d-1, the Registrant will file Managements Annual Report on Internal Control Over
Financial Reporting by amendment to this Form 10-K within 45 days of its March 16, 2005 filing
deadline.  (c)
    Attestation Report of the Registered Public Accounting Firm In accordance with the aforementioned order of the Securities and Exchange Commission under
Section 36 of Securities Exchange Act of 1934, the Registrant will file an attestation report of
Crowe Chizek and Company LLC, its registered public accounting firm, on managements assessment of
the Registrants internal control over financial reporting by amendment to this Form 10-K within 45
days of its March 16, 2005 filing deadline. 
  ITEM 9B.
    OTHER INFORMATION Not applicable. 78




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##### Table of Contents



PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the captions Information About the Board of Directors
and Their Committees and Executive Officers under the caption Election of Directors, Audit
Committee Report and Filings Under Section 16(A) Beneficial Ownership Reporting Compliance in
the Proxy Statement to be utilized in connection with the Companys 2005 Annual Shareholders
Meeting is incorporated herein by reference. In 2004, we adopted a code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer, controller, and persons performing
similar functions. We have posted the text of our code of ethics on
our website at www.tibbank.com
in the section titled Investor Relations. In addition, we intend to promptly disclose (i) the
nature of any amendment to our code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer, controller, or persons performing
similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision
of our code of ethics that is granted to one of these specified individuals, the name of such
person who is granted the waiver, and the date of the waiver on our website in the future. 
 ITEM 11. EXECUTIVE COMPENSATION The information contained under the captions Compensation of Executive Officers and
Directors and Performance Graph in the Proxy Statement to be utilized in connection with the
Companys 2005 Annual Shareholders Meeting is incorporated herein by reference. 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS The information contained under the caption Management and Principal Shareholders in
the Proxy Statement to be utilized in connection with the Companys 2005 Annual Shareholders
Meeting is incorporated herein by reference. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the caption Certain Relationships and Related
Transactions in the Proxy Statement to be utilized in connection with the Companys 2005 Annual
Shareholders Meeting is incorporated herein by reference. 79




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information contained under the caption Principal Accountant Fees and Services in
the Proxy Statement to be utilized in connection with the Companys 2005 Annual Shareholders
Meeting is incorporated herein by reference. 
 PART IV 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES  (a)
    1. Financial StatementsThe consolidated financial statements, notes thereto and independent auditors report
thereon, filed as part hereof, are listed in Item 8. 2. Financial Statement Schedules  Financial Statement schedules have been omitted as the required information is not
applicable or the required information has been incorporated in the consolidated financial
statements and related notes incorporated by reference herein. 3. Exhibits  Exhibit Numbers  3.1
    Restated Articles of Incorporation*****3.2
    Bylaws**4.1
    Specimen Stock Certificate*10.1
    Employment Agreement between Edward V. Lett, TIB Financial Corp. and TIB Bank
effective March 1, 2004 ***/******10.2
    401(K) Savings and Employee Stock Ownership Plan */***10.3
    Employee Incentive Stock Option Plan */***10.4
    Employment Agreement between Millard J. Younkers, Jr., TIB Financial Corp. and
TIB Bank effective March 1, 2004 ***/******10.5
    Employment Agreement between David P. Johnson, TIB Financial Corp. and TIB Bank
effective March 1, 2004 ***/******10.6
    Form of Director Deferred Fee Agreement***/****10.7
    Form of Director Split Dollar Agreement***/****10.8
    Form of Salary Continuation Agreement***/****10.9
    Form of Executive Officer Split Dollar Agreement***/****10.10
    Form of Director Deferred Fee Agreement  First Amendment***10.11
    Form of Executive Officer Split Dollar Agreement  First Amendment***10.12
    Form of Director Split Dollar Agreement  First Amendment***10.13
    Employment Agreement between Michael D. Carrigan, TIB Financial Corp. and TIB
Bank effective March 1, 2004 ***/******10.14
    Form of Salary Continuation Agreement  First Amendment***21.1
    Subsidiaries of the Company23.1
    Consent of Crowe Chizek and Company LLC31.1
    Chief Executive Officers certification required under Section 302 of
Sarbanes-Oxley Act of 200231.2
    Chief Financial Officers certification required under Section 302 of
Sarbanes-Oxley Act of 2002 80




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##### Table of Contents



32.1
    Chief Executive Officers certification required under Section 906 of
Sarbanes-Oxley Act of 200232.2
    Chief Financial Officers certification required under Section 906 of
Sarbanes-Oxley Act of 2002*
    Previously filed by the Company as an Exhibit (with the same respective Exhibit
Number as indicated herein) to the Companys Registration Statement (Registration No.
333-03499) and such document is incorporated herein by reference.**
    Previously filed by the Company as Exhibit (with the same respective Exhibit
Number as indicated herein) to the Companys Registration Statement (Registration No.
333-113484) and such document is incorporated herein by reference.***
    Represents a management contract or a compensation plan or arrangement required
to be filed as an exhibit.****
    Items 10.6 through 10.9 were previously filed by the Company as Exhibits to the
Companys December 31, 2001 10-K and such documents are incorporated herein by
reference.*****
    Incorporated by reference to Appendix A in the Companys Definitive Proxy
Statement filed on April 8, 2004.******
    Items 10.1, 10.4, 10.5 and 10.10 through 10.13 were previously filed by the Company
as Exhibits to the Companys December 31, 2003 10-K and such documents are incorporated
herein by reference. 81




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 on March 16, 2005. TIB FINANCIAL CORP. By:
    
    /s/ Edward V. LettEdward V. LettPresident, Chief Executive Officer and Director
 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated on March
16, 2005. Signature
    
    Title/s/ Edward V. Lett
    
    President (Principal Executive Officer), Chief Executive Officerand DirectorEdward V. Lett/s/ Richard C. Bricker, Jr.
    
    DirectorRichard C. Bricker, Jr./s/ Armando J. Henriquez
    
    DirectorDr. Armando J. Henriquez/s/ Gretchen K. Holland
    
    DirectorGretchen K. Holland/s/ Paul O. Jones, Jr., M.D.
    
    DirectorPaul O. Jones, Jr., M.D./s/ James R. Lawson
    
    DirectorJames R. Lawson/s/ Thomas J. Longe
    
    DirectorThomas J. Longe/s/ John G. Parks, Jr.
    
    DirectorJohn G. Parks, Jr.
 82




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##### Table of Contents



Signature
    
    Title/s/ Marvin F. Schindler
    
    DirectorMarvin F. Schindler/s/ Otis T. Wallace
    
    DirectorOtis T. Wallace/s/ Millard J. Younkers, Jr.
    
    DirectorMillard J. Younkers, Jr./s/ Robert A. Zolten, M.D.
    
    DirectorRobert A. Zolten, M.D./s/ David P. Johnson
    
    Chief Financial and Accounting OfficerDavid P. Johnson
 83