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, 2007
            
            Commission
      file number
              000-21329





TIB
FINANCIAL CORP.


(Exact
Name of Registrant as Specified in Its Charter)





Florida
              (State
      of Incorporation)
            
            65-0655973
              (I.R.S.
      Employer
              Identification
      No.)599
      9th Street North
              Suite
      101
              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: Common stock, par value
      $0.10Securities
      Registered pursuant to Section 12(g) of the Act: NoneIndicate
      by check mark if the registrant is a well-known seasoned issuer, as
      defined in Rule 405 of the Securities Act.  ̈ Yes or þ NoCheck
      if the issuer is not required to file reports pursuant to Section 13 or
      Section 15(d) of the Act.  ̈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 Yes or  ̈ NoCheck
      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. þIndicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition
      of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
      Exchange Act.Large
      accelerated filer  ̈
            Accelerated
      filer þ
            Non-accelerated
      filer  ̈Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).  ̈ Yes or þ NoThe
      aggregate market value of the voting stock held by non-affiliates of the
      registrant as of June 30, 2007 was approximately $164,753,000 based on the
      $12.85 per share closing price on June 29, 2007.The
      number of shares outstanding of issuer’s class of common stock at February
      29, 2008 was 12,787,649 shares of common stock.Documents
      Incorporated By Reference: Portions of the Proxy Statement for the 2008
      Annual Meeting of Shareholders to be filed with the Securities and
      Exchange Commission within 120 days of the Registrant’s 2007 fiscal year
      end are incorporated by reference into Parts II and III of this
      report.



















TABLE OF CONTENTS





PART I
            PageITEM 1
            BUSINESS
            1ITEM 1A
            RISK
      FACTORS
            12ITEM 1B
            UNRESOLVED STAFF
      COMMENTS
            19ITEM 2
            PROPERTIES
            20ITEM 3
            LEGAL
      PROCEEDINGS
            21ITEM 4
            SUBMISSION OF MATTERS TO A VOTE
      OF SECURITY HOLDERS
            21PART IIITEM 5
            MARKET FOR REGISTRANT’S COMMON
      EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITES
            21ITEM 6
            SELECTED FINANCIAL
      DATA
            23ITEM 7
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            25ITEM 7A
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
            50ITEM 8
            FINANCIAL STATEMENTS AND
      SUPPLEMENTARY DATA
            51ITEM 9
            CHANGES IN AND DISAGREEMENTS
      WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            93ITEM 9A
            CONTROLS AND
      PROCEDURES
            93ITEM 9B
            OTHER
      INFORMATION
            94PART IIIITEM 10
            DIRECTORS, EXECUTIVE OFFICERS
      AND CORPORATE GOVERNANCE
            95ITEM 11
            EXECUTIVE
      COMPENSATION
            95ITEM 12
            SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
      MATTERS
            95ITEM 13
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE
            95ITEM 14
            PRINCIPAL ACCOUNTANT FEES AND
      SERVICES
            95PART IVITEM 15
            EXHIBITS AND FINANCIAL
      STATEMENT SCHEDULES
            96







Table of Contents


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); the term “Banks” mean TIB Bank (and its subsidiaries) and The
Bank of Venice (unless the context indicates another meaning).





ITEM 1:  BUSINESS





General


We are a financial holding
company headquartered in Naples, Florida, whose business is conducted primarily
through our wholly-owned subsidiaries, TIB Bank, The Bank of Venice and Naples
Capital Advisors, Inc.  Together we have twenty full-service banking
offices in Florida that are located in Monroe, Miami-Dade, Collier, Lee,
Highlands, and Sarasota counties.  TIB Bank, which was formed in 1974,
serves the Southern Florida market while The Bank of Venice serves the Sarasota
County market.  At December 31, 2007, we had approximately $1.44
billion in total assets, $1.05 billion in total deposits, $1.11 billion in total
loans, and $96.2 million in shareholder’s equity.  The Banks’ deposits
are insured by the Federal Deposit Insurance Corporation (FDIC), up to
applicable limits.





Through
the Banks, 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,
including: owner-operated commercial real estate; acquisition, development and
construction; income-producing properties; working capital; inventory and
receivable facilities; and equipment loans. We also offer a full complement of
consumer loan products including 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 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. Through
Naples Capital Advisors, Inc., we offer wealth management and advisory
services.




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 FDIC. This
regulation is intended for the protection of our depositors, not our
shareholders.







1
 Table of Contents


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, commercial business loans
to small and medium-sized businesses and private banking and wealth management.
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 diversify our sources of loans
      and revenue and enhance our net interest margin and generate attractive
      risk adjusted returns;





·
            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. The Banks
focus their commercial loan originations on established small and mid-sized
businesses, professionals and professional organizations in their market areas.
These loans are usually accompanied by cash management services and deposit
relationships. The Banks provide commercial real estate loans to finance the
acquisition and development of owner operated properties; acquisition,
development and construction of investment properties; builder construction
lines of credit; and the purchase of income-producing properties, including
office buildings, industrial buildings, self-storage, hotel/motel, medical
centers, marinas, retail and shopping centers. The Banks offer a complete range
of commercial loan products, including revolving lines of credit for working
capital and term loans for the acquisition of equipment, funding property
improvements or other business related expenses. Commercial underwriting is
driven by cash flow repayment analysis along with the additional support
provided by collateral and the principals involved with the loan.





Retail Banking. Retail
banking activities emphasize consumer deposit and checking accounts. An
extensive range of these services is offered by the Banks to meet the varied
needs of its customers from young persons to senior citizens. In addition to
traditional products and services, the Banks offer contemporary products and
services, such as debit cards, Internet banking and electronic bill payment
services. Consumer loan products offered by the Banks 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. The Banks’
mortgage banking business is structured to provide a source of fee income
largely from the process of originating mortgages for sale in the secondary
market (primarily fixed rate loans), as well as the origination of primarily
adjustable rate loans to be held in the Banks’ loan portfolio. Mortgage banking
capabilities include conventional and nonconforming mortgage underwriting; and
construction and permanent financing.








2
 Table of Contents


Lending
activities





Loan Portfolio Composition.
At December 31, 2007, the Banks' loan portfolios totaled $1.13 billion,
representing approximately 78% of our total assets of $1.44 billion. For a
discussion of our loan portfolio, see “Management's Discussion of Financial
Condition and Results of Operation - Loan Portfolio.”





The
composition of the Banks’ loan portfolio at December 31, 2007 and 2006 is
indicated below, along with the growth from the prior year





(Dollars
      in thousands)
            
            Total
      Loans
              December
      31, 2007
            
            
            %
      of Total Loans
            
            
            Total
      Loans
              December
      31, 2006
            
            
            %
      of Total Loans
            
            
            %
      Increase (Decrease) from December 31,
              2006
      to 2007Real
      estate mortgage loans:Commercial
            
            $
            612,084
            
            
            
            54
            %
            
            $
            546,276
            
            
            
            51
            %
            
            
            12
            %Residential
            
            
            112,138
            
            
            
            10
            %
            
            
            82,243
            
            
            
            8
            %
            
            
            36
            %Farmland
            
            
            11,361
            
            
            
            1
            %
            
            
            24,210
            
            
            
            2
            %
            
            
            (53
            %)Construction
      and vacant land
            
            
            168,595
            
            
            
            15
            %
            
            
            157,672
            
            
            
            15
            %
            
            
            7
            %Commercial
      and agricultural loans
            
            
            72,076
            
            
            
            6
            %
            
            
            84,905
            
            
            
            8
            %
            
            
            (15
            %)Indirect
      auto dealer loans
            
            
            117,439
            
            
            
            11
            %
            
            
            141,552
            
            
            
            13
            %
            
            
            (17
            %)Home
      equity loans
            
            
            21,820
            
            
            
            2
            %
            
            
            17,199
            
            
            
            2
            %
            
            
            27
            %Other
      consumer loans
            
            
            12,154
            
            
            
            1
            %
            
            
            9,795
            
            
            
            1
            %
            
            
            24
            %Total
            
            $
            1,127,667
            
            
            
            100.0
            %
            
            $
            1,063,852
            
            
            
            100.0
            %
            
            
            6
            %





Commercial Real Estate Mortgage
Loans. At December 31, 2007, the Banks’ commercial real estate loan
portfolio totaled $612.1 million. The Banks also have $11.4 million in loans
outstanding that are secured by farmland. The Banks originate commercial
mortgages secured by office and retail buildings, hotels, bed and breakfast
inns, and multi-purpose warehouse buildings. Although terms may vary, the Banks’
commercial mortgages generally are long term in nature, owner-occupied or owner
operated, and variable-rate loans. The Banks seek to reduce the risks associated
with commercial mortgage lending by generally lending in their market area and
obtaining periodic financial statements and tax returns from borrowers.
Commercial real estate loans are underwritten with future cash flows as the
primary source of repayment. It is also the Banks’ general policy to obtain
personal guarantees from the principals of the borrowers and assignments of all
leases related to the collateral.





Commercial Loans. At December
31, 2007, the Banks’ commercial loan portfolio totaled $72.1 million. The Banks
originate 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.





Construction Loans. At
December 31, 2007, the Banks’ construction loan portfolio totaled $168.6
million. The Banks provide interim real estate acquisition development and
construction loans to builders, developers, and the owner-occupants of 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. The Banks
carefully monitor these loans with on-site inspections and control of
disbursements.




3
 Table of Contents


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, the
Banks consider the market conditions and feasibility of the proposed project,
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 generally 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, 2007, the Banks’ residential loan portfolio
totaled $112.1 million. The Banks originate adjustable and fixed-rate
residential mortgage loans. Such mortgage loans are generally originated under
terms, conditions and documentation acceptable to the secondary mortgage market.
The Banks will place some of these, primarily adjustable rate, loans into our
portfolio, although the majority of loans originated are sold to
investors.





Indirect Auto Dealer Loans.
At December 31, 2007, TIB Bank's indirect auto dealer loans portfolio totaled
$117.4 million. TIB 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 declined in 2007 as we reacted to local
economic conditions by implementing more stringent underwriting criteria and
reducing the volume of our originations. We expect new production in 2008 to be
less than loan principal repayments causing the total amount of indirect loans
held in the portfolio to decline during the year.





We strive
to deliver attractive risk adjusted returns 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.





Other Consumer Loans and Home Equity
Loans. At December 31, 2007, the Banks’ consumer loan portfolios totaled
$12.2 million, and their home equity portfolios totaled $21.8 million. The Banks
offer 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
 Table of Contents


Credit
administration





The
Banks’ lending activities are governed by written policies approved by their
boards of directors to ensure proper management of credit risk. Loans are
subject to a defined credit process that includes repayment analysis of the
borrower, 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 the Banks’ 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.





The Banks
generally do not make commercial or consumer loans outside their market areas
unless the borrower has an established relationship with one of the Banks and
conducts its principal business operations within the Banks’ market areas.
Consequently, the Banks and their borrowers are affected by the economic
conditions prevailing in their market areas.


Private
Banking and Wealth Management
 
 On
January 2, 2008, the Company acquired Naples Capital Advisors, Inc. of Naples,
Florida. The investment management company, which has $80 million in assets
under advisement from area families and high net worth individuals, became a
wholly-owned subsidiary. This acquisition spearheads our entry into a new
business line offering private banking, wealth management and trust services
throughout our market areas. The Company has applied for trust powers which are
expected to be granted by the State of Florida Office of Financial Regulation by
mid-summer, 2008.


Merchant
Bankcard Processing





Through
December 30, 2005, TIB Bank processed credit card transactions for merchants
primarily in the Florida Keys. TIB Bank sold the merchant bankcard processing
segment to NOVA Information Systems on December 30, 2005. Subsequent to the
sale, all historical operating results are reflected as discontinued operations
in the accompanying financial statements.





Employees





As of
December 31, 2007, the Banks employed 337 full-time employees and 13 part-time
employees. Except for certain officers of the Banks 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 their employees.





Related
Party Transactions





At
December 31, 2007, we had $1.13 billion in total loans outstanding, of which
$679,000 was outstanding to certain of our executive officers and directors and
their related business interests. In the ordinary course of business, the Banks
make 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
 Table of Contents




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 the Banks.




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 non-bank 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 the Banks remain well-capitalized
under the standards discussed below, and also meet certain other
requirements.  As of December 31, 2007, the Banks 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 the Banks 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, the
Banks may not generally require a customer to obtain other services from
themselves 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
 Table of Contents




Federal
and State Bank Regulation





The Banks
are Florida state-chartered banks, 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. The
Banks are 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 the
Banks and not involve more than the normal risk of repayment.  The
Banks are also subject to federal laws establishing certain record keeping,
customer identification and reporting requirements with respect to certain large
cash transactions, sales of 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 the Banks, 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 their most recent examination reports,
the Banks have 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
be subject to regulatory sanctions and/or be 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 believe that we substantially meet 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.






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Deposit
Insurance





As FDIC
member institutions, deposits of the Banks are currently insured to the current
maximum allowed by law 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 the Banks. Both federal and state laws impose restrictions on the
ability of the Banks to pay dividends. Federal law prohibits the payment of a
dividend by an insured depository institution 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 arrangements 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
200% for assets with relatively high credit risk, such as asset-backed and
mortgage-backed securities that are rated below investment grade.





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, 2007, the Banks met the definition of a
“well-capitalized” institution.






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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.




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 the Banks 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 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 reformed and modernized certain areas of
financial services regulations and repealed 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 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.  The law also includes substantive requirements for maintenance
of customer financial privacy.







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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;





·
            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 the Banks 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 Banks encounter strong competition
from most of the financial institutions in the Banks' primary service
areas.  In the conduct of certain areas of their banking business, the
Banks also compete 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 Banks.  Many of these competitors have substantially greater
resources and lending limits than the Banks have and offer certain services,
such as trust services, that the Banks do not provide
presently.  Management believes that personalized service and
competitive pricing is a sustainable competitive advantage that will provide us
with a method to compete effectively in our primary service areas.




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.







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FDIC
Insurance Assessments





The FDIC
insures the deposits of the Banks 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. As a result of the Federal Deposit
Insurance Reform Act of 2005, the Banks were assessed deposit insurance on a
quarterly basis beginning January 1, 2007.  The Banks’ latest
assessment rate is approximately 0.06% of total deposits.





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.





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ITEM 1A: RISK FACTORS





RISK
FACTORS





Our business is subject to a variety of
risks, including the risks described below as well as adverse business
conditions and changes in regulations and the local, regional and national
economic environment. The risks and uncertainties described below are not the
only ones facing us. Additional risks and uncertainties not known to us or not
described below which we have not determined to be material may also impair our
business operations. You should carefully consider the risks described below,
together with all other information in this report, including information
contained in the “Business,” “Management’s Discussion and Analysis of Results of
Operations and Financial Condition,” and “Quantitative and Qualitative
Disclosures about Market Risk” sections. This report contains forward-looking
statements that involve risks and uncertainties, including statements about our
future plans, objectives, intentions and expectations. Many factors, including
those described below, could cause actual results to differ materially from
those discussed in forward-looking statements. If any of the following risks
actually occur, our business, financial condition and results of operations
could be adversely affected, and we may not be able to achieve our goals. Such
events may cause actual results to differ materially from expected and
historical results, and the trading price of our common stock could
decline.





Risks
Related to Our Business





Our
business strategy includes the continuation of significant growth plans, and if
we fail to grow or fail to manage our growth effectively as we pursue our
strategy, it could negatively affect our results of operations





We intend
to continue pursuing a significant growth strategy for our business. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in significant growth stages of development.
We cannot assure you that we will be able to expand our market presence in our
existing markets or successfully enter new markets or that any such expansion
will not adversely affect our results of operations. Failure to manage our
growth effectively could have a material adverse effect on our business, future
prospects, financial condition or results of operations, and could adversely
affect our ability to successfully implement our business strategy. Also, if our
growth occurs more slowly than anticipated or declines, our operating results
could be materially adversely affected.





Our
ability to successfully grow will depend on a variety of factors including the
continued availability of desirable business opportunities, the competitive
responses from other financial institutions in our market areas and our ability
to manage our growth. While we believe that we have the management resources and
internal systems in place to successfully manage our future growth, there can be
no assurance that growth opportunities will be available or that growth will be
successfully managed.





Our
business may face risks with respect to future expansion





We may
acquire other financial institutions or parts of financial institutions in the
future and we may engage in additional de novo branch expansion. We may also
consider and enter into new lines of business or offer new products or services.
Acquisitions and mergers involve a number of risks, including:





·
            the
      time and costs associated with identifying and evaluating potential
      acquisitions and merger partners;





·
            the
      estimates and judgments used to evaluate credit, operations, management
      and market risks with respect to the target institution may not be
      accurate;





·
            the
      time and costs of evaluating new markets, hiring experienced local
      management and opening new offices, and the time lags between these
      activities and the generation of sufficient assets and deposits to support
      the costs of the expansion;







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·
            our
      ability to finance an acquisition and possible dilution to our existing
      shareholders;





·
            the
      diversion of our management’s attention to the negotiation of a
      transaction, and the integration of the operations and personnel of the
      combining businesses;





·
            entry
      into new markets where we lack
experience;





·
            the
      introduction of new products and services into our
    business;




·
            the
      incurrence and possible impairment of goodwill associated with an
      acquisition and possible adverse short-term effects on our results of
      operations; and





·
            the
      risk of loss of key employees and
customers.





We may
incur substantial costs to expand, and can give no assurance such expansion will
result in the levels of profits we seek. There can be no assurance integration
efforts for any future mergers or acquisitions will be successful. Also, we may
issue equity securities, including common stock and securities convertible into
shares of our common stock in connection with future acquisitions, which could
cause ownership and economic dilution to our shareholders. There is no assurance
that, following any future mergers or acquisitions, our integration efforts will
be successful or, after giving effect to the acquisition, that we will achieve
profits comparable to, or better than, our historical experience.





Our
business is subject to the success of the local economies where it
operates





Our
success significantly depends upon the growth in population, income levels,
deposits and housing starts in our primary and secondary markets. If the
communities in which we operate do not grow or if prevailing economic conditions
locally or nationally are unfavorable, our business may not succeed. Adverse
economic conditions in our specific market area could reduce our growth rate,
affect the ability of our customers to repay their loans to us and generally
affect our financial condition and results of operations. We are less able than
a larger institution to spread the risks of unfavorable local economic
conditions across a large number of diversified economies. Moreover, we cannot
give any assurance that we will benefit from any market growth or favorable
economic conditions in our primary market areas if they do occur.





Any
adverse market or economic conditions in the State of Florida may
disproportionately increase the risk that our borrowers will be unable to make
their loan payments. In addition, the market value of the real estate securing
loans as collateral could be adversely affected by unfavorable changes in market
and economic conditions. As of December 31, 2007, approximately 82% of our loans
held for investment were secured by real estate. Of this amount, approximately
67% were commercial real estate loans, 12% were residential real estate loans
and 18% were construction and development loans. Any sustained period of
increased payment delinquencies, foreclosures or losses caused by adverse market
or economic conditions in the State of Florida could adversely affect the value
of our assets, revenues, results of operations and financial
condition.





We
make and hold in our portfolio a significant number of land acquisition and
development and construction loans, which pose more credit risk than other types
of loans typically made by financial institutions.




We offer
land acquisition and development and construction loans for builders, developers
and individuals. As of December 31, 2007, approximately $168.6 million of our
loan portfolio represents loans for construction and vacant land. Land
acquisition and development and construction loans are considered more risky
than other types of loans. The primary credit risks associated with land
acquisition and development and construction lending are underwriting, project
risks and market risks. Project risks include cost overruns, borrower credit
risk, project completion risk, general contractor credit risk, and environmental
and other hazard risks. Market risks are risks associated with the sale of the
completed residential or commercial units. They include affordability risk,
which means the risk of affordability of financing by borrowers, product design
risk, and risks posed by competing projects. While we believe we have
established adequate reserves on our financial statements to cover the credit
risk of our land acquisition and development and construction loan portfolio,
there can be no assurance that losses will not exceed our reserves, which could
adversely impact our earnings. In February 2008, a $13.5 million commercial land
development loan matured and was placed on nonaccrual because the borrowers were
unable to service the debt. Non-performing loans in our land acquisition and
development and construction portfolio may increase further and these
non-performing loans may result in a material level of charge-offs, which may
negatively impact our capital and earnings.





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If
the value of real estate in our core Florida market were to decline materially,
a significant portion of our loan portfolio could become under-collateralized,
which could have a material adverse effect on us.





With most
of our loans concentrated in Southern Florida, a decline in local economic
conditions could adversely affect the values of our real estate collateral.
Additionally, the availability of property insurance, including windstorm and
flood insurance, and the significant increases in the cost thereof in the
Florida market may negatively affect borrowers’ abilities to repay existing
loans and the abilities of potential borrowers to qualify for new loans.
Consequently, a decline in local economic conditions may have a greater effect
on our earnings and capital than on the earnings and capital of larger financial
institutions whose real estate loan portfolios are geographically
diverse.





In
addition to the financial strength and cash flow characteristics of the borrower
in each case, the Banks often secure their loans with real estate collateral. At
December 31, 2007, approximately 82% of the Banks’ loans have real estate as a
primary or secondary component of collateral. The real estate collateral in each
case provides an alternate source of repayment in the event of default by the
borrower and may deteriorate in value during the time the credit is extended. If
we are required to liquidate the collateral securing a loan to satisfy the debt
during a period of reduced real estate values, our earnings and capital could be
adversely affected.




Current
and anticipated deterioration in the housing market and the homebuilding
industry may lead to increased loss severities and further worsening of
delinquencies and non-performing assets in our loan portfolios. Consequently,
our results of operations may be adversely impacted.





There has
been substantial industry concern and publicity over asset quality among
financial institutions due in large part to issues related to residential
mortgage lending, declining real estate values and general economic concerns. As
of December 31, 2007, our non performing loans have increased significantly to
$16.1 million, or 1.4% of our loan portfolio. Furthermore, the housing and
residential mortgage markets recently have experienced a variety of difficulties
and changed economic conditions. If market conditions continue to deteriorate,
they may lead to additional valuation adjustments on our loan portfolios and
real estate owned as we continue to reassess the market value of our loan
portfolio, the losses associated with the loans in default and the net
realizable value of real estate owned.





The
homebuilding industry has experienced a significant and sustained decline in
demand for new homes and an oversupply of new and existing homes available for
sale in various markets, including the markets in which we lend. Our customers
who are builders and developers face greater difficulty in selling their homes
in markets where these trends are more pronounced. Consequently, we may face
increased delinquencies and non-performing assets if builders and developers are
forced to default on their loans with us. We do not anticipate that the housing
market will improve in the near-term, and accordingly, additional downgrades,
provisions for loan losses and charge-offs related to our loan portfolio may
occur.





An
inadequate allowance for loan losses would reduce our earnings.





The risk
of credit losses on loans varies with, among other things, general economic
conditions, the type of loan being made, the creditworthiness of the borrower
over the term of the loan and, in the case of a collateralized loan, the value
and marketability of the collateral for the loan. Management maintains an
allowance for loan losses based upon, among other things, historical experience,
an evaluation of economic conditions and regular reviews of delinquencies and
loan portfolio quality. Based upon such factors, management makes various
assumptions and judgments about the ultimate collectibility of the loan
portfolio and provides an allowance for loan losses based upon a percentage of
the outstanding balances and for specific loans when their ultimate
collectibility is considered questionable. If management’s assumptions and
judgments prove to be incorrect and the allowance for loan losses is inadequate
to absorb losses, or if the bank regulatory authorities require the Banks to
increase the allowance for loan losses as a part of their examination process,
the Banks’ earnings and capital could be significantly and adversely
affected.






14
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Our
indirect lending program has a limited operating history and, as a result, the
financial performance to date of this program may not be a reliable indicator of
whether this business will be successful.





A portion
of our current lending involves the purchase of consumer automobile installment
sales contracts from automobile dealers primarily located in Southwest Florida.
We began this program in 2002 and as of December 31, 2007, we had approximately
$117 million of indirect loans outstanding. These loans 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. While these loans have higher yields than many of our other loans,
they involve significant risks in addition to normal credit risk. Potential risk
elements associated with indirect lending include the limited personal contact
with the borrower as a result of indirect lending through dealers, the absence
of assured continued employment of the borrower, the varying general
creditworthiness of the borrower, changes in the local economy and difficulty in
monitoring collateral. While indirect automobile loans are secured, they are
secured by depreciating assets and characterized by loan to value ratios that
could result in the Bank not recovering the full value of an outstanding loan
upon default by the borrower. Due to the economic slowdown in Southwest Florida,
we are currently experiencing significantly higher delinquencies, charge-offs
and repossessions of vehicles in this portfolio. If the economy continues to
contract, we may continue to experience higher levels of delinquencies,
repossessions and charge-offs.




The
market value of our debt securities may be impacted by the level of interest
rates and the credit quality and strength of the underlying issuers.


If a
decline in market value is determined to be other than temporary, under
generally accepted accounting principals, we are required to write these
securities down to their estimated fair value. As of December 31, 2007, we owned
collateralized debt obligations with a historical cost of $10.0 million which
were determined to be other than temporarily impaired. Accordingly, we wrote
these securities down to their estimated fair value of $6.1 million. Future
changes in interest rates or the credit quality and strength of the underlying
issuers may reduce the market value of these and other securities. If such
decline is determined to be other than temporary, we will write them down
through a charge to earnings to their then current fair
value.




Our
de novo branching strategy could cause our expenses to increase faster than
revenues.





Our
primary strategy for building market share in Southwest Florida is based on
establishing new branches. We currently plan to open one additional branch each
year in 2008 and 2009. There are considerable costs involved in opening branches
and new branches generally do not generate sufficient revenues to offset their
costs until they have been in operation for at least a year or more.
Accordingly, our new branches can be expected to negatively impact earnings for
some period of time until the branches reach certain economies of scale. Our
expenses could be further increased if we encounter delays in the opening of any
of our new branches. Finally, we have no assurance that our new branches will be
successful even after they have been established.





If
we are unable to increase our share of deposits in our markets, we may accept
out of market and brokered deposits, the costs of which may be higher than
expected.





We can
offer no assurance that we will be able to maintain or increase our market share
of deposits in our highly competitive service areas. If we are unable to do so,
we may be forced to accept increased amounts of out of market or brokered
deposits. At times, the cost of out of market and brokered deposits exceeds the
cost of deposits in our local market. In addition, the cost of out of market and
brokered deposits can be volatile, and if we are unable to access these markets
or if our costs related to out of market and brokered deposits increases, our
liquidity and ability to support demand for loans could be adversely
affected.







15
 Table of Contents




Our
recent results may not be indicative of our future results.





We may
not be able to sustain our historical rate of growth or may not even be able to
grow our business at all. In addition, the rapid growth of recent years may
distort some of our historical financial ratios and statistics. In the future,
we may not have the benefit of several recently favorable factors, such as a
generally stable interest rate environment or the ability to find suitable
expansion opportunities. Various factors, such as economic conditions,
regulatory and legislative considerations and competition, may also impede or
prohibit our ability to expand our market presence. If we experience a
significant decrease in our historical rate of growth, our results of operations
and financial condition may be adversely affected due to a high percentage of
our operating costs being fixed expenses.





Our
continued growth and current level of earnings may require us to raise
additional capital in the future, but that capital may not be available when it
is needed.





We are
required by federal and state regulatory authorities to maintain adequate levels
of capital to support our operations. We anticipate our capital resources will
satisfy our capital requirements for the foreseeable future. We may at some
point, however, need to raise additional capital to support our continued
growth.





Our
ability to raise additional capital, if needed, will depend on conditions in the
capital markets at that time, which are outside of our control, and on our
financial performance. Accordingly, we cannot give any assurance that we will be
able to raise additional capital if needed on terms acceptable to us. If we
cannot raise additional capital when needed, our ability to further expand our
operations through internal growth and acquisitions could be materially
impaired.




Our
net interest income could be negatively affected by the Federal Reserve’s recent
interest rate adjustments.





As a
financial institution, our earnings are significantly dependent upon our net
interest income, which is the difference between the interest income that we
earn on interest-earning assets, such as investment securities and loans, and
the interest expense that we pay on interest-bearing liabilities, such as
deposits and borrowings. Therefore, any change in general market interest rates,
including changes resulting from changes in the Federal Reserve’s fiscal and
monetary policies, affect us more than non-financial institutions and can have a
significant effect on our net interest income and total income. Our assets and
liabilities may react differently to changes in overall market rates or
conditions because there may be mismatches between the repricing or maturity
characteristics of the assets and liabilities. As a result, an increase or
decrease in market interest rates could have material adverse effects on our net
interest margin and results of operations.




In
response to the dramatic deterioration of the sub-prime, mortgage, credit and
liquidity in financial markets and increasing concerns about recessionary
trends, the Federal Reserve recently has taken action on five occasions to
reduce interest rates by a total of 225 basis points since September 2007, which
likely will reduce our net interest income during the first quarter of 2008 and
the foreseeable future. This reduction in net interest income likely will be
exacerbated by the high level of competition that we face in our markets, which
requires us to offer more attractive interest rates to borrowers on loans and to
our other customers on deposits, and to rely upon out-of-market funding sources.
Any reduction in our net interest income will negatively affect our business,
financial condition, liquidity, operating results and cash flows. Additionally,
in 2008, we expect to have continued margin pressure given these interest rate
reductions, along with elevated levels of non-performing
assets.




Increases
in interest rates may negatively affect our earnings and the value of our
assets.





Changes
in interest rates may affect our level of interest income, the primary component
of our gross revenue, as well as the level of our interest expense, our largest
recurring expenditure. In a period of rising interest rates, our interest
expense could increase in different amounts and at different rates while the
interest that we earn on our assets may not change in the same amounts or at the
same rates. Accordingly, increases in interest rates could decrease our net
interest income.







16
 Table of Contents


Changes
in the level of interest rates also may negatively affect our ability to
originate real estate loans, the value of our assets and our ability to realize
gains from the sale of our assets, all of which ultimately affect our earnings.
A decline in the market value of our assets may limit our ability to borrow
additional funds or result in our lenders requiring additional collateral from
us under our borrowing agreements. As a result, we could be required to sell
some of our loans and investments under adverse market conditions, upon terms
that are not favorable to us, in order to maintain our liquidity. If those sales
are made at prices lower than the amortized costs of the investments, we will
incur losses.





Competition
from financial institutions and other financial service providers may adversely
affect our profitability.





The
banking business is highly competitive and we experience competition in each of
our markets from many other financial institutions. We compete with commercial
banks, credit unions, savings and loan associations, mortgage banking firms,
consumer finance companies, securities brokerage firms, insurance companies,
money market funds, and other mutual funds, as well as other super-regional,
national and international financial institutions that operate offices in our
primary market areas and elsewhere.





We
compete with these institutions both in attracting deposits and in making loans.
In addition, we have to attract our customer base from other existing financial
institutions and from new residents. Many of our competitors are
well-established, larger financial institutions. While we believe we can and do
successfully compete with these other financial institutions in our primary
markets, we may face a competitive disadvantage as a result of our smaller size,
lack of geographic diversification and inability to spread our marketing costs
across a broader market. Although we compete by concentrating our marketing
efforts in our primary markets with local advertisements, personal contacts, and
greater flexibility and responsiveness in working with local customers, we can
give no assurance this strategy will be successful.




We are subject to extensive
regulation that could limit or restrict our activities.





We
operate in a highly regulated industry and are subject to examination,
supervision, and comprehensive regulation by various federal and state agencies.
Our compliance with these regulations is costly and restricts certain of our
activities, including payment of dividends, mergers and acquisitions,
investments, loans and interest rates charged, interest rates paid on deposits
and locations of offices. We are also subject to capitalization guidelines
established by our regulators, which require us to maintain adequate capital to
support our growth.





The laws
and regulations applicable to the banking industry could change at any time, and
we cannot predict the effects of these changes on our business and
profitability. Because government regulation greatly affects the business and
financial results of all commercial banks and bank holding companies, our cost
of compliance could adversely affect our ability to operate
profitably.





The
various federal and state regulatory agencies have advised that they may require
enhanced credit monitoring and at times set limits or restrictions on certain
lending activities based upon concentrations of risk identified (for example,
concentrations of commercial real estate loans exceeding 300% of capital). We
cannot assure compliance with any possible future requirements will not
adversely affect our ability to operate profitably or grow at the rates we
desire.





The
Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by
the Securities and Exchange Commission and Nasdaq that are applicable to us,
have increased the scope, complexity and cost of corporate governance, reporting
and disclosure practices. As a result, we may experience greater compliance
costs.





We
face regulatory risks related to our commercial real estate loan
concentrations.





Commercial
real estate, or CRE, is cyclical and poses risks of possible loss due to
concentration levels and similar risks of the asset class. As of December 31,
2007, approximately 55% of our loan portfolio consisted of CRE loans. The
banking regulators are more closely scrutinizing CRE lending and may require
banks with higher levels of CRE loans to implement more rigorous underwriting,
internal controls, risk management policies and portfolio stress testing, as
well as possibly requiring higher levels of allowances for possible loan losses
and capital levels as a result of CRE lending growth and exposures.


17
 Table of Contents
  We
are dependent upon the services of our management team.





Our
future success and profitability is substantially dependent upon the management
and banking abilities of our senior executives. We believe that our future
results will also depend in part upon our attracting and retaining highly
skilled and qualified management and other personnel. Competition for such
personnel is intense, and we cannot assure you that the Company will be
successful in retaining such personnel. We also cannot guarantee that members of
our executive management team will remain with us. Changes in key personnel and
their responsibilities may be disruptive to the Company’s business and could
have a material adverse effect on our business, financial condition and results
of operations.




Risk
Related to an Investment in Our Common Stock





Future
capital needs could result in dilution of shareholders’
investments.





Our board
of directors may determine from time to time that there is a need to obtain
additional capital through the issuance of additional shares of our common stock
or other securities. These issuances would dilute the ownership interests of
current shareholders in the Company and may dilute the per share book value of
our common stock. New investors may also have rights, preferences and privileges
senior to our current shareholders which may adversely impact our current
shareholders.




Although
publicly traded, the trading market in our common stock is less liquid and the
price of our common stock due to this limited trading market may be more
volatile in the future.





Our
common stock is thinly traded. The average daily trading volume of our shares on
The NASDAQ National Market during 2007 was approximately 20,444 shares. Thinly
traded stock can be more volatile than stock trading in an active public market.
We cannot predict the extent to which an active public market for our common
stock will develop or be sustained. In recent years, the stock market has
experienced a high level of price and volume volatility, and market prices for
the stock of many companies have experienced wide price fluctuations that have
not necessarily been related to their operating performance. Therefore, our
shareholders may not be able to sell their shares at the volumes, prices, or
times that they desire.





Our
ability to pay dividends is limited and we may be unable to pay future
dividends.





Our
ability to pay dividends is limited by regulatory restrictions and the need to
maintain sufficient consolidated capital and is dependent upon the receipt of
dividends from the Banks and cash available at the holding company. The ability
of the Banks to pay dividends to us is limited by their obligations to maintain
sufficient capital and by other general restrictions on their dividends that are
applicable to state banks that are regulated by the FDIC. If we do not satisfy
these regulatory requirements, we will be unable to pay dividends on our common
stock. Based on the level of undistributed earnings of TIB Bank for the
prior two years, declaration of dividends by TIB Bank, during 2008, would likely
require regulatory approval. The Bank of Venice has no retained earnings
available for dividends.





Holders
of our junior subordinated debentures have rights that are senior to those of
our common stockholders.





We have
supported our continued growth through the issuance of trust preferred
securities from special purpose trusts and accompanying junior subordinated
debentures. At December 31, 2007, we had outstanding trust preferred securities
and accompanying junior subordinated debentures totaling $33 million. Payments
of the principal and interest on the trust preferred securities of these special
purpose trusts are conditionally guaranteed by us. Further, the accompanying
junior subordinated debentures we issued to the special purpose trusts are
senior to our shares of common stock. As a result, we must make payments on the
junior subordinated debentures before any dividends can be paid on our common
stock and, in the event of our bankruptcy, dissolution or liquidation, the
holders of the junior subordinated debentures must be satisfied before any
distributions can be made on our common stock. We have the right to defer
distributions on our junior subordinated debentures (and the related trust
preferred securities) for up to five years, during which time no dividends may
be paid on our common stock.




18
 Table of Contents




We
may issue debt and equity securities or securities convertible into equity
securities, which are senior to our common stock as to distributions and in
liquidation, which could negatively affect the value of our common
stock.





In the
future, we may attempt to increase our capital resources by entering into debt
or debt-like financing that is unsecured or secured by all or up to all of our
assets, or by issuing debt or equity securities, which could include issuances
of secured or unsecured commercial paper, medium-term notes, senior notes,
subordinated notes, common stock, warrants, or other securities convertible into
common stock. In the event of our liquidation, our lenders and holders of our
debt securities would receive a distribution of our available assets before
distributions to the holders of our common stock. Because our decision to incur
debt and issue securities in our future offerings will depend on market
conditions and other factors beyond our control, we cannot predict or estimate
the amount, timing or nature of our future offerings and debt financings.
Further, market conditions could require us to accept less favorable terms for
the issuance of our securities in the future.




ITEM 1B: UNRESOLVED STAFF COMMENTS





We did
not receive any written comments during 2007 from the Commission staff regarding
our periodic and current reports under the Act. There are no comments that
remain unresolved from any prior period.







19
 Table of Contents




ITEM 2:  PROPERTIES





The
Company‘s executive offices are located at 599 9th Street North, Naples,
Florida.  TIB Bank‘s executive offices are located at 6435 Naples
Boulevard, Naples, Florida.  The Bank of Venice’s executive offices
are located at 240 Nokomis Avenue South, Venice, Florida.  All Company
operated properties are as follows:








Address
            Location
            Purpose
            Owned/
              Leased30400
      Overseas Highway
            Big
      Pine Key
            Branch
            Owned8100
      Health Center Boulevard
            Bonita
      Springs
            Branch
      and Office Space
            Leased12205
      Metro Parkway
            Fort
      Myers
            Branch
            Owned12195
      Metro Parkway
            Fort
      Myers
            Indirect
      lending
            Leased600
      North Homestead Boulevard
            Homestead
            Branch
            Owned777
      North Krome Avenue
            Homestead
            Branch
            Owned632
      Washington Avenue
            Homestead
            Office
      Space
            Leased28
      N.E. 18 Street
            Homestead
            Office
      Space
            Owned80900
      Overseas Highway
            Islamorada
            Branch
      and Office Space
            Owned99451
      Overseas Highway
            Key
      Largo
            Branch
      and Office Space
            Owned103330
      Overseas Highway
            Key
      Largo
            Branch
            Owned330
      Whitehead Street
            Key
      West
            Branch
            Owned3618
      North Roosevelt Boulevard
            Key
      West
            Branch
            Owned2348
      Overseas Highway
            Marathon
            Branch
            Owned11401
      Overseas Highway
            Marathon
      Shores
            Branch
            Owned6435
      Naples Boulevard
            Naples
            TIB
      Bank HQ, Branch & Office Space
            Owned3940
      Prospect Avenue – Suite 104 & 105
            Naples
            Branch
      and Office Space
            Leased1720
      J & C Boulevard – Suite 1
            Naples
            Office
      Space
            Leased599
      9th
      Street North – Suite 100 & 101
            Naples
            Corporate
      HQ & Branch
            Owned599
      9th
      Street North – Suite 201
            Naples
            Office
      space
            Owned1125
      US Highway 27 South
            Sebring
            Branch
            Leased91980
      Overseas Highway
            Tavernier
            Branch
            Owned240
      Nokomis Avenue South
            Venice
            Bank
      of Venice HQ & Branch
            Owned1790
      East Venice Avenue, Suite 101
            Venice
            Branch
            Leased3479
      Precision Drive, Suite 118
            Venice
            Branch
            Leased





In 2005,
TIB Bank sold land that it bought in 2004 located at the Miami Land &
Development Subdivision in Homestead, Florida.  TIB Bank also
purchased a property at 17000 Cam Circle in Ft. Myers, Florida which was later
sold in 2006.





In 2006,
TIB Bank purchased parcels of land located at the Lehigh Acres Subdivision in
Lehigh, FL and at the City Gate Subdivision in Naples, Florida, where it plans
to construct new branches.  In addition, TIB Bank entered into a
sale-leaseback transaction on a building and related land located at 12195 Metro
Parkway in Fort Myers, Florida.





In 2007,
TIB Bank sold vacant land adjacent to the branch located at 3618 North Roosevelt
Boulevard in Key West, Florida and a building located at 228 Atlantic Boulevard
in Key Largo, FL which had previously been used for office
space.   TIB Bank also entered into a lease agreement for a
building located at 704 Washington Street in Homestead, FL.  This
building will be used as office space and will be occupied in early
2008.





20
 Table of Contents





ITEM 3:  LEGAL PROCEEDINGS





While the
Company and the Banks 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 Banks 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





We did
not submit any matters to a vote of our security holders during the Company's
fourth quarter of the fiscal year ended December 31, 2007.





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, 2007, there were 595 registered
shareholders of record and 12,783,161 shares of our common stock outstanding.
The share and per share amounts discussed throughout this document have been
adjusted to account for the effects of the two-for-one stock split distributed
October 23, 2006. 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:





2007
            
            
            2006(Quarter
      Ended)
            
            High
            
            
            Low
            
            
            High
            
            
            LowMarch
      31
            
            $
            18.21
            
            
            $
            14.67
            
            
            $
            16.18
            
            
            $
            14.75June
      30
            
            
            15.00
            
            
            
            12.77
            
            
            
            16.25
            
            
            
            14.44September
      30
            
            
            13.34
            
            
            
            10.38
            
            
            
            16.20
            
            
            
            15.64December
      31
            
            
            11.17
            
            
            
            6.73
            
            
            
            18.44
            
            
            
            15.84





For the
year ended December 31, 2007, we paid cash dividends to our shareholders in the
amount of $.06 per share for the first three quarters and $.0625 per share for
the last quarter ($.2425 in the aggregate).  For the year ended
December 31, 2006, we paid cash dividends to our shareholders in the amount of
$.05875 per share for the first three quarters and $.06 per share for the last
quarter ($.23625 in the aggregate).  Our ability to continue to pay
cash dividends to our shareholders is primarily dependent on the earnings of the
Banks.  Payment of dividends by the Banks to us is limited by dividend
restrictions in capital requirements imposed by bank
regulators.  Information regarding restrictions on the ability of the
Banks 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 Banks.





With
respect to information regarding our securities authorized for issuance under
equity incentive plans, the information contained in the section entitled
“Executive Compensation – Equity Compensation Plan Information” of our
definitive Proxy Statement for the 2008 Annual Meeting of Shareholders is
incorporated herein by reference.







21
 Table of Contents


Issuer
Purchases of Equity Securities





As of December 31, 2007,
we repurchased a total of 69,200 shares of our common stock through the
repurchase program announced August 6, 2007. The following table presents
information relating to the purchases of the Company’s common stock by the
Company during the fourth quarter of 2007:





Issuer
      Purchases of Equity SecuritiesPeriod
            
            Total
      Number
              of
      Shares Purchased
            
            
            Average
      Price Paid Per Share
            
            
            Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
            
            
            Maximum
      Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased
      Under the Plans or Programs400,000November
      1 – 30, 2007
            
            
            50,700
            
            
            $
            8.06
            
            
            
            50,700
            
            
            
            349,300December
      1 – 31, 2007
            
            
            18,500
            
            
            
            8.68
            
            
            
            18,500
            
            
            
            330,800Total
            
            
            69,200
            
            
            $
            8.23
            
            
            
            69,200
            
            
            
            330,800





STOCK
PRICE PERFORMANCE GRAPH





The stock
price performance graph below shall not be deemed incorporated by reference by
any general statement incorporating by reference this Form 10-K into any filing
under the Securities Act of 1933 or under the Securities Exchange Act of 1934,
except to the extent TIB Financial Corp. specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.





The graph
below compares the cumulative total return of TIB Financial Corp., the Nasdaq
Composite Index and a peer group index.







22
 Table of Contents


Period
      EndingIndex
            
            12/31/02
            
            
            12/31/03
            
            
            12/31/04
            
            
            12/31/05
            
            
            12/31/06
            
            
            12/31/07TIB
      Financial Corp.
            
            
            100.00
            
            
            
            153.23
            
            
            
            168.19
            
            
            
            215.44
            
            
            
            239.08
            
            
            
            118.95NASDAQ
      Composite
            
            
            100.00
            
            
            
            150.01
            
            
            
            162.89
            
            
            
            165.13
            
            
            
            180.85
            
            
            
            198.60SNL
      Southeast Bank Index
            
            
            100.00
            
            
            
            125.58
            
            
            
            148.92
            
            
            
            152.44
            
            
            
            178.75
            
            
            
            134.65




Source
: SNL Financial LC, Charlottesville, VA






ITEM 6:  SELECTED FINANCIAL DATA


The
selected consolidated financial data presented below as of and for the years
ended December 31, 2007, 2006, 2005, 2004 and 2003 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
 As
of December 31,
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Total
      assets
              
              $
              1,444,739
              
              
              $
              1,319,093
              
              
              $
              1,076,070
              
              
              $
              829,325
              
              
              $
              669,298Investment
      securities
              
              
              160,357
              
              
              
              131,199
              
              
              
              97,464
              
              
              
              77,807
              
              
              
              52,557Total
      loans
              
              
              1,127,667
              
              
              
              1,063,852
              
              
              
              882,372
              
              
              
              653,521
              
              
              
              538,598Allowance
      for loan losses
              
              
              14,973
              
              
              
              9,581
              
              
              
              7,546
              
              
              
              6,243
              
              
              
              5,216Deposits
              
              
              1,049,958
              
              
              
              1,029,457
              
              
              
              920,424
              
              
              
              687,859
              
              
              
              553,813Shareholders’
      equity
              
              
              96,240
              
              
              
              85,862
              
              
              
              77,524
              
              
              
              68,114
              
              
              
              41,246
   Income
Statement Data
 Year
ended December 31,
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Interest
      and dividend income
              
              $
              94,741
              
              
              $
              85,234
              
              
              $
              59,434
              
              
              $
              40,916
              
              
              $
              34,606Interest
      expense
              
              
              48,721
              
              
              
              38,171
              
              
              
              20,304
              
              
              
              10,730
              
              
              
              9,839Net
      interest income
              
              
              46,020
              
              
              
              47,063
              
              
              
              39,130
              
              
              
              30,186
              
              
              
              24,767Provision
      for loan losses
              
              
              9,657
              
              
              
              3,491
              
              
              
              2,413
              
              
              
              2,455
              
              
              
              1,586Net
      interest income after provision for loan losses
              
              
              36,363
              
              
              
              43,572
              
              
              
              36,717
              
              
              
              27,731
              
              
              
              23,181Non-interest
      income *
              
              
              1,362
              
              
              
              6,275
              
              
              
              6,258
              
              
              
              6,306
              
              
              
              7,084Non-interest
      expense
              
              
              (41,921
              )
              
              
              (35,833
              )
              
              
              (31,856
              )
              
              
              (27,057
              )
              
              
              (23,541
              )Income
      tax (expense) benefit
              
              
              1,775
              
              
              
              (5,021
              )
              
              
              (3,927
              )
              
              
              (2,337
              )
              
              
              (2,324
              )Income
      (loss) from continuing operations
              
              
              (2,421
              )
              
              
              8,993
              
              
              
              7,192
              
              
              
              4,643
              
              
              
              4,400Income
      from discontinued operations, net of taxes
              
              
              -
              
              
              
              254
              
              
              
              4,632
              
              
              
              555
              
              
              
              702Net
      income (loss)
              
              $
              (2,421
              )
              
              $
              9,247
              
              
              $
              11,824
              
              
              $
              5,198
              
              
              $
              5,102
 *
                Non-interest income
      during 2007 includes a charge of $5.7 million related to the other than
      temporary impairment of investment securities as discussed in more detail
      in the "Investment Portfolio” section of management’s discussion and
      analysis.
   23
 Table of Contents
 Per
Share Data
 Year
ended December 31,
 2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Book
      value per share at year end *
              
              $
              7.53
              
              
              $
              7.33
              
              
              $
              6.69
              
              
              $
              6.00
              
              
              $
              4.65Basic
      earnings (loss) per share from continuing operations
              
              $
              (0.20
              )
              
              $
              0.78
              
              
              $
              0.63
              
              
              $
              0.44
              
              
              $
              0.52Basic
      earnings per share from discontinued operations
              
              
              -
              
              
              
              0.02
              
              
              
              0.41
              
              
              
              0.05
              
              
              
              0.08Basic
      earnings (loss) per share
              
              $
              (0.20
              )
              
              $
              0.80
              
              
              $
              1.04
              
              
              $
              0.49
              
              
              $
              0.60Diluted
      earnings (loss) per share from continuing operations
              
              $
              (0.20
              )
              
              $
              0.76
              
              
              $
              0.61
              
              
              $
              0.42
              
              
              $
              0.50Diluted
      earnings per share from discontinued operations
              
              
              -
              
              
              
              0.02
              
              
              
              0.39
              
              
              
              0.05
              
              
              
              0.08Diluted
      earnings (loss) per share
              
              $
              (0.20
              )
              
              $
              0.78
              
              
              $
              1.00
              
              
              $
              0.47
              
              
              $
              0.58Basic
      weighted average common equivalent shares outstanding
              
              
              12,299,093
              
              
              
              11,609,394
              
              
              
              11,423,948
              
              
              
              10,619,720
              
              
              
              8,514,448Diluted
      weighted average common equivalent shares outstanding
              
              
              12,299,093
              
              
              
              11,889,606
              
              
              
              11,800,892
              
              
              
              10,959,392
              
              
              
              8,871,722Dividends
      declared per share
              
              $
              0.2425
              
              
              $
              0.2363
              
              
              $
              0.2313
              
              
              $
              0.2263
              
              
              $
              0.2213
 *
              Calculation includes
      unvested shares of restricted stock.
    Performance
Ratios
 2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Return
      (loss) on average assets**
              
              
              (0.18
              )%
              
              
              0.74
              %
              
              
              0.74
              %
              
              
              0.63
              %
              
              
              0.71
              %Return
      (loss) on average equity**
              
              
              (2.52
              )%
              
              
              11.05
              %
              
              
              10.19
              %
              
              
              7.83
              %
              
              
              11.69
              %Average
      equity/average assets
              
              
              6.99
              %
              
              
              6.72
              %
              
              
              7.26
              %
              
              
              8.01
              %
              
              
              6.05
              %Net
      interest margin
              
              
              3.60
              %
              
              
              4.18
              %
              
              
              4.38
              %
              
              
              4.51
              %
              
              
              4.43
              %Dividend
      payout ratio ***
              
              
              (123.19
              )%
              
              
              30.50
              %
              
              
              36.74
              %
              
              
              51.76
              %
              
              
              42.82
              %Allowance
      for loan losses/total loans
              
              
              1.33
              %
              
              
              0.90
              %
              
              
              0.86
              %
              
              
              0.96
              %
              
              
              0.97
              %Non-performing
      assets/total assets
              
              
              1.88
              %
              
              
              0.69
              %
              
              
              0.46
              %
              
              
              0.60
              %
              
              
              0.55
              %Non-performing
      loans/total loans
              
              
              1.43
              %
              
              
              0.40
              %
              
              
              0.11
              %
              
              
              0.11
              %
              
              
              0.07
              %Allowance
      for loan losses/non-performing loans
              
              
              93.08
              %
              
              
              226.88
              %
              
              
              789.33
              %
              
              
              886.79
              %
              
              
              1,336.33
              %Non-interest
      expense/tax equivalent net interest income and non-interest income from
      continuing operations
              
              
              87.86
              %
              
              
              66.75
              %
              
              
              69.69
              %
              
              
              73.48
              %
              
              
              73.44
              %
 **
              The computation of
      return on average assets and return on average equity is based on net
      income from continuing operations.***
              The
      computation of the dividend payout ratio is based on net income (loss)
      from continuing operations.
   24
 Table of Contents
  ITEM 7:  MANAGEMENT’S DISCUSSION AND ANALYSISOF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 Overview
  The Banks
operate primarily as real estate secured commercial lenders, focusing on
middle-market businesses in our Southern Florida markets.  The Banks
fund their lending activity primarily by gathering retail and commercial
deposits from our service area.  TIB Bank was formed in and has a
substantial market presence in the Florida Keys.  In recent years, TIB
Bank has expanded into the adjacent Florida counties of Miami-Dade, Collier, Lee
and Highlands.  On April 30, 2007, we completed the acquisition of The
Bank of Venice located in Sarasota County, Florida.  Despite slowing
economic growth in Florida, we anticipate increased opportunities in these
contiguous markets for our well-positioned financial institution.
 
 Historically
we have been 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. While de novo expansion has a dilutive effect on short-term earnings,
the resulting growth will continue to add significant value to our
franchise.  By timing our expansion, we plan to balance earnings,
growth and expense.
 
 The
acquisition of The Bank of Venice expanded our presence into Sarasota
County.  We believe this strategic merger will provide new growth
opportunities through our operation of a local community bank in an attractive
new market.  The pricing, market and culture fit indicate the
acquisition will be advantageous to our growth and expansion plans.
 
 We
believe the completion of our strategic merger with The Bank of Venice on April
30, 2007 and the January 2, 2008 closing of our acquisition of Naples Capital
Advisors, a wealth management and investment advisory firm with approximately
$80 million of assets under advisement are exemplary accomplishments which will
further enhance our franchise value and current position in the
marketplace.
 
 On March
7, 2008, the Company consummated a transaction whereby two of Southwest
Florida’s prominent families, their representatives and their related business
interests purchased 1.2 million shares of the Company’s common stock and
warrants to purchase an additional 1.2 million shares of common stock at an
exercise price of $8.40 per share at any time prior to March 7, 2011. Gross
proceeds from the investment provided additional capital of $10.1
million.
 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 and The
Bank of Venice.  For the year ended December 31, 2007, our operations
resulted in a net loss of $2.4 million, or $0.20 per basic and diluted share.
These results compared with net income of $9.0 million from continuing
operations, or $0.78 per basic share and $0.76 per diluted share, for the prior
year.  The most significant factors contributing to the 2007 loss were
the $9.7 million provision for loan losses and write-downs of investment
securities totaling $5.7 million.
 
 Our
operating environment remains challenging and our loan growth is muted due to
loan payoffs and a lower level of loan origination. During this period of slower
economic activity, our loans increased 6% from last year.  Our
strategy of building relationships with small businesses and middle-market
customers continues to drive our growth and expansion.
 
 Deteriorating
credit quality and the interest rate environment continue to be the dominant
forces affecting our industry and our main challenges are managing asset quality
and efficiently funding the growth of our loan portfolios. We are leveraging our
current product and delivery advantages along with our sustainable customer
service quality advantages in our efforts to increase market share and plan to
continue to capitalize on the opportunities in our region.
 
 Net
interest income on a tax-equivalent basis was $46.4 million for 2007, a decrease
of 2% from $47.4 million a year ago. Changes in monetary policy by the Federal
Reserve affect the prime rate, our loan yields, our deposit and borrowing costs
and our net interest margin. During a period of increasing short-term interest
rates through mid-year 2006 followed by decreasing rates starting in September
2007, our interest margin contracted 58 basis points from 4.18% in 2006 to 3.60%
in 2007.
   25
 Table of Contents
  Non-interest
income, which includes service charges on deposit accounts, investment
securities gains and losses, real estate fees and other operating income,
decreased approximately $4.9 million to $1.4 million in 2007 from $6.3 million
in 2006.  Excluding the effect of the $5.7 million write-down of
investment securities and the increased gains on sales of assets, non-interest
income was comparable during 2006 to 2007.  Service charges on deposit
accounts increased from $2.5 million in 2006 to $2.7 million in 2007, but were
offset by a decline in fees on mortgage loans sold. The decrease is primarily
attributable to a lower volume of residential real estate closings in the Monroe
and Collier counties markets resulting in lower residential mortgage
originations and lower fees from the sale of mortgage loans.
 
 Non-interest
expense for 2007 was $41.9 million, compared with $35.8 million a year ago. The
increase in non-interest expense for 2007 is primarily attributable to a 12%
increase in salaries and employee benefits expenses including severance costs
for certain employees. Salaries and employee benefits for The Bank of Venice,
during 2007, were approximately $900,000.  Net occupancy and other
expenses increased 30% compared to 2006.  The increase in this
category includes approximately $371,000 related to The Bank of
Venice.  The increase in other expenses was primarily attributable to
increases in repossession expenses, consulting engagements, FDIC insurance
assessments and $507,000 related to the operations of The Bank of
Venice.
 
 Total
assets increased 10% during 2007 to $1.44 billion as of December 31, 2007,
compared with $1.32 billion a year ago. Total loans grew 6% to $1.13 billion as
of December 31, 2007, compared with $1.06 billion a year ago. Commercial real
estate mortgage loans accounted for the largest categorical dollar increase
during 2007, representing $65.8 million of the total increase. Asset growth was
funded by a $96.7 million increase in FHLB advances and other borrowings and an
increase in total deposits to $1.05 billion as of December 31, 2007,
representing deposit growth of 2% from $1.03 billion in the prior year. As of
December 31, 2007, the acquisition of The Bank of Venice resulted in $72.9
million, $58.7 million and $51.9 million of the 2007 growth in assets, loans and
deposits, respectively.
 
 In
response to slowing economic activity and continued softness in residential real
estate in our markets, we strengthened our reserve for loan
losses.  As of December 31, 2007 the allowance for loan losses totaled
$15.0 million, or 1.33% of total loans. This level of allowance represents 93%
of non-performing loans at December 31, 2007. This compares with 0.90% and 227%,
respectively, as of December 31, 2006. Annual net charge-offs represented 0.45%
of average loans as of December 31, 2007, compared with 0.15% as of December 31,
2006.
 
 Our
balance sheet reflects the continued success of our strategic expansion into
more dynamic growth markets in South Florida. By the end of 2007, approximately
51% of the Company’s customer deposit base was located outside our historical
core business market of the Florida Keys.
 Economic
and Operating Environment Overview
 
 During
2007, business activity in our primary markets experienced an economic
contraction as the ripple effect of the residential real estate crisis
significantly impacted certain of our local markets. The national trends of
slowing economic expansion with increased overall employment and productivity
gains were significantly more favorable than the trends in southern
Florida.  In an effort to respond to the credit and liquidity crisis
which arose during the third quarter of 2007 and thereafter, the Federal Reserve
acted to ease monetary policy and promote growth by lowering short-term interest
rates by 225 basis points between September 2007 and January 2008 including once
between regularly scheduled interest rate meetings. Accordingly, the target
Federal Funds Rate began 2007 at 5.25% and ended the year at
4.25%.  The Prime lending rate decreased from 8.25% to 7.25% during
the year.
  
 26
 Table of Contents
  The
effect of the interest rate environment during 2007 was a continued contraction
of our net interest margin. The decreasing Prime rate directly affects yields on
loans tied to that index and even loans not indexed to Prime are priced
reflective of overall lower asset yields. In contrast, our funding needs
resulted in our decision to be more competitive on deposit pricing and seek
additional wholesale funding. We believe that the net effect of the current
interest rate environment will translate into margin contraction as we continue
to manage these factors with our increased funding needs and our desire to
obtain such funding through our branch distribution system.
 
 During
2007, TIB Bank strengthened its underwriting criteria resulting in a contraction
of its indirect automobile lending program, in an effort to enhance overall loan
quality in this portfolio.  As of December 31, 2007, we had
approximately $117.4 million of indirect auto loans outstanding.  The
balance of outstanding indirect loans declined in 2007 as we reacted to local
economic conditions and a higher level of delinquencies and charge-offs
resulting from this portfolio which is highly concentrated in southwest Florida,
an area significantly impacted by the downturn of the residential housing
market. We expect new production in 2008 to be less than loan principal
repayments causing the total amount of indirect loans held in the portfolio to
decline during the year.
 
 In
January 2007, we completed construction of our 16,000-square-foot banking office
in Naples, Florida and subsequently relocated the TIB Bank headquarters to this
facility. On April 30, 2007, we completed the acquisition of The Bank of Venice
which subsequently opened its second and third branches in Venice, Florida. We
expect to open one to two additional branches in Southwest Florida during 2008
and 2009.  Additional branch sites will continue to be explored in
other high-growth markets throughout Florida.
 
 Additionally,
on December 12, 2007, we entered into an agreement to purchase Naples Capital
Advisors, a wealth management and investment advisory firm with approximately
$80 million of assets under advisement. Under the terms of the agreement, Naples
Capital Advisors will become a wholly-owned subsidiary of the Company.
Shareholders of Naples Capital Advisors will be entitled to receive $1.33
million in cash. The closing of the merger occurred on January 2, 2008. During
the first quarter of 2008, we began offering private banking services and filed
an application to seek approval to capitalize and operate a trust
company.
 
 Subsequently,
on March 7, 2008, the Company consummated a transaction whereby two of Southwest
Florida’s prominent families, their representatives and their related business
interests purchased 1.2 million shares of the Company’s common stock and
warrants to purchase an additional 1.2 million shares of common stock at an
exercise price of $8.40 per share at any time prior to March 7, 2011. Gross
proceeds from the investment provided additional capital of $10.1
million.
 
 Analysis
of Financial Condition
 
 Our
assets totaled $1.44 billion at December 31, 2007 compared to $1.32 billion at
the end of 2006, an increase of $125.6 million, or 10%.  The effect of
the acquisition of The Bank of Venice accounts for $72.9 million of the
increase.  The growth in assets was primarily a result of increased
investing and lending activity as the Banks invested funds provided by deposit
growth and borrowings.
 
 Total
loans increased $63.8 million or 6%, to $1.13 billion at December 31,
2007.  The growth in the loan portfolio was primarily attributed to
increases in commercial real estate loans of $65.8 million and residential real
estate loans of $29.9 million, partially offset by a $24.1 million decrease in
indirect auto dealer loans.
  Total
deposits increased $20.5 million or 2%, from $1.03 billion at the end of 2006 to
$1.05 billion on December 31, 2007.  Non-interest-bearing deposits
decreased $16.0 million or 10%, while interest-bearing deposits increased $36.5
million or 4%.
  
 27
 Table of Contents
  Borrowed
funds, consisting of Federal Home Loan Bank (FHLB) advances, short-term
borrowings, notes payable, and subordinated debentures, totaled $280.9 million
at year end 2007 compared to $184.3 million at the end of
2006.  During 2007, we increased our FHLB advances by $15.0
million.  On January 1, 2007 we repaid $4.0 million of notes payable
bearing interest at 9% at par.
 
 Shareholders’
equity increased $10.4 million or 12%, from $85.9 million on December 31, 2006
to $96.2 million at the end of 2007.
 
 Book
value per share increased to $7.53 at December 31, 2007, from $7.33 at December
31, 2006.
  Results
of Operations
 
 Net
income
 
 2007
compared with 2006:
 
 Net loss
from continuing operations was $2.4 million for 2007, compared to net income of
$9.0 million for 2006.  Basic and diluted loss per share from
continuing operations for 2007 were $0.20, as compared to basic and diluted
earnings per share of $0.78 and $0.76, respectively, in 2006.
 
 Based on
continuing operations, the loss on average assets for 2007 was 0.18% compared to
a return on average assets of 0.74% for 2006. On the same basis, loss on average
shareholders’ equity was 2.5% for 2007 while the return on average shareholders’
equity was 11.05% for 2006.
 
 As
discussed in Note 2 of the accompanying "Notes to Consolidated Financial
Statements", the Company closed the sale of the merchant bankcard processing
segment in the fourth quarter of 2005. Accordingly, the results of the merchant
bankcard operations were classified as discontinued operations during 2006. The
Company’s net loss for 2007 was $2.4 million compared to net income of $9.2
million for 2006. Basic and diluted loss per share for 2007 were $0.20 as
compared to basic and diluted earnings per share of $0.80 and $0.78,
respectively, in 2006.
 
 Contributing
significantly to the loss during 2007 were the $9.7 million provision for loan
losses and the write-down of $5.7 million of investment securities. In response
to continued slowing economic activity and softening real estate values in our
markets, our provision for loan losses in excess of net charge offs resulted in
an increase of the allowance for loan losses to $15.0 million or 1.33% of total
loans at December 31, 2007. For additional information on these items, see the
sections that follow entitled “Allowance and Provision for Loan Losses” and
“Investment Portfolio”, respectively.
 
 2006
compared with 2005:
 
 Net
income from continuing operations was $9.0 million for 2006, compared to $7.2
million for 2005, an increase of 25%.  Basic and diluted earnings per
share from continuing operations for 2006 were $0.78 and $0.76, respectively, as
compared to $0.63 and $0.61 per share in 2005.
 
 Return on
average assets based on net income from continuing operations was 0.74% for 2006
and 2005, while return on average shareholders’ equity based on net income from
continuing operations was 11.05% and 10.19%, respectively.
  
 28
 Table of Contents
  As
discussed in Note 2 of the accompanying "Notes to Consolidated Financial
Statements", the Company closed the sale of the merchant bankcard processing
segment in the fourth quarter of 2005. Accordingly, the results of the merchant
bankcard operations were classified as discontinued operations during 2006 and
2005. The Company’s 2006 net income of $9.2 million decreased 22% compared to
$11.8 million in 2005 due to $4.6 million of net income from discontinued
operations in 2005. Basic and diluted earnings per share for 2006 were $0.80 and
$0.78, respectively, as compared to $1.04 and $1.00 per share in
2005.
 
 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.
  2007
compared with 2006:
 
 Net
interest income was $46.0 million for the year ended December 31, 2007, compared
to $47.1 million for the same period in 2006.  The 2% decrease was
mainly attributable to deposit accounts re-pricing higher during 2007 lagging
prime based asset re-pricings which occurred more timely during 2006 and
remained stable throughout the first three quarters of the year. The impact of
this lag effect was exacerbated during the fourth quarter as it combined with
intense local market competition for deposits as well as the evaporation of
wholesale market liquidity resulting in funding rates remaining at higher levels
even as the Federal Reserve began swiftly lowering rates in September. Partially
offsetting this decrease were increases in loan and securities volume.
Additional factors impacting net interest income included a significant increase
in the level of nonaccrual loans, increases in interest rates paid on
transaction accounts and more significantly time deposits, our highest cost
deposit category as a percentage share of total deposits, along with additional
funding from short-term borrowings and FHLB advances.
 
 Many of
the Banks’ loans are indexed to the prime rate. The comparability of the level
of the prime rate in 2007 and 2006 combined with the impact of a higher level of
non-accrual loans and the acquisition of The Bank of Venice is reflected in a
slightly lower average yield for the loan portfolio. The acquisition of The Bank
of Venice on April 30, 2007 reduced the average loan yield slightly as it
generally has a lower yielding loan mix than TIB Bank. The average yield on
interest-earning assets for the 2007 was 7.39% which was a decrease of 16 basis
points compared to the 7.55% yield earned during 2006.  The average
cost of interest-bearing liabilities increased 38 basis points from 4.07% during
2006 to 4.45% in 2007. The average cost of interest bearing deposits and all
interest bearing liabilities reflect in part the increase in local deposit
competition as well as a general liquidity premium resulting from worldwide
financial market turmoil during the second half of 2007. As a result, our tax
equivalent net interest margin contracted 58 basis points to 3.60% from 4.18% in
2006. Going forward, we expect market interest rates to decline in the immediate
term and then remain relatively stable resulting in a short-term decline in loan
yields followed by a period of stability. At the same time, while we expect
deposit costs will follow in their decline, they will continue to be subject to
the forces of competitive pressure which may result in deposit rates decreasing
more slowly. In the current interest rate environment, we believe that our
interest margin will contract further. 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 continue to be less in extent
than the relative impact of asset growth.
 
 2006
compared with 2005:
 
 Net
interest income was $47.1 million for the year ended December 31, 2006, compared
to $39.1 million for the same period in 2005.  The 20% increase was
mainly attributable to increased lending volume.  Partially offsetting
this increase were increases in interest expense on transaction accounts and
more significantly time deposits. Additional funding from short-term borrowings
and FHLB advances also increased interest expense. The average yield on
interest-earning assets for 2006 was 7.55% which was an increase of 91 basis
points compared to the 6.64% yield earned during 2005. The average cost of
interest-bearing liabilities increased 125 basis points from 2.82% during 2005
to 4.07% in 2006. The average cost of interest bearing deposits and all interest
bearing liabilities reflect in part the increase in short-term interest rates
and the change in the funding mix for 2006 as compared to 2005. As a result of
these changes, our tax equivalent net interest margin contracted 20 basis points
to 4.18% from 4.38% in 2005.
  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, 2007, 2006 and 2005.
  29
 Table of Contents
 Average
Balance Sheets
  2007
              
              
              2006
              
              
              2005(Dollars
      in thousands)
              
              Average
      Balances
              
              
              Income/
                Expense
              
              
              Yields/
                Rates
              
              
              Average
      Balances
              
              
              Income/
                Expense
              
              
              Yields/
                Rates
              
              
              Average
      Balances
              
              
              Income/
                Expense
              
              
              Yields/
                RatesASSETSInterest-earning
      assets:Loans
      (a)(b)
              
              $
              1,088,751
              
              
              $
              84,775
              
              
              
              7.79
              %
              
              $
              989,617
              
              
              $
              78,382
              
              
              
              7.92
              %
              
              $
              772,363
              
              
              $
              54,492
              
              
              
              7.06
              %Investment
      securities (b)
              
              
              146,376
              
              
              
              7,633
              
              
              
              5.21
              %
              
              
              123,651
              
              
              
              6,149
              
              
              
              4.97
              %
              
              
              86,325
              
              
              
              3,938
              
              
              
              4.56
              %Interest
      bearing deposits in other banks
              
              
              383
              
              
              
              19
              
              
              
              4.96
              %
              
              
              448
              
              
              
              22
              
              
              
              4.94
              %
              
              
              359
              
              
              
              10
              
              
              
              2.90
              %FHLB
      stock
              
              
              8,408
              
              
              
              503
              
              
              
              5.98
              %
              
              
              4,935
              
              
              
              285
              
              
              
              5.78
              %
              
              
              2,725
              
              
              
              113
              
              
              
              4.15
              %Federal
      funds sold
              
              
              42,187
              
              
              
              2,144
              
              
              
              5.08
              %
              
              
              15,465
              
              
              
              739
              
              
              
              4.78
              %
              
              
              38,374
              
              
              
              1,202
              
              
              
              3.13
              %Total
      interest-earning assets
              
              
              1,286,105
              
              
              
              95,074
              
              
              
              7.39
              %
              
              
              1,134,116
              
              
              
              85,577
              
              
              
              7.55
              %
              
              
              900,146
              
              
              
              59,755
              
              
              
              6.64
              %Non-interest
      earning assets:Cash
      and due from banks
              
              
              20,394
              
              
              
              
              
              
              
              
              
              
              
              22,402
              
              
              
              
              
              
              
              
              
              
              
              21,680Premises
      and equipment, net
              
              
              36,609
              
              
              
              
              
              
              
              
              
              
              
              32,205
              
              
              
              
              
              
              
              
              
              
              
              27,007Allowances
      for loan losses
              
              
              (10,174
              )
              
              
              
              
              
              
              
              
              
              
              (8,325
              )
              
              
              
              
              
              
              
              
              
              
              (6,887
              )Other
      assets
              
              
              41,167
              
              
              
              
              
              
              
              
              
              
              
              32,037
              
              
              
              
              
              
              
              
              
              
              
              30,626Total
      non-interest earning assets
              
              
              87,996
              
              
              
              
              
              
              
              
              
              
              
              78,319
              
              
              
              
              
              
              
              
              
              
              
              72,426Total
      Assets
              
              $
              1,374,101
              
              
              
              
              
              
              
              
              
              
              $
              1,212,435
              
              
              
              
              
              
              
              
              
              
              $
              972,572LIABILITIES
      & SHAREHOLDERS’ EQUITYInterest
      bearing liabilities:Interest
      bearing deposits:NOW
      accounts
              
              $
              151,745
              
              
              
              4,967
              
              
              
              3.27
              %
              
              $
              131,386
              
              
              
              3,500
              
              
              
              2.66
              %
              
              $
              92,754
              
              
              
              919
              
              
              
              0.99
              %Money
      market
              
              
              186,996
              
              
              
              7,753
              
              
              
              4.15
              %
              
              
              166,501
              
              
              
              5,959
              
              
              
              3.58
              %
              
              
              165,266
              
              
              
              3,686
              
              
              
              2.23
              %Savings
      deposits
              
              
              55,360
              
              
              
              968
              
              
              
              1.75
              %
              
              
              48,897
              
              
              
              346
              
              
              
              0.71
              %
              
              
              47,774
              
              
              
              243
              
              
              
              0.51
              %Time
      deposits
              
              
              486,658
              
              
              
              24,172
              
              
              
              4.97
              %
              
              
              477,204
              
              
              
              21,852
              
              
              
              4.58
              %
              
              
              357,824
              
              
              
              12,595
              
              
              
              3.52
              %Total
      interest-bearing deposits
              
              
              880,759
              
              
              
              37,860
              
              
              
              4.30
              %
              
              
              823,988
              
              
              
              31,657
              
              
              
              3.84
              %
              
              
              663,618
              
              
              
              17,443
              
              
              
              2.63
              %Short-term
      borrowings and FHLB advances
              
              
              174,583
              
              
              
              7,861
              
              
              
              4.50
              %
              
              
              86,883
              
              
              
              4,102
              
              
              
              4.72
              %
              
              
              39,465
              
              
              
              1,282
              
              
              
              3.25
              %Long-term
      borrowings
              
              
              39,860
              
              
              
              3,000
              
              
              
              7.53
              %
              
              
              27,442
              
              
              
              2,412
              
              
              
              8.79
              %
              
              
              17,052
              
              
              
              1,579
              
              
              
              9.26
              %Total
      interest bearing liabilities
              
              
              1,095,202
              
              
              
              48,721
              
              
              
              4.45
              %
              
              
              938,313
              
              
              
              38,171
              
              
              
              4.07
              %
              
              
              720,135
              
              
              
              20,304
              
              
              
              2.82
              %Non-interest
      bearing liabilities and shareholders’ equity:Demand
      deposits
              
              
              163,478
              
              
              
              
              
              
              
              
              
              
              
              174,798
              
              
              
              
              
              
              
              
              
              
              
              169,426Other
      liabilities
              
              
              19,338
              
              
              
              
              
              
              
              
              
              
              
              17,903
              
              
              
              
              
              
              
              
              
              
              
              12,443Shareholders’
      equity
              
              
              96,083
              
              
              
              
              
              
              
              
              
              
              
              81,421
              
              
              
              
              
              
              
              
              
              
              
              70,568Total
      non-interest bearing liabilities and shareholders’ equity
              
              
              278,899
              
              
              
              
              
              
              
              
              
              
              
              274,122
              
              
              
              
              
              
              
              
              
              
              
              252,437Total
      liabilities and shareholders’ equity
              
              $
              1,374,101
              
              
              
              
              
              
              
              
              
              
              $
              1,212,435
              
              
              
              
              
              
              
              
              
              
              $
              972,572Interest
      rate spread
              
              
              
              
              
              
              
              
              
              
              2.94
              %
              
              
              
              
              
              
              
              
              
              
              3.48
              %
              
              
              
              
              
              
              
              
              
              
              3.82
              %Net
      interest income
              
              
              
              
              
              $
              46,353
              
              
              
              
              
              
              
              
              
              
              $
              47,406
              
              
              
              
              
              
              
              
              
              
              $
              39,451Net
      interest margin (c)
              
              
              
              
              
              
              
              
              
              
              3.60
              %
              
              
              
              
              
              
              
              
              
              
              4.18
              %
              
              
              
              
              
              
              
              
              
              
              4.38
              %
 __________
 (a)
              Average
      loans include non-performing loans.  Interest on loans includes
      loan fees of $706 in 2007, $632 in 2006, and $468 in
  2005.
 (b)
              Interest
      income and rates include the effects of a tax equivalent adjustment using
      applicable Federal tax rates 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.
  30
 Table of Contents
  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.
 
 2007
      compared to 2006
                Due
      to changes in
              
              
              2006
      compared to 2005
                Due
      to changes in(Dollars
      in thousands)
              
              Average
      Volume
              
              
              Average
      Rate
              
              
              Net
      Increase (Decrease)
              
              
              Average
      Volume
              
              
              Average
      Rate
              
              
              Net
      Increase (Decrease)Interest
      incomeLoans
      (a)
              
              $
              7,738
              
              
              $
              (1,345
              )
              
              $
              6,393
              
              
              $
              16,637
              
              
              $
              7,253
              
              
              $
              23,890Investment
      securities (a)
              
              
              1,174
              
              
              
              310
              
              
              
              1,484
              
              
              
              1,830
              
              
              
              381
              
              
              
              2,211Interest-bearing
      deposits in other banks
              
              
              (3
              )
              
              
              -
              
              
              
              (3
              )
              
              
              3
              
              
              
              9
              
              
              
              12FHLB
      stock
              
              
              207
              
              
              
              11
              
              
              
              218
              
              
              
              116
              
              
              
              56
              
              
              
              172Federal
      funds sold
              
              
              1,355
              
              
              
              50
              
              
              
              1,405
              
              
              
              (918
              )
              
              
              455
              
              
              
              (463
              )Total
      interest income
              
              
              10,471
              
              
              
              (974
              )
              
              
              9,497
              
              
              
              17,668
              
              
              
              8,154
              
              
              
              25,822Interest
      expenseNOW
      accounts
              
              
              592
              
              
              
              875
              
              
              
              1,467
              
              
              
              511
              
              
              
              2,070
              
              
              
              2,581Money
      market
              
              
              784
              
              
              
              1,010
              
              
              
              1,794
              
              
              
              28
              
              
              
              2,245
              
              
              
              2,273Savings
      deposits
              
              
              51
              
              
              
              571
              
              
              
              622
              
              
              
              6
              
              
              
              97
              
              
              
              103Time
      deposits
              
              
              440
              
              
              
              1,880
              
              
              
              2,320
              
              
              
              4,867
              
              
              
              4,390
              
              
              
              9,257Short-term
      borrowings and FHLB advances
              
              
              3,957
              
              
              
              (198
              )
              
              
              3,759
              
              
              
              2,047
              
              
              
              773
              
              
              
              2,820Long-term
      borrowings
              
              
              972
              
              
              
              (384
              )
              
              
              588
              
              
              
              917
              
              
              
              (84
              )
              
              
              833Total
      interest expense
              
              
              6,796
              
              
              
              3,754
              
              
              
              10,550
              
              
              
              8,376
              
              
              
              9,491
              
              
              
              17,867Change
      in net interest income
              
              $
              3,675
              
              
              $
              (4,728
              )
              
              $
              (1,053
              )
              
              $
              9,292
              
              
              $
              (1,337
              )
              
              $
              7,955
 __________
 (a) Interest
income includes the effects of a tax equivalent adjustment using applicable
federal tax rates in adjusting tax exempt interest on tax exempt investment
securities and loans to a fully taxable basis.
 
 Non-interest
income
 
 The
following table presents the principal components of non-interest income for the
years ended December 31:
 
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005Fees
      on mortgage loans sold
              
              $
              1,446
              
              
              $
              1,599
              
              
              $
              1,880Service
      charges on deposit accounts
              
              
              2,692
              
              
              
              2,457
              
              
              
              2,360Investment
      securities gains (losses), net
              
              
              (5,660
              )
              
              
              -
              
              
              
              1Debit
      card income
              
              
              733
              
              
              
              711
              
              
              
              572Earnings
      on bank owned life insurance policies
              
              
              445
              
              
              
              400
              
              
              
              416Gain
      on sale of assets
              
              
              957
              
              
              
              138
              
              
              
              267Other
              
              
              749
              
              
              
              970
              
              
              
              762Total
      non-interest income
              
              $
              1,362
              
              
              $
              6,275
              
              
              $
              6,258
  Non-interest
income decreased by $4.9 million, or 78 %, in 2007 when compared to 2006 and
2005.  The decrease is primarily due to losses on investment
securities write-downs of $5.7 million.
   31
 Table of Contents
 2007
compared to 2006:
 
 Non-interest
income remained relatively constant during 2007 as compared to 2006 excluding
the losses on investment securities and increased gains on sale of assets. While
service charges on deposit accounts increased approximately 10% to $2.7 million
during 2007, this increase was offset by the 10% decline in fees on mortgage
loans sold.  The increase in service charges is primarily due to an
increase in overdraft related charges. The decrease in fees on mortgage loans
sold is primarily due to lower volumes resulting from the continuing softening
of the local real estate markets.
 
 2006
compared to 2005:
 
 Service
charges on deposit accounts increased slightly in 2006.  This increase
is primarily due to growth in the number of deposit accounts and to increases in
the volume of ATM usage.  Debit card income also increased 24.3% over
2005 which resulted from the increase in customer usage of debit
cards.
 
 Non-interest
expenses
 
 The
following table represents the principal components of non-interest expenses for
the years ended December 31:
 
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005Salary
      and employee benefits
              
              $
              22,550
              
              
              $
              20,205
              
              
              $
              17,724Net
      occupancy expense
              
              
              7,979
              
              
              
              6,120
              
              
              
              5,502Accounting,
      legal, and other professional
              
              
              2,144
              
              
              
              1,710
              
              
              
              1,444Computer
      services
              
              
              2,172
              
              
              
              1,955
              
              
              
              1,650Postage,
      courier and armored car
              
              
              837
              
              
              
              845
              
              
              
              719Marketing
      and community relations
              
              
              1,151
              
              
              
              983
              
              
              
              731Operating
      supplies
              
              
              581
              
              
              
              581
              
              
              
              589Directors’
      fees
              
              
              568
              
              
              
              518
              
              
              
              468Indirect
      loan production expense
              
              
              12
              
              
              
              276
              
              
              
              379Provision
      for unfunded commitments
              
              
              (98
              )
              
              
              (101
              )
              
              
              316Travel
      expenses
              
              
              396
              
              
              
              387
              
              
              
              299FDIC
      and state assessments
              
              
              629
              
              
              
              298
              
              
              
              253Amortization
      of intangibles
              
              
              440
              
              
              
              288
              
              
              
              291Repossessed
      asset expenses
              
              
              986
              
              
              
              312
              
              
              
              128Operational
      charge-offs
              
              
              74
              
              
              
              124
              
              
              
              69Other
      operating expenses
              
              
              1,500
              
              
              
              1,332
              
              
              
              1,294Total
      non-interest expenses
              
              $
              41,921
              
              
              $
              35,833
              
              
              $
              31,856
 
 
 Over the
past three years, non-interest expenses have increased from $31.9 million to
$41.9 million or 32%.  While primarily due to increases in employee
salaries and benefits, facilities and infrastructure costs necessary to manage
and facilitate our organizational growth, the increase in this category includes
the operating costs of The Bank of Venice subsequent to its acquisition on April
30, 2007.
  
 32
 Table of Contents
  2007
compared to 2006:
 
 Non-interest
expense for 2007 was $41.9 million, an increase of approximately $6.1 million or
17% over $35.8 million for 2006.  The increase reflects $1.8 million
of non-interest expenses of The Bank of Venice which were not present in 2006;
increases in employees’ salaries and benefits including severance for certain
employees and signing bonuses for newly hired professionals related to the
launch of our private banking and the acquisition of Naples Capital Advisors,
Inc.; expenses related to consulting engagements; expenses related to the early
termination of various contracts; increased repossession related expenses; and
an increase in the FDIC insurance assessment.
  2006
compared to 2005:
 
 Non-interest
expense for 2006 was $35.8 million, an increase of approximately $4.0 million or
12% over $31.9 million for 2005.  The increase in non-interest expense
is primarily attributable to salaries and employee benefits increasing $2.5
million.  At December 31, 2006 the Company had 337 full-time employees
and 11 part-time employees, compared to 332 full-time employees and 12 part-time
employees at December 31, 2005. The higher personnel costs include approximately
$305,000 of stock-based compensation expense.  The Company began
recording compensation expense related to stock options on January 1, 2006
pursuant to the adoption of SFAS 123R.  Other expense includes a
charitable contribution of approximately $135,000 expressing our commitment to
and reinvestment in the community by funding the construction of affordable
local housing.
 
 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, 2007, 2006, and 2005 were 42%, 36% and 37%, respectively.  The
fluctuations in effective tax rates reflect the effect of the differences in
deductibility of certain income and expenses.   The primary
factor resulting in the higher tax benefit rate during 2007 is the greater
relative impact of the effect of tax exempt interest income on the pretax loss.
During 2006, the lower effective income tax rate was largely due to the
recognition of a state income tax credit related to the Company’s funding of
affordable housing construction costs for a local charitable organization.
During 2006, the Company’s taxable income exceeded the 34% federal statutory
income tax bracket and a portion of our taxable income was taxable at a rate of
35%. Additionally, during 2005, due primarily to the gain recognized on the sale
of our merchant bankcard processing segment during that year, the Company’s
taxable income exceeded the 34% Federal statutory tax bracket resulting in a
portion of our taxable income being taxed at 35% and 38% statutory Federal
income tax rates. Our future effective income tax rate will fluctuate based on
the mix of taxable and tax free investments we make and, to a greater extent,
our overall level of taxable income. See Notes 1 and 11 of our consolidated
financial statements for additional information about the calculation of income
tax expense and the various components thereof.
 
 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.  As our business has expanded in
Southwest Florida, our loan portfolio has benefited from the resulting
geographic diversification which is expected to provide more industry-based
diversity to our loan portfolio.  As of December 31, 2007, we had
approximately $573.4 million of loans outstanding (including indirect auto
dealer loans) in Southwest Florida.
 
 The cost
of living in Monroe County is higher in comparison to other counties in Florida
due in large part to the limited and expensive real estate with various
construction restrictions and environmental
considerations.  Accordingly, collateral values on loans secured by
property in this market are greater. Collier and Lee counties in Southwest
Florida are significantly higher growth communities and the majority of the
growth of our commercial loan portfolio has been generated by serving this
market.  The quality of our credit administration along with
historically stable real estate values has kept real estate secured loan losses
for recent years at low levels.
  
 33
 Table of Contents
  Loans are
expected to produce higher yields than investment securities and other
interest-earning assets.  The absolute volume of loans and the volume
as a percentage of total earning assets are important determinants of the net
interest margin.  Total loans outstanding increased to $1.13 billion
at the end of 2007 as compared to $1.06 billion at year end 2006, an increase of
6%.  Of this amount, real estate mortgage loans increased 12% from
$810.4 million to $904.2 million.  Commercial real estate mortgage
loans accounted for much of this increase, growing from $546.3 million to $612.1
million at the respective year ends.  Residential loans also increased
significantly growing from $82.2 million at December 31, 2006 to $112.1 million
at December 31, 2007. Offsetting these increases in 2007 were declines in
indirect auto dealer loans.  This portfolio decreased from $141.6
million at December 31, 2006 to $117.4 million at December 31,
2007.  The acquisition of The Bank of Venice during 2007 resulted in
$58.7 million of the total loan growth during 2007. We generally originate
commercial loans with rates that fluctuate with the prime lending rate or may be
fixed for initial periods of 3 to 5 years and residential loans held in the
portfolio with rates that adjust periodically and are tied to the one year
treasury index.  At December 31, 2007, 74% of the total loan portfolio
had floating or adjustable rates.
  The following table
presents the composition our loan portfolio at December 31:
 
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Real
      estate mortgage loans:Commercial
              
              $
              612,084
              
              
              $
              546,276
              
              
              $
              451,969
              
              
              $
              351,346
              
              
              $
              297,221Residential
              
              
              112,138
              
              
              
              82,243
              
              
              
              76,003
              
              
              
              67,204
              
              
              
              60,104Farmland
              
              
              11,361
              
              
              
              24,210
              
              
              
              4,660
              
              
              
              4,971
              
              
              
              2,317Construction
      and vacant land
              
              
              168,595
              
              
              
              157,672
              
              
              
              125,207
              
              
              
              49,815
              
              
              
              32,089Commercial
      and agricultural loans
              
              
              72,076
              
              
              
              84,905
              
              
              
              80,055
              
              
              
              64,622
              
              
              
              63,624Indirect
      auto dealer loans
              
              
              117,439
              
              
              
              141,552
              
              
              
              118,018
              
              
              
              91,890
              
              
              
              59,437Home
      equity loans
              
              
              21,820
              
              
              
              17,199
              
              
              
              17,232
              
              
              
              13,856
              
              
              
              12,574Other
      consumer loans
              
              
              12,154
              
              
              
              9,795
              
              
              
              9,228
              
              
              
              9,817
              
              
              
              11,232Subtotal
              
              
              1,127,667
              
              
              
              1,063,852
              
              
              
              882,372
              
              
              
              653,521
              
              
              
              538,598Less:  deferred
      loan costs (fees)
              
              
              1,489
              
              
              
              1,616
              
              
              
              1,652
              
              
              
              2,157
              
              
              
              1,815Less:  allowance
      for loan losses
              
              
              (14,973
              )
              
              
              (9,581
              )
              
              
              (7,546
              )
              
              
              (6,243
              )
              
              
              (5,216
              )Net
      loans
              
              $
              1,114,183
              
              
              $
              1,055,887
              
              
              $
              876,478
              
              
              $
              649,435
              
              
              $
              535,197
  The two most significant
components of our loan portfolio are commercial real estate and construction and
vacant land. Our goal of maintaining high standards of credit quality include a
strategy of diversification of loan type and purpose within these categories.
The following charts illustrate the composition of these portfolios as of
December 31.
 
 2007
              
              
              2006(Dollars
      in thousands)
              
              Commercial
                Real
      Estate
              
              
              Percentage
                Composition
              
              
              Commercial
                Real
      Estate
              
              
              Percentage
                CompositionMixed
      Use Commercial/Residential
              
              $
              103,937
              
              
              
              17
              %
              
              $
              92,220
              
              
              
              17
              %1-4
      Family and Multi Family
              
              
              76,339
              
              
              
              13
              %
              
              
              75,154
              
              
              
              14
              %Hotels/Motels
              
              
              86,909
              
              
              
              14
              %
              
              
              77,055
              
              
              
              14
              %Guesthouses
              
              
              81,817
              
              
              
              13
              %
              
              
              76,990
              
              
              
              14
              %Office
      Buildings
              
              
              97,633
              
              
              
              16
              %
              
              
              74,380
              
              
              
              14
              %Retail
      Buildings
              
              
              64,819
              
              
              
              11
              %
              
              
              57,930
              
              
              
              10
              %Restaurants
              
              
              37,186
              
              
              
              6
              %
              
              
              31,802
              
              
              
              6
              %Marinas/Docks
              
              
              20,364
              
              
              
              3
              %
              
              
              26,312
              
              
              
              5
              %Warehouse
      and Industrial
              
              
              29,958
              
              
              
              5
              %
              
              
              21,206
              
              
              
              4
              %Other
              
              
              13,122
              
              
              
              2
              %
              
              
              13,227
              
              
              
              2
              %Total
              
              $
              612,084
              
              
              
              100
              %
              
              $
              546,276
              
              
              
              100
              %
 
  34
 Table of Contents
 2007
              
              
              2006(Dollars
      in thousands)
              
              Construction
      and
                Vacant
      Land
              
              
              Percentage
                Composition
              
              
              Construction
      and
                Vacant
      Land
              
              
              Percentage
                CompositionConstruction:Residential – owner
      occupied
              
              $
              20,620
              
              
              
              12
              %
              
              $
              23,892
              
              
              
              15
              %Residential – commercial
      developer
              
              
              36,107
              
              
              
              21
              %
              
              
              42,664
              
              
              
              27
              %Commercial
    structure
              
              
              14,367
              
              
              
              9
              %
              
              
              24,035
              
              
              
              15
              %Total
      construction
              
              
              71,094
              
              
              
              42
              %
              
              
              90,591
              
              
              
              57
              %Land:Raw land
              
              
              15,890
              
              
              
              9
              %
              
              
              6,580
              
              
              
              4
              %Residential
    lots
              
              
              16,775
              
              
              
              10
              %
              
              
              19,759
              
              
              
              13
              %Land
    development
              
              
              29,818
              
              
              
              18
              %
              
              
              9,578
              
              
              
              6
              %Commercial
lots
              
              
              35,018
              
              
              
              21
              %
              
              
              31,164
              
              
              
              20
              %Total
      land
              
              
              97,501
              
              
              
              58
              %
              
              
              67,081
              
              
              
              43
              %Total
              
              $
              168,595
              
              
              
              100
              %
              
              $
              157,672
              
              
              
              100
              %
  The
contractual maturity distribution of our loan portfolio at December 31, 2007 is
indicated in the table below.  The majority of these are amortizing
loans.
 
 Loans
      maturing(Dollars
      in thousands)
              
              Within
                1
      Year
              
              
              1
      to 5
                Years
              
              
              After
                5
      Years
              
              
              TotalReal
      estate mortgage loans:Commercial
              
              $
              72,530
              
              
              $
              95,315
              
              
              $
              444,239
              
              
              $
              612,084Residential
              
              
              3,221
              
              
              
              1,761
              
              
              
              107,156
              
              
              
              112,138Farmland
              
              
              1,021
              
              
              
              1,831
              
              
              
              8,509
              
              
              
              11,361Construction
      and vacant land (a)
              
              
              79,180
              
              
              
              60,431
              
              
              
              28,984
              
              
              
              168,595Commercial
      and agricultural loans
              
              
              33,840
              
              
              
              24,579
              
              
              
              13,657
              
              
              
              72,076Indirect
      auto dealer loans
              
              
              3,557
              
              
              
              97,109
              
              
              
              16,773
              
              
              
              117,439Home
      equity loans
              
              
              1,851
              
              
              
              6,610
              
              
              
              13,359
              
              
              
              21,820Other
      consumer loans
              
              
              2,428
              
              
              
              7,117
              
              
              
              2,609
              
              
              
              12,154Total
      loans
              
              $
              197,628
              
              
              $
              294,753
              
              
              $
              635,286
              
              
              $
              1,127,667
 __________
 (a) $22,364
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 vacant land and commercial real estate construction
loans, some of which have been approved for permanent financing but are still
under construction.
   35
 Table of Contents
 
 Loans
      maturing(Dollars
      in thousands)
              
              Within
                1
      Year
              
              
              1
      to 5
                Years
              
              
              After
                5
      Years
              
              
              TotalLoans
      with:Predetermined
      interest rates
              
              $
              44,706
              
              
              $
              191,381
              
              
              $
              55,886
              
              
              $
              291,973Floating
      or adjustable rates
              
              
              152,922
              
              
              
              103,372
              
              
              
              579,400
              
              
              
              835,694Total
      loans
              
              $
              197,628
              
              
              $
              294,753
              
              
              $
              635,286
              
              
              $
              1,127,667
 
 
 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, Substandard and Loss.  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.
 
 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 $15.0 million and $9.6 million at December
31, 2007 and December 31, 2006, respectively.  Based on an analysis
performed by management at December 31, 2007, 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 $9.7 million, $3.5
million and $2.4 million for the years ended December 31, 2007, 2006 and 2005,
respectively. Loan growth of $181.5 million and $228.9 million was the primary
driver of the provision for loan losses during 2006 and 2005, respectively. The
higher provision for loan losses in 2007 was primarily attributable to the
continued contraction of residential real estate activity and the ripple effect
on our local economies as well as the increase in our nonperforming loans,
delinquencies and charge-offs. Additionally, due to the weakening economic
environment, we increased economic risk factors employed in estimating the
allowance during the second quarter of 2006 and have maintained these higher
factors since that period. We again elevated certain quantitative and
qualitative factors used in estimating our allowance for loan losses during each
quarter of 2007.
 
 Management
continuously monitors and actively manages the credit quality of the loan
portfolio and will continue to recognize the provision required to maintain the
allowance for loan losses at an appropriate level. Due to the economic slowdown
discussed above our customers are exhibiting increasing difficulty in timely
payment of their loan obligations. We believe that this trend will continue in
the near term. Consequently, we may experience higher levels of delinquent and
nonperforming loans, which may require higher provisions for loan losses, higher
charge-offs and higher collection related expenses in future
periods.
  
 36
 Table of Contents
 Changes
affecting the allowance for loan losses are summarized for the years ended
December 31,
 
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Balance
      at beginning of year
              
              $
              9,581
              
              
              $
              7,546
              
              
              $
              6,243
              
              
              $
              5,216
              
              
              $
              4,272Charge-offs:Real
      estate mortgage loans:Commercial
              
              
              118
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Residential
              
              
              63
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Farmland
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Construction
      and vacant land
              
              
              1,251
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Commercial
      and agricultural loans
              
              
              278
              
              
              
              12
              
              
              
              107
              
              
              
              92
              
              
              
              183Indirect
      auto dealer loans
              
              
              3,110
              
              
              
              1,557
              
              
              
              1,045
              
              
              
              1,313
              
              
              
              370Home
      equity loans
              
              
              331
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              53Other
      consumer loans
              
              
              51
              
              
              
              4
              
              
              
              67
              
              
              
              82
              
              
              
              61Total
      charge-offs
              
              
              5,202
              
              
              
              1,573
              
              
              
              1,219
              
              
              
              1,487
              
              
              
              667Recoveries:Real
      estate mortgage loans:Commercial
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6Residential
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Farmland
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Construction
      and vacant land
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Commercial
      and agricultural loans
              
              
              -
              
              
              
              20
              
              
              
              6
              
              
              
              38
              
              
              
              1Indirect
      auto dealer loans
              
              
              262
              
              
              
              55
              
              
              
              65
              
              
              
              3
              
              
              
              8Home
      equity loans
              
              
              2
              
              
              
              2
              
              
              
              8
              
              
              
              2
              
              
              
              1Other
      consumer loans
              
              
              6
              
              
              
              40
              
              
              
              30
              
              
              
              16
              
              
              
              9Total
      recoveries
              
              
              270
              
              
              
              117
              
              
              
              109
              
              
              
              59
              
              
              
              25Net
      charged off
              
              
              4,932
              
              
              
              1,456
              
              
              
              1,110
              
              
              
              1,428
              
              
              
              642Provision
      for loan losses
              
              
              9,657
              
              
              
              3,491
              
              
              
              2,413
              
              
              
              2,455
              
              
              
              1,586Acquisition
      of The Bank of Venice
              
              
              667
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Allowance
      for loan losses at end of year
              
              $
              14,973
              
              
              $
              9,581
              
              
              $
              7,546
              
              
              $
              6,243
              
              
              $
              5,216Ratio
      of net charge-offs to average net loans outstanding
              
              
              0.45
              %
              
              
              0.15
              %
              
              
              0.14
              %
              
              
              0.24
              %
              
              
              0.13
              %
 
   37
 Table of Contents
 While no
portion of the allowance is in any way restricted to any individual loan or
group of loans and the entire allowance is available to absorb losses from any
and all loans, 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. Qualitative factors
used in determining the allowance for loan losses resulted in the establishment
of an unallocated reserve totaling approximately $1.1 million as of December 31,
2007.  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.
 
 2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003(Dollars
      in thousands)
              
              Allowance
              
              
              %
      of Total Loans
              
              
              Allowance
              
              
              %
      of Total Loans
              
              
              Allowance
              
              
              %
      of Total Loans
              
              
              Allowance
              
              
              %
      of Total Loans
              
              
              Allowance
              
              
              %
      of Total LoansReal
      estate mortgage loans:Commercial
              
              $
              5,250
              
              
              
              54
              %
              
              $
              3,764
              
              
              
              51
              %
              
              $
              2,971
              
              
              
              51
              %
              
              $
              2,513
              
              
              
              54
              %
              
              $
              2,608
              
              
              
              55
              %Residential
              
              
              381
              
              
              
              10
              %
              
              
              191
              
              
              
              8
              %
              
              
              168
              
              
              
              9
              %
              
              
              144
              
              
              
              10
              %
              
              
              151
              
              
              
              11
              %Farmland
              
              
              84
              
              
              
              1
              %
              
              
              161
              
              
              
              2
              %
              
              
              30
              
              
              
              1
              %
              
              
              34
              
              
              
              1
              %
              
              
              20
              
              
              
              1
              %Construction
      and vacant land
              
              
              1,218
              
              
              
              15
              %
              
              
              922
              
              
              
              15
              %
              
              
              743
              
              
              
              14
              %
              
              
              312
              
              
              
              8
              %
              
              
              217
              
              
              
              6
              %Commercial
      and agricultural loans
              
              
              1,547
              
              
              
              6
              %
              
              
              1,002
              
              
              
              8
              %
              
              
              912
              
              
              
              9
              %
              
              
              737
              
              
              
              10
              %
              
              
              901
              
              
              
              12
              %Indirect
      auto dealer loans
              
              
              5,072
              
              
              
              11
              %
              
              
              3,352
              
              
              
              13
              %
              
              
              2,523
              
              
              
              13
              %
              
              
              2,312
              
              
              
              14
              %
              
              
              1,095
              
              
              
              11
              %Home
      equity loans
              
              
              213
              
              
              
              2
              %
              
              
              87
              
              
              
              2
              %
              
              
              85
              
              
              
              2
              %
              
              
              67
              
              
              
              2
              %
              
              
              78
              
              
              
              2
              %Other
      consumer loans
              
              
              113
              
              
              
              1
              %
              
              
              102
              
              
              
              1
              %
              
              
              114
              
              
              
              1
              %
              
              
              124
              
              
              
              1
              %
              
              
              146
              
              
              
              2
              %Unallocated
              
              
              1,095
              
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              -$
              14,973
              
              
              
              100
              %
              
              $
              9,581
              
              
              
              100
              %
              
              $
              7,546
              
              
              
              100
              %
              
              $
              6,243
              
              
              
              100
              %
              
              $
              5,216
              
              
              
              100
              %
 
 Non-Performing
Assets
 
 Non-performing
assets include non-accrual loans and investments securities, accruing loans
contractually past due 90 days or more, repossessed personal property, and other
real estate.  Loans and investments are placed on non-accrual status
when management has concerns relating to the ability to collect the principal
and interest and generally when such assets 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:
 
 
 (Dollars
      in thousands)
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Total
      non-accrual loans (a)
              
              $
              16,086
              
              
              $
              4,223
              
              
              $
              956
              
              
              $
              704
              
              
              $
              390Accruing
      loans delinquent 90 days or more (a)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
      non-performing loans
              
              
              16,086
              
              
              
              4,223
              
              
              
              956
              
              
              
              704
              
              
              
              390Non-accrual
      investment security(b)
              
              
              3,154
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Repossessed
      personal property (primarily indirect auto dealer loans)
              
              
              3,136
              
              
              
              1,958
              
              
              
              962
              
              
              
              688
              
              
              
              598Other
      real estate owned
              
              
              1,846
              
              
              
              -
              
              
              
              190
              
              
              
              882
              
              
              
              193Other
      assets (c)
              
              
              2,915
              
              
              
              2,861
              
              
              
              2,815
              
              
              
              2,665
              
              
              
              2,472Total  non-performing
      assets
              
              $
              27,137
              
              
              $
              9,042
              
              
              $
              4,923
              
              
              $
              4,939
              
              
              $
              3,653Allowance
      for loan losses
              
              $
              14,973
              
              
              $
              9,581
              
              
              $
              7,546
              
              
              $
              6,243
              
              
              $
              5,216Non-performing
      assets as a percent of total assets
              
              
              1.88
              %
              
              
              0.69
              %
              
              
              0.46
              %
              
              
              0.60
              %
              
              
              0.55
              %Non-performing
      loans as a percent of total loans
              
              
              1.43
              %
              
              
              0.40
              %
              
              
              0.11
              %
              
              
              0.11
              %
              
              
              0.07
              %Allowance
      for loan losses as a percent of non-performing loans (a)
              
              
              93.08
              %
              
              
              226.88
              %
              
              
              789.33
              %
              
              
              886.79
              %
              
              
              1,336.33
              %
   38
 Table of Contents
 _________
 (a)
              Non-performing
      loans from 2003 through 2005 exclude the $1.6 million loan discussed below
      that is guaranteed for both principal and interest by the USDA. In
      December 2006, the Bank stopped accruing interest on this loan pursuant to
      a ruling made by the USDA. Accordingly, the loan is included in total
      non-accrual loans as of December 31, 2006 and 2007. Other non-accrual
      loans at December 31, 2003 through December 31, 2006 are primarily
      indirect auto dealer loans. Non-accrual loans as of December 31, 2007 and
      2006 are as follows:
  December
      31, 2007
                
                
                December
      31, 2006Collateral
      Description
                
                Number
      of
                  Loans
                
                
                Outstanding
      Balance
                
                
                Number
      of
                  Loans
                
                
                Outstanding
      BalanceResidential
      1-4 family
                
                
                13
                
                
                $
                4,442
                
                
                
                2
                
                
                $
                150Commercial
      and agricultural
                
                
                4
                
                
                
                293
                
                
                
                1
                
                
                
                142Commercial
      real estate
                
                
                4
                
                
                
                2,619
                
                
                
                1
                
                
                
                396Residential
      land development
                
                
                1
                
                
                
                2,686
                
                
                
                -
                
                
                
                -Participations
      in residential loan pools
                
                
                9
                
                
                
                1,246
                
                
                
                -
                
                
                
                -Government
      guaranteed loan
                
                
                1
                
                
                
                1,641
                
                
                
                1
                
                
                
                1,641Indirect
      auto-dealer loans
                
                
                238
                
                
                
                3,159
                
                
                
                156
                
                
                
                1,894$
                16,086
                
                
                
                
                
                
                $
                4,223
   (b)
              In
      December 2007, the Company placed a collateralized debt security secured
      primarily by homebuilders, REITs, real estate companies and commercial
      mortgage backed securities on non-accrual. This security had an original
      cost of $6.0 million and was rated A at purchase. Additionally, management
      deemed the decline in market value of this security other than temporary
      and recorded a realized loss of $2.8 million in writing the security down
      to its December 31, 2007 fair value of $3.2 million. For additional
      details on this and other investment securities, see the section of
      management’s discussion and analysis that follows entitled “Investment
      Portfolio”.
 
 (c)
              In
      1998, TIB Bank made a $10.0 million loan to construct a lumber mill in
      northern Florida. Of this amount, $6.4 million had been sold by the Bank
      to other lenders. The loan was 80% guaranteed as to principal and interest
      by the U.S. Department of Agriculture (USDA). In addition to business real
      estate and equipment, the loan was collateralized by the business owner’s
      interest in a trust. Under provisions of the trust agreement,
      beneficiaries cannot receive trust assets until November
    2010.
 
 The
portion of this loan guaranteed by the USDA and held by us was approximately
$1.6 million at December 31, 2007 and December 31, 2006. The loan was accruing
interest until December 2006 when the Bank ceased the accrual of interest
pursuant to a ruling made by the USDA.  Accrued interest on this loan
totals approximately $941,000 at December 31, 2007 and December 31, 2006,
respectively.
 
 In
pursuing a sale of the property and equipment, the Bank has incurred various
expenditures.  The Bank capitalized the liquidation costs and portion
of the protective advances which it expects will be fully reimbursed by the
USDA. The non-guaranteed principal and interest ($2.0 million at December 31,
2007 and December 31, 2006) and the reimbursable capitalized liquidation costs
and protective advance costs totaling approximately $954,000 and $899,000 at
December 31, 2007 and December 31, 2006, respectively, are included as “other
assets” in the financial statements.
 
 Florida
law requires a bank to liquidate or charge off repossessed real property within
five years, and repossessed personal property within six months. Since the
property had not been liquidated during this period, the Bank charged-off the
non guaranteed principal and interest totaling $2.0 million at June 30, 2003,
for regulatory purposes.  Since we believe this amount is ultimately
realizable, we did not write off this amount for financial statement purposes
under generally accepted accounting principles.
  
 
 39
 Table of Contents
  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 and decreases in cash and cash equivalents are as follows
for the three years ending December 31:
 (Dollars
      in thousands)
                
                2007
                
                
                2006
                
                
                2005Provided
      by operating activities
                
                $
                3,770
                
                
                $
                11,607
                
                
                $
                19,998Used
      by investing activities
                
                
                (40,328
                )
                
                
                (229,815
                )
                
                
                (246,077
                )Provided
      by financing activities
                
                
                52,065
                
                
                
                232,250
                
                
                
                224,651Net
      increase (decrease) in cash and cash equivalents
                
                $
                15,507
                
                
                $
                14,042
                
                
                $
                (1,428
                )
  As
discussed in Note 16 of the Consolidated Financial Statements, the Company had
unfunded loan commitments and unfunded letters of credit totaling $136.1 million
at December 31, 2007.  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 Banks
have unsecured overnight federal funds purchased accommodation up to a maximum
of $30.0 million from their principal correspondent
banks.  Additionally, the Banks have agreements with various financial
institutions under which securities can be sold under agreements to repurchase.
Further, the Banks have invested in FHLB stock for the purpose of establishing
credit lines with the FHLB. The credit availability to the Banks is based on a
percentage of the Banks’ total assets as reported on the most recent quarterly
financial information submitted to the regulators subject to the pledging of
sufficient collateral.  At December 31, 2007, in addition to $25.0
million in letters of credit used in lieu of pledging securities to the State of
Florida there was $140.0 million in advances outstanding.  Borrowings
are collateralized by the Banks’ qualifying one-to-four family residential
mortgage loans and commercial real estate loans. The amount eligible for
collateral approximated $200.9 million at December 31, 2007.
 
 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, 2007, our gross loan to deposit ratio was 107.5% compared to a
ratio of 103.3% at December 31, 2006.  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 a bank exceeds the bank’s net profits
to date for that year combined with its retained net profits for the preceding
two years.  Subsequent to year end, TIB Bank paid $7.6 million of
dividends to the holding company that had been declared during 2007. Based on
the level of undistributed earnings for the prior two years, declaration of
dividends by TIB Bank, during 2008, would likely require regulatory approval.
The Bank of Venice has no retained earnings available for
dividends.  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.
   40
 Table of Contents
 Our
interest rate sensitivity position at December 31, 2007 is presented in the
table below.
 
 
 (Dollars
      in thousands)
              
              3
      Months
                or
      Less
              
              
              4
      to 6
                Months
              
              
              7
      to 12
                Months
              
              
              1
      to 5
                Years
              
              
              Over
      5
                Years
              
              
              TotalInterest-earning
      assets:Loans
              
              $
              337,276
              
              
              $
              44,677
              
              
              $
              81,806
              
              
              $
              540,507
              
              
              $
              123,401
              
              
              $
              1,127,667Investment
      securities-taxable
              
              
              35,969
              
              
              
              9,997
              
              
              
              7,284
              
              
              
              18,383
              
              
              
              77,916
              
              
              
              149,549Investment
      securities-tax exempt
              
              
              1,486
              
              
              
              683
              
              
              
              201
              
              
              
              968
              
              
              
              6,246
              
              
              
              9,584Marketable
      equity securities
              
              
              1,224
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,224FHLB
      stock
              
              
              8,881
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,881Federal
      funds sold and securities purchased under agreements to
    resell
              
              
              48,744
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              48,744Interest-bearing
      deposit in other banks
              
              
              146
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              146Total
      interest-bearing assets
              
              
              433,726
              
              
              
              55,357
              
              
              
              89,291
              
              
              
              559,858
              
              
              
              207,563
              
              
              
              1,345,795Interest-bearing
      liabilities:NOW
      accounts
              
              
              161,878
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              161,878Money
      market
              
              
              176,900
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              176,900Savings
      deposits
              
              
              55,045
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              55,045Time
      deposits
              
              
              138,116
              
              
              
              131,831
              
              
              
              152,922
              
              
              
              89,885
              
              
              
              -
              
              
              
              512,754Subordinated
      debentures
              
              
              25,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,000
              
              
              
              33,000Other
      borrowings
              
              
              102,922
              
              
              
              -
              
              
              
              30,000
              
              
              
              115,000
              
              
              
              -
              
              
              
              247,922Total
      interest-bearing liabilities
              
              
              659,861
              
              
              
              131,831
              
              
              
              182,922
              
              
              
              204,885
              
              
              
              8,000
              
              
              
              1,187,499Interest
      sensitivity gap
              
              $
              (226,135
              )
              
              $
              (76,474
              )
              
              $
              (93,631
              )
              
              $
              354,973
              
              
              $
              199,563
              
              
              $
              158,296Cumulative
      interest sensitivity gap
              
              $
              (226,135
              )
              
              $
              (302,609
              )
              
              $
              (396,240
              )
              
              $
              (41,267
              )
              
              $
              158,296
              
              
              $
              158,296Cumulative
      sensitivity ratio
              
              
              (16.8
              %)
              
              
              (22.5
              %)
              
              
              (29.4
              %)
              
              
              (3.1
              %)
              
              
              11.8
              %
              
              
              11.8
              %
 
 
 We are
cumulatively liability sensitive through the five-year time period, and asset
sensitive in the over five year timeframe above.  Certain liabilities
such as non-indexed NOW and passbook savings accounts, while technically subject
to immediate re-pricing in response to changing market rates, historically do
not re-price as quickly or to the extent as other interest-sensitive
accounts.  If market interest rates should decrease, it is anticipated
that our net interest margin would decrease.  Also, as approximately
14% of our deposit funding is comprised of non-interest-bearing liabilities,
total interest-earning assets are substantially greater than the total
interest-bearing liabilities and therefore it is anticipated that, over time,
the effects on net interest income from changes in asset yield will be greater
than the change in expense from liability cost.  In the next three
months, we anticipate short-term interest rates may decline and we expect that
our net interest margin may decline. This expectation is due to the effects of
competitive pressure on loan production combined with increased depositor rate
sensitivity. Due to the Federal Reserve’s recent monetary policy where
short-term interest rates are decreasing, we anticipate that our net interest
margin contraction would be slower because we have positioned the Company by
increasing our liability sensitivity through variable borrowings and shorter
term certificates of deposit. We expect this will be largely offset by the
effect of having more total assets subject to rate changes than total
liabilities that are rate sensitive.
   41
 Table of Contents
  Even in
the near term, we believe the $396.2 million one year cumulative negative
sensitivity gap may exaggerate the probable effects on earnings for two
reasons.  First, the liabilities subject to re-pricing are
predominately not indexed to any specific market rate and therefore they may not
fully reflect the changes in market rates in any rate
re-pricings.  Further, the assets subject to re-pricing are expected
to reflect fully any changes in market rates, primarily the prime
rate.
  Interest-earning
assets and time deposits are presented based on their contractual
terms.  It is anticipated that run off in any deposit category will be
approximately offset by new deposit generation. It is our policy to maintain our
cumulative one year gap ratio in the -30% to 0% range.  At December
31, 2007, the Company was within this range with a one year cumulative
sensitivity ratio of -29.4%. Anticipating the end of the cycle of Federal
Reserve interest rate hikes, we had intentionally increased the liability
sensitivity of the balance sheet through variable rate funding decisions when
possible.  The effectiveness of this tactic will depend on the timing
and extent of the current round of interest rate decreases.
 
 Investment
Portfolio
 
 Contractual
maturities of investment securities at December 31, 2007 are shown
below.  Expected maturities may differ from contractual maturities
because borrowers may have the right to call or repay obligations without call
or prepayment penalties. Other securities include mortgage-backed securities and
marketable equity securities which are not due at a single maturity
date.
 
 (Dollars
      in thousands)
              
              Within
      1 Year
              
              
              After
      1 Year
                Within
      5 Years
              
              
              After
      5 Years
                Within
      10 Years
              
              
              After
      10 Years
              
              
              Other
      SecuritiesAmount
              
              
              Yield
              
              
              Amount
              
              
              Yield
              
              
              Amount
              
              
              Yield
              
              
              Amount
              
              
              Yield
              
              
              AmountSecurities
      Available for Sale:U.S.
      Gov’t agencies and corporations
              
              $
              8,525
              
              
              
              3.09
              %
              
              $
              25,236
              
              
              
              4.73
              %
              
              $
              27,958
              
              
              
              5.12
              %
              
              $
              11,942
              
              
              
              5.57
              %
              
              $
              -States
      and political subdivisions – tax exempt (a)
              
              
              1,548
              
              
              
              5.31
              %
              
              
              1,461
              
              
              
              6.68
              %
              
              
              4,708
              
              
              
              5.25
              %
              
              
              1,867
              
              
              
              5.66
              %
              
              
              -States
      and political subdivisions – taxable
              
              
              -
              
              
              
              -
              
              
              
              176
              
              
              
              7.29
              %
              
              
              -
              
              
              
              -
              
              
              
              2,299
              
              
              
              6.10
              %
              
              
              -Marketable
      equity securities (a)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,224Mortgage-backed
      securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              60,160Corporate
      bonds
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,765
              
              
              
              6.13
              %
              
              
              -Collateralized
      debt obligations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10,488
              
              
              
              5.06
              %
              
              
              -Total
              
              $
              10,073
              
              
              
              3.43
              %
              
              $
              26,873
              
              
              
              4.86
              %
              
              $
              32,666
              
              
              
              5.14
              %
              
              $
              29,361
              
              
              
              5.48
              %
              
              $
              61,384
 
 
 Yield by
classification of investment securities at December 31, 2007 was as
follows:
  (Dollars
      in thousands)
              
              Yield
              
              
              TotalsSecurities
      Available for Sale:U.S.
      Government agencies and corporations
              
              
              4.82
              %
              
              
              73,661States
      and political subdivisions – tax exempt (a)
              
              
              5.56
              %
              
              
              9,584States
      and political subdivisions – taxable
              
              
              6.18
              %
              
              
              2,475Marketable
      equity securities (a) (b)
              
              
              14.34
              %
              
              
              1,224Mortgage-backed
      securities
              
              
              5.39
              %
              
              
              60,160Corporate
      bonds
              
              
              6.13
              %
              
              
              2,765Collateralized
      debt obligations
              
              
              5.06
              %
              
              
              10,488Total
              
              
              5.21
              %
              
              $
              160,357
   42
 Table of Contents
 _____
 (a)
              Weighted
      average yields on tax exempt obligations and marketable equity securities
      have been computed by grossing up actual tax exempt income
 (b)
              Weighted
      average yield on marketable equity securities was computed using the
      actual 2007 income grossed up to an 85% taxable equivalent basis. We
      expect the future yield and relative proportion of tax exempt income to be
      significantly lower during 2008 and
beyond.
  The
following table presents the amortized cost, unrealized gains, unrealized
losses, and market value for the major categories of our investment portfolio
for each reported period:
 
 
 Available
for Sale—December 31, 2007
 
 (Dollars
      in thousands)
              
              Amortized
                Cost
              
              
              Unrealized
                Gains
              
              
              Unrealized
                Losses
              
              
              Fair
                ValueU.S.
      Government agencies and corporations
              
              $
              72,482
              
              
              $
              1,245
              
              
              $
              66
              
              
              $
              73,661States
      and political subdivisions-tax exempt
              
              
              9,629
              
              
              
              6
              
              
              
              51
              
              
              
              9,584States
      and political subdivisions-taxable
              
              
              2,495
              
              
              
              1
              
              
              
              21
              
              
              
              2,475Marketable
      equity securities
              
              
              1,224
              
              
              
              -
              
              
              
              -
              
              
              
              1,224Mortgage-backed
      securities
              
              
              60,161
              
              
              
              295
              
              
              
              296
              
              
              
              60,160Corporate
      bonds
              
              
              2,865
              
              
              
              -
              
              
              
              100
              
              
              
              2,765Collateralized
      debt obligations
              
              
              11,110
              
              
              
              -
              
              
              
              622
              
              
              
              10,488$
              159,966
              
              
              $
              1,547
              
              
              $
              1,156
              
              
              $
              160,357
   Available
for Sale—December 31, 2006
 
 (Dollars
      in thousands)
              
              Amortized
                Cost
              
              
              Unrealized
                Gains
              
              
              Unrealized
                Losses
              
              
              Fair
                ValueU.S.
      Treasury Securities
              
              $
              5,087
              
              
              $
              -
              
              
              $
              125
              
              
              $
              4,962U.S.
      Government agencies and corporations
              
              
              84,014
              
              
              
              278
              
              
              
              1,294
              
              
              
              82,998States
      and political subdivisions-tax exempt
              
              
              10,818
              
              
              
              22
              
              
              
              98
              
              
              
              10,742States
      and political subdivisions-taxable
              
              
              2,578
              
              
              
              12
              
              
              
              -
              
              
              
              2,590Marketable
      equity securities
              
              
              3,000
              
              
              
              484
              
              
              
              -
              
              
              
              3,484Mortgage-backed
      securities
              
              
              16,428
              
              
              
              94
              
              
              
              8
              
              
              
              16,514Collateralized
      debt obligations
              
              
              9,996
              
              
              
              -
              
              
              
              87
              
              
              
              9,909$
              131,921
              
              
              $
              890
              
              
              $
              1,612
              
              
              $
              131,199
 
  43
 Table of Contents
  Available
for Sale—December 31, 2005
 
 (Dollars
      in thousands)
              
              Amortized
                Cost
              
              
              Unrealized
                Gains
              
              
              Unrealized
                Losses
              
              
              Fair
                ValueU.S.
      Treasury Securities
              
              $
              5,182
              
              
              $
              1
              
              
              $
              145
              
              
              $
              5,038U.S.
      Government agencies and corporations
              
              
              64,145
              
              
              
              5
              
              
              
              1,738
              
              
              
              62,412States
      and political subdivisions-tax exempt
              
              
              9,594
              
              
              
              91
              
              
              
              101
              
              
              
              9,584States
      and political subdivisions-taxable
              
              
              2,655
              
              
              
              8
              
              
              
              -
              
              
              
              2,663Marketable
      equity securities
              
              
              3,000
              
              
              
              439
              
              
              
              -
              
              
              
              3,439Mortgage-backed
      securities
              
              
              10,083
              
              
              
              193
              
              
              
              24
              
              
              
              10,252Collateralized
      debt obligations
              
              
              3,996
              
              
              
              80
              
              
              
              -
              
              
              
              4,076$
              98,655
              
              
              $
              817
              
              
              $
              2,008
              
              
              $
              97,464
  Other
than temporary impairment of available for sale securities
 
 As of
December 31, 2007, we owned three collateralized debt obligation investment
securities with an aggregate original cost of $10.0 million that had an
estimated fair value of $6.1 million at that time. The underlying assets in the
three collateralized debt obligations are comprised primarily of corporate debt
obligations of homebuilders, REITs, real estate companies and commercial
mortgage backed securities. These securities are floating rate securities which
were rated “A” or better by an independent and nationally recognized rating
agency at the time of our purchase. In late December 2007, these securities were
downgraded below investment grade by a nationally recognized rating agency. Due
to the ratings downgrade, and the amount of unrealized loss, management
concluded that the loss of value was other than temporary under generally
accepted accounting principles and the Company wrote these investment securities
down to their estimated fair value. This resulted in the recognition of an other
than temporary impairment loss of $3.9 million. In determining their estimated
fair value, management utilized a discounted cash flow modeling valuation
approach. Additionally, during 2007, the market value of an investment in equity
securities, which the Company originally acquired in 2003 for $3.0 million to
obtain community reinvestment credit, of a publicly owned company declined
significantly. As of December 31, 2007, management determined that this decline
was other than temporary and wrote this investment down by $1.8 million to its
fair value at that time. These write downs resulted in a total recognized other
than temporary impairment loss of $5.7 million during 2007. During 2006 and
2005, no other than temporary impairment losses were necessary.
 
 We
regularly review each investment security for impairment based on criteria that
include the extent to which cost exceeds market price, the duration of that
market decline, the financial health of and specific prospects for the issuer(s)
and our ability and intention with regard to holding the security to maturity.
Future declines in the market value of these or other securities may result in
additional impairment charges which may be material to the financial condition
and results of operations of the Company.
 
 Deposits
 
 The
following table presents the average amount outstanding and the average rate
paid on deposits by us for the years ended December 31, 2007, 2006, and
2005.
 
 2007
              
              
              2006
              
              
              2005(Dollars
      in thousands)
              
              Average
      Amount
              
              
              Average
      Rate
              
              
              Average
      Amount
              
              
              Average
      Rate
              
              
              Average
      Amount
              
              
              Average
      RateNon-interest
      bearing deposits
              
              $
              163,478
              
              
              
              
              
              $
              174,798
              
              
              
              
              
              $
              169,426Interest-bearing
      depositsNOW
      Accounts
              
              
              151,745
              
              
              
              3.27
              %
              
              
              131,386
              
              
              
              2.66
              %
              
              
              92,754
              
              
              
              0.99
              %Money
      market
              
              
              186,996
              
              
              
              4.15
              %
              
              
              166,501
              
              
              
              3.58
              %
              
              
              165,266
              
              
              
              2.23
              %Savings
      deposit
              
              
              55,360
              
              
              
              1.75
              %
              
              
              48,897
              
              
              
              0.71
              %
              
              
              47,774
              
              
              
              0.51
              %Time
      deposits
              
              
              486,658
              
              
              
              4.97
              %
              
              
              477,204
              
              
              
              4.58
              %
              
              
              357,824
              
              
              
              3.52
              %Total
              
              $
              1,044,237
              
              
              
              3.63
              %
              
              $
              998,786
              
              
              
              3.17
              %
              
              $
              833,044
              
              
              
              2.09
              %
 
  44
 Table of Contents
  The
following table presents the maturity of our time deposits at December 31,
2007:
 
 (Dollars
      in thousands)
              
              Deposits
      $100 and Greater
              
              
              Deposits
      Less than $100
              
              
              TotalMonths
      to maturity:3
      or less
              
              $
              61,678
              
              
              $
              62,306
              
              
              $
              123,9844
      to 6
              
              
              60,479
              
              
              
              71,475
              
              
              
              131,9547
      through 12
              
              
              60,911
              
              
              
              92,754
              
              
              
              153,665Over
      12
              
              
              57,785
              
              
              
              45,366
              
              
              
              103,151Total
              
              $
              240,853
              
              
              $
              271,901
              
              
              $
              512,754
  Off-Balance
Sheet Arrangements and Contractual Obligations
 
 Our
off-balance sheet arrangements and contractual obligations at December 31, 2007
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,
2007 pursuant to off-balance sheet arrangements and contractual
obligations.
 
 Amount
      of Commitment Expiration Per Period(Dollars
      in thousands)
              
              Total
      Amounts
                Committed
              
              
              One
      Year
                or
      Less
              
              
              Over
      One Year
                Through
      Three
                Years
              
              
              Over
      Three Years
                Through
      Five
                Years
              
              
              Over
      Five
                YearsOff-balance
      sheet arrangementsCommitments to extend
      credit
              
              $
              259,413
              
              
              $
              111,513
              
              
              $
              59,488
              
              
              $
              20,857
              
              
              $
              67,555Standby letters of
      credit
              
              
              2,948
              
              
              
              2,745
              
              
              
              203
              
              
              
              -
              
              
              
              -Total
              
              $
              262,361
              
              
              $
              114,258
              
              
              $
              59,691
              
              
              $
              20,857
              
              
              $
              67,555Contractual
      obligationsTime deposits
              
              $
              512,754
              
              
              $
              409,603
              
              
              $
              92,091
              
              
              $
              11,060
              
              
              $
              -Operating lease
      obligations
              
              
              6,397
              
              
              
              1,273
              
              
              
              1,661
              
              
              
              1,180
              
              
              
              2,283Purchase
      obligations
              
              
              12,693
              
              
              
              2,271
              
              
              
              4,903
              
              
              
              5,519
              
              
              
              -Long-term debt
              
              
              63,000
              
              
              
              -
              
              
              
              30,000
              
              
              
              -
              
              
              
              33,000Other long-term liabilities
      reflected on the balance sheet under GAAP
              
              
              6,676
              
              
              
              40
              
              
              
              161
              
              
              
              323
              
              
              
              6,152Total
              
              $
              601,520
              
              
              $
              413,187
              
              
              $
              128,816
              
              
              $
              18,082
              
              
              $
              41,435
 
 
 The Banks
are party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of their
customers.  These financial instruments include commitments to extend
credit and standby letters of credit.  These instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the consolidated balance sheets.
  
 45
 Table of Contents
  The
Banks’ exposure to credit loss in the event of nonperformance by the other party
to financial instruments for commitments to extend credit and standby letters of
credit is represented by the contractual notional amount of these
instruments.  The Banks use the same credit policies in making
commitments to extend credit and generally use the same credit policies for
letters of credit as they do for on-balance sheet instruments.
 
 Commitments
to extend credit are legally binding agreements to lend to a customer as long as
there is no violation of any condition established in the
contract.  Since some of these commitments are expected to expire
without being drawn upon, the total commitment amount does not necessarily
represent future cash requirements.  Unused commercial lines of
credit, which comprise a substantial portion of these commitments, generally
expire within a year from their date of origination.  Other loan
commitments generally expire in 30 days.  The amount of collateral
obtained, if any, by the Banks 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 Banks or other financial
institutions, and securities.
 
 Standby
letters of credit are conditional commitments issued by the Banks to assure the
performance or financial obligations of a customer to a third
party.  The credit risk involved in issuing standby letters of credit
is essentially the same as that involved in extending loans to
customers.  The Banks generally hold collateral and/or obtain personal
guarantees supporting these commitments.
 
 The Banks
are obligated under operating leases for office and banking premises which
expire in periods varying from one to nineteen years.  Future minimum
lease payments, before considering renewal options that generally are present,
total $6.4 million at December 31, 2007.
 
 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.
  Long term
debt, at December 31, 2007, consists of subordinated debentures totaling $33.0
million and securities sold under repurchase agreement totaling $30.0 million.
These borrowings are further described in Note 10 of the Consolidated Financial
Statements.
 
 Other
long-term liabilities represent obligations under the non-qualified retirement
plan for the Company’s 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, 43% of the executive’s
highest compensation level in the three years immediately preceding the date of
termination of employment for a period of up to 15 years.
 
 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, 2007, the Banks exceeded the levels of capital required in order to
be categorized by the FDIC as well capitalized under the regulatory framework
for prompt corrective action.  The risk-based capital ratios of Tier 1
capital to risk-weighted assets were 9.2% and 15.5%, the risk-based ratios of
total capital to risk-weighted assets were 10.4% and 16.7%, and the leverage
ratios were 7.8% and 11.9% for TIB Bank and The Bank of Venice,
respectively.
 
 As of
December 31, 2007, the Company exceeded its required levels of capital under
capital adequacy guidelines.  The Company’s risk-based capital ratio
of Tier 1 capital to risk-weighted assets was 10.0%, its risk-based ratio of
total capital to risk-weighted assets was 11.3%, and its leverage ratio was
8.4%.
  As
previously discussed, in March 2008, we sold 1.2 million shares of our common
stock and warrants to purchase an additional 1.2 million shares resulting in
gross proceeds of $10.1 million. This strengthens our capital to support future
growth and expansion.
  46
 Table of Contents
  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 became
effective for fiscal years beginning after June 15, 2005 for all equity awards
granted or modified 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.
Previously, the Company accounted for stock options granted to employees
according to the provisions of APB Opinion No. 25, whereby compensation expense
was recorded based upon the intrinsic value method. The stock-based compensation
table included in Note 1 of the accompanying 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.
Subsequent to adoption, the income tax benefits for the exercise of stock
options in excess of income tax expense for financial reporting purposes are
classified as cash inflows from financing activities and cash outflows from
operating activities in the statement of cash flows. The Company adopted SFAS
123R on January 1, 2006, as required, using the modified prospective transition
method.  Accordingly, the Company has recorded stock-based employee
compensation cost for stock options using the fair value method starting in
2006.
 
 During
2007 and 2006, employee compensation expense includes $284,000 and $305,000,
respectively, for stock options pursuant to the provisions of SFAS 123R. Prior
to January 1, 2006, stock options were accounted for using the intrinsic value
method; therefore, no stock based compensation cost is reflected in net income
for the years ending December 31, 2005 and 2004, as all options granted had an
exercise price equal to or greater than the market price of the underlying
common stock at the date of grant.
  In
February 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 155, “Accounting for Certain Hybrid Financial Instruments – an
amendment of FASB Statements No. 133 and 140,” (“SFAS 155”). SFAS 155 simplifies
and conforms the accounting for certain financial instruments permitting fair
value remeasurement for any hybrid financial instrument with an embedded
derivative that otherwise would require bifurcation, provided that the whole
instrument is accounted for on a fair value basis. The amendments to SFAS No.
133 also clarify that interest-only and principal-only strips are not embedded
derivatives. The amendments to SFAS No. 140 allow a qualifying special purpose
entity to hold a derivative financial instrument that pertains to a beneficial
interest other than another derivative financial instrument. This statement is
effective for all financial instruments acquired or issued after the beginning
of the first fiscal year after September 15, 2006. Adoption on January 1, 2007,
as required, did not have a material effect on the Company’s financial
condition, results of operations or liquidity.
 
 In March
2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial
Assets-an amendment of FASB Statement No. 140”.  This Statement
provides the following: 1) revised guidance on when a servicing asset and
servicing liability should be recognized; 2) requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value, if practicable; 3) permits an entity to elect to measure servicing assets
and servicing liabilities at fair value each reporting date and report changes
in fair value in earnings in the period in which the changes occur; 4) upon
initial adoption, permits a onetime reclassification of available-for-sale
securities to trading securities for securities which are identified as
offsetting the entity's exposure to changes in the fair value of servicing
assets or liabilities that a servicer elects to subsequently measure at fair
value; and 5) requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of financial
position and additional footnote disclosures.  This Standard is
effective as of the beginning of an entity's first fiscal year that begins after
September 15, 2006 with the effects of initial adoption being reported as a
cumulative-effect adjustment to retained earnings.  Adoption on
January 1, 2007, as required, did not have a material effect on the Company’s
financial condition, results of operations or liquidity.
  
 47
 Table of Contents
  The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007.  The
adoption of FIN 48 had no affect on the Company’s financial statements. The
Company has no material unrecognized tax benefits and does not anticipate any
increase in unrecognized benefits during 2008 relative to any tax positions
taken prior to January 1, 2007 or December 31, 2007.  Should the
accrual of any interest or penalties relative to unrecognized tax benefits be
necessary, it is the Company’s policy to record such accruals in its income
taxes accounts; no such accruals exist as of January 1, 2007.  The
Company and its subsidiaries file a consolidated U.S. federal income tax return
and a consolidated income tax return in the state of Florida.  These
returns are subject to examination by taxing authorities for all years after
2003.
 
 In
September 2006, FASB issued Statement No. 157, “Fair Value Measurements” (“FAS
157”). This statement defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. This statement
establishes a fair value hierarchy about the assumptions used to measure fair
value and clarifies assumptions about risk and the effect of a restriction on
the sale or use of an asset. The standard is effective for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued Staff
Position (“FSP”) 157-2, Effective Date of FASB Statement No. 157. This FSP
delays the effective date of FAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value on a recurring basis (at least annually) to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. The impact of
adoption was not material to the Company’s financial condition, results of
operations or liquidity.
 
 In
September 2006, the FASB Emerging Issues Task Force (“EITF”) finalized Issue No.
06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects
of Endorsement Split-Dollar Life Insurance Arrangements”.  This issue
requires that a liability be recorded during the service period when a
split-dollar life insurance agreement continues after participants’ employment
or retirement.  The required accrued liability will be based on either
the post-employment benefit cost for the continuing life insurance or based on
the future death benefit depending on the contractual terms of the underlying
agreement.  This issue is effective for fiscal years beginning after
December 15, 2007.  Adoption on January 1, 2008, as required, did not
have a material effect on the Company’s financial condition, results of
operations or liquidity.
 
 In
September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106 and 132(R).  This Statement requires an employer to
recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its balance sheet, beginning with year end 2006, and to recognize changes in
the funded status in the year in which the changes occur through comprehensive
income beginning in 2007.  Additionally, defined benefit plan assets
and obligations are to be measured as of the date of the employer’s fiscal
year-end, starting in 2008.  Adoption had no effect on the Company’s
financial condition, results of operations or liquidity as the Company does not
have any defined benefit plans falling within the scope of SFAS No.
158.
  In
September 2006, the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (SAB 108), which is effective for fiscal years ending on or after
November 15, 2006.  SAB 108 provides guidance on how the effects of
prior-year uncorrected financial statement misstatements should be considered in
quantifying a current year misstatement.  SAB 108 requires public
companies to quantify misstatements using both an income statement (rollover)
and balance sheet (iron curtain) approach and evaluate whether either approach
results in a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material.  If prior year errors that had
been previously considered immaterial now are considered material based on
either approach, no restatement is required so long as management properly
applied its previous approach and all relevant facts and circumstances were
considered.  The adoption of SAB 108 had no effect on the Company’s
financial statements.
 
 In
September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5,
“Accounting for Purchases of Life Insurance - Determining the Amount That Could
Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for
Purchases of Life Insurance)”. This issue requires that a policyholder consider
contractual terms of a life insurance policy in determining the amount that
could be realized under the insurance contract.  It also requires that
if the contract provides for a greater surrender value if all individual
policies in a group are surrendered at the same time, that the surrender value
be determined based on the assumption that policies will be surrendered on an
individual basis.  Lastly, the issue discusses whether the cash
surrender value should be discounted when the policyholder is contractually
limited in its ability to surrender a policy.  This issue is effective
for fiscal years beginning after December 15, 2006.  The adoption of
this issue on January 1, 2007, as required, did not have a material impact on
the financial condition, results of operations, or liquidity of the
Company.
  
 48
 Table of Contents
  In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This Statement is expected to expand the
use of fair value measurement, which is consistent with the Board’s long-term
measurement objectives for accounting for financial instruments. This Statement
is effective for fiscal years beginning after November 15, 2007. Adoption on
January 1, 2008, as required, did not have a material effect on the Company’s
financial condition, results of operations or liquidity.
 
 In June
2007, the FASB finalized Issue No. 06-11, “Accounting for Income Tax Benefits of
Dividends on Share-Based Payment Awards”.  This issue requires that a
realized income tax benefit from dividends or dividend equivalents that are
charged to retained earnings and are paid to employees for equity classified
nonvested equity shares, nonvested equity share units, and outstanding equity
share options should be recognized as an increase to additional paid-in capital.
The amount recognized in additional paid-in capital for the realized income tax
benefit from dividends on those awards should be included in the pool of excess
tax benefits available to absorb tax deficiencies on share-based payment awards
(as described in paragraphs 62 and 63  of Statement
123(R)).  This issue is effective for fiscal years beginning after
December 15, 2007.  Adoption on January 1, 2008, as required, did not
have a material effect on the Company’s financial condition, results of
operations or liquidity.
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007), “Business Combinations” (“FAS 141(R)”), which revises
Statement 141. FAS 141(R) requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to disclose to investors and other users all of the
information needed to evaluate and understand the nature and financial effect of
the business combination. FAS 141(R) is effective for fiscal years beginning
after December 15, 2008. Management has not yet completed its analysis of the
potential impact of FAS 141(R).
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Noncontrolling Interests in Consolidated Financial Statements” (“FAS
160”), which requires all entities to report noncontrolling (minority) interests
in subsidiaries as equity in the consolidated financial statements.
Additionally, FAS 160 requires that transactions between an entity and
noncontrolling interests be treated as equity transactions. FAS 160 is effective
for fiscal years beginning after December 15, 2008. Management has not yet
completed its analysis of the potential impact of FAS 160, but does not expect
it to have a material effect on the Company’s financial condition, results of
operations or liquidity.
  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 and the impairment of investment
securities are 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.
 
 Impairment
of investment securities results in a write-down that must be included in net
income when a market decline below cost is other-than-temporary. We regularly
review each investment security for impairment based on criteria that include
the extent to which cost exceeds market price, the duration of that market
decline, the financial health of and specific prospects for the issuer(s) and
our ability and intention with regard to holding the security to maturity.
 
 49
 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
interest rate sensitivity as of December 31, 2007 was analyzed using simulation
analysis of the Company’s sensitivity to changes in net interest income under
varying assumptions for changes in market interest rates.  TIB Bank uses
standardized assumptions run against their data by an outsourced provider of
Asset Liability reporting.  The model derives expected interest income and
interest expense resulting from both a +/- 2% parallel shift in the yield curve
and a +/- steepening/twist of the yield curve.  The standard parallel yield
curve shift is used to estimate risk related to the level of interest
rates, while the non-parallel yield curve twist is used to estimate risk
related to the level of interest rates and changes in the slope of the yield
curve.   All rate change scenarios are “ramped” over a three-month
period.
 
 Yield
curve twists change both the level and slope of the yield curve and are more
realistic than parallel yield curve shifts and are more useful for planning
purposes.  A 200 basis point yield curve twist decrease would result in
short term rates decreasing approximately 200 basis points and long term rates
decreasing approximately 100 basis points.  A 200 basis point yield curve
twist increase would result in a short term rates increasing approximately 200
basis points and long term rates increasing approximately 100 basis
points.
 
 The
analysis indicates a 200 basis point parallel interest rate increase would have
relatively no impact to TIB Bank’s net interest income over a 12-month
period.  A 200 basis point parallel interest rate decrease would result in
a decrease in net interest income of approximately $1.2 million over a 12-month
period.  Additionally, a 200 basis point yield curve twist increase would
have relatively no impact to net interest income over a 12-month period.  A
200 basis point yield curve twist decrease would result in a decrease in net
interest income of approximately $830,000 over a 12-month period.
 
 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 re-pricing characteristics of the deposit liabilities.
  
 50
 Table of Contents
  ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
 
 
 The
consolidated financial statements, notes thereto and report of independent
registered public accounting firm thereon included on the following pages are
incorporated herein by reference.
 
 Index
to Consolidated Financial Statements
 
 PageReport of Independent Registered Public Accounting
      Firm
              52Consolidated Balance Sheets for the Years Ended December
      31, 2007 and 2006
              53Consolidated Statements of Operations for the Years
      Ended December 31, 2007, 2006 and 2005
              54Consolidated Statements of Changes in Shareholders'
      Equity for the Years Ended December 31, 2007, 2006 and
      2005
              56Consolidated Statements of Cash Flows for the Years
      Ended December 31, 2007, 2006 and 2005
              58Notes to Consolidated Financial Statements for the
      Years Ended December 31, 2007, 2006 and 2005
              60
 
  51
 Table of Contents
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 
  
 Board of
Directors and Shareholders
 TIB
Financial Corp.
 Naples,
Florida
 
 We have
audited the accompanying consolidated balance sheets of TIB Financial Corp. as
of December 31, 2007 and 2006, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 2007.  We also have
audited the Company's internal control over financial reporting as of December
31, 2007, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).  The Company's management is responsible for these
financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over
financial reporting, included in Management's Annual Report on Internal Control
Over Financial Reporting contained in Item 9A.(b) of the accompanying Form
10-K.  Our responsibility is to express an opinion on these financial
statements and an opinion on the Company's internal control over financial
reporting based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation.  Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also included performing such other
procedures as we considered necessary in the circumstances.  We
believe that our audits provide a reasonable basis for our
opinions.
 
 A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of TIB Financial Corp. as of
December 31, 2007 and 2006, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2007, in
conformity with accounting principles generally accepted in the United States of
America.  Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2007, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
 /s/Crowe Chizek
      and Company LLCCrowe
      Chizek and Company LLCFort
      Lauderdale, FloridaMarch
      17, 2008
  52
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated Balance Sheets
 As
of December 31,
 
 (Dollars
      in thousands, except per share amounts)
              
              2007
              
              
              2006AssetsCash
      and due from banks
              
              $
              22,315
              
              
              $
              25,223Federal
      funds sold and securities purchased under agreements to
    resell
              
              
              48,744
              
              
              
              30,329Cash
      and cash equivalents
              
              
              71,059
              
              
              
              55,552Investment
      securities available for sale
              
              
              160,357
              
              
              
              131,199Loans,
      net of deferred loan costs and fees
              
              
              1,129,156
              
              
              
              1,065,468Less:
      Allowance for loan losses
              
              
              14,973
              
              
              
              9,581Loans,
      net
              
              
              1,114,183
              
              
              
              1,055,887Premises
      and equipment, net
              
              
              38,284
              
              
              
              34,102Goodwill
              
              
              4,686
              
              
              
              106Intangible
      assets, net
              
              
              2,772
              
              
              
              813Accrued
      interest receivable and other assets
              
              
              53,398
              
              
              
              41,434Total
      assets
              
              $
              1,444,739
              
              
              $
              1,319,093Liabilities
      and Shareholders’ EquityLiabilitiesDeposits:Noninterest-bearing
      demand
              
              $
              143,381
              
              
              $
              159,380Interest-bearing
              
              
              906,577
              
              
              
              870,077Total
      deposits
              
              
              1,049,958
              
              
              
              1,029,457Federal
      Home Loan Bank (FHLB) advances
              
              
              140,000
              
              
              
              125,000Short-term
      borrowings
              
              
              77,922
              
              
              
              22,250Long-term
      borrowings
              
              
              63,000
              
              
              
              37,000Accrued
      interest payable and other liabilities
              
              
              17,619
              
              
              
              19,524Total
      liabilities
              
              
              1,348,499
              
              
              
              1,233,231Commitments
      and Contingencies (Notes 1, 6 and 16)Shareholders’
      EquityPreferred
      stock – no par value: 5,000,000 shares authorized, 0 shares
      issued
              
              
              -
              
              
              
              -Common
      stock - $.10 par value: 40,000,000 shares authorized, 12,852,361 and
      11,720,527 shares issued, 12,783,161 and 11,720,527
      outstanding
              
              
              1,285
              
              
              
              1,172Additional
      paid in capital
              
              
              56,133
              
              
              
              40,514Retained
      earnings
              
              
              39,151
              
              
              
              44,620Accumulated
      other comprehensive income (loss)
              
              
              240
              
              
              
              (444
              )Treasury
      stock, at cost, 69,200 and 0 shares
              
              
              (569
              )
              
              
              -Total
      shareholders’ equity
              
              
              96,240
              
              
              
              85,862Total
      Liabilities and Shareholders’ Equity
              
              $
              1,444,739
              
              
              $
              1,319,093See
      accompanying notes to consolidated financial statements
 
  53
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated Statements of Operations
 Years
Ended December 31,
 
 (Dollars
      in thousands, except per share amounts)
              
              2007
              
              
              2006
              
              
              2005Interest
      and dividend incomeLoans,
      including fees
              
              $
              84,773
              
              
              $
              78,379
              
              
              $
              54,488Investment
      securities:U.S.
      Treasury securities
              
              
              152
              
              
              
              170
              
              
              
              171U.S.
      Government agencies and corporations
              
              
              5,404
              
              
              
              4,207
              
              
              
              2,607States
      and political subdivisions, tax-exempt
              
              
              396
              
              
              
              422
              
              
              
              377States
      and political subdivisions, taxable
              
              
              157
              
              
              
              163
              
              
              
              169Other
      investments
              
              
              1,193
              
              
              
              847
              
              
              
              297Interest-bearing
      deposits in other banks
              
              
              19
              
              
              
              22
              
              
              
              10Federal
      Home Loan Bank stock
              
              
              503
              
              
              
              285
              
              
              
              113Federal
      funds sold
              
              
              2,144
              
              
              
              739
              
              
              
              1,202Total
      interest and dividend income
              
              
              94,741
              
              
              
              85,234
              
              
              
              59,434Interest
      expenseInterest-bearing
      demand and money market
              
              
              12,721
              
              
              
              9,459
              
              
              
              4,605Savings
              
              
              968
              
              
              
              346
              
              
              
              243Time
      deposits of $100 or more
              
              
              12,622
              
              
              
              11,713
              
              
              
              6,505Other
      time deposits
              
              
              11,549
              
              
              
              10,139
              
              
              
              6,090Long-term
      debt - subordinated debentures
              
              
              2,708
              
              
              
              2,045
              
              
              
              1,212Federal
      Home Loan Bank advances
              
              
              6,197
              
              
              
              3,415
              
              
              
              857Short-term
      borrowings
              
              
              1,664
              
              
              
              687
              
              
              
              425Long-term
      borrowings
              
              
              292
              
              
              
              367
              
              
              
              367Total
      interest expense
              
              
              48,721
              
              
              
              38,171
              
              
              
              20,304Net
      interest income
              
              
              46,020
              
              
              
              47,063
              
              
              
              39,130Provision
      for loan losses
              
              
              9,657
              
              
              
              3,491
              
              
              
              2,413Net
      interest income after provision for loan losses
              
              
              36,363
              
              
              
              43,572
              
              
              
              36,717Non-interest
      incomeService
      charges on deposit accounts
              
              
              2,692
              
              
              
              2,457
              
              
              
              2,360Investment
      securities gains (losses), net
              
              
              (5,660
              )
              
              
              -
              
              
              
              1Fees
      on mortgage loans sold
              
              
              1,446
              
              
              
              1,599
              
              
              
              1,880Other
      income
              
              
              2,884
              
              
              
              2,219
              
              
              
              2,017Total
      non-interest income
              
              
              1,362
              
              
              
              6,275
              
              
              
              6,258Non-interest
      expenseSalaries
      and employee benefits
              
              
              22,550
              
              
              
              20,205
              
              
              
              17,724Net
      occupancy and equipment expense
              
              
              7,979
              
              
              
              6,120
              
              
              
              5,502Other
      expense
              
              
              11,392
              
              
              
              9,508
              
              
              
              8,630Total
      non-interest expense
              
              
              41,921
              
              
              
              35,833
              
              
              
              31,856Income
      (loss) from continuing operations before income taxes
              
              
              (4,196
              )
              
              
              14,014
              
              
              
              11,119Income
      tax expense (benefit)
              
              
              (1,775
              )
              
              
              5,021
              
              
              
              3,927Income
      (loss) from continuing operations
              
              
              (2,421
              )
              
              
              8,993
              
              
              
              7,192
  (Continued)
  54
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated
Statements of Operations
 Years
Ended December 31,
 (Continued)
 
 (Dollars
      in thousands, except per share amounts)
              
              2007
              
              
              2006
              
              
              2005Discontinued
      operationsIncome
      from merchant bankcard operations
              
              
              -
              
              
              
              414
              
              
              
              7,630Income
      tax expense
              
              
              -
              
              
              
              160
              
              
              
              2,998Income
      from discontinued operations
              
              
              -
              
              
              
              254
              
              
              
              4,632Net
      income (loss)
              
              $
              (2,421
              )
              
              $
              9,247
              
              
              $
              11,824Basic
      earnings (loss) per common shareContinuing
      operations
              
              $
              (0.20
              )
              
              $
              0.78
              
              
              $
              0.63Discontinued
      operations
              
              
              -
              
              
              
              0.02
              
              
              
              0.41Basic
      earnings (loss) per share
              
              $
              (0.20
              )
              
              $
              0.80
              
              
              $
              1.04Diluted
      earnings (loss) per common shareContinuing
      operations
              
              $
              (0.20
              )
              
              $
              0.76
              
              
              $
              0.61Discontinued
      operations
              
              
              -
              
              
              
              0.02
              
              
              
              0.39Diluted
      earnings (loss) per share
              
              $
              (0.20
              )
              
              $
              0.78
              
              
              $
              1.00See
      accompanying notes to consolidated financial statements
 
  55
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated Statements of Changes in Shareholders’
Equity
 (Dollars
in thousands, except per share amounts)
 
 Shares
              
              
              Common
      Stock
              
              
              Additional
                Paid
      in
                Capital
              
              
              Retained
      Earnings
              
              
              Accumulated
      Other Comprehensive Income (Loss)
              
              
              Treasury
                Stock
              
              
              Total
      Shareholders’ EquityBalance,
      January 1, 2005
              
              
              11,358,478
              
              
              $
              1,136
              
              
              $
              37,716
              
              
              $
              28,968
              
              
              $
              294
              
              
              $
              -
              
              
              $
              68,114Comprehensive
      income:Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              11,824
              
              
              
              
              
              
              
              
              
              
              
              11,824Other
      comprehensive income, net of tax benefit of $624:Net
      market valuation adjustment on securities available for
    sale
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,037
              )Other
      comprehensive loss, net of tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,037
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              10,787Restricted
      stock grants
              
              
              82,000
              
              
              
              8
              
              
              
              (8
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Stock-based
      compensation
              
              
              
              
              
              
              
              
              
              
              98
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              98Exercise
      of stock options
              
              
              144,718
              
              
              
              14
              
              
              
              824
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              838Income
      tax benefit from stock options exercised
              
              
              
              
              
              
              
              
              
              
              343
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              343Cash
      dividends declared, $.23125 per share
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,656
              )
              
              
              
              
              
              
              
              
              
              
              (2,656
              )Balance,
      December 31, 2005
              
              
              11,585,196
              
              
              $
              1,158
              
              
              $
              38,973
              
              
              $
              38,136
              
              
              $
              (743
              )
              
              $
              -
              
              
              $
              77,524Comprehensive
      income:Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              9,247
              
              
              
              
              
              
              
              
              
              
              
              9,247Other
      comprehensive income, net of tax expense of $170:Net
      market valuation adjustment on securities available for
    sale
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              299Other
      comprehensive income, net of tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              299Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              9,546Restricted
      stock grants, net of 10,000 restricted stock cancellations
              
              
              345Stock-based
      compensation
              
              
              
              
              
              
              
              
              
              
              564
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              564Registration
      statement costs
              
              
              
              
              
              
              
              
              
              
              (5
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5
              )Exercise
      of stock options
              
              
              134,986
              
              
              
              14
              
              
              
              832
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              846Income
      tax benefit related to stock-based compensation
              
              
              
              
              
              
              
              
              
              
              150
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              150Cash
      dividends declared, $.23625 per share
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,763
              )
              
              
              
              
              
              
              
              
              
              
              (2,763
              )Balance,
      December 31, 2006
              
              
              11,720,527
              
              
              $
              1,172
              
              
              $
              40,514
              
              
              $
              44,620
              
              
              $
              (444
              )
              
              $
              -
              
              
              $
              85,862
 
 Continued
  56
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated
Statements of Changes in Shareholders’ Equity
 (Dollars
in thousands, except per share amounts)
 (Continued)
 
 Shares
              
              
              Common
      Stock
              
              
              Additional
      Paid in Capital
              
              
              Retained
      Earnings
              
              
              Accumulated
      Other Comprehensive Income (Loss)
              
              
              Treasury
                Stock
              
              
              Total
      Shareholders’ EquityBalance,
      December 31, 2006
              
              
              11,720,527
              
              
              $
              1,172
              
              
              $
              40,514
              
              
              $
              44,620
              
              
              $
              (444
              )
              
              $
              -
              
              
              $
              85,862Comprehensive
      loss:Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,421
              )
              
              
              
              
              
              
              
              
              
              
              (2,421
              )Other
      comprehensive income, net of tax expense of $429:Net
      market valuation adjustment on securities available for
    sale
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,846
              )Add:
      reclassification adjustment for losses included in net loss net of tax of
      $2,130
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,530Other
      comprehensive income, net of tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              684Comprehensive
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (1,737
              )Restricted
      stock grants
              
              
              36,659
              
              
              
              4
              
              
              
              (4
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Stock-based
      compensation
              
              
              
              
              
              
              
              
              
              
              648
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              648The
      Bank of Venice acquisition
              
              
              944,400
              
              
              
              94
              
              
              
              13,861
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              13,955Exercise
      of stock options
              
              
              150,775
              
              
              
              15
              
              
              
              1,093
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,108Income
      tax benefit related to stock-based compensation
              
              
              
              
              
              
              
              
              
              
              21
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              21Purchase
      of treasury stock
              
              
              (69,200
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (569
              )
              
              
              (569
              )Cash
      dividends declared, $.2425 per share
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,048
              )
              
              
              
              
              
              
              
              
              
              
              (3,048
              )Balance,
      December 31, 2007
              
              
              12,783,161
              
              
              $
              1,285
              
              
              $
              56,133
              
              
              $
              39,151
              
              
              $
              240
              
              
              $
              (569
              )
              
              $
              96,240See
      accompanying notes to consolidated financial statements
 
 
  57
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated Statements of Cash Flows
 (Dollars
in thousands)
  Years
      Ended December 31,2007
              
              
              2006
              
              
              2005Cash
      flows from operating activities:Net
      (loss) income
              
              $
              (2,421
              )
              
              $
              9,247
              
              
              $
              11,824Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
              
              
              3,328
              
              
              
              2,642
              
              
              
              2,511Provision
      for loan losses
              
              
              9,657
              
              
              
              3,491
              
              
              
              2,413Deferred
      income tax benefit
              
              
              (4,472
              )
              
              
              (1,168
              )
              
              
              (944
              )Investment
      securities net realized (gains) losses
              
              
              5,660
              
              
              
              -
              
              
              
              (1
              )Gain
      on sale of merchant bankcard processing segment
              
              
              -
              
              
              
              (414
              )
              
              
              (6,697
              )Stock
      based compensation
              
              
              646
              
              
              
              564
              
              
              
              98Other
              
              
              (834
              )
              
              
              162
              
              
              
              (496
              )Mortgage
      loans originated for sale
              
              
              (90,818
              )
              
              
              (105,248
              )
              
              
              (114,257
              )Proceeds
      from sales of mortgage loans
              
              
              91,218
              
              
              
              105,412
              
              
              
              119,321Fees
      on mortgage loans sold
              
              
              (1,434
              )
              
              
              (1,599
              )
              
              
              (1,880
              )Increase
      in accrued interest receivable and other assets
              
              
              (5,022
              )
              
              
              (2,491
              )
              
              
              (2,672
              )(Increase)
      decrease in accrued interest payable and other liabilities
              
              
              (1,738
              )
              
              
              1,009
              
              
              
              10,778Net
      cash provided by operating activities
              
              
              3,770
              
              
              
              11,607
              
              
              
              19,998Cash
      flows from investing activities:Purchases
      of investment securities available for sale
              
              
              (71,669
              )
              
              
              (42,532
              )
              
              
              (13,995
              )Sales
      of investment securities available for sale
              
              
              5,491
              
              
              
              -
              
              
              
              -Repayments
      of principal and maturities of investment securities available for
      sale
              
              
              34,863
              
              
              
              9,296
              
              
              
              1,103Cash
      equivalents acquired from The Bank of Venice acquisition
              
              
              10,176
              
              
              
              -
              
              
              
              -Cash
      paid for The Bank of Venice
              
              
              (888
              )
              
              
              -
              
              
              
              -Net
      (purchase) sale of FHLB stock
              
              
              (673
              )
              
              
              (4,993
              )
              
              
              129Proceeds
      from sales of loans
              
              
              624
              
              
              
              7,439
              
              
              
              -Proceeds
      from sale of merchant bankcard processing segment
              
              
              -
              
              
              
              -
              
              
              
              7,250Loans
      originated or acquired, net of principal repayments
              
              
              (14,809
              )
              
              
              (188,238
              )
              
              
              (237,371
              )Purchases
      of premises and equipment
              
              
              (5,265
              )
              
              
              (12,425
              )
              
              
              (3,928
              )Proceeds
      from disposal of premises, equipment and intangible assets
              
              
              1,822
              
              
              
              1,638
              
              
              
              735Net
      cash used by investing activities
              
              
              (40,328
              )
              
              
              (229,815
              )
              
              
              (246,077
              )Cash
      flows from financing activities:Net
      increase in federal funds purchased and securities sold under agreements
      to repurchase
              
              
              55,672
              
              
              
              4,966
              
              
              
              5,127Net
      increase (decrease) in FHLB advances
              
              
              10,000
              
              
              
              100,000
              
              
              
              (10,000
              )Proceeds
      from long term repurchase agreements
              
              
              30,000
              
              
              
              -
              
              
              
              -Repayment
      of notes payable
              
              
              (4,000
              )
              
              
              -
              
              
              
              (1,250
              )Net
      increase in demand, money market and savings accounts
              
              
              9,614
              
              
              
              12,838
              
              
              
              51,943Net
      (decrease) increase in time deposits
              
              
              (46,828
              )
              
              
              96,195
              
              
              
              180,622Proceeds
      from exercise of stock options
              
              
              1,108
              
              
              
              846
              
              
              
              838Proceeds
      from issuance of trust preferred securities
              
              
              -
              
              
              
              19,995
              
              
              
              -Income
      tax benefits related to stock-based compensation
              
              
              21
              
              
              
              150
              
              
              
              -Repurchase
      of company common stock
              
              
              (569
              )
              
              
              -
              
              
              
              -Cash
      dividends paid
              
              
              (2,953
              )
              
              
              (2,740
              )
              
              
              (2,629
              )Net
      cash provided by financing activities
              
              
              52,065
              
              
              
              232,250
              
              
              
              224,651Net
      increase (decrease)  in cash and cash
equivalents
              
              
              15,507
              
              
              
              14,042
              
              
              
              (1,428
              )Cash
      and cash equivalents at beginning of year
              
              
              55,552
              
              
              
              41,510
              
              
              
              42,938Cash
      and cash equivalents at end of year
              
              $
              71,059
              
              
              $
              55,552
              
              
              $
              41,510




Continued





58
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Consolidated
Statements of Cash Flows


(Dollars
in thousands)


(Continued)





Years
      Ended December 31,2007
            
            
            2006
            
            
            2005Supplemental
      disclosures of cash paid:Interest
            
            $
            50,678
            
            
            $
            33,983
            
            
            $
            17,387Income
      taxes
            
            
            4,193
            
            
            
            10,330
            
            
            
            3,530Supplemental
      disclosures of non-cash transactions:Mortgage
      backed securities issued and retained subsequent to securitization of
      residential mortgages
            
            $
            -
            
            
            $
            -
            
            
            $
            8,509Financing
      of sale of premises and equipment to third parties
            
            
            -
            
            
            
            2,136
            
            
            
            1,100Fair
      value of noncash assets acquired
            
            
            68,458
            
            
            
            -
            
            
            
            -Fair
      value of liabilities assumed
            
            
            63,882
            
            
            
            -
            
            
            
            -Fair
      value of common stock and stock options issued
            
            
            13,992
            
            
            
            -
            
            
            
            -See
      accompanying notes to consolidated financial statements










59
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
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 and The Bank of Venice (the “Banks”), collectively known as the
“Company.”  All significant inter-company accounts and transactions
have been eliminated in consolidation.   TIBFL Statutory Trust I,
TIBFL Statutory Trust II and TIBFL Statutory Trust III were formed in
conjunction with the issuance of trust preferred securities as further discussed
in Note 10.





The Banks
are the Company’s primary operating subsidiaries.  The Banks provide
banking services from their twenty branch locations in Monroe, Miami-Dade,
Collier, Lee, Highlands and Sarasota counties, Florida.  The Banks
offer a wide range of commercial and retail banking and financial services to
businesses and individuals. Account services include checking, interest-bearing
checking, money market, savings, certificates of deposit and individual
retirement accounts. The Banks offer all types of commercial loans, including:
owner-operated commercial real estate; acquisition, development and
construction; income-producing properties; working capital; inventory and
receivable facilities; and equipment loans. Consumer loan products include
residential real estate, installment loans, home equity, home equity lines, and
indirect auto dealer loans.





The share
and per share amounts discussed throughout this document have been adjusted to
account for the effects of the two-for-one stock split distributed October 23,
2006.





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 and impairment 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 customer loan and deposit
transactions and short term borrowings.





Investment
Securities





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




60
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




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





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




Occasionally, the Banks securitize
residential real estate secured mortgages through the Federal Home Loan Mortgage
Corporation (Freddie Mac). The Banks have, from time to time, retained the
resulting securities. Prior to a securitization transaction, these loans are
recorded as residential real estate loans and interest income is reported as
interest income from loans. Subsequent to the transaction, if the securities are
retained by the Banks, they are reported as mortgage-backed securities and
interest income is reported as interest income from securities issued by U.S.
Government agencies and corporations.





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.





Loans
Held for Sale





The
majority of residential fixed rate mortgage loans are originated by TIB Bank and
sold servicing released to third parties immediately with temporary recourse
provisions. The recourse provisions may require the repurchase of the
outstanding balance of loans which default within a limited period of time
subsequent to the sale of the loan. The recourse periods vary by investor and
extend up to six months subsequent to the sale of the loan.  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. TIB Bank has not historically experienced losses resulting from the
recourse provisions described above. Accordingly, management believes that no
such provision or allowance is necessary as of December 31, 2007 or
2006.





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.




61
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




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.




Foreclosed
Assets





Assets
acquired through, or in lieu of, loan foreclosure or repossession are held for
sale and are initially recorded at fair value less cost to sell when acquired,
establishing a new cost basis.  If fair value declines subsequent to
foreclosure, a valuation allowance is recorded through expense.  Costs
incurred after acquisition are generally expensed.





Intangible
Assets





Intangible
assets include core deposit base premiums and customer relationship intangibles
arising from acquisitions and are initially measured at fair
value.  The intangibles are being amortized using the straight-line
method over estimated lives ranging from 10 to 15 years.




Long-lived
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.  Upon adoption of EITF 06-5, which is discussed further
below, Company owned life insurance is recorded at the amount that can be
realized under the insurance contract at the balance sheet date, which is the
cash surrender value adjusted for other charges or other amounts due that are
probable at settlement, if applicable. Prior to the adoption of EITF 06-5, the
Company recorded owned life insurance at its cash surrender value.




62
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Income
Taxes





Income
tax expense (or benefit) 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.





Earnings
(Loss) Per Common Share





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





Earnings
(loss) per share have been computed based on the following for the years ended
December 31:





2007
            
            
            2006
            
            
            2005Weighted
      average number of common shares outstanding:Basic
            
            
            12,299,093
            
            
            
            11,609,394
            
            
            
            11,423,948Dilutive
      effect of options outstanding
            
            
            -
            
            
            
            266,010
            
            
            
            376,944Dilutive
      effect of restricted shares
            
            
            -
            
            
            
            14,202
            
            
            
            -Diluted
            
            
            12,299,093
            
            
            
            11,889,606
            
            
            
            11,800,892





Stock
options for 642,409, 78,273 and 20,000 shares of common stock were not
considered in computing diluted earnings per common share for 2007, 2006, and
2005 because they were anti-dilutive.  For 2007, 2006 and 2005, the
anti-dilutive unvested restricted shares of common stock excluded in computing
diluted earnings per common share were 78,141, 305 and 82,000, respectively. The
dilutive effect of stock options and the dilutive effect of unvested restricted
shares were the only common stock equivalents for purposes of calculating
diluted earnings per common share.




Stock-Based
Compensation





Effective January 1, 2006,
the Company adopted Statement of Financial Accounting Standards (“SFAS”) No.
123(R), Share-based Payment, using the modified prospective transition
method.  Accordingly, the Company has recorded stock-based employee
compensation cost using the fair value method starting in 2006.  For
2007 and 2006, adopting this standard resulted in stock based compensation
expense from stock options of $284 and $305.





Prior to January 1, 2006,
employee compensation expense under stock options was reported using the
intrinsic value method; therefore, no stock based compensation cost from stock
options is reflected in net income for the year ending December 31, 2005, 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.




63
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)


The
following table illustrates the effect on net income and earnings per share if
expense was measured using the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock Based Compensation, for the year ending
December 31, 2005.





2005Net
      income, as reported
            
            $
            11,824Stock-based
      compensation expense determined under fair value based method, net of
      tax
            
            
            268Pro
      forma net income
            
            $
            11,556Basic
      earnings per share as reported
            
            $
            1.04Pro
      forma basic earnings per share
            
            
            1.02Diluted
      earnings per share as reported
            
            
            1.00Pro
      forma diluted earnings per share
            
            
            0.99





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.





Securities
Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase





Securities
purchased under agreements to resell and securities sold under agreements to
repurchase are generally accounted for as collateralized financing transactions
and are recorded at the amounts at which the securities were acquired or sold
plus accrued interest. The fair value of collateral either received from or
provided to a third party is regularly monitored, and additional collateral is
obtained, provided or requested to be returned as appropriate.





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





While the
chief decision-makers monitor the revenue streams of the various products and
services, subsequent to the sale of the merchant bankcard processing segment
during 2005 (see Note 2), operations are managed and financial performance is
evaluated on a Company wide basis.  Accordingly, all of the financial
service operations are considered by management to be aggregated in one
reportable operating segment.




64
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




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





In
February 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 155, “Accounting for Certain Hybrid Financial Instruments – an
amendment of FASB Statements No. 133 and 140,” (“SFAS 155”). SFAS 155 simplifies
and conforms the accounting for certain financial instruments permitting fair
value remeasurement for any hybrid financial instrument with an embedded
derivative that otherwise would require bifurcation, provided that the whole
instrument is accounted for on a fair value basis. The amendments to SFAS No.
133 also clarify that interest-only and principal-only strips are not embedded
derivatives. The amendments to SFAS No. 140 allow a qualifying special purpose
entity to hold a derivative financial instrument that pertains to a beneficial
interest other than another derivative financial instrument. This statement is
effective for all financial instruments acquired or issued after the beginning
of the first fiscal year after September 15, 2006. Adoption on January 1, 2007,
as required, did not have a material effect on the Company’s financial
condition, results of operations or liquidity.





In March
2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial
Assets-an amendment of FASB Statement No. 140”.  This Statement
provides the following: 1) revised guidance on when a servicing asset and
servicing liability should be recognized; 2) requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value, if practicable; 3) permits an entity to elect to measure servicing assets
and servicing liabilities at fair value each reporting date and report changes
in fair value in earnings in the period in which the changes occur; 4) upon
initial adoption, permits a onetime reclassification of available-for-sale
securities to trading securities for securities which are identified as
offsetting the entity's exposure to changes in the fair value of servicing
assets or liabilities that a servicer elects to subsequently measure at fair
value; and 5) requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of financial
position and additional footnote disclosures.  This Standard is
effective as of the beginning of an entity's first fiscal year that begins after
September 15, 2006 with the effects of initial adoption being reported as a
cumulative-effect adjustment to retained earnings.  Adoption on
January 1, 2007, as required, did not have a material effect on the Company’s
financial condition, results of operations or liquidity.





The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007.  The
adoption of FIN 48 had no affect on the Company’s financial statements. The
Company has no material unrecognized tax benefits and does not anticipate any
increase in unrecognized benefits during 2008 relative to any tax positions
taken prior to January 1, 2007.  Should the accrual of any interest or
penalties relative to unrecognized tax benefits be necessary, it is the
Company’s policy to record such accruals in its income taxes accounts; no such
accruals exist as of January 1, 2007 or December 31, 2007.  The
Company and its subsidiaries file a consolidated U.S. federal income tax return
and a consolidated income tax return in the state of Florida.  These
returns are subject to examination by taxing authorities for all years after
2003.





In
September 2006, FASB issued Statement No. 157, “Fair Value Measurements” (“FAS
157”). FAS 157 provides guidance for using fair value to measure assets and
liabilities. FAS 157 will apply whenever another standard requires (or permits)
assets or liabilities to be measured at fair value. FAS 157 provides guidance
about the extent to which companies measure assets and liabilities at fair
value, the information used to measure fair value and the effect that fair value
measurements have on earnings. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. Adoption on January 1, 2008, as required, did not
have a material effect on the Company’s financial condition, results of
operations or liquidity.




65
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




In
September 2006, the FASB Emerging Issues Task Force (“EITF”) finalized Issue No.
06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects
of Endorsement Split-Dollar Life Insurance Arrangements”.  This issue
requires that a liability be recorded during the service period when a
split-dollar life insurance agreement continues after participants’ employment
or retirement.  The required accrued liability will be based on either
the post-employment benefit cost for the continuing life insurance or based on
the future death benefit depending on the contractual terms of the underlying
agreement.  This issue is effective for fiscal years beginning after
December 15, 2007.  Adoption on January 1, 2008, as required, did not
have a material effect on the Company’s financial condition, results of
operations or liquidity.




In
September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106 and 132(R).  This Statement requires an employer to
recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its balance sheet, beginning with year end 2006, and to recognize changes in
the funded status in the year in which the changes occur through comprehensive
income beginning in 2007.  Additionally, defined benefit plan assets
and obligations are to be measured as of the date of the employer’s fiscal
year-end, starting in 2008.  Adoption had no effect on the Company’s
financial condition, results of operations or liquidity as the Company does not
have any defined benefit plans falling within the scope of SFAS No.
158.





In
September 2006, the Securities and Exchange Commission (SEC) released Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (SAB 108), which is effective for fiscal years ending on or after
November 15, 2006.  SAB 108 provides guidance on how the effects of
prior-year uncorrected financial statement misstatements should be considered in
quantifying a current year misstatement.  SAB 108 requires public
companies to quantify misstatements using both an income statement (rollover)
and balance sheet (iron curtain) approach and evaluate whether either approach
results in a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material.  If prior year errors that had
been previously considered immaterial now are considered material based on
either approach, no restatement is required so long as management properly
applied its previous approach and all relevant facts and circumstances were
considered.  The adoption of SAB 108 had no effect on the Company’s
financial statements.





In
September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-5,
“Accounting for Purchases of Life Insurance - Determining the Amount That Could
Be Realized in Accordance with FASB Technical Bulletin No. 85-4 (Accounting for
Purchases of Life Insurance)”. This issue requires that a policyholder consider
contractual terms of a life insurance policy in determining the amount that
could be realized under the insurance contract.  It also requires that
if the contract provides for a greater surrender value if all individual
policies in a group are surrendered at the same time, that the surrender value
be determined based on the assumption that policies will be surrendered on an
individual basis.  Lastly, the issue requires disclosure when there
are contractual restrictions on the Company’s ability to surrender a
policy.  The adoption of this issue on January 1, 2007, as required,
had no impact on the financial condition, results of operations, or liquidity of
the Company.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. This Statement permits entities to
choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This Statement is expected to expand the
use of fair value measurement, which is consistent with the Board’s long-term
measurement objectives for accounting for financial instruments. This Statement
is effective for fiscal years beginning after November 15, 2007. Adoption on
January 1, 2008, as required, did not have a material effect on the Company’s
financial condition, results of operations or liquidity.





In June
2007, the FASB finalized Issue No. 06-11, “Accounting for Income Tax Benefits of
Dividends on Share-Based Payment Awards”.  This issue requires that a
realized income tax benefit from dividends or dividend equivalents that are
charged to retained earnings and are paid to employees for equity classified
nonvested equity shares, nonvested equity share units, and outstanding equity
share options should be recognized as an increase to additional paid-in capital.
The amount recognized in additional paid-in capital for the realized income tax
benefit from dividends on those awards should be included in the pool of excess
tax benefits available to absorb tax deficiencies on share-based payment awards
(as described in paragraphs 62 and 63  of Statement
123(R)).  This issue is effective for fiscal years beginning after
December 15, 2007.  Adoption on January 1, 2008, as required, did not
have a material effect on the Company’s financial condition, results of
operations or liquidity.




66
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007), “Business Combinations” (“FAS 141(R)”), which revises
Statement 141. FAS 141(R) requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to disclose to investors and other users all of the
information needed to evaluate and understand the nature and financial effect of
the business combination. FAS 141(R) is effective for fiscal years beginning
after December 15, 2008. Management has not yet completed its analysis of the
potential impact of FAS 141(R).





In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Noncontrolling Interests in Consolidated Financial Statements” (“FAS
160”), which requires all entities to report noncontrolling (minority) interests
in subsidiaries as equity in the consolidated financial statements.
Additionally, FAS 160 requires that transactions between an entity and
noncontrolling interests be treated as equity transactions. FAS 160 is effective
for fiscal years beginning after December 15, 2008. Management has not yet
completed its analysis of the potential impact of FAS 160, but does not expect
it to have a material effect on the Company’s financial condition, results of
operations or liquidity.




Reclassifications





Some
items in the prior year financial statements were reclassified to conform to the
current presentation.




Note
2—Acquisitions, Divestitures and Discontinued Operations





On
December 30, 2005, the Company closed the sale of its merchant bankcard
processing business segment to NOVA Information Systems, Inc. (“NOVA”). NOVA
paid $7,250 in cash at the closing resulting in the Company recognizing a gain
of $6,697 on the transaction. The transaction was structured as a sale of the
segment assets. Accordingly, the results of operations of the Company’s merchant
bankcard processing business segment are included in the Consolidated Statements
of Income as “discontinued operations”. In connection with the sale, the Company
entered into a Marketing and Sales Alliance Agreement and a Non-Competition
Agreement. The Marketing and Sales Alliance Agreement provides for the exclusive
referral by the Bank to NOVA of Bank customers seeking merchant card processing
services, and on-going, active promotion of NOVA’s services to Bank customers.
The Marketing and Sales Alliance Agreement has an initial term of ten years, and
may be extended by the parties. The Non-Competition Agreement prohibits the
Company from competing with NOVA to provide merchant card processing services,
and prohibits the Bank from soliciting for such services (other than to be
provided by NOVA) any merchants that had a merchant services relationship with
the Bank at the time of the sale, and any merchants subsequently referred to
NOVA. The Non-Competition Agreement is effective for so long as the Marketing
and Sales Alliance Agreement is in effect. The non-solicitation covenant extends
for two years following termination of the Marketing and Sales Alliance
Agreement.





During
2006, the Company recorded additional gains totaling $414 relating primarily to
the settlement of certain contractual early termination provisions on a basis
that was more favorable than originally estimated.





The
operating results of the merchant bankcard processing segment, which have been
classified as discontinued operations in the accompanying consolidated financial
statements, are summarized as follows:





Years
      ended December 31,
            
            2007
            
            
            2006
            
            
            2005Other
      income
            
            $
            -
            
            
            $
            414
            
            
            $
            12,865Depreciation
      and amortization
            
            
            -
            
            
            
            -
            
            
            
            (8
            )Other
      expense
            
            
            -
            
            
            
            -
            
            
            
            (5,227
            )Pretax
      income from discontinued operations
            
            $
            -
            
            
            $
            414
            
            
            $
            7,630







67
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




On April
30, 2007, the Company completed the acquisition of The Bank of Venice, a Florida
chartered commercial bank in exchange for consideration consisting of 944,400
shares of the Company’s common stock valued at approximately $13,628, cash of
$568 and stock options valued at $364. The total purchase price, which includes
certain direct acquisition costs of $194, totaled $14,754. Under the purchase
method of accounting, the assets and liabilities of The Bank of Venice were
recorded at their respective estimated fair values as of April 30, 2007 and are
included in the accompanying balance sheet as of December 31, 2007. Purchase
accounting adjustments will be amortized or accreted into income over the
estimated lives of the related assets and liabilities. Goodwill and other
intangible assets identified were approximately $6,980 and are not deductible
for income tax purposes.




The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed as of the date of acquisition:





Cash
      and cash equivalents
            
            $
            10,176Securities
      available for sale
            
            
            2,292Federal
      Home Loan Bank Stock and other equity securities
            
            
            496Loans,
      net
            
            
            55,373Fixed
      assets
            
            
            2,714Goodwill
            
            
            4,580Core
      deposit intangible
            
            
            2,150Customer
      relationship intangible
            
            
            250Other
            
            
            605Total
      assets acquired
            
            
            78,636Deposits
            
            
            57,715FHLB
      advances
            
            
            5,000Other
      liabilities
            
            
            1,167Total
      liabilities assumed
            
            
            63,882Total
      consideration paid for The Bank of Venice
            
            $
            14,754





The
acquisition of The Bank of Venice provided an established entry point into the
Sarasota County market and allows us to significantly accelerate the rate of
franchise growth of the combined entity which is expected to be greater than the
Company could achieve on a de novo basis.




On
December 12, 2007, the Company entered into a definitive Stock Purchase
Agreement (the “Agreement”) with Naples Capital Advisors, Inc. (“NCA”), a
registered investment advisor with approximately $80,000 of assets under
advisement. Under the terms of the Agreement, NCA will become a wholly-owned
subsidiary of the Company. Shareholders of NCA will receive $1,333 in cash at
closing.  In addition, the Sellers shall be entitled to receive
additional cash consideration up to $148 on each of the first three annual
anniversaries of NCA or a subsidiary of the Company receiving a trust department
license under the Florida Financial Institutions Codes subject to NCA achieving
certain total revenue milestones outlined in the Agreement. The closing of the
sale was finalized on January 2, 2008.




68
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
3—Cash and Due From Banks





Cash on
hand or on deposit with the Federal Reserve Bank of $3,204 and $4,885 was
required to meet regulatory reserve and clearing requirements at December 31,
2007, and December 31, 2006, 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 $146 and $386 at
December 31, 2007 and December 31, 2006, respectively.




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:








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











December
      31, 2006
            
            Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unrealized
      Losses
            
            
            Estimated
      Fair ValueU.S.
      Treasury securities
            
            $
            5,087
            
            
            $
            -
            
            
            $
            125
            
            
            $
            4,962U.S.
      Government agencies and corporations
            
            
            84,014
            
            
            
            278
            
            
            
            1,294
            
            
            
            82,998States
      and political subdivisions—tax exempt
            
            
            10,818
            
            
            
            22
            
            
            
            98
            
            
            
            10,742States
      and political subdivision—taxable
            
            
            2,578
            
            
            
            12
            
            
            
            -
            
            
            
            2,590Marketable
      equity securities
            
            
            3,000
            
            
            
            484
            
            
            
            -
            
            
            
            3,484Mortgage-backed
      securities
            
            
            16,428
            
            
            
            94
            
            
            
            8
            
            
            
            16,514Collateralized
      debt obligations
            
            
            9,996
            
            
            
            -
            
            
            
            87
            
            
            
            9,909$
            131,921
            
            
            $
            890
            
            
            $
            1,612
            
            
            $
            131,199




69
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)


Securities
with unrealized losses not recognized in income are as follows:





Less
      than 12 Months
            
            
            12
      Months or Longer
            
            
            TotalDecember
      31, 2007
            
            Estimated
      Fair Value
            
            
            Unrealized
      Losses
            
            
            Estimated
      Fair Value
            
            
            Unrealized
      Losses
            
            
            Estimated
      Fair Value
            
            
            Unrealized
      LossesU.S.
      Government agencies and corporations
            
            $
            -
            
            
            $
            -
            
            
            $
            13,577
            
            
            $
            66
            
            
            $
            13,577
            
            
            $
            66States
      and political subdivisions—tax exempt
            
            
            2,814
            
            
            
            9
            
            
            
            5,753
            
            
            
            42
            
            
            
            8,567
            
            
            
            51States
      and political subdivisions—taxable
            
            
            2,299
            
            
            
            21
            
            
            
            -
            
            
            
            -
            
            
            
            2,299
            
            
            
            21Mortgage-backed
      securities
            
            
            30,254
            
            
            
            295
            
            
            
            1,072
            
            
            
            1
            
            
            
            31,326
            
            
            
            296Corporate
      bonds
            
            
            2,765
            
            
            
            100
            
            
            
            -
            
            
            
            -
            
            
            
            2,765
            
            
            
            100Collateralized
      debt obligations
            
            
            4,378
            
            
            
            622
            
            
            
            -
            
            
            
            -
            
            
            
            4,378
            
            
            
            622Total
      temporarily impaired
            
            $
            42,510
            
            
            $
            1,047
            
            
            $
            20,402
            
            
            $
            109
            
            
            $
            62,912
            
            
            $
            1,156







Less
      than 12 Months
            
            
            12
      Months or Longer
            
            
            TotalDecember
      31, 2006
            
            Estimated
      Fair Value
            
            
            Unrealized
      Losses
            
            
            Estimated
      Fair Value
            
            
            Unrealized
      Losses
            
            
            Estimated
      Fair Value
            
            
            Unrealized
      LossesU.S.
      Treasury securities
            
            $
            101
            
            
            $
            -
            
            
            $
            4,861
            
            
            $
            125
            
            
            $
            4,962
            
            
            $
            125U.S.
      Government agencies and corporations
            
            
            -
            
            
            
            -
            
            
            
            60,539
            
            
            
            1,294
            
            
            
            60,539
            
            
            
            1,294States
      and political subdivisions—tax exempt
            
            
            3,996
            
            
            
            25
            
            
            
            3,823
            
            
            
            73
            
            
            
            7,819
            
            
            
            98Mortgage-backed
      securities
            
            
            -
            
            
            
            -
            
            
            
            1,084
            
            
            
            8
            
            
            
            1,084
            
            
            
            8Collateralized
      debt obligations
            
            
            9,909
            
            
            
            87
            
            
            
            -
            
            
            
            -
            
            
            
            9,909
            
            
            
            87Total
      temporarily impaired
            
            $
            14,006
            
            
            $
            112
            
            
            $
            70,307
            
            
            $
            1,500
            
            
            $
            84,313
            
            
            $
            1,612




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 interest 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, other than for the collateralized debt obligations,
the magnitude of the unrealized losses of approximately 3% or less of the
historical cost 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.




70
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




As of
December 31, 2007, the Company owned three collateralized debt obligation
investment securities with an aggregate original cost of $9,996 that had an
estimated fair value of $6,111 at that time. The underlying assets in the three
collateralized debt obligations are comprised primarily of corporate debt
obligations of homebuilders, REITs, real estate companies and commercial
mortgage backed securities. The Company’s securities are floating rate
securities which were rated A or better by an independent and nationally
recognized rating agency at the time of our purchase. In late December 2007,
these securities were downgraded below investment grade by a nationally
recognized rating agency. Due to the ratings downgrade, and the amount of
unrealized loss, management concluded that the loss of value was other than
temporary under generally accepted accounting principles and the Company wrote
these investment securities down to their estimated fair value. This resulted in
the recognition of an other than temporary impairment loss of $3,885. In
determining their estimated fair value, management utilized a discounted cash
flow modeling valuation approach. Discount rates utilized in the modeling of
these securities were estimated based upon a variety of factors including the
yield at issuance of similarly rated classes of comparably structured
collateralized debt obligations. Cash flows utilized in the modeling of these
securities were based upon actual default history of the underlying issuers and
varying assumptions of estimated future defaults of these issuers. Additionally,
during 2007, the market value of an investment in equity securities, which the
Company originally acquired in 2003 for $3,000 to obtain community reinvestment
credit, of a publicly owned company declined significantly. As of December 31,
2007, management determined that this decline was other than temporary and wrote
this investment down by $1,776 to its fair value at that time. These write downs
resulted in a total recognized other than temporary impairment loss of $5,661
during 2007. During 2006 and 2005, no other than temporary impairment losses
were necessary.





The
estimated fair value of investment securities available for sale at December 31,
2007, 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.





December
      31, 2007Due
      in one year or less
            
            $
            10,073Due
      after one year through five years
            
            
            26,873Due
      after five years through ten years
            
            
            32,666Due
      after ten years
            
            
            29,361Marketable
      equity securities
            
            
            1,224Mortgage-backed
      securities
            
            
            60,160$
            160,357





At
December 31, 2007, securities with a fair value of approximately $51,096 are
subject to call during 2008.




Sales of available for sale
securities were as follows:





2007
            
            
            2006
            
            
            2005Proceeds
            
            $
            5,491
            
            
            $
            -
            
            
            $
            -Gross
      gains
            
            
            1
            
            
            
            -
            
            
            
            -Gross
      losses
            
            
            -
            
            
            
            -
            
            
            
            -





The tax
provision related to net realized gains was $0 during 2007, 2006, and
2005.




71
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Maturities,
principal repayments, and calls of investment securities available for sale
during 2007, 2006 and 2005 were $34,863, $9,296, and $1,103,
respectively.  Net gains (losses) realized from calls and mandatory
redemptions of securities during 2007, 2006 and 2005 were $0, $0, and $1,
respectively.





Investment
securities having carrying values of approximately $129,970 and $47,473 at
December 31, 2007 and 2006, respectively, were pledged to secure public funds on
deposit, securities sold under agreements to repurchase, and for other purposes
as required by law.





Note
5—Loans





Major
classifications of loans are as follows:





December
      31,
            
            2007
            
            
            2006Real
      estate mortgage loans:Commercial
            
            $
            612,084
            
            
            $
            546,276Residential
            
            
            112,138
            
            
            
            82,243Farmland
            
            
            11,361
            
            
            
            24,210Construction
      and vacant land
            
            
            168,595
            
            
            
            157,672Commercial
      and agricultural loans
            
            
            72,076
            
            
            
            84,905Indirect
      auto dealer loans
            
            
            117,439
            
            
            
            141,552Home
      equity loans
            
            
            21,820
            
            
            
            17,199Other
      consumer loans
            
            
            12,154
            
            
            
            9,795Total
      loans
            
            
            1,127,667
            
            
            
            1,063,852Net
      deferred loan costs
            
            
            1,489
            
            
            
            1,616Loans,
      net of deferred loan costs
            
            $
            1,129,156
            
            
            $
            1,065,468





Substantially
all loans are made to borrowers in the Banks’ primary market area of Monroe,
South Miami-Dade, Collier, Lee, Sarasota and Highlands counties of
Florida.





In 1998,
TIB Bank made a $10,000 loan to construct a lumber mill in northern Florida. Of
this amount, $6,400 had been sold by TIB Bank to other lenders. The loan was 80%
guaranteed as to principal and interest by the U.S. Department of Agriculture
(USDA). In addition to business real estate and equipment, the loan was
collateralized by the business owner’s interest in a trust. Under provisions of
the trust agreement, beneficiaries cannot receive trust assets until November
2010.





The
portion of this loan guaranteed by the USDA and held by us was approximately
$1,600 at December 31, 2007 and December 31, 2006. The loan was accruing
interest until December 2006 when TIB Bank ceased the accrual of interest
pursuant to a ruling made by the USDA. Accrued interest on this loan totals
approximately $941 at December 31, 2007 and December 31, 2006,
respectively.




72
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




In
pursuing a sale of the property and equipment, TIB Bank has incurred various
expenditures.  TIB Bank capitalized the liquidation costs and the
portion of the protective advances which it expects will be fully reimbursed by
the USDA. The non-guaranteed principal and interest ($1,961 at December 31, 2007
and December 31, 2006) and the reimbursable capitalized liquidation costs and
protective advance costs totaling approximately $954 and $899 at December 31,
2007 and December 31, 2006, respectively, are included as “other assets” in the
financial statements.





Florida
law requires a bank to liquidate or charge off repossessed real property within
five years, and repossessed personal property within six
months.  Since the property had not been liquidated during this
period, TIB 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,
            
            2007
            
            
            2006
            
            
            2005Balance,
      beginning of year
            
            $
            9,581
            
            
            $
            7,546
            
            
            $
            6,243Acquisition
      of The Bank of Venice
            
            
            667
            
            
            
            -
            
            
            
            -Provision
      for loan losses charged to expense
            
            
            9,657
            
            
            
            3,491
            
            
            
            2,413Loans
      charged off
            
            
            (5,202
            )
            
            
            (1,573
            )
            
            
            (1,219
            )Recoveries
      of loans previously charged off
            
            
            270
            
            
            
            117
            
            
            
            109Balance,
      end of year
            
            $
            14,973
            
            
            $
            9,581
            
            
            $
            7,546




Impaired
loans are as follows:





Years
      ended December 31,
            
            2007
            
            
            2006Year
      end loans with no specifically allocated allowance for loan
      losses
            
            $
            4,448
            
            
            $
            519Year
      end loans with allocated allowance for loan losses
            
            
            3,748
            
            
            
            142Total
            
            $
            8,196
            
            
            $
            661Amount
      of the allowance for loan losses allocated
            
            $
            1,401
            
            
            $
            45








2007
            
            
            2006
            
            
            2005Average
      of impaired loans during the year
            
            $
            4,464
            
            
            $
            363
            
            
            $
            599Interest
      income recognized during impairment
            
            
            40
            
            
            
            21
            
            
            
            41Cash
      basis interest income recognized
            
            
            27
            
            
            
            6
            
            
            
            -





73
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




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.  Generally, 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,
            
            2007
            
            
            2006Nonaccrual
      loans (a)
            
            $
            16,086
            
            
            $
            4,223Loans
      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.  In February 2008, a $13.5 million commercial land and
development loan matured and was placed on nonaccrual because the borrowers were
unable to service the debt.


(a)
            Non-performing
      loans includes the $1,600 loan discussed previously which is guaranteed
      for both principal and interest by a U.S. government agency.  We
      discontinued accruing interest on this loan during December 2006 pursuant
      to a ruling made by the agency.





Note
6—Premises and Equipment





A summary
of the cost and accumulated depreciation of premises and equipment
follows:





December
      31,
            
            2007
            
            
            2006
            
            Estimated
      Useful LifeLand
            
            $
            11,197
            
            
            $
            10,712Buildings
      and leasehold improvements
            
            
            23,962
            
            
            
            16,591
            
            1
      to 40 yearsFurniture,
      fixtures and equipment
            
            
            14,050
            
            
            
            14,261
            
            1
      to 40 yearsConstruction
      in progress
            
            
            3,498
            
            
            
            7,72352,707
            
            
            
            49,287Less
      accumulated depreciation
            
            
            (14,423
            )
            
            
            (15,185
            )Premises
      and equipment, net
            
            $
            38,284
            
            
            $
            34,102





Depreciation expense for the years
ended December 31, 2007, 2006, and 2005, was approximately $2,887, $2,354, and
$2,219, respectively.





The Banks
are obligated under operating leases for office and banking premises which
expire in periods varying from one to nineteen years.  Future minimum
lease payments, before considering renewal options that generally are present,
are as follows at December 31, 2007:





Years
      Ending December 31,2008
            
            $
            1,2732009
            
            
            8622010
            
            
            7992011
            
            
            7552012
            
            
            425Thereafter
            
            
            2,283$
            6,397





Rental
expense for the years ended December 31, 2007, 2006, and 2005, was approximately
$1,128, $794, and $674, respectively.




74
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)
  Note
7—Goodwill and Intangible Assets





The
changes in the carrying amount of goodwill for the years ended December 31, are
as follows:





2007
            
            
            2006Beginning
      of the year
            
            $
            106
            
            
            $
            106Goodwill
      associated with the acquisition of The Bank of Venice
            
            
            4,580
            
            
            
            -Balance
      at end of year
            
            $
            4,686
            
            
            $
            106




Intangible assets at December
31, consist of the following:





2007
            
            
            2006December
      31,
            
            GrossCarrying
              Amount
            
            
            Accumulated
              Amortization
            
            
            Net
      Book
              Value
            
            
            Gross
      Carrying
              Amount
            
            
            Accumulated
              Amortization
            
            
            Net
      Book
              ValueCore
      deposit intangible
            
            $
            5,091
            
            
            $
            2,564
            
            
            $
            2,527
            
            
            $
            2,941
            
            
            $
            2,136
            
            
            $
            805Customer
      relationship intangible
            
            
            250
            
            
            
            11
            
            
            
            239
            
            
            
            -
            
            
            
            -
            
            
            
            -Other
            
            
            26
            
            
            
            20
            
            
            
            6
            
            
            
            36
            
            
            
            28
            
            
            
            8Total
            
            $
            5,367
            
            
            $
            2,595
            
            
            $
            2,772
            
            
            $
            2,977
            
            
            $
            2,164
            
            
            $
            813





Aggregate
intangible asset amortization expense was $440, $288, and $291 for 2007, 2006,
and 2005, respectively.





Estimated
amortization expense for each of the next five years is as follows:





Years
      Ending December 31,2008
            
            
            4812009
            
            
            3722010
            
            
            3662011
            
            
            2332012
            
            
            233







75
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
8—Time Deposits





Time
deposits of $100 or more were $240,853 and $286,591 at December 31, 2007 and
2006, respectively.





At
December 31, 2007, the scheduled maturities of time deposits are as
follows:





Years
      Ending December 31,2008
            
            $
            409,6032009
            
            
            81,6022010
            
            
            10,4892011
            
            
            8,8982012
            
            
            2,162$
            512,754





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 Banks
have unsecured overnight federal funds purchased accommodation up to a maximum
of $30,000 from their correspondent banks.  Additionally, the Banks
have agreements with various financial institutions under which securities can
be sold under agreements to repurchase.  TIB Bank also has securities
sold under agreements to repurchase with commercial account holders whereby TIB
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
TIB Bank.





The Banks
accept Treasury, tax and loan deposits from certain commercial depositors and
remit these deposits to the appropriate government authorities. TIB 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 pays interest on those
funds held. TIB Bank pledges certain investment securities against this
account.





The Banks
invest in Federal Home Loan Bank stock for the purpose of establishing credit
lines with the Federal Home Loan Bank. The credit availability to the Banks is
based on a percentage of the Banks’ total assets as reported on the most recent
quarterly financial information submitted to the regulators subject to the
pledging of sufficient collateral.  At December 31, 2007, in addition
to $25,000 in letters of credit used in lieu of pledging securities to the State
of Florida, there was $140,000 in advances outstanding. At December 31, 2006,
the amount of outstanding advances was $125,000.  The outstanding
amount at December 31, 2007 consists of:





Amount
            
            Issuance
      Date
            
            Maturity
      Date
            
            Repricing
      Frequency
            
            Rate
      at
              December
      31, 2007$
            50,000
            
            February
      2007
            
            February
      2010 (a)
            
            Fixed
            
            
            4.65
            %50,000
            
            December
      2006
            
            December
      2011 (a)
            
            Fixed
            
            
            4.18
            %25,000
            
            August
      2006
            
            February
      2008
            
            Quarterly
            
            
            5.01
            %10,000
            
            September
      2007
            
            September
      2012 (a)
            
            Fixed
            
            
            4.05
            %5,000
            
            March
      2007
            
            March
      2012 (a)
            
            Fixed
            
            
            4.29
            %


(a) These advances have quarterly
conversion dates beginning six months to one year from date of
issuance.  If the FHLB chooses to convert the advance, the Banks have
the option of prepaying the entire balance without
penalty.  Otherwise, the advance will convert to an adjustable rate,
repricing on a quarterly basis.  If the FHLB does not convert the
advance, it will remain at the contracted fixed rate until the maturity
date.


76
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)





The Bank’s
collateral with the FHLB consists of a blanket floating lien pledge of the
Bank’s residential 1-4 family mortgage and commercial real estate secured
loans.  The amount of eligible collateral at December 31, 2007 was
$200,857.
  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
categories of short-term borrowings and FHLB advances:


Year
      Ended December 31,
            
            2007
            
            
            2006Federal
      funds purchased:Balance:Average
      daily outstanding
            
            $
            190
            
            
            $
            915Year-end
      outstanding
            
            
            157
            
            
            
            -Maximum
      month-end outstanding
            
            
            11,024
            
            
            
            13,042Rate:Weighted
      average for year
            
            
            5.7
            %
            
            
            5.9
            %Weighted
      average interest rate at December 31
            
            
            5.3
            %
            
            
            n/aSecurities
      sold under agreements to repurchase:Balance:Average
      daily outstanding
            
            $
            41,074
            
            
            $
            20,506Year-end
      outstanding
            
            
            75,861
            
            
            
            20,352Maximum
      month-end outstanding
            
            
            75,861
            
            
            
            31,451Rate:Weighted
      average for year
            
            
            4.2
            %
            
            
            4.7
            %Weighted
      average interest rate at December 31
            
            
            3.9
            %
            
            
            4.4
            %Treasury,
      tax and loan note option:Balance:Average
      daily outstanding
            
            $
            1,127
            
            
            $
            1,051Year-end
      outstanding
            
            
            1,904
            
            
            
            1,898Maximum
      month-end outstanding
            
            
            1,904
            
            
            
            1,898Rate:Weighted
      average for year
            
            
            4.6
            %
            
            
            4.4
            %Weighted
      average interest rate at December 31
            
            
            3.6
            %
            
            
            5.0
            %Advances
      from the Federal Home Loan Bank-Short Term:Balance:Average
      daily outstanding
            
            $
            1,068
            
            
            $
            19,274Year-end
      outstanding
            
            
            -
            
            
            
            -Maximum
      month-end outstanding
            
            $
            10,000
            
            
            $
            50,000Rate:Weighted
      average for year
            
            
            5.2
            %
            
            
            5.5
            %Weighted
      average interest rate at December 31
            
            
            n/a
            
            
            
            n/aAdvances
      from the Federal Home Loan Bank-Long Term:Balance:Average
      daily outstanding
            
            $
            131,123
            
            
            $
            45,137Year-end
      outstanding
            
            
            140,000
            
            
            
            125,000Maximum
      month-end outstanding
            
            
            140,000
            
            
            
            125,000Rate:Weighted
      average for year
            
            
            4.7
            %
            
            
            5.2
            %Weighted
      average interest rate at December 31
            
            
            4.5
            %
            
            
            4.9
            %




77
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
10—Long-Term Borrowings





Line
of Credit





Until its
maturity on April 30, 2005, the Company had a $3,000 revolving line of credit
with Independent Bankers’ Bank of Florida. Amounts outstanding under the line
bore interest equal to the prime rate published in The Wall Street Journal minus
one half percent, which was subject to change daily, and was subject to a 4.25%
floor.  Interest was payable monthly, and principal was due on demand,
or if no demand was made, at maturity.  This credit facility was
secured by 100 percent of the outstanding shares of the Bank and required, 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, 2007, 2006 or 2005 as the Company elected not to renew the line
upon maturity.





Securities
Sold Under Agreements to Repurchase




During 2007, the Company
entered into agreements with another financial institution for the sale of
certain securities to be repurchased at a future date.  The interest
rates on these repurchase agreements are fixed for the term of the
agreement.  The financial institution has the ability to terminate
these agreements on a quarterly basis beginning on the terminable
date.  The outstanding amount at December 31, 2007 was $30,000 and
consists of:




Amount
            
            Terminable
      Date
            
            Maturity
      Date
            
            Rate
      at
              December31,2007$
            20,000
            
            September
      2008
            
            September
      2010
            
            
            4.18
            %10,000
            
            December
      2008
            
            December
      2010
            
            
            3.46
            %




Notes
Payable





The
Company entered into an agreement with the Company’s largest shareholder
effective July 1, 2000, to purchase 1,050,000 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.  On January 1, 2007, the
remaining $4,000 was repaid at par.





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
deferrable interest 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.




78
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




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 deferrable
interest 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, 2007 was 8.54%. 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.




On June
23, 2006, the Company issued $20,000 of additional trust preferred securities
through a private placement. The Company formed TIBFL Statutory Trust III (the
“Trust III”), a wholly-owned statutory trust subsidiary for the purpose of
issuing the trust preferred securities. The Trust III used the proceeds from the
issuance of $20,000 in trust preferred securities to acquire junior subordinated
deferrable interest 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 155 basis points). The rate in effect at December 31, 2007 was
6.79%.  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 at par after
five years, and sooner, at a 5% premium, if specific events occur, subject to
prior approval by the Federal Reserve Board, if then required.





Under the
provisions of the related indenture agreements, the interest payable on the
trust preferred securities is deferrable for up to five years and any such
deferral is not considered a default. During any period of deferral, the Company
would be precluded from declaring or paying dividends to shareholders or
repurchasing any of the Company’s common stock.





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).





Contractual
Maturities





At
December 31, 2007, the contractual maturities of long-term borrowings were as
follows:





Fixed
      Rate
            
            
            Floating
      Rate
            
            
            TotalDue
      in 2008
            
            $
            -
            
            
            $
            -
            
            
            $
            -Due
      in 2009
            
            
            -
            
            
            
            -
            
            
            
            -Due
      in 2010
            
            
            30,000
            
            
            
            -
            
            
            
            30,000Due
      in 2011
            
            
            -
            
            
            
            -
            
            
            
            -Thereafter
            
            
            8,000
            
            
            
            25,000
            
            
            
            33,000Total
      long-term debt
            
            $
            38,000
            
            
            $
            25,000
            
            
            $
            63,000






79
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
11—Income Taxes





Income
tax expense (benefit) from continuing operations was as follows:





Years
      ended December 31,
            
            2007
            
            
            2006
            
            
            2005Current
      income tax provision:Federal
            
            $
            2,798
            
            
            $
            5,386
            
            
            $
            3,985State
            
            
            436
            
            
            
            803
            
            
            
            8863,234
            
            
            
            6,189
            
            
            
            4,871Deferred
      tax benefit:Federal
            
            
            (4,334
            )
            
            
            (1,018
            )
            
            
            (805
            )State
            
            
            (675
            )
            
            
            (150
            )
            
            
            (139
            )(5,009
            )
            
            
            (1,168
            )
            
            
            (944
            )Total
            
            $
            (1,775
            )
            
            $
            5,021
            
            
            $
            3,927




A
reconciliation of income tax computed at applicable Federal statutory income tax
rates to total income taxes reported is as follows:





Years
      ended December 31,
            
            2007
            
            
            2006
            
            
            2005Pretax
      income from continuing operations
            
            $
            (4,196
            )
            
            $
            14,014
            
            
            $
            11,119Income
      taxes computed at Federal statutory tax rate
            
            $
            (1,427
            )
            
            $
            4,815
            
            
            $
            3,780Effect
      of:Tax-exempt
      income, net
            
            
            (322
            )
            
            
            (330
            )
            
            
            (324
            )State
      income taxes, net
            
            
            (156
            )
            
            
            423
            
            
            
            390Stock
      based compensation expense, net
            
            
            92
            
            
            
            80
            
            
            
            -Other,
      net
            
            
            38
            
            
            
            33
            
            
            
            81Total
            
            $
            (1,775
            )
            
            $
            5,021
            
            
            $
            3,927









80
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Year end
deferred tax assets and liabilities were due to the following:





Years
      ended December 31,
            
            2007
            
            
            2006Allowance
      for loan losses
            
            $
            5,910
            
            
            $
            3,848Recognized
      impairment losses on available for sale securities
            
            
            2,184
            
            
            
            -Core
      deposit intangibles
            
            
            318
            
            
            
            285Deferred
      compensation
            
            
            1,836
            
            
            
            1,126Non-accrual
      interest income
            
            
            386
            
            
            
            63Net
      unrealized losses on securities available for sale
            
            
            -
            
            
            
            278Other
            
            
            468
            
            
            
            49Total
      gross deferred tax assets
            
            
            11,102
            
            
            
            5,649Accumulated
      depreciation
            
            
            (934
            )
            
            
            (637
            )Deferred
      loan costs
            
            
            (746
            )
            
            
            (621
            )Core
      deposit and other non-deductible acquisition related
      intangibles
            
            
            (822
            )
            
            
            (10
            )Net
      unrealized gains on securities available for sale
            
            
            (151
            )
            
            
            -Other
            
            
            (69
            )
            
            
            (65
            )Total
      gross deferred tax liabilities
            
            
            (2,722
            )
            
            
            (1,333
            )Net
      deferred tax asset
            
            $
            8,380
            
            
            $
            4,316





Note
12—Employee Benefit Plans





The
Company 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 Company and participants:
basic voluntary contributions which are discretionary contributions made by all
participants; a matching contribution, whereby the Company will match 50 percent
of salary reduction contributions up to 5 percent of compensation; and an
additional discretionary contribution which may be made by the Company and
allocated to the accounts of participants on the basis of total relative
compensation.  During 2005 and 2006, the Company match was capped at
the lower of 4 percent of compensation or $1 per employee.  The
Company contributed $307, $152, and $132, to the plan in 2007, 2006 and 2005,
respectively. As of December 31, 2007, the Plan contained approximately 265,000
shares of the Company’s common stock.




In 2001,
TIB Bank entered into salary continuation agreements with three of its executive
officers.  Two additional TIB Bank executive officers entered into
salary continuation agreements in 2003 and another in 2004. In 2007, an
additional two pre-existing salary continuation agreements with The Bank of
Venice’s executive officers were assumed as part of the
acquisition.  The plans are nonqualified deferred compensation
arrangements that are designed to provide supplemental retirement income
benefits to participants.  The Company expensed $811, $617, and $386
for the accrual of future salary continuation benefits in 2007, 2006 and 2005,
respectively.  The Banks have purchased single premium life insurance
policies on these individuals.  Cash value income (net of related
insurance premium expense) totaled $266, $234, and $208 in 2007, 2006 and 2005,
respectively.  Other assets included $7,374 and $6,171 in surrender
value and other liabilities included salary continuation benefits payable of
$2,726 and $1,863 at December 31, 2007 and 2006, respectively.




81
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




In 2001,
TIB Bank established a non qualified retirement benefit plan for eligible Bank
directors.  Under the plan, the Bank 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.  TIB Bank expensed $239, $231, and $233 for the accrual of
current and future retirement benefits in 2007, 2006 and 2005, respectively,
which included $160, $170, and $184 in 2007, 2006 and 2005 related to the annual
director retainer fees and monthly meeting fees that certain directors elected
to defer.  TIB Bank has purchased single premium split dollar life
insurance policies on these individuals.  Cash value income (net of
related insurance premium expense) totaled $152, $141, and $138 in 2007, 2006
and 2005, respectively.  Other assets included $4,286 and $4,134 in
surrender value in other assets and other liabilities included retirement
benefits payable of $1,294 and $1,071 at December 31, 2007 and 2006,
respectively.





Note
13—Related Party Transactions





The Banks
had loans outstanding to certain of the Company’s executive officers, directors,
and their related business interests as follows:





Beginning
      balance, January 1, 2007
            
            $
            760New
      loans
            
            
            701Repayments
            
            
            (782
            )Ending
      balance, December 31, 2007
            
            $
            679





Unfunded
loan commitments to these individuals and their related business interests
totaled $198 at December 31, 2007.  Deposits from these individuals
and their related interests were $2,451 and $2,206 at December 31, 2007 and
2006, respectively.





Note
14—Shareholders’ Equity and Minimum Regulatory Capital Requirements





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





To be
considered well capitalized and adequately capitalized (as defined) under the
regulatory framework for prompt corrective action, the Banks must maintain
minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios. These
minimum amounts and ratios along with the actual amounts and ratios for the
Company and TIB Bank as of December 31, 2007 and 2006 and for The Bank of Venice
as of December 31, 2007 are presented in the following tables.







82
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)







December
      31, 2007
            
            Well
      Capitalized Requirement
            
            
            Adequately
      Capitalized Requirement
            
            
            ActualAmount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio
            
            
            Amount
            
            
            RatioTier
      1 Capital (to Average Assets)Consolidated
            
            
            N/A
            
            
            
            N/A
            
            
            $
            ≥
      56,173
            
            
            
            ≥
      4.0
            %
            
            $
            118,303
            
            
            
            8.4
            %TIB
      Bank
            
            $
            ≥
      66,804
            
            
            
            ≥5.0
            %
            
            
            ≥
      53,443
            
            
            
            ≥
      4.0
            %
            
            
            104,258
            
            
            
            7.8
            %The
      Bank of Venice
            
            
            ≥
    3,330
            
            
            
            ≥
      5.0
            %
            
            
            ≥
      2,664
            
            
            
            ≥
      4.0
            %
            
            
            7,906
            
            
            
            11.9
            %Tier
      1 Capital ( to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            N/A
            
            
            $
            ≥
      47,482
            
            
            
            ≥
      4.0
            %
            
            $
            118,303
            
            
            
            10.0
            %TIB
      Bank
            
            $
            ≥
      68,180
            
            
            
            ≥
      6.0
            %
            
            
            ≥
      45,453
            
            
            
            ≥
      4.0
            %
            
            
            104,258
            
            
            
            9.2
            %The
      Bank of Venice
            
            
            ≥3,069
            
            
            
            ≥
      6.0
            %
            
            
            ≥
      2,046
            
            
            
            ≥
      4.0
            %
            
            
            7,906
            
            
            
            15.5
            %Total
      Capital (to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            N/A
            
            
            $
            ≥
      94,965
            
            
            
            ≥
      8.0
            %
            
            $
            134,565
            
            
            
            11.3
            %TIB
      Bank
            
            $
            ≥
      113,633
            
            
            
            ≥
      10.0
            %
            
            
            ≥
      90,906
            
            
            
            ≥
      8.0
            %
            
            
            118,468
            
            
            
            10.4
            %The
      Bank of Venice
            
            
            ≥
    5,116
            
            
            
            ≥
      10.0
            %
            
            
            ≥
      4,092
            
            
            
            ≥
      8.0
            %
            
            
            8,546
            
            
            
            16.7
            %







December
      31, 2006
            
            Well
      Capitalized Requirement
            
            
            Adequately
      Capitalized Requirement
            
            
            ActualAmount
            
            
            Ratio
            
            
            Amount
            
            
            Ratio
            
            
            Amount
            
            
            RatioTier
      1 Capital (to Average Assets)Consolidated
            
            
            N/A
            
            
            
            N/A
            
            
            $
            ≥
      51,336
            
            
            
            ≥
      4.0
            %
            
            $
            112,368
            
            
            
            8.8
            %TIB
      Bank
            
            $
            ≥
      64,078
            
            
            
            ≥
      5.0
            %
            
            
            ≥
      51,262
            
            
            
            ≥
      4.0
            %
            
            
            115,689
            
            
            
            9.0
            %Tier
      1 Capital ( to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            N/A
            
            
            $
            ≥
      44,366
            
            
            
            ≥
      4.0
            %
            
            $
            112,368
            
            
            
            10.1
            %TIB
      Bank
            
            $
            ≥ 66,519
            
            
            
            ≥ 6.0
            %
            
            
            ≥
      44,346
            
            
            
            ≥
      4.0
            %
            
            
            115,689
            
            
            
            10.4
            %Total
      Capital (to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            N/A
            
            
            $
            ≥
      88,733
            
            
            
            ≥
      8.0
            %
            
            $
            131,074
            
            
            
            11.8
            %TIB
      Bank
            
            $
            ≥
      110,864
            
            
            
            ≥
      10.0
            %
            
            
            ≥
      88,692
            
            
            
            ≥
      8.0
            %
            
            
            125,715
            
            
            
            11.3
            %




At year
end 2007 and 2006, the most recent regulatory notification categorized the Banks
as well capitalized under the regulatory framework for prompt corrective
action.




83
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Management
believes, as of December 31, 2007, that the Company and the Banks meet all
capital requirements to which they are subject.  Tier 1 Capital for
the Company and TIB Bank includes the trust preferred securities that were
issued in September 2000, July 2001 and June 2006 to the extent
allowable.





Under
state banking law, regulatory approval will be required if the total of all
dividends declared in any calendar year by a bank exceeds the bank’s net profits
to date for that year combined with its retained net profits for the preceding
two years. Based on the level of undistributed earnings for the prior two years,
declaration of dividends by TIB Bank to the Company, during 2008, will likely
require regulatory approval.  As of December 31, 2007, The Bank of
Venice has no retained earnings available for dividends to the
Company.




Note
15 – Stock-Based Compensation





As of
December 31, 2007, 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. Pursuant to the
merger agreement, upon the April 30, 2007 closing of its acquisition of The Bank
of Venice, the Company granted 82,750 stock options in exchange for the options
outstanding for the purchase of shares of common stock of The Bank of Venice at
such date. The options were fully vested at the grant date and ranged in price
from $9.17 to $10.54 per share as determined by the conversion ratio specified
in the merger agreement. 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–based awards to
any director, and incentive or nonqualified stock-based awards 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 awarded
through the 2014 expiration of the plan is 800,000 shares, no more than 266,000
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 or awards granted
under the Plan expire or terminate for any reason without having been exercised
in full or released from restriction, the corresponding shares shall again be
available for option or award for the purposes of the Plan as long as no
dividends have been paid to the holder in accordance with the provisions of the
grant agreement.




The following table
summarizes the components and classification of stock-based compensation expense
for the years ended December 31.





2007
            
            
            2006
            
            
            2005Stock
      Options
            
            $
            284
            
            
            $
            305
            
            
            $
            -Restricted
      Stock
            
            
            364
            
            
            
            259
            
            
            
            98Total
      stock-based compensation expense
            
            $
            648
            
            
            $
            564
            
            
            $
            98Salaries
      and employee benefits
            
            $
            417
            
            
            $
            390
            
            
            $
            5Other
      expense
            
            
            231
            
            
            
            174
            
            
            
            93Total
      stock-based compensation expense
            
            $
            648
            
            
            $
            564
            
            
            $
            98


The tax
benefit related to stock-based compensation expense arising from restricted
stock awards and non-qualified stock options was approximately $142, $101 and
$38 for the years ended December 31, 2007, 2006 and 2005,
respectively.




84
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)


The fair
value of each option is estimated as of the date of grant using the
Black-Scholes Option Pricing Model. This model requires the input of subjective
assumptions that will usually have a significant impact on the fair value
estimate. The assumptions for the current period grants were developed based on
SFAS 123R and SEC guidance contained in Staff Accounting Bulletin (SAB) No. 107,
“Share-Based Payment.” The following table summarizes the weighted average
assumptions used to compute the grant-date fair value of options granted for the
years ended December 31.





2007
            
            
            2006
            
            
            2005Dividend
      yield
            
            
            1.63
            %
            
            
            1.55
            %
            
            
            1.93
            %Risk-free
      interest rate
            
            
            4.18
            %
            
            
            4.89
            %
            
            
            4.13
            %Expected
      option life
            
            4.6
      years
            
            
            6.5
      years
            
            
            9
      yearsVolatility
            
            
            21
            %
            
            
            31
            %
            
            
            23
            %Weighted
      average grant-date fair value of options granted
            
            $
            4.05
            
            
            $
            5.23
            
            
            $
            3.75







·
            The
      dividend yield was estimated using historical dividends paid and market
      value information for the Company’s stock. An increase in dividend yield
      will decrease stock compensation
expense.





·
            The
      risk-free interest rate was developed using the U.S. Treasury yield curve
      for periods equal to the expected life of the options on the grant date.
      An increase in the risk-free interest rate will increase stock
      compensation expense.





·
            The
      expected option life for the current period grants was estimated using the
      vesting period, the term of the option and estimates of future exercise
      behavior patterns. Prior to 2006, this assumption was based on the typical
      vesting schedule and estimates of future exercise behavior patterns. An
      increase in the option life will increase stock compensation
      expense.





·
            The
      volatility was estimated using historical volatility for periods
      approximating the expected option life. An increase in the volatility will
      increase stock compensation
expense.





SFAS 123R
requires the recognition of stock-based compensation for the number of awards
that are ultimately expected to vest. As a result, an estimate of the expected
forfeiture rate based on historical forfeiture rates is considered when
estimating the amount of current period stock based-compensation expense. Our
estimate of forfeitures will be reassessed in subsequent periods and may change
based on new facts and circumstances. Any changes in our estimates will be
accounted for prospectively in the period of change. Prior to January 1, 2006,
actual forfeitures were accounted for as they occurred for purposes of required
pro forma stock compensation disclosures.





As of
December 31, 2007, unrecognized compensation expense associated with stock
options and restricted stock was $937 and $1,036 which is expected to be
recognized over weighted average periods of approximately 2 years.




85
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Stock
Options





Under the
2004 Plan, the exercise price for common stock must equal at least 100 percent
of the fair market value of the stock on the day an 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.
Stock options vest over varying service periods which range from vesting
immediately to up to nine years.




A summary
of the stock option activity in the plans is as follows:




Shares
            
            
            Weighted
      Average
              Exercise
      PriceBalance,
      January 1, 2005
            
            
            803,188
            
            
            $
            6.81Granted
            
            
            159,000
            
            
            
            12.97Exercised
            
            
            (144,718
            )
            
            
            5.79Expired or
    forfeited
            
            
            (39,500
            )
            
            
            10.66Balance,
      December 31, 2005
            
            
            777,970
            
            
            $
            8.06Granted
            
            
            85,624
            
            
            
            15.13Exercised
            
            
            (134,986
            )
            
            
            6.27Expired or
    forfeited
            
            
            (21,100
            )
            
            
            10.72Balance,
      December 31, 2006
            
            
            707,508
            
            
            $
            9.18Granted
            
            
            150,163
            
            
            
            9.33Exercised
            
            
            (150,775
            )
            
            
            7.35Expired or
    forfeited
            
            
            (30,455
            )
            
            
            11.90Balance,
      December 31, 2007
            
            
            676,441
            
            
            
            9.50







Options
      exercisable at December 31,
            
            2007
            
            
            2006Shares
            
            
            Weighted
      Average
              Exercise
      Price
            
            
            Shares
            
            
            Weighted
      Average
              Exercise
      Price294,694
            
            
            $
            8.78
            
            
            
            271,384
            
            
            $
            7.62




The
weighted average remaining terms for outstanding stock options and for
exercisable stock options were 5.6 years and 4.6 years at December 31, 2007,
respectively. The aggregate intrinsic value at December 31, 2007 was $570 for
stock options outstanding and $283 for stock options exercisable. The intrinsic
value for stock options is calculated based on the exercise price of the
underlying awards and the market price of the Company’s common stock as of the
reporting date.




86
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Options
outstanding at December 31, 2007 were as follows:





Outstanding
      Options
            
            
            Options
      ExercisableRange
      of Exercise Prices
            
            
            Number
            
            
            Weighted
      Average
              Remaining
              Contractual
      Life
            
            
            Weighted
      Average Exercise Price
            
            
            Number
            
            
            Weighted
      Average Exercise Price$
            5.06
      – $6.75
            
            
            
            228,475
            
            
            
            2.83
            
            
            $
            6.08
            
            
            
            115,775
            
            
            $
            6.136.78
      – 11.38
            
            
            
            256,948
            
            
            
            6.84
            
            
            
            9.44
            
            
            
            128,648
            
            
            
            9.4211.40
      – 15.82
            
            
            
            191,018
            
            
            
            7.09
            
            
            
            13.68
            
            
            
            50,271
            
            
            
            13.24$
            5.06
      – $15.82
            
            
            
            676,441
            
            
            
            5.55
            
            
            $
            9.50
            
            
            
            294,694
            
            
            $
            8.78





Proceeds
received from the exercise of stock options were $1,108, $846 and $838 during
the years ended December 31, 2007, 2006 and 2005, respectively. The intrinsic
value related to the exercise of stock options was $1,194, $1,297 and $1,281,
during the years ended December 31, 2007, 2006 and 2005, respectively. The
intrinsic value related to exercises of non-qualified stock options and
disqualifying dispositions of incentive stock options resulted in the
realization of tax benefits of $11, $147 and $343, during the years ended
December 31, 2007, 2006 and 2005, respectively.





Restricted
Stock





Restricted
stock provides the grantee with voting, dividend and anti-dilution rights
equivalent to common shareholders, but is restricted from transfer until vested,
at which time all restrictions are removed. Vesting for restricted shares is
generally on a straight-line basis and ranges from one to five years. The value
of the restricted stock, estimated to be equal to the closing market price on
the date of grant, is being amortized on a straight-line basis over the
respective service periods.  The fair market value of restricted stock
awards that vested was $202, $251 and $0 during the years ended December 31,
2007, 2006 and 2005, respectively. Tax benefits related to the vesting of
restricted shares of $10, $3 and $0 were realized during the years ended
December 31, 2007, 2006 and 2005, respectively.


A summary
of the restricted stock activity in the plan is as follows:





2007
            
            
            2006
            
            
            2005Shares
            
            
            Weighted
      Average
              Grant-Date
              Fair
      Value
            
            
            Shares
            
            
            Weighted
      Average
              Grant-Date
              Fair
      Value
            
            
            Shares
            
            
            Weighted
      Average
              Grant-Date
              Fair
      ValueBalance,
      January 1,
            
            
            66,877
            
            
            $
            15.68
            
            
            
            82,000
            
            
            $
            15.64
            
            
            
            -
            
            
            $
            -Granted
            
            
            36,855
            
            
            
            12.74
            
            
            
            10,345
            
            
            
            15.83
            
            
            
            82,000
            
            
            
            15.64Vested
            
            
            (18,061
            )
            
            
            15.68
            
            
            
            (15,468
            )
            
            
            15.67
            
            
            
            -
            
            
            
            -Expired or
    forfeited
            
            
            (196
            )
            
            
            14.21
            
            
            
            (10,000
            )
            
            
            15.58
            
            
            
            -
            
            
            
            -Balance,
      December 31,
            
            
            85,475
            
            
            $
            14.41
            
            
            
            66,877
            
            
            $
            15.68
            
            
            
            82,000
            
            
            $
            15.64




87
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




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:





2007
            
            
            2006Fixed
      Rate
            
            
            Variable
      Rate
            
            
            Fixed
      Rate
            
            
            Variable
      RateCommitments
      to make loans
            
            $
            6,384
            
            
            $
            4,180
            
            
            $
            7,906
            
            
            $
            15,032Unfunded
      commitments under lines of credit
            
            
            9,446
            
            
            
            116,068
            
            
            
            896
            
            
            
            151,398





Commitments
to make loans are generally made for periods of 30 days.  As of
December 31, 2007, the fixed rate loan commitments have interest rates ranging
from 6.40% to 18.00% and maturities ranging from 12 months to 20
years.





As of December 31, 2007 and 2006, the
Company was subject to letters of credit totaling $2,947 and $3,190,
respectively.




Note
17—Supplemental Financial Data





Components
of other expense in excess of 1 percent of total interest and non-interest
income are as follows:





Years
      Ended December 31,
            
            2007
            
            
            2006
            
            
            2005Computer
      services
            
            $
            2,172
            
            
            $
            1,955
            
            
            $
            1,650Legal
      and professional fees
            
            
            2,145
            
            
            
            1,710
            
            
            
            1,444Marketing
      and community relations
            
            
            1,151
            
            
            
            983
            
            
            
            731Postage,
      courier, and armored car
            
            
            837
            
            
            
            845
            
            
            
            722Repossessed
      asset expenses
            
            
            986
            
            
            
            312
            
            
            
            128






88
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
18—Fair Values of Financial Instruments





Carrying
amount and estimated fair values of financial instruments were as follows at
December 31:





2007
            
            
            2006CarryingValue
            
            
            Estimated
              Fair
      Value
            
            
            CarryingValue
            
            
            Estimated
              Fair
      ValueFinancial
      assets:Cash
      and cash equivalents
            
            $
            71,059
            
            
            $
            71,059
            
            
            $
            55,552
            
            
            $
            55,552Investment
      securities available for sale
            
            
            160,357
            
            
            
            160,357
            
            
            
            131,199
            
            
            
            131,199Loans,
      net
            
            
            1,114,183
            
            
            
            1,126,691
            
            
            
            1,055,887
            
            
            
            1,060,474Federal
      Home Loan Bank and Independent Bankers’ Bank stock
            
            
            9,068
            
            
            
            9,068
            
            
            
            7,899
            
            
            
            7,899Accrued
      interest receivable
            
            
            7,761
            
            
            
            7,761
            
            
            
            8,319
            
            
            
            8,319Financial
      liabilities:Non-contractual
      deposits
            
            
            537,204
            
            
            
            537,204
            
            
            
            501,458
            
            
            
            501,458Contractual
      deposits
            
            
            512,754
            
            
            
            515,715
            
            
            
            527,999
            
            
            
            525,905Federal
      Home Loan Bank Advances
            
            
            140,000
            
            
            
            142,438
            
            
            
            125,000
            
            
            
            124,730Short-term
      borrowings
            
            
            77,922
            
            
            
            77,900
            
            
            
            22,250
            
            
            
            22,250Long-term
      repurchase agreements
            
            
            30,000
            
            
            
            30,401
            
            
            
            -
            
            
            
            -Notes
      payable
            
            
            -
            
            
            
            -
            
            
            
            4,000
            
            
            
            4,000Subordinated
      debentures
            
            
            33,000
            
            
            
            33,646
            
            
            
            33,000
            
            
            
            33,449Accrued
      interest payable
            
            
            9,012
            
            
            
            9,012
            
            
            
            10,798
            
            
            
            10,798





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, accrued
interest receivable and payable, demand deposits, certain short-term debt, and
variable rate loans or deposits that reprice frequently and fully.  As
it is not practicable to determine the fair value of Federal Home Loan Bank
stock and other bankers’ bank stock due to restrictions placed on its
transferability, the estimated fair value of these items is equal to their
historical cost. 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 including estimates of discounted cash
flows when necessary. 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.




89
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
19—Condensed Financial Information of TIB Financial Corp.





Condensed
Balance Sheets


(Parent
Only)





December
      31,
            
            2007
            
            
            2006Assets:Cash
      on deposit with subsidiary
            
            $
            1,092
            
            
            $
            6,323Dividends
      receivable from subsidiaries
            
            
            7,595
            
            
            
            21Investment
      in bank subsidiaries
            
            
            121,684
            
            
            
            117,504Investment
      in other subsidiaries
            
            
            1,022
            
            
            
            1,022Other
      assets
            
            
            576
            
            
            
            664Total
      Assets
            
            $
            131,969
            
            
            $
            125,534Liabilities
      and Shareholders’ Equity:Dividends
      payable
            
            $
            799
            
            
            $
            703Interest
      payable
            
            
            679
            
            
            
            778Notes
      payable
            
            
            34,022
            
            
            
            38,022Other
      liabilities
            
            
            229
            
            
            
            169Shareholders’
      equity
            
            
            96,240
            
            
            
            85,862Total
      Liabilities and Shareholders’ Equity
            
            $
            131,969
            
            
            $
            125,534








Condensed
Statements of Income


(Parent
Only)





Year
      Ended December 31,
            
            2007
            
            
            2006
            
            
            2005Operating
      income:Dividends
      from bank subsidiaries
            
            $
            11,340
            
            
            $
            7,630
            
            
            $
            2,946Dividends
      from other subsidiaries
            
            
            83
            
            
            
            63
            
            
            
            37Total
      operating income
            
            
            11,423
            
            
            
            7,693
            
            
            
            2,983Operating
      expense:Interest
      expense
            
            
            2,798
            
            
            
            2,475
            
            
            
            1,616Other
      expense
            
            
            1,298
            
            
            
            975
            
            
            
            600Total
      operating expense
            
            
            4,096
            
            
            
            3,450
            
            
            
            2,216Income
      before income tax benefit and equity in undistributed earnings of
      subsidiaries
            
            
            7,327
            
            
            
            4,243
            
            
            
            767Income
      tax benefit
            
            
            1,509
            
            
            
            1,281
            
            
            
            884Income
      before equity in undistributed earnings of subsidiaries
            
            
            8,836
            
            
            
            5,524
            
            
            
            1,651Equity
      in undistributed earnings (losses) of bank subsidiaries
            
            
            (11,257
            )
            
            
            3,723
            
            
            
            10,173Net
      income (loss)
            
            $
            (2,421
            )
            
            $
            9,247
            
            
            $
            11,824




90
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)


Note
19—Condensed Financial Information of TIB Financial Corp. (Continued)
  Condensed
Statements of Cash Flows


(Parent
Only)





Year
      Ended December 31,
            
            2007
            
            
            2006
            
            
            2005Cash
      flows from operating activities:Net
      income (loss)
            
            $
            (2,421
            )
            
            $
            9,247
            
            
            $
            11,824Equity
      in undistributed (earnings) losses of bank subsidiaries
            
            
            11,257
            
            
            
            (3,723
            )
            
            
            (10,173
            )Stock-based
      compensation expense
            
            
            231
            
            
            
            174
            
            
            
            98Increase
      (decrease) in net income tax obligation
            
            
            157
            
            
            
            377
            
            
            
            (81
            )Increase
      in other assets
            
            
            (7,416
            )
            
            
            (238
            )
            
            
            (36
            )Increase
      (decrease) in other liabilities
            
            
            (175
            )
            
            
            419
            
            
            
            (10
            )Net
      cash provided by operating activities
            
            
            1,633
            
            
            
            6,256
            
            
            
            1,622Cash
      flows from investing activities:Investment
      in bank subsidiaries
            
            
            (888
            )
            
            
            (19,500
            )
            
            
            -Investment
      in other subsidiaries
            
            
            -
            
            
            
            (619
            )
            
            
            -Net
      cash used in investing activities
            
            
            (888
            )
            
            
            (20,119
            )
            
            
            -Cash
      flows from financing activities:Repayment
      of note payable
            
            
            (4,000
            )
            
            
            -
            
            
            
            (1,250
            )Proceeds
      from exercise of stock options
            
            
            1,108
            
            
            
            846
            
            
            
            838Income
      tax benefits related to stock based compensation
            
            
            21
            
            
            
            150
            
            
            
            -Proceeds
      from bank subsidiary for equity awards
            
            
            417
            
            
            
            390
            
            
            
            -Payment
      to repurchase stock
            
            
            (569
            )
            
            
            -
            
            
            
            -Proceeds
      from issuance of long-term debt
            
            
            -
            
            
            
            20,619
            
            
            
            -Cash
      dividends paid
            
            
            (2,953
            )
            
            
            (2,741
            )
            
            
            (2,629
            )Net
      cash provided (used) by financing activities
            
            
            (5,976
            )
            
            
            19,264
            
            
            
            (3,041
            )Net
      increase (decrease) in cash
            
            
            (5,231
            )
            
            
            5,401
            
            
            
            (1,419
            )Cash,
      beginning of year
            
            
            6,323
            
            
            
            922
            
            
            
            2,341Cash,
      end of year
            
            $
            1,092
            
            
            $
            6,323
            
            
            $
            922









91
 Table of Contents
 TIB
Financial Corp. and Subsidiaries
 Notes
to Consolidated Financial Statements
 (Dollars
in thousands except share and per share
amounts)




Note
20—Quarterly Financial Data (Unaudited)





The
following is a summary of unaudited quarterly results for 2007 and
2006:





2007
            
            
            2006Fourth
            
            
            Third
            
            
            Second
            
            
            First
            
            
            Fourth
            
            
            Third
            
            
            Second
            
            
            FirstCondensed
      income statements:Interest
      income
            
            $
            23,863
            
            
            $
            23,549
            
            
            $
            23,950
            
            
            $
            23,379
            
            
            $
            23,240
            
            
            $
            22,293
            
            
            $
            20,822
            
            
            $
            18,879Net
      interest income
            
            
            11,350
            
            
            
            11,286
            
            
            
            11,882
            
            
            
            11,502
            
            
            
            11,772
            
            
            
            11,860
            
            
            
            11,949
            
            
            
            11,482Income
      (loss) from continuing operations
            
            
            (6,498
            )
            
            
            494
            
            
            
            1,712
            
            
            
            1,871
            
            
            
            1,864
            
            
            
            2,437
            
            
            
            2,329
            
            
            
            2,363Net
      income (loss)
            
            
            (6,498
            )
            
            
            494
            
            
            
            1,712
            
            
            
            1,871
            
            
            
            1,936
            
            
            
            2,452
            
            
            
            2,496
            
            
            
            2,363Earnings
      (loss) per share:Income
      (loss) from continuing operations – Basic
            
            $
            (0.51
            )
            
            $
            0.04
            
            
            $
            0.14
            
            
            $
            0.16
            
            
            $
            0.16
            
            
            $
            0.21
            
            
            $
            0.20
            
            
            $
            0.20Income
      (loss) from continuing operations – Diluted
            
            $
            (0.51
            )
            
            $
            0.04
            
            
            $
            0.14
            
            
            $
            0.16
            
            
            
            0.16
            
            
            
            0.21
            
            
            
            0.20
            
            
            
            0.20




Note
21—Subsequent  Event





On March
7, 2008, the Company consummated a transaction whereby two of Southwest
Florida’s prominent families, their representatives and their related business
interests purchased 1.2 million shares of the Company’s common stock and
warrants to purchase an additional 1.2 million shares of common stock at an
exercise price of $8.40 per share at any time prior to March 7, 2011. Gross
proceeds from the investment were $10,080. Aggregate ownership of the Company by
each family group is limited to 9.9% of outstanding shares. The shares were
issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933
for the sale of shares in a private placement transaction. Additionally, in
connection with this transaction, two representatives will be appointed to the
Company’s Board of Directors.









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ITEM 9:  CHANGES IN AND DISAGREEMENTSWITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





Not
applicable.





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
Company’s disclosure controls and procedures as of the end of the period covered
by this report. Based upon that evaluation, they have concluded that the
Corporation’s disclosure controls and procedures are effective in ensuring that
material information related to the Corporation is made known to them by others
within the Corporation.





(b)     Management’s
Annual Report on Internal Control Over Financial Reporting





During
the fourth quarter of 2007 and subsequent thereto, 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.








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MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING





The
management of TIB Financial Corp. is responsible for establishing and
maintaining adequate internal control over financial reporting, based on the
criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). TIB
Financial Corp.’s system of internal control over financial reporting was
designed under the supervision of the company’s chief executive officer and
chief financial officer to provide reasonable assurance regarding the
reliability of the preparation of the company’s financial statements for
external reporting purposes, in accordance with U.S. generally accepted
accounting principles.





TIB
Financial Corp.’s management assessed the effectiveness of the company’s
internal control over financial reporting as of December 31, 2007, based on the
criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on the assessment, management determined that, as of December 31, 2007, the
company’s internal control over financial reporting is effective. The
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2007 has been audited by Crowe Chizek and Company LLC, an
independent registered public accounting firm, as stated
in their report appearing in Item 8, page 52 of this Form
10-K.








Date:
      March 17, 2008/s/
      Edward V. LettEdward
      V. Lett
              President
      and Chief Executive Officer/s/
      Stephen J. GilhoolyStephen
      J. Gilhooly
              Executive
      Vice President and Chief Financial Officer








ITEM 9B:  OTHER INFORMATION





Not
applicable.








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PART
III








ITEM 10:  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





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 2008 Annual Shareholders Meeting is
incorporated herein by reference.





We have
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.tibfinancialcorp.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 Discussion and Analysis,”
“Compensation Committee Report”, “Compensation Committee Interlocks and Insider
Participation”, "Executive Compensation” and “Compensation of Directors" in the
Proxy Statement to be utilized in connection with the Company's 2008 Annual
Shareholders Meeting is incorporated herein by reference.








ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERSAND MANAGEMENT AND RELATED SHAREHOLDER MATTERS





The
information contained under the captions "Management and Principal Shareholders"
and “Equity Compensation Plan Information” under “Executive Compensation” in the
Proxy Statement to be utilized in connection with the Company's 2008 Annual
Shareholders Meeting is incorporated herein by reference.








ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE





The
information contained under the captions “Director Independence” under “Election
of Directors” and "Certain Relationships and Related Transactions" in the Proxy
Statement to be utilized in connection with the Company's 2008 Annual
Shareholders Meeting is incorporated herein by reference.








ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND
SERVICES





The
information contained under the caption "Independent Public Accountants" in the
Proxy Statement to be utilized in connection with the Company's 2008 Annual
Shareholders Meeting is incorporated herein by reference.








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PART
IV








ITEM 15:  EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES





1.  Financial
Statements





The
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
      Numbers3.1
            Restated
      Articles of Incorporation (a)3.2
            Amendment
      to Articles of Incorporation (b)3.3
            Bylaws
      (c)3.4
            Amendment
      to TIB Financial Corp. Bylaws4.1
            Specimen
      Stock Certificate (d)10.1
            Employment
      Agreement between Edward V. Lett, TIB Financial Corp. and TIB Bank
      effective March 1, 2004 (e), (f)10.2
            401(K)
      Savings and Employee Stock Ownership Plan (d), (e)10.3
            Employee
      Incentive Stock Option Plan (d), (e)10.4
            Employment
      Agreement between Millard J. Younkers, Jr., TIB Financial Corp. and TIB
      Bank effective March 1, 2004 (e), (f)10.5
            Employment
      Agreement between David P. Johnson, TIB Financial Corp. and TIB Bank
      effective March 1, 2004 (e), (f)10.6
            Employment
      Agreement between Michael D. Carrigan, TIB Financial Corp. and TIB Bank
      effective March 1, 2004 (e), (g)10.7
            Employment
      Agreement between Alma Shuckhart, TIB Financial Corp., and TIB Bank
      effective March 1, 2004. (e), (g)10.8
            Employment
      Agreement between Stephen J. Gilhooly, TIB Financial Corp., and TIB Bank
      effective September 27, 2006 (e), (h)10.9
            Form
      of Director Deferred Fee Agreement (e), (i)10.10
            Form
      of Salary Continuation Agreement (e), (i)10.11
            Form
      of Executive Officer Split Dollar Agreement (e), (i)10.12
            Form
      of Director Deferred Fee Agreement – First Amendment (e),
    (f)10.13
            Form
      of Executive Officer Split Dollar Agreement – First Amendment (e),
      (f)10.14
            Form
      of Salary Continuation Agreement – First Amendment (e),
  (j)10.15
            Form
      of Restricted Stock Agreement (k)10.16
            Form
      of Restricted Stock Agreement Addendum (k)10.17
            Form
      of Salary Continuation Agreement – Second Amendment (e),
    (m)10.18
            Marketing
      and Sales Alliance Agreement (k)10.19
            Non-Competition
      Agreement (k)






(Continued)




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Exhibit
      Numbers (continued)10.20
            Form
      of Salary Continuation Agreement - Michael Carrigan and Steve Gilhooly
      (e), (n)10.21
            Stock
      Purchase Agreement between Naples Capital Advisors, Inc., John M. Suddeth,
      Jr. and Michael H. Morris, and TIB Financial Corp. (o)10.22
            Amendment
      to the Employment Agreement for Alma Shuckhart (e), (t)10.23
            Employment
      Agreement between David F. Voigt, TIB Financial Corp., and The Bank of
      Venice (e), (q)10.24
            Revised
      Audit Committee Charter dated April 24, 2007 (t)10.25
            Revised
      Corporate Governance and Nomination Committee Charter dated January 23,
      2007 (r)10.26
            Revised
      Corporate Governance Guidelines dated January 23, 2007 (r)10.27
            Second
      Amendment to the Employment Agreement for Alma Shuckhart (e),
  (p)10.28
            Form
      of Stock Purchase Agreement (s)10.29
            Form
      of Registration Rights Agreement (s)10.30
            Form
      of Relationship Agreement (s)10.31
            Form
      of Common Stock Warrant (s)14.1
            Board
      of Directors Ethics Code (k)14.2
            Senior
      Financial Officer Ethics Code (k)21.1
            Subsidiaries
      of the Registrant23.1
            Consent
      of Independent Registered Public Accounting Firm31.1
            Chief
      Executive Officer’s certification required under Section 302 of
      Sarbanes-Oxley Act of 200231.2
            Chief
      Financial Officer’s certification required under Section 302 of
      Sarbanes-Oxley Act of 200232.1
            Chief
      Executive Officer’s certification required under Section 906 of
      Sarbanes-Oxley Act of 200232.2
            Chief
      Financial Officer’s certification required under Section 906 of
      Sarbanes-Oxley Act of 200299.1
            Statement
      of Policy with respect to Related Person Transactions (m)


(a)
            Incorporated
      by reference to Appendix A in the Company’s Definitive Proxy Statement
      filed on April 8, 2004.(b)
            Item
      3.2 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on September 28, 2006 and is incorporated herein by
      reference.(c)
            Previously
      filed by the Company as an Exhibit to the Company's Registration Statement
      (Registration No. 333-113489) and such document is incorporated herein by
      reference.(d)
            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.






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(e)
            Represents
      a management contract or a compensation plan or arrangement required to be
      filed as an exhibit.(f)
            Items
      10.1, 10.4, 10.5, 10.12 and 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.(g)
            Items
      10.6 and 10.7 were previously filed by the Company as an Exhibit to the
      Form 10-Q filed by the Company on November 8, 2006 and are incorporated
      herein by reference.(h)
            Item
      10.8 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on September 27, 2006 and is incorporated herein by
      reference.(i)
            Items
      10.9 through 10.11 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.(j)
            Item
      10.14 was previously filed by the Company as an Exhibit to the Company’s
      December 31, 2004 10-K and is incorporated herein by
      reference.(k)
            Items
      10.15, 10.16, 10.18, 10.19, 14.1 and 14.2 were previously filed by the
      Company as Exhibits to the Company’s December 31, 2005 10-K and such
      documents are incorporated herein by reference.(l)
            Item
      10.20 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on November 14, 2006 and is incorporated herein by
      reference.(m)
            Items
      10.17 and 99.1 were previously filed by the Company as Exhibits (with the
      same respective exhibit number as indicated herein) to the Company's
      December 31, 2006 Form 10-K and such documents are incorporated herein by
      reference.(n)
            Item
      10.20 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on February 7, 2008 and is incorporated herein by
      reference.(o)
            Item
      10.21 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on December 13, 2007 and is incorporated herein by
      reference.(p)
            Item
      10.27 was previously filed by the Company as an Exhibit to the Form 10-Q
      filed by the Company on November 9, 2007 and is incorporated herein by
      reference.(q)
            Item
      10.23 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on May 2, 2007 and is incorporated herein by
      reference.(r)
            Items
      10.25 and 10.26 were previously filed by the Company as Exhibits to
      the Form 8-K filed by the Company on January 25, 2007 and such
      documents are incorporated herein by reference.(s)
            Items
      10.28 through 10.31 were previously filed by the Company as Exhibits to
      the Form 8-K filed by the Company on March 11, 2008 and such documents are
      hereby incorporated by reference.(t)
            Item
      10.22 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on October 1, 2007 and is incorporated herein by
      reference.(u)
            Item
      10.24 was previously filed by the Company as an Exhibit to the Form 8-K
      filed by the Company on April 26, 2007 and is incorporated herein by
      reference.








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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 17, 2008.







TIB
      FINANCIAL CORP.By:
              /s/ Edward
      V. LettEdward
      V. LettPresident,
      Chief Executive Officer and Director





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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 17, 2008.





Signature
            
            Title/s/
      Edward V. Lett
            
            President
      (Principle Executive Officer), Chief Executive Officer and
      DirectorEdward
      V. Lett/s/
      Richard C. Bricker, Jr.
            
            DirectorRichard
      C. Bricker, Jr./s/
      Paul O. Jones, Jr. M.D.
            
            DirectorPaul
      O. Jones, Jr., M.D./s/
      Thomas J. Longe
            
            DirectorThomas
      J. Longe/s/
      John G. Parks, Jr.
            
            DirectorJohn
      G. Parks, Jr./s/
      Marvin F. Schindler
            
            DirectorMarvin
      F. Schindler/s/
      Otis T. Wallace
            
            DirectorOtis
      T. Wallace/s/
      David F. Voigt
            
            DirectorDavid
      F. Voigt/s/
      Stephen J. Gilhooly
            
            Chief
      Financial and Accounting OfficerStephen
      J. Gilhooly








100