<PAGE>   1
                    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                                     Commission file number
ended December 31, 1998                                           000-21329


                              TIB FINANCIAL CORP.
             (Exact Name of Registrant as Specified in Its Charter)

         Florida                                               65-0655973
(State of Incorporation)                                    (I.R.S. Employer
                                                           Identification No.)
       99451 Overseas Highway
         Key Largo, Florida                                     33037-7808
(Address of Principal Executive Offices)                        (Zip Code)


                                 (305) 451-4660
                        (Registrant's telephone number)

Securities Registered pursuant to Section 12(b) of the Act:  None
Securities Registered pursuant to Section 12(g) of the Act:  Common stock, 
                                                             par value $0.10

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No
                                              -----   -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant'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. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 1, 1999 was $32,072,659 based on $10.875 per share as of
March 22, 1999.

The number of shares outstanding of issuer's class of common stock at March 22,
1999 was 4,376,695 shares of common stock.

Documents Incorporated By Reference: Portions of the Proxy Statement for the
1999 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission within 120 days of the Registrant's 1998 fiscal year end
are incorporated by reference into Part III of this report.



<PAGE>   2


                               TABLE OF CONTENTS
                                     PART I


<TABLE>
<CAPTION>
                                                                                                    Page
<S>               <C>                                                                               <C>
ITEM 1.           BUSINESS...................................................................         1

ITEM 2.           PROPERTIES.................................................................         8 

ITEM 3.           LEGAL PROCEEDINGS..........................................................         9

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS...........................................................         9

                                                       PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS................................................         9

ITEM 6.           SELECTED FINANCIAL DATA....................................................        10

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION...............................        11 

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK .................        31

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................        32

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE.......................................................        68

                                                      PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS
                  OF THE REGISTRANT..........................................................        68

ITEM 11.          EXECUTIVE COMPENSATION.....................................................        68

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN
                  BENEFICIAL OWNERS AND MANAGEMENT...........................................        68

ITEM 13.          CERTAIN RELATIONSHIPS AND
                  RELATED TRANSACTIONS.......................................................        68



</TABLE>



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<TABLE>
 

                                                     PART IV                                     Page
<S>               <C>                                                                            <C>   
ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                  AND REPORTS ON FORM 8-K.........................................................69

SIGNATURES        ..............................................................................70-71


</TABLE>

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CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

Certain of the matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this Annual Report on Form 10-K may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act and as such
may involve known and unknown risk, uncertainties and other factors which may
cause the actual results, performance or achievements of TIB Financial Corp.
(the "Company") to be materially different from future results described in
such forward-looking statements. Actual results may differ materially from the
results anticipated in these forward looking statements due to a variety of
factors, including, without limitation: the effects of future economic
conditions; governmental monetary and fiscal policies, as well as legislative
and regulatory changes; the risks of changes in interest rates on the level and
composition of deposits, loan demand, and the values of loan collateral, and
interest rate risks; the effects of competition from other commercial banks,
thrifts, consumer finance companies, and other financial institutions operating
in the Company's market area and elsewhere. All forward looking statements
attributable to the Company are expressly qualified in their entirety by these
cautionary statements. The Company disclaims any intent or obligation to update
these forward-looking statements, whether as a result of new information,
future events or otherwise.

                                     PART I


ITEM 1.  BUSINESS


TIB Financial Corp. (the "Company"), Key Largo, Florida, was incorporated as a
Florida business corporation in February 1996, for the purpose of becoming a
bank holding company by acquiring all of the common stock of TIB Bank of the
Keys (the "Bank"), Key Largo, Florida. Following the receipt of approval from
the Board of Governors of the Federal Reserve System (the "Federal Reserve"),
the Company became a bank holding company within the meaning of the Bank
Holding Company Act of 1956 (the "Act") upon the acquisition of all of the
Common Stock of the Bank on August 31, 1996.

The Company is authorized to engage in any activity permitted by law to a
Florida corporation, subject to applicable Federal regulatory restrictions on
the activities of bank holding companies.

The Bank was incorporated under the laws of the State of Florida on December
28, 1973, for the purpose of conducting the business of commercial banking. The
Bank commenced commercial banking operations on February 1, 1974. The deposits
at the Bank are insured up to applicable limits by the Federal Deposit
Insurance Corporation (the "FDIC").

The Bank conducts a general commercial banking business in its primary service
area, Monroe County, Florida, emphasizing the banking needs of individuals,
professionals and business customers. The Company and the Bank conduct business
from the main office of the Bank located at 99451 Overseas Highway, Key Largo,
Florida 33037-7808. The Bank also conducts business from its ten branch
locations throughout the Florida Keys from Key Largo to Key West and South Dade
County Florida.

The principal business of the Bank is to attract deposits from the public and
to use such deposits to make real estate, business and consumer loans its
primary service area. As of December 31, 1998, the Bank had total assets of
approximately $354.5 million, total deposits of approximately $325.1 million
and total shareholders' equity of approximately $25.4 million.

The Bank offers a full range of deposit services that are typically available
from financial institutions, including NOW accounts, money market checking
accounts, demand accounts, savings accounts, certificates of deposit and other
time deposits. In addition, retirement accounts such as Individual Retirement
Accounts are available from the Bank. The Bank pays interest on its deposit
accounts and certificates competitive with other financial institutions in its
primary service area.

The Bank seeks to concentrate its deposits and loan efforts within Monroe and
South Dade Counties, Florida, its primary service area. The primary factors in
competing for deposits are interest rates, the range of financial services
offered, 




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<PAGE>   5

service, convenience of office locations and flexible office hours. Direct
competition for such deposits comes from other commercial banks, savings
institutions, credit unions, brokerage firms and money market funds.

The Bank's lending philosophy is to make loans, taking into consideration the
safety of the Bank's depositors' funds, the preservation of the Bank's
liquidity, the interest of the Company's shareholders, and the welfare of the
community. Interest income from the Bank's lending operations is a principal
component of the Bank's income, so therefore prudent lending is essential for
the prosperity of the Bank.

The primary factors in competing for loans are interest rates, loan origination
fees and the range of lending services offered. Competition for origination of
loans normally comes from other commercial banks, savings institutions, credit
unions and mortgage banking firms. Such entities may have competitive
advantages as a result of greater resources and higher lending limits (by
virtue of their greater capitalization). There are also smaller financial
institutions that compete for the same market. The bank seeks to attract
customers with its products and services which are tailored to the needs of the
customers. Management seeks to emphasize a high degree of personalized client
service in order to be able to better meet the banking needs of its customers.

The Bank's loan portfolio at December 31, 1998 contained approximately 28% real
estate loans, 67% commercial loans and 5% consumer loans. Approximately 86% of
all loans outstanding are secured by real estate. The Bank's loan to deposit
ratio at December 31, 1998 was approximately 75.9%.

In addition to interest income from the Bank's lending operations, the other
major sources of income for the Bank are fees collected on loans, interest on
investment securities and service charges on deposit accounts, gains on sales
of government guaranteed loans, and merchant bankcard processing income. The
principal expenses of the Bank are interest paid on deposits, employee
compensation, office expenses, and other overhead expenses.

The Bank engages through a wholly-owned subsidiary, TIB Investment & Insurance
Center, Inc. ("TIB Investment"), in the retail sale of nondeposit investment
products such as variable and fixed rate annuities, mutual funds and other
products. The Bank has entered into an agreement with Linsco/Private Ledger
Corp., a third-party provider which trains and supervises employees of the Bank
or TIB Investment in the sale of these products from various offices of the
Bank.

The Bank also engages through a wholly-owned subsidiary, TIB Government Loan
Specialists, Inc., in the origination and sale of the government guaranteed
portion of loans that qualify for government guaranteed loan programs such as
those offered by the Small Business Administration and the U.S. Department of
Agriculture Rural Development Business and Industry Program.

In the third and fourth quarters of 1998, the Company acquired a 30% interest
in ERAS JV for $791,216. This Company specializes in cash item processing for
depository institutions and customized software for the financial industry. The
Company has also contracted to begin using ERAS JV for the bank's data
processing needs starting at the end of the first quarter of 1999.

Additionally, the Company has the option to acquire a 50% interest in
Professional Protective Insurance Company (PPIC) during the next three years.
PPIC writes homeowners insurance; initially assuming business from the State of
Florida property fund, known as the FRPC-JUA. PPIC's goal is to develop a
significant presence in the Florida insurance market.

The Bank's business plan relies principally upon local advertising and
promotional activity and upon personal contacts by its directors, officers and
shareholders to attract business and to acquaint potential customers with the
Bank's personalized services. The Bank emphasizes a high degree of personalized
client service in order to be able to provide for each customer's banking
needs. The Bank's marketing approach emphasizes the advantages of dealing with
an independent, locally-owned and managed state chartered bank to meet the
particular needs of consumers, professionals and businesses customers in the
community. All banking services are continually evaluated with regard to their
profitability and efforts are made to modify the Bank's business plan if deemed
appropriate.




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<PAGE>   6

EMPLOYEES

As of December 31, 1998, the Bank employed 178 full-time employees and 13
part-time employees. Except for the officers of the Bank who presently serve as
officers of the Company, the Company does not have any employees. Neither the
Company nor the Bank is a party to any collective bargaining agreement, and
management believes the Bank enjoys satisfactory relations with its employees.


SUPERVISION AND REGULATION

REGULATION OF THE BANK. The operations of the Bank are subject to state and
federal statutes applicable to state chartered banks whose deposits are insured
by the FDIC, and also to the regulations of the Florida Department of Banking
and Finance (the "DBF") and the FDIC. Such statutes and regulations relate to,
among other things, required reserves, investments, loans, mergers and
consolidations, branching, issuances of securities, payment of dividends,
payment of interest rates, establishment of branches and other aspects of the
Bank's operations. Under the provisions of the Federal Reserve Act, the Bank is
subject to certain restrictions on any extensions of credit to the Company or,
with certain exceptions, other affiliates, and on the taking of such stock or
securities as collateral on loans to any borrower. In addition, the Bank is
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or the providing of any property or service. Florida law
permits banks to branch on a statewide basis. Therefore, the Bank has the
ability to expand its market presence in Monroe County, Florida or into other
markets in Florida.

The FDIC has adopted risk-based capital guidelines for all FDIC insured state
chartered banks that are not members of the Federal Reserve System. These
guidelines require all banks to maintain a minimum ratio of total capital to
risk weighted assets of 8 percent (of which at least 4 percent must consist of
Tier 1 capital). Tier 1 capital of state chartered banks (as defined in
regulations) generally consists of (i) common stockholders equity; (ii)
noncumulative perpetual preferred stock and related surplus; and (iii) minority
interests in the equity accounts of consolidated subsidiaries.

In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets
of banks. This capital measure is generally referred to as the leverage capital
ratio. The FDIC has established a minimum leverage capital ratio of 3 percent
if the FDIC determines that the institution is not anticipating or experiencing
significant growth and has well-diversified risk, including no undue interest
rate exposure, excellent asset quality, high liquidity, good earnings and, in
general, is considered a strong banking organization, rated Composite 1 under
the Uniform Financial Institutions Rating System. Other financial institutions
are expected to maintain leverage capital at least 100 to 200 basis points
above the minimum level. At December 31, 1998, the Bank exceeded the minimum
Tier 1, risk-based and leverage capital ratios. The table which follows set
forth certain capital information for the Bank as of December 31, 1998.




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<TABLE>
<CAPTION>

                                CAPITAL ADEQUACY
                             (Dollars in thousands)

                               December 31, 1998
                              ---------------------   
                              Amount        Percent
                              ------        -------  
<S>                           <C>          <C> 
Leverage Ratio:

     Actual                   $23,676        7.6%
     Minimum Required (1)     $ 9,413        3.0%

Risk-Based Capital:
Tier 1 Capital
 
     Actual                   $23,676        9.4%
     Minimum Required         $10,108        4.0%

Total Capital

     Actual                   $26,193       10.4%
     Minimum Required         $20,217        8.0%

</TABLE>

(1)  Represents the highest regular minimum requirement. Institutions that are
     contemplating acquisitions or anticipating or experiencing significant
     growth may be required to maintain a substantially higher leverage ratio.
     See below regarding the consequences of failing to meet specified capital
     standards.

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
contains "prompt corrective action" provisions which established among other
things, the following five capital standard categories for depository
institutions: (i) well capitalized, (ii) adequately capitalized, (iii)
undercapitalized, (iv) significantly undercapitalized and (v) critically
undercapitalized. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions depending on the category in
which an institution is classified. Each of the federal banking agencies has
issued uniform regulations, which, among other things, define the capital levels
described above. Under the regulations, a bank is considered "well capitalized"
if it (i) has a total risk-based capital ratio of 10% or greater, (ii) has a
Tier 1 risk-based capital ratio of 6% or greater, (iii) has a leverage ratio of
5% or greater, and (iv) is not subject to any order or written directive to meet
and maintain a specific capital level for any capital measure. An "adequately
capitalized" bank is defined as one that has (i) a total risk-based capital
ratio for 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater
and (iii) a leverage ratio of 4% or greater. An "undercapitalized" bank is
defined as one that has a total risk-based capital ratio of less than 8%, (ii) a
Tier I risk-based capital ratio of less than 4% or (iii) a leverage ratio of
less than 3%. A "significantly undercapitalized" bank is defined as one that has
a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital
ratio of less than 3% or a leverage ratio of less than 3% and a bank is
"critically undercapitalized" if the bank has a leverage ratio equal to or less
than 2%. The applicable federal regulatory agency for a bank that is "well
capitalized" may reclassify it as "adequately capitalized" or "undercapitalized"
and subject the institution to the supervisory actions applicable to the next
lower capital category, if it determines that the Bank is in an unsafe or
unsound condition or deems the bank to be engaged in an unsafe or unsound
practice and not to have corrected the deficiency. As of December 31, 1998, the
Bank met the definition of a "well capitalized" institution.

"Undercapitalized" depository institutions, among other things, are subject to
growth limitations, are prohibited, with certain exceptions, from making capital
distributions, are limited in their ability to obtain funding from a Federal
Reserve Bank and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan and provide 




                                       4

<PAGE>   8

appropriate assurances of performance. If a depository institution fails to
submit an acceptable plan, including if the holding company refuses or is
unable to make the guarantee described in the previous sentence, it is treated
as if it is "significantly undercapitalized". Failure to submit or implement an
acceptable capital plan also is grounds for the appointment of a conservator or
a receiver. "Significantly undercapitalized" depository institutions may be
subject to a number of additional requirements and restrictions such as orders
to sell sufficient voting stock to become adequately capitalized, requirements
to reduce total assets, and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions, among other things, are
prohibited from making any payments of principal and interest on subordinated
debt, and are subject to the appointment of a receiver or conservator.

Under FDICIA, the FDIC is permitted to provide financial assistance to an
insured bank before appointment of a conservator or receiver only if (i) such
assistance would be the least costly method of meeting the FDIC's insurance
obligations, (ii) grounds for appointment of a conservator or a receiver exist
or are likely to exist, (iii) it is unlikely that the bank can meet all capital
standards without assistance and (iv) the bank's management has been competent,
has complied with applicable laws, regulations, rules and supervisory
directives and has not engaged in any insider dealing, speculative practice or
other abusive activity.

The Bank is also subject to, among other things, the provisions of the Equal
Credit Opportunity Act (the "ECOA") and the Fair Housing Act (the "FHA"), both
of which prohibit discrimination based on race or color, religion, national
origin, sex, and familial status in any aspect of a consumer or commercial
credit or residential real estate transaction. The Department of Housing and
Urban Development, the Department of Justice (the "DOJ"), and all of the
federal banking agencies have issued an Interagency Policy Statement on
discrimination in Lending which provides guidance to financial institutions as
to what the agencies consider in determining whether discrimination exists, how
the agencies will respond to lending discrimination, and what steps lenders
might take to prevent discriminatory lending practices.


REGULATION OF THE COMPANY. The Company is a bank holding company within the
meaning of the Act. As a bank holding company, the Company is required to file
with the Federal Reserve an annual report and such additional information as
the Board may require pursuant to the Act. The Federal Reserve may also make
examinations of the Company and each of its subsidiaries. Bank holding
companies are required by the Act to obtain approval from the Federal Reserve
prior to acquiring, directly or indirectly, ownership or control of more than
5% of the voting shares of a bank.

The Act also prohibits bank holding companies, with certain exceptions, from
acquiring more than 5% of the voting shares of any company that is not a bank
and from engaging in any nonbanking business (other than a business closely
related to banking as determined by the Federal Reserve) or from managing or
controlling banks and other subsidiaries authorized by the Act or furnishing
services to, or performing services for, its subsidiaries without the prior
approval of the Federal Reserve. The Federal Reserve is empowered to
differentiate between activities that are initiated de novo by a bank holding
company or a subsidiary and activities commenced by acquisition of a going
concern.

As a bank holding company, the Company is subject to capital adequacy
guidelines established for bank holding companies by the Federal Reserve. The
minimum required ratio for total capital to risk weighted assets is 8 percent
(of which at least 4 percent must consist of Tier 1 capital). Tier 1 capital
(as defined in regulations of the Federal Reserve) consists of common and
qualifying preferred stock and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and other intangible assets required
to be deducted under the Federal Reserve's guidelines. The Federal Reserve's
guidelines apply on a consolidated basis to bank holding companies with total
consolidated assets of $150 million or more. For bank holding companies with
less than $150 million in total consolidated assets, the guidelines apply on a
bank only basis, unless the bank holding company is engaged in nonbanking
activity involving significant leverage or has significant amount of debt
outstanding that is held by the general public. The Federal Reserve has stated
that risk based capital guidelines establish minimum standards and that bank
holding companies generally are expected to operate well above the minimum
standards.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), 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 







                                       5

<PAGE>   9

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. The Interstate Banking Act
generally prohibits an interstate acquisition (other than the initial entry
into a state by a bank holding company) that would result in either the control
of more than (i) 10% of the total amount of insured deposits in the United
States, or (ii) 30% of the total insured deposits in the home state of the
target bank, unless such 30% limitation is waived by the home state on a basis
which does not discriminate against out-of-state institutions. As a result of
this legislation, the Company may become a candidate for acquisition by, or may
itself seek to acquire, banking organizations located in other states.

Florida has enacted the Florida Interstate Branching Act (the "Florida
Branching Act"), which permits interstate branching through merger transactions
under the Interstate Banking Act. Under the Florida Branching Act, with the
prior approval of the DBF, 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, the Florida Branching Act 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 the
branches of the Florida bank that participated in such merger. An out-of-state
bank, however, is not permitted to acquire a Florida bank in a merger
transaction unless the Florida bank has been in existence and continuously
operated for more than three years.

The Riegle Community Development and Regulatory Improvement Act of 1994 (the
"Improvement Act") provides for the creation of a community development
financial institutions' fund to promote economic revitalization in community
development. Banks and thrift institutions are allowed to participate in such
community development banks. The Improvement Act also contains (i) provisions
designed to enhance small business capital formation and to enhance disclosure
with regard to high cost mortgages for the protection of consumers, and (ii)
more than 50 regulatory relief provisions that apply to banks and thrift
institutions, including the coordination of examinations by various federal
agencies, coordination of frequency and types of reports financial institutions
are required to file and reduction of examinations for well capitalized
institutions.

Federal Reserve policy requires a bank holding company to act as a source of
financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not otherwise be warranted. In addition, under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), where a bank holding
company has more than one bank or thrift subsidiary, each of the bank holding
company's subsidiary depository institutions is responsible for any losses to
the FDIC as a result of an affiliated depository institution's failure. As a
result, a bank holding company may be required to loan money to its
subsidiaries in the form of capital notes or other instruments which qualify as
capital under regulatory rules. However, any loans from the holding company to
such subsidiary banks likely will be unsecured and subordinated to such bank's
depositors and perhaps to other creditors of the bank. In addition, a bank
holding company may be required to provide additional capital to any additional
banks it acquires as a condition to obtaining the approvals and consents of
regulatory authorities in connection with such acquisitions.

The Federal Reserve has adopted certain provisions implementing The Economic
Growth and Regulatory Paperwork Reduction Act of 1996. Among other things,
these provisions reduce the notice and application requirements applicable to
bank and nonbank acquisitions and de novo expansion by well-capitalized and
well-managed bank holding companies; expand the list of nonbanking activities
permitted to bank holding companies; reduce certain limitations on previously
permitted activities; and amend Federal Reserve anti-tying restrictions to
allow banks greater flexibility to package products and services with their
affiliates.

The Company and the Bank are subject to Section 23A of the Federal Reserve Act,
which limits a bank's "covered transactions" (generally, any extension of
credit or purchase of assets) with any single affiliate to no more than 10% of
a bank's capital and surplus. Covered transactions with all affiliates combined
are limited to no more than 20% of a bank's capital and surplus. All covered
and exempt transactions between a bank and its affiliates must be on terms and
conditions consistent with safe and sound banking practices, and a bank and its
subsidiaries are prohibited from purchasing low quality assets from the bank's
affiliates. Finally, Section 23A requires that all of a bank's extensions of
credit to an affiliate be appropriately secured by collateral. The Company and
the Bank are also subject to Section 23B of the Federal Reserve Act, which
further limits transactions among affiliates. Sections 22(g) and 22(h) of the
Federal Reserve Act and



                                       6

<PAGE>   10

implementing regulations also prohibit extensions of credit by a state
non-member bank (such as the Bank) to its directors, executive officers and
controlling shareholders on terms which are more favorable than those afforded
other borrowers, and impose limits on the amounts of loans to individual
affiliates and all affiliates as a group.

The Company and the Bank are subject to the provisions of the Community
Reinvestment Act of 1977 (the "CRA") and the federal banking agencies'
regulations issued thereunder. Under the CRA, all banks and thrifts have a
continuing and affirmative obligation, consistent with its safe and sound
operation to help meet the credit needs for their entire communities, including
low- and moderate-income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions, nor does it limit
an institution's discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA. The CRA requires a depository institution's primary federal regulator, in
connection with its examination of the institution, to assess the institution's
record of assessing and meeting the credit needs of the community served by
that institution, including low- and moderate-income neighborhoods. The
regulatory agency's assessment of the institution's record is made available to
the public. In the case of a bank holding company applying for approval to
acquire a bank or other bank holding company, the Federal Reserve will assess
the records of each subsidiary depository institution of the applicant bank
holding company, and such records may be the basis for denying the application.

The evaluation system used to judge an institution's CRA performance consists
of three tests: a lending test; an investment test; and a service test. Each of
these tests will be applied by the institution's primary federal regulatory
taking into account such factors as: (i) demographic data about the community;
(ii) the institution's capacity and constraints; (iii) the institution's
product offerings and business strategy; and (iv) data on the prior performance
of the institution and similarly-situated lenders.

In addition, a financial institution has the option of having its CRA
performance evaluated based on a strategic plan of up to five years in length
that it had developed in cooperation with local community groups. In order to
be rated under a strategic plan, the institution is required to obtain the
prior approval of its federal regulator.

The interagency CRA regulations provide that an institution evaluated under a
given test will receive one of five ratings for the test: outstanding, high
satisfactory, low satisfactory, needs to improve, or substantial
non-compliance. An institution will receive a certain number of points for its
rating on each test, and the points are combined to produce an overall
composite rating of either outstanding, satisfactory, needs to improve, or
substantial non-compliance. Under the agencies' rating guidelines, an
institution that receives an "outstanding" rating on the lending test will
receive an overall rating of at least "satisfactory", and no institution can
receive an overall rating of "satisfactory" unless it receives a rating of at
least "low satisfactory" on its lending test. In addition, evidence of
discriminatory or other illegal credit practices would adversely affect an
institution's overall rating. Under the new regulations, an institution's CRA
rating would continue to be taken into account by its primary federal regulator
in considering various types of applications. As a result of the Bank's most
recent CRA examination in July 1998, the Bank received an "outstanding" CRA
rating.

The United States Congress and the Florida Legislature periodically consider
and adopt legislation that results in, and could further result in,
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 the business of the Company or the Bank
cannot be accurately predicted. The Company cannot predict what legislation
might be enacted or what other implementing regulations might be adopted, and
if enacted or adopted, the effect thereof.


COMPETITION

The banking business is highly competitive. The Bank competes with other
commercial banks that conduct operations in its primary service area.

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 






                                     7

<PAGE>   11

personal manner in which services are offered. The Bank encounters strong
competition from most of the financial institutions in the Bank's primary
service area. In the conduct of certain areas of its banking business, the Bank
also competes with credit unions, consumer finance companies, insurance
companies, money market mutual funds and other financial institutions, some of
which are not subject to the same degree of regulation and restrictions imposed
upon the Bank. Many of these competitors have substantially greater resources
and lending limits than the Bank has and offer certain services, such as trust
services, that the Bank does not provide presently. Management believes that
personalized service and competitive pricing will provide it with a method to
compete effectively in the primary service area.

MONETARY POLICY

Earnings of the Company are affected by domestic and foreign economic
conditions, particularly by the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve has an important impact
on the operating results of banks and other financial institutions through its
power to implement national monetary policy. The methods used by the Federal
Reserve include setting the reserve requirements of banks, establishing the
discount rate on bank borrowings and conducting open market transactions in
United States Government securities.

FDIC INSURANCE ASSESSMENTS

The FDIC has regulations that provide for a risk-based premium system which
requires higher assessment rates for banks which the FDIC determines pose
greater risks to the BIF.

Under the regulations, banks pay an assessment depending upon risk
classification. Although the regulations were adopted by the FDIC as final
regulations, the Board of the FDIC will consider whether changes in economic
and industry conditions require adjustments in the range of assessment rates to
be charged in future years.

To arrive at risk-based assessments, the FDIC places each bank in one of nine
risk categories using a two step process based on capital ratios and on other
relevant information. Each bank is assigned to one of three groups (well
capitalized, adequately capitalized, or under capitalized) based on its capital
ratios. The FDIC has also assigned each bank to one of three subgroups based
upon an evaluation of the risk posed by the bank. The three subgroups include
(i) banks that are financially sound with only a few minor weaknesses, (ii)
those banks with weaknesses which, if not corrected, could result in
significant deterioration of the bank and increased risk to the BIF, and (iii)
those banks that pose a substantial probability of loss to the BIF unless
corrective action is taken. These supervisory evaluations modify premium rates
within each of the three capital groups with the result being the nine risk
categories and assessment rates based on a summary multiplier.

The Bank has been informed by the FDIC that it has been classified as well
capitalized and in the lowest risk category and will be assessed accordingly
for 1999.

STATISTICAL INFORMATION

Certain statistical information is found in Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations of this Annual Report
on Form 10-K.


ITEM 2.  PROPERTIES

The Company conducts its business operations through the principal executive
and operations office of the Company and the Bank located on an approximately
1.3 acre site at 99451 Overseas Highway, Key Largo, Monroe County, Florida. The
main offices of the Bank at 99451 Overseas Highway are housed in a two-story
building, owned by the Bank and containing approximately 13,275 square feet of
finished space used for offices and operations and seven teller windows in the
Bank lobby. The building also has two drive-up teller windows and an automated
teller machine with 24-hour a day access.

The Bank's ten branches are located at 28 N.E. 18th Street in Homestead; 777
Krome Avenue in Homestead; 103300 



                                      8
<PAGE>   12
Overseas Highway in Key Largo; 91980 Overseas Highway in Tavernier; 80900
Overseas Highway in Islamorada; 110401 Overseas Highway in Marathon Shores; 2135
Overseas Highway in Marathon; Mile Marker 30.4 Big Pine Key; 330 Whitehead
Street in Key West; and 3322 N. Roosevelt Drive, Searstown Key West; Florida.
One of the Bank's ten branch locations is leased under an operating lease and
the main office and the remaining branch properties are owned by the Bank. The
lease on the Key West branch located at Searstown is continuing on a month to
month basis until a new facility is constructed less than one mile from the
existing office.

The Bank also owns three other properties. The Bank owns a one-story building
containing approximately 5,000 square feet on a one-half acre lot located at
100210 Overseas Highway, Key Largo. This building is leased to other
businesses. The Bank owns a three-story building at 228 Atlanta Boulevard, Key
Largo, Florida, consisting of approximately 3,000 square feet that is utilized
by the Bank primarily for the loan operations, human resources and marketing
departments. Finally, the bank owns property at 3618 N. Roosevelt Boulevard in
Key West where the renovation of an existing structure into a branch bank will
be completed in the second quarter of 1999.


ITEM 3.  LEGAL PROCEEDINGS

While the Company and the Bank are from time to time parties to various legal
proceedings arising in the ordinary course of their business, management
believes after consultation with legal counsel that there are no proceedings
threatened or pending against the Company or the Bank that will, individually
or in the aggregate, have a material adverse effect on the consolidated results
of operations or financial condition of the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the Company's
fourth quarter of the fiscal year ended December 31, 1998.


                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND 
         RELATED STOCKHOLDER MATTERS

As of December 31, 1998, there were approximately 425 shareholders of record
and 4,399,795 shares of the Company's common stock outstanding. On June 18,
1997, the Company's $0.10 par value common Stock became listed on the Nasdaq
National Market System under the symbol "TIBB." Prior thereto, the Company's
common stock had not been traded on an established trading market, so there had
been limited trading. The following table sets forth the high and low sale
prices per share for the Company's common stock on the Nasdaq National Market
for each quarter beginning with the quarter ended June 30, 1997, and high and
low sales price information for the common stock for each quarter prior thereto
in which trading has occurred since January 1, 1997:

<TABLE>
<CAPTION>


Quarter Ended                            1998                           1997
                                  ---------------------           ----------------------
                                   High           Low              High            Low
                                  ------         ------           ------          ------
<S>                               <C>            <C>              <C>             <C>  
March 31                          $14.38         $12.13           $ 9.17          $ 9.00
June 30                            14.88          12.19            17.50            9.00
September 30                       12.50          10.56            15.50           12.75
December 31                        11.38          10.00            14.75           13.25

</TABLE>

Management believes that all of the above sales for the period prior to June
18, 1997, were between individuals or entities who had differing reasons and
degrees of motivation for their purchases and sales. Further, there may have
been sales 



                                      9
<PAGE>   13
between private individuals during such period who did not present the shares
for transfer on the Company's transfer books.

For the year ended December 31, 1998, the Company paid cash dividends to
shareholders in the amount of $.10 per share for the first three quarters and
$.1025 per share for the last quarter ($.4025 in the aggregate). The Company
paid quarterly cash dividends to shareholders in the amount of $.10 per share
($.40 in the aggregate) for the year ended December 31, 1997. The only source
of funds presently available to the Company for the payment of cash dividends
is dividends from the Bank. Certain regulatory requirements restrict the amount
of dividends that can be paid to the Company by the Bank without obtaining the
prior approval of the appropriate regulatory authorities. Information regarding
restrictions on the ability of the Bank to pay dividends to the Company is
contained in Note 11 of the "Notes to Consolidated Financial Statements"
contained in Item 8 hereof. The Company expects that comparable cash dividends
will continue to be paid in the future, although no assurance can be given that
further dividends will be declared by the Company, or if declared, what the
amount of the dividends will be.

In the fourth quarter of 1998 the Company purchased 50,000 shares of common
stock through one of its market makers at an average price of $11.16 per share.
Also, the Company authorized the purchase of an additional 50,000 shares
beginning in the first quarter of 1999. As of March 30, 1999, 35,000
shares had been purchased at an average cost of $11.07.


ITEM 6.  SELECTED FINANCIAL DATA

The selected consolidated financial data presented below as of and for the
years ended December 31, 1998, 1997, 1996, 1995, and 1994 is unaudited and has
been derived from the Consolidated Financial Statements of the Company and its
subsidiaries, and from records of the Company. During 1996, TIB Financial Corp.
("Company") was formed providing for a reorganization whereby TIB Bank of the
Keys ("Bank") became a wholly-owned subsidiary of TIB Financial Corp. The
transaction was accounted for on a historical cost basis similar to a pooling
of interest and, accordingly, the following selected consolidated financial
data was prepared as if the reorganization occurred January 1, 1994. 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."

<TABLE>
<CAPTION>


DOLLARS IN THOUSAND, EXCEPT PER SHARE DATA                                      AS OF DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data                                           1998          1997          1996          1995          1994
---------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>           <C>           <C>     
Total Assets                                               $355,476      $277,959      $241,051      $219,567      $208,607
Investment Securities                                        66,001        54,690        50,878        60,961        65,347
Gross Loans                                                 246,668       186,279       165,151       139,061       124,199
Allowance for loan losses                                     2,517         2,202         1,930         1,701         1,567
Deposits                                                    325,057       248,822       204,984       192,458       190,147
Stockholders' Equity                                         26,568        24,564        22,621        21,063        16,888


                                                                              YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------
Statement of Income Data                                     1998          1997          1996          1995          1994
---------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>           <C>           <C>
Interest income                                              23,705        20,558        18,503        17,525        15,179
Interest expense                                              9,915         7,876         6,507         6,253         4,959
Net interest income                                          13,790        12,682        11,996        11,272        10,220
Provision for loan losses                                       360           300           240           135           120
Net interest income after provision for loan losses          13,430        12,382        11,756        11,137        10,100
Non-interest income (2)                                       6,399         5,319         3,784         3,273         2,311
Non-interest expense (2)                                     14,502        12,776        10,748         9,818         8,352
Income tax expense                                            1,886         1,719         1,589         1,591         1,373
Net Income                                                    3,441         3,206         3,203         3,001         2,686

</TABLE>
                                      10

<PAGE>   14


<TABLE>
<S>                                                        <C>           <C>           <C>           <C>           <C>

Per Share Data (1)
------------------------------------------------------
Book value per share at year end                              $6.04         $5.62         $5.23         $4.95         $4.03
Basic earnings per share                                       0.78          0.74          0.75          0.71          0.65
Diluted earnings per share                                     0.74          0.70          0.72          0.69          0.65
Basic weighted average common equivalent shares
         outstanding                                      4,415,949     4,354,547     4,280,712     4,246,218     4,160,994
Diluted weighted average common equivalent shares
         outstanding                                      4,624,380     4,602,375     4,424,676     4,352,838     4,160,994
Dividends declared                                          $0.4025         $0.40         $0.39         $0.25         $0.21

Ratios
------------------------------------------------------
Return on average assets                                       1.10%         1.25%         1.40%         1.40%         1.31%
Return on average equity                                      13.31%        13.52%        15.89%        17.00%        17.11%
Average equity/average assets                                  8.23%         9.22%         8.79%         8.23%         7.67%
Net interest margin                                            4.88%         5.42%         5.83%         5.85%         5.53%
Dividend payout ratio                                         51.65%        54.33%        52.12%        35.37%        32.54%
Non-performing assets/total loans and other real
         estate                                                0.21%         0.15%         0.26%         0.06%         0.31%
Allowance for loan losses/total loans                          1.02%         1.18%         1.17%         1.22%         1.26%
Allowance for loan losses/nonperforming assets               483.28%       806.73%       448.84%     2,074.39%       405.96%
Non-interest expense/net interest income and
         non-interest income                                  71.83%        70.98%        68.11%        67.50%        66.65%

</TABLE>

(1)  Stock splits in 1997 and 1996 have been retroactively reflected in the per
     share data and weighted-average common equivalent and diluted shares
     outstanding as if they occurred January 1, 1994.
(2)  Noninterest income has been adjusted for all years presented to show the
     gross income from the various activities. Costs which have previously been
     netted against noninterest income have been included in noninterest
     expense for all years presented.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

INTRODUCTION

During 1996, TIB Financial Corp. ("Company") was formed providing for a
reorganization whereby TIB Bank of the Keys ("Bank") became a wholly-owned
subsidiary of TIB Financial Corp. The transaction was accounted for on a
historical cost basis similar to a pooling of interests and, accordingly,
Selected Financial Data, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and the Consolidated Financial Statements
have been restated to reflect the reorganization as occurring at the beginning
of the first period presented. In 1997, the Bank formed two subsidiaries, the
first on June 13, 1997, when the Bank acquired the assets of Small Business
Consultants, Inc., a Florida corporation specializing in the government
guaranteed loan consulting business. On July 31, 1997, the Bank formed TIB
Investment & Insurance Center, Inc. for the purpose of selling investment
products to the public. During the third and fourth quarters of 1998 the
Company acquired a 30% interest in ERAS JV, a joint venture computer software,
item and data processing company. ERAS JV currently processes the cash items
for the bank and in 1999 will become the bank's data processing provider.

In March 1996, TIB Bank of the Keys declared a two-for-one stock split which
was distributed on May 14, 1996, to shareholders of record on May 2, 1996. On
February 25, 1997, TIB Financial Corp. declared a three-for-one stock split
which was distributed on March 18, 1997, to shareholders of record on February
25, 1997. In the Selected Financial Data, Management's Discussion and Analysis
of Financial Condition and Results of Operations, and the Consolidated
Financial Statements, all per share amounts, number of shares outstanding and
market prices have been restated to


                                      11
<PAGE>   15

reflect these stock splits as if they occurred at the beginning of the first
period presented.

In 1998, the banking industry trends nationwide of consolidation and pressure on
net interest margins continued. In the Bank's market of South Dade and Monroe
Counties the final chapter in the NationsBank acquisition of Barnett Banks with
the required branch divestitures, contributed to the Bank's ability to grow
deposits and market share. This growth was also aided by the Bank's purchase of
a branch facility in Homestead, Florida with approximately $12 million in
deposits. The Bank's consistent response to increasing rate competition for both
loans and deposits has been to meet that competition and try to maintain overall
profitability by leveraging existing resources and maximizing cross-selling
opportunities. The Bank utilizes greater activity with core banking products
which increases its exposure to potential customers for other products.

PERFORMANCE OVERVIEW

The Company achieved record net income of $3.4 million in 1998 representing a
$235,000 or a 7.3% increase over the prior year. Management attributes the
results to an 8.7% increase in net interest income primarily caused by strong
loan growth, along with a 20.3% increase in non-interest income offset by a
25.9% increase in interest expense and a 13.5% increase in non-interest
expenses. Net income of $3.2 million in 1997 represented a $3,000 or 0.1%
increase over 1996.

Reported basic earnings per share for 1998 was $.78 compared to $.74 in 1997.
Basic weighted-average common equivalent shares outstanding in 1998 were
4,415,949 compared to 4,354,547 in 1997. This increase resulted from the
exercise of stock options and the award of compensation paid through the
issuance of common stock, partially offset by Company stock repurchases.

Diluted earnings per share for 1998 was $0.74 compared to $0.70 in 1997.
Diluted weighted-average common equivalent shares outstanding in 1998 were
4,624,380 compared to 4,602,375 in 1997. The increase is attributed to the
exercise of stock options, the award of compensation paid through the issuance
of common stock, and the effect of additional options granted in 1998.

Total assets of the Company at December 31, 1998 were $355.5 million compared
to $278.0 million at the previous year end, reflecting an increase of 27.9%.
Asset growth was funded by an increase in deposits of 30.6%, or $76.2 million
in 1998. A continuing source of deposits was from an investment vehicle
introduced in 1997, a prime rate indexed Money Market account, that resulted in
growth of $45.2 million by year end. Much of this deposit growth was absorbed
by funding of the loan portfolio growth. The Company's total loan volume
increased 32.4%, or $60.4 million, to $246.7 million at year end 1998 compared
to $186.3 million at December 31, 1997. During the last four years the
Company's loans outstanding have grown at a rate of 18.7% compounded annually.

Net interest income in 1998 increased 8.7%, or $1.1 million, to $13.8 million
from $12.7 million reported in 1997. The Company's interest margin declined from
5.42% to 4.88%. This decline resulted from the Company's decision to be
aggressive in an increasingly competitive deposit and loan market.
Non-performing assets increased to 0.21% of total loans from 0.15% at year end
1997. Non-interest income increased $1.1 million to $6.4 million in 1998. The
increase consisted primarily of a $92,000 increase in service charges on deposit
accounts, $549,000 increase in gains on sales of government guaranteed loans,
$97,000 increase in fees on mortgage loans sold at origination, $100,000
increase in retail investment services, and $120,000 increase in net gains on
investment securities. Net interest income in 1997 increased 5.7%, or $686,000,
to $12.7 million from $12.0 million reported in 1996.

The Company experienced an increase in non-interest expenses of $1.7 million in
1998, or 13.5 % over 1997. Most of the increase is directly attributable to the
costs of servicing a larger base of customers. Specifically, the establishment
of two branch offices in its new service area of South Dade County required
expenditures for additional personnel and occupancy related costs. Further, the
overall growth in customers to 36,995 accounts of all types at year end 1998
from 31,251 accounts at year end 1997, required additional personnel and data
processing type expenditures. Non-interest expense increased in 1997 by 18.9%
or $2.0 million as compared to 1996 due primarily to the increase in salaries
due to 



                                      12

<PAGE>   16
the offering of new services and products along with enhanced marketing efforts
and the market effects of the NationsBank and Barnett Banks merger.

The high growth rate of deposits in 1998 led to increased average assets and
this combined with slower growth of earnings in 1998 compared to 1997 resulted
in return on average assets declining from 1.25% in 1997 to 1.10% in 1998.
Similarly, increased equity from retained earnings in 1998 divided into
somewhat higher earnings caused the return on average equity to decline
slightly from 13.52% in 1997 to 13.31% in 1998.

YEAR 2000

The Company and its subsidiaries are currently addressing a universal situation
commonly referred to as the "Year 2000 Problem." The Bank subsidiary has the
most significant exposure to the Year 2000 problem. The Year 2000 Problem
relates to the inability of certain computer software programs and equipment to
properly recognize and process date-sensitive information relative to the year
2000 and beyond. During 1997, the Company developed a plan to devote the
necessary resources to identify and modify systems impacted by the year 2000
problem and if necessary, implement new systems to become year 2000 compliant
in a timely manner. Year 2000 efforts are progressing as scheduled. All mission
critical vendors and servicers have been identified. Certifications/assurances
have been received from major data processing and item processing vendors.
Independent testing of all mission critical systems commenced in June 1998 and
will be completed as scheduled no later than June 1999.

The Bank has evaluated most of its significant borrowers and does not believe
the year 2000 problems should, on an aggregate basis, impact their ability to
make payments to the Bank. The Bank is monitoring its service bureau to
evaluate whether the bureau's data processing system will fail and is being
provided with periodic updates on the status of testing and upgrades being made
by the service bureau. If the Bank's service bureau fails, the Bank will
calculate loan and deposit balances and interest using manual ledgers. If this
labor intensive approach is necessary, management and employees will become
much less efficient. However, the Bank believes that it would be able to
operate in this manner indefinitely, until its existing service bureau is able
to again provide data processing services.

To determine the readiness of our vendors, the Bank has sent out a letter to
each vendor inquiring about their compliance with Year 2000. For those vendors
that have responded that they are Year 2000 compliant and that the Bank has
determined to not have a material impact on the Bank's operations, no further
work is performed. For those vendors that have responded they are working
towards Year 2000 compliance and that the Bank has determined to be
significant, including mission critical vendors, the Bank will follow up on a
regular basis through 1999. These vendors have advised the Bank that they
expect to be Year 2000 compliant prior to December 31, 1999. If those vendors
do not demonstrate compliance by a certain date, the Bank will seek other
alternatives in accordance with the Bank's contingency plan, which may include
seeking replacement vendors.

The most significant expenditures related to the Year 2000 issue have involved
system upgrades, both hardware and software, which would have been implemented
at some point even without the Y2K issue. However, because of Y2K, some of
these expenditures have been accelerated. These expenditures are capital in
nature and the cost will be amortized over their useful lives. The amount of
these items totaled approximately $300,000 in 1998 and are budgeted to be about
$100,000 in 1999. The amount spent in 1998 on testing and compliance issues of
existing systems was about $2,000 in 1998 and will be approximately $50,000 in
1999 and is recorded in other expense. None of these costs are expected to
materially impact the Company's results of operations in any one reporting
period.

Ultimately, the potential impact of the Year 2000 issue will depend not only on
the corrective measures the Bank undertakes, but also on the way in which the
Year 2000 issue is addressed by governmental agencies, businesses, and other
entities who provide data to the Bank, receive data from the Bank, or whose
financial condition or operational capability is important to the Bank, such as
suppliers or customers. At worst, the Bank customers and vendors will face
severe Year 2000 issues, which may cause borrowers to become unable to service
their loans. The Bank may also be required to replace non-compliant vendors
with more expensive Year 2000-compliant vendors. At this time the Bank cannot
determine the financial effect on it if significant customer and/or vendor
remediation efforts are not resolved in a timely manner. 





                                      13

<PAGE>   17

RESULTS OF OPERATIONS

The following table summarizes the balance sheet and results of operations
including selected financial performance ratios of the Company for the three
years ended December 31, 1998:

<TABLE>
<CAPTION>

DOLLARS IN THOUSAND, EXCEPT PER SHARE DATA                               AS OF DECEMBER 31,
---------------------------------------------------------------------------------------------------------

Balance Sheet Data                                               1998             1997             1996
---------------------------------------------------------------------------------------------------------
<S>                                                           <C>               <C>              <C>
Total Assets                                                   $355,476         $277,959         $241,051
Investment Securities                                            66,001           54,690           50,878
Gross Loans                                                     246,668          186,279          165,151
Allowance for loan losses                                         2,517            2,202            1,930
Deposits                                                        325,057          248,822          204,984
Stockholders' Equity                                             26,568           24,564           22,621

<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------

Statement of Income Data                                        1998              1997             1996
---------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>              <C> 
Interest income                                                 $23,705          $20,558          $18,503
Interest expense                                                  9,915            7,876            6,507
Net interest income                                              13,790           12,682           11,996
Provision for loan losses                                           360              300              240
Net interest income after provision for loan losses              13,430           12,382           11,756
Non-interest income                                               6,399            5,319            3,784
Non-interest expense                                             14,502           12,776           10,748
Income tax expense                                                1,886            1,719            1,589
Net Income                                                        3,441            3,206            3,203

Per Share Data (1) (2)
------------------------------------------------------
Book value per share at year end                                   6.04             5.62             5.23
Basic earnings per share                                           0.78             0.74             0.75
Diluted earnings per share                                         0.74             0.70             0.72
Basic weighted average common equivalent shares
         outstanding                                          4,415,949        4,354,547        4,280,712
Diluted weighted average common equivalent shares
         outstanding                                          4,624,380        4,602,375        4,424,676
Dividends declared                                              $0.4025            $0.40            $0.39

Ratios (2)
------------------------------------------------------
Return on average assets                                           1.10%            1.25%            1.40%
Return on average equity                                          13.31%           13.52%           15.89%
Average equity/average assets                                      8.23%            9.22%            8.79%
Net interest margin                                                4.88%            5.42%            5.83%
Dividend payout ratio                                             51.65%           54.33%           52.12%
Non-performing assets/total loans and other real
         estate                                                    0.21%            0.15%            0.26%
Allowance for loan losses/total loans                              1.02%            1.18%            1.17%
Non-interest expense/net interest income and
         non-interest income                                      71.83%           70.98%           68.11%

</TABLE>

(1)  Stock splits in 1997 and 1996 have been retroactively reflected in per
     share data and weighted average common equivalent and diluted shares
     outstanding as if they occurred as of the earliest date presented.

(2)  Averages are derived from daily balances.





                                      14
<PAGE>   18
NET INTEREST INCOME

Net interest income, the primary source of revenue for the Company, is a
function of the yield earned on average interest-earning assets and the rate
paid on average interest-bearing liabilities. Changes in net interest income
from period to period reflect the increases or decreases in average
interest-earning assets, interest-bearing liabilities and the interest rate
spread which is affected by the degree of mismatch in maturity and repricing
characteristics of the Company's interest-earning assets and interest-bearing
liabilities.

Net interest income on a tax equivalent basis, increased 9.2% to $14.1 million
in 1998, as compared to last year. Net interest margin decreased 54 basis
points to 4.88%. As mentioned previously, the Company has continued to
aggressively price both loan and deposit products in order to gain market share
and enhance overall customer relationships. The Company's desire to provide
one-stop shopping for a customers' complete financial services needs requires
competitive pricing for all product offerings. The introduction of a high rate
money market account in 1997, and its continued success in 1998 though
increasing the average costs of funds, continued to bring in substantial new
deposits from both new and existing customers of the Bank. These new deposits
funded an average interest-earning asset increase of 21.2%, or $50.6 million.
Loan volume represented the majority of this change in average earning assets
increasing $27.0 million while average investment securities volumes increased
$17.6 million. Average interest-bearing liabilities increased 22.7%, or $42.1
million, over 1997. Average decreases in time and savings deposits of $6.4
million were more than offset by the large increase of $44.0 million in money
market accounts.

Net interest income, on a tax equivalent basis for 1997 increased 5.5% to $12.9
million from $12.2 million in 1996. Average earning assets increased $28.2
million from 1996 to 1997 while average interest-bearing liabilities increased
only $18.8 million. Loan volume represented the majority of this change in
average earning assets increasing $27.1 million while average investment
securities volumes decreased $5.7 million. The Company recorded a net interest
margin in 1997 of 5.42%, a decrease of 41 basis points over the 5.83% interest
margin for 1996. This was attributed to prevailing deposit rates becoming more
competitive in the local market. As competitive pressures intensify, the spread
between loan yields obtainable and the cost of interest-bearing deposits
narrows. In 1997, the Company's net interest margin declined as a result of
these pressures.

The following table sets forth information with respect to the average
balances, interest income and average yield by major categories of assets; the
average balances, interest expense and average rate by major categories of
liabilities; the average balances of noninterest-earning assets,
noninterest-bearing liabilities and stockholders' equity; and net interest
income, interest rate spread, and net interest margin for the years ended
December 31, 1998, 1997 and 1996.



                                      15





<PAGE>   19


<TABLE>
<CAPTION>

AVERAGE BALANCE SHEETS
                                                  1998                              1997                             1996
                                   ------------------------------    ------------------------------    -----------------------------
                                   AVERAGE     INCOME/     YIELDS    AVERAGE     INCOME/     YIELDS    AVERAGE     INCOME/    YIELDS
(Dollars in thousands)             BALANCES    EXPENSE     RATES     BALANCES    EXPENSE     RATES     BALANCES    EXPENSE    RATES
                                   ------------------------------    ------------------------------    -----------------------------
<S>                                <C>          <C>         <C>      <C>         <C>          <C>      <C>         <C>        <C>
ASSETS
   Interest-earning assets:
      Loans (1)                    $205,319    $18,746     9.13%     $178,317    $17,019      9.54%    $151,212    $15,038     9.94%
      Investment securities -
        taxable                      59,136      3,676     6.22%       44,857      2,706      6.03%      51,751      3,022     5.84%
      Investment securities -
        tax exempt (2)                9,929        851     8.57%        6,576        605      9.21%       5,354        598    11.17%
     Federal funds sold              14,060        721     5.13%        8,054        433      5.38%       1,334         69     5.17%
                                   -------------------               -------------------               ------------------- 
Total interest-earning assets       288,444     23,994     8.32%      237,804     20,763      8.73%     209,651     18,727     8.93%
                                   -------------------               -------------------               ------------------- 


Non-interest-earning assets:
   Cash and due from banks           11,196                             7,307                             8,981
   Investment in ERAS                   165                                --                                --
   Premises and equipment, net       10,295                             8,754                             8,441
   Allowances for loan losses        (2,347)                           (2,058)                           (1,809)
   Other assets                       6,466                             5,261                             4,060
                                   --------                          --------                          --------
Total non-interest earning
   assets                            25,775                            19,264                            19,673
                                   --------                          --------                          --------
Total assets                        314,219                           257,068                           229,324
                                   ========                          ========                          ========

LIABILITIES & STOCKHOLDERS' EQUITY
   Interest-bearing liabilities:
     Interest bearing deposits:
     NOW accounts                    32,198        459     1.43%       28,122        393      1.40%      30,235        473     1.56%
     Money market                    99,567      4,832     4.85%       55,543      2,692      4.85%      13,256        335     2.53%
     Savings deposits                23,005        570     2.48%       28,474        778      2.73%      41,380      1,231     2.97%
     Other time deposits             70,671      3,976     5.63%       71,565      3,949      5.52%      75,689      4,170     5.51%
                                   -------------------               -------------------                ------------------ 

Total interest-bearing deposits     225,441      9,837     4.36%      183,704      7,812      4.25%     160,560      6,209     3.87%

   Other interest-bearing
    liabilities:
   Federal funds purchased              334         20     5.89%           57          3      6.01%         817         48     5.88%
   Short-term borrowings              1,275         58     4.58%        1,217         61      4.97%       4,821        250     5.19%
                                   -------------------               -------------------               ------------------- 

Total interest-bearing 
  liabilities                       227,050      9,915     4.37%      184,978      7,876      4.26%     166,198      6,507     3.92%
                                   -------------------               -------------------               ------------------- 


Non-interest bearing 
   liabilities and 
   stockholders' equity:
   Demand deposits                   58,058                            46,323                            41,755
   Other liabilities                  3,248                             2,054                             1,214
   Stockholders' equity              25,863                            23,713                            20,157
                                   --------                          ---------                         --------

Total non-interest bearing
    liabilities and
    stockholders' equity             87,169                            72,090                            63,126
                                   --------                          ---------                         --------
Total liabilities and
    stockholders' equity            314,219                           257,068                           229,324
                                   ========                          =========                         ========

Interest rate spread                                       3.95%                              4.47%                            5.01%
                                                           ====                               =====                            ====

Net interest income                            $14,079                           $12,887                           $12,220
                                               ========                          =======                           =======

Net interest margin (3)                                    4.88%                              5.42%                            5.83%
                                                           ====                               =====                            ====

</TABLE>


                                      16


<PAGE>   20

(1)  Average loans include non-performing loans. Interest on loans includes
     loan fees of $74,966 in 1998 and $83,918 in 1997 and $27,813 in 1996. 
(2)  Interest income and rates include the effects of a tax equivalent
     adjustment using a Federal tax rate of 34% in adjusting tax exempt
     interest on tax exempt investment securities to a fully taxable basis. 
(3)  Net interest margin is net interest income divided by average total
     interest-earning assets.


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, 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.

<TABLE>
<CAPTION>

                                           1998 compared to 1997 (1)                  1997 compared to 1996 (1)
                                               Due to changes in                          Due to changes in
                                        ------------------------------------------------------------------------------
(In thousands)                                                       Net                                       Net
                                         Average       Average      Increase      Average       Average       Increase
INTEREST INCOME                           Volume         Rate      (Decrease)      Volume         Rate       (Decrease)
-----------------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>         <C>            <C>           <C>          <C>  
Loans                                     $2,484        $ (757)      $1,727       $2,606        $(625)         $1,981
Investment Securities (2)                  1,153            63        1,216         (365)          56            (309)
Federal Funds sold                           309           (21)         288          361            3             364
                                         ----------------------------------------------------------------------------
Total interest income                      3,946          (715)       3,231        2,602         (566)          2,036
                                         ----------------------------------------------------------------------------
INTEREST EXPENSE

NOW Accounts                                  58             8           66          (32)         (48)            (80)
Money Market                               2,140            --        2,140        1,831          526           2,357
Savings deposits                            (141)          (67)        (208)        (360)         (93)           (453)
Other time deposits                          (50)           77           27         (229)           8            (221)
Federal funds purchased                       17            --           17          (46)           1             (45)
Short-term borrowings                          3            (6)          (3)        (179)         (10)           (189)

                                          ---------------------------------------------------------------------------
Total interest expense                     2,027            12        2,039          985          384           1,369
                                          ---------------------------------------------------------------------------
Change in net interest income             $1,919        $ (727)      $1,192       $1,617        $(950)           $667
                                          ===========================================================================  
</TABLE>

(1)  The change in interest due to both rate and volume has been allocated to
     the volume and rate components in proportion to the relationship of the
     dollar amounts of the absolute change in each.
(2)  Interest income includes the effects of a tax equivalent adjustment using
     a federal tax rate of 34% in adjusting tax exempt interest on tax exempt
     investment securities to a fully taxable basis.




                                      17


<PAGE>   21

NON-INTEREST INCOME

The following table presents the principal components of non-interest income
for the years ended December 31, 1998, 1997, and 1996.
<TABLE>
<CAPTION>

(In thousands)                                                     1998            1997            1996
--------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C> 
Net credit card processing income                                 $2,174          $  608          $  519
     Expenses previously netted against income                        --           1,501           1,190
                                                                  --------------------------------------
Gross credit card processing income                                2,174           2,109           1,709

Gains on sales of mortgage loans                                      --             119             173

Net gains on sales of government guaranteed loans                    988             280              --
     Expenses previously netted against income                        --             160              --
                                                                  --------------------------------------
Gross gains on sales of government guaranteed loans                  988             440              17

Fees on mortgage loans sold at origination                           461             364             360
SBA servicing income                                                  94              58              53
Service charge income                                              1,732           1,640           1,246
Net gains on sales of investment securities                          131              11              18

Net investment services income                                       419             143              --
     Expenses previously netted against income                        --             176              --
                                                                  --------------------------------------
Gross investment services income                                     419             319              --

Other                                                                400             259             208
                                                                  ======================================
Total non-interest income                                         $6,399          $5,319          $3,784
                                                                  ======================================
</TABLE>

The Company's continued emphasis on non-interest income remains a primary
focus. Over the past three years, the Company has increased non-interest income
from $3.8 million to $6.4 million or approximately 69.1%. This was achieved by
introducing new areas of fee income generation and stimulating other areas of
non-interest income. The introduction in 1997 of retail sales of investment
products brought in commissions to the Company of $319,000 in that year and
$419,000 in 1998. These products are primarily equity mutual funds but also
include a full range of brokerage services. Also, with the Bank's acquisition
of the assets of a company specializing in the origination and sale of
government guaranteed loans, this category of non-interest income continued to
improve. Gains on the sale of government guaranteed loans went from $17,000 in
1996 to $440,000 in 1997 and $988,000 in 1998. Further, income from all types
of bank service charges showed continued improvement increasing $92,000 in
1998. Recognizing the opportunities in a tourist driven economy, the Company
has made major inroads into merchant card processing, and processes credit card
transactions for over eight hundred local merchants at year end 1998. This
activity accounted for fee income of $2.2 million in 1998 which represented a
$65,000 increase over 1997. The Bank continues to be aggressive in soliciting
new merchants and providing quality customer service with our existing customer
base.

Non-interest income increased $1,535,000 from 1996 to 1997, due to the new
areas of fee generation discussed above.

The Bank began a program to originate and sell conforming fixed rate
residential mortgages to the secondary market in late 1994. By 1996 the Bank
had become the number one originator of residential mortgages in Monroe County
Florida generating over $50 million in residential mortgages in 1996, 1997 and
1998. Approximately 40%





                                      18
<PAGE>   22


of the annual volume was conforming fixed rate residential loans that are sold
immediately to the secondary market. Approximately 60% of the annual production
represents conforming adjustable rate loans that are placed in the Bank's
portfolio. At the end of 1994 the Bank began to originate these loans utilizing
industry standards for documentation and procedures in order for them to be
suitable for sale as a back-up source for liquidity. From time to time the Bank
sells a portion of these loans to confirm their use as a back up source of
liquidity. In 1998 none were sold. In 1997, $5.9 million were sold for a gain
of $119,000 as compared to 1996 when $11.4 million of the Bank's portfolio
adjustable rate mortgages were sold in the secondary market generating gains of
$173,000. The Company may seek to retain most of this portfolio production as
the yield may be of benefit for years to come. Additionally, effective
cross-selling of other bank products around this and other activities has
contributed to the Bank's growth in its deposit base.

NON-INTEREST EXPENSES

The following table represents the principal components of non-interest
expenses for the years ended December 31, 1998, 1997, and 1996.
<TABLE>
<CAPTION>

(In thousands)                                          1998               1997             1996
--------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>              <C> 
Net salaries and employee benefits                     $ 7,159            $ 6,199          $ 5,536
     Salaries and employee benefits
         previously netted against other
         income categories                                  --                306               --
                                                       -------            -------          -------
Gross salary and employee benefits                       7,159              6,505            5,536
                                                                                         
Expenses previously netted against                                                       
     merchant bankcard processing:                                                       
     Credit card interchange expense                     1,269              1,159              938
     Other merchant charges                                323                342              252
                                                       -------            -------          -------
Gross merchant card expenses                             1,592              1,501            1,190
                                                                                         
Occupancy                                                1,130                918              823
Equipment                                                1,119                907              869
Accounting, legal, and other professional                  510                512              398
Computer services                                          861                597              572
Postage, courier and armored car                           325                285              240
Marketing and community relations                          496                417              225
Taxes - non building                                        45                 41               37
Operating supplies                                         398                339              290
Director's fees                                            152                149              150
FDIC and state assessments                                  90                 77               48
Amortization of intangibles                                 96                 47               60
                                                                                         
Net other operating expenses                               529                453              310
Expenses previously netted against retail                                                
         Investment services income                         --                 29               --
                                                       -------            -------          -------
Gross other operating expense                              529                482              310
                                                                                         
                                                       =======            =======          =======
Total non-interest expenses                            $14,502            $12,777          $10,748
                                                       =======            =======          =======
</TABLE>                                                                

The Company has over the three year periods of 1996, 1997, and 1998 expanded
non-interest expense in an effort to 





                                       19                
<PAGE>   23

build an infrastructure which will position the Bank in a quality customer
service mode and a growth perspective. Non-interest expenses increased 13.5% in
1998 due primarily to expansion of personnel costs to support the accelerated
growth in account generation and loans outstanding and the two new branch
offices. Additionally, the enhancement of non-interest income growth has
required further staffing in these areas. With ten branch facilities spread
over a geographic market 135 miles long and at times only a quarter mile wide,
it is important to the Company to have experienced decision making personnel in
distant branch locations. This strategy has allowed for the continuing high
quality asset generation and the expansion of the Bank's customer base over the
three year period.

The increase in salary and employee benefits, occupancy and computer services
costs in 1998 was directly attributed to the establishment of two branch
offices in South Dade County and the overall significant increase in bank
accounts processed.

Equipment costs increased $212,000 in 1998 substantially resulting from
upgrades of computer workstations and network systems. These upgrades enhance
performance and capabilities while also being part of year 2000 preparedness.

Non-interest expenses increased $2.0 million in 1997 compared to 1996. The
increase was primarily due to additional personnel costs resulting from the
growth of the Bank along with bankcard processing costs rising with increasing
usage.

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, 1998, 1997 and 1996
were 35.4%, 34.9%, and 33.2%, respectively. The fluctuations in effective tax
rates reflects the effect of the differences in timing or deductibility of
certain expenses.

LOAN PORTFOLIO

The Company is located in the Florida Keys and the primary industry is tourism.
Commercial loan demand therefore is significant for resort, hotel, restaurant,
marina and related real estate secured property loans. The Company serves this
market by offering long-term adjustable rate financing to the owners of these
types of properties for acquisition and improvements thereon. These loans are
often $1 million or larger and are good candidates for government guarantee
programs or traditional participation agreements. The nature of government
programs such as the Small Business Administration is generally geared toward
long term adjustable rate financing.

Monroe County has the highest cost of living of any county in Florida and this
is driven in large part by the scarce and expensive real estate. This also
serves to maintain and enhance collateral values on loans secured by property
in this market. The Company has grown in commercial loans by aggressively
serving its market. The quality of the Company's credit administration along
with the stable real estate values have kept loan losses at low levels.

Loans are expected to produce higher yields than investment securities and
other interest earning assets (assuming that credit losses are not excessive).
Thus the absolute volume of loans and the volume as a percentage of total
earning assets are important determinants of the net interest margin. Net loans
outstanding increased to $243.8 million as compared to $183.5 million at year
end 1997, an increase of 32.8%. Of this amount, loans secured by real estate
increased from $163.3 million to $212.3 million. Commercial loans accounted for
much of this increase, growing from $124.0 million to $164.4 million at the
respective year ends. Consumer loans increased from $9.7 to $13.8 million at
December 31, 1998. The Company maintains a posture of originating commercial
loans with rates that fluctuate with the prime lending rate and residential
loans with rates that fluctuate with the one year treasury index. At December
31, 1998, 88.5% of the total loan portfolio had floating or adjustable rates.


                                      20
<PAGE>   24

<TABLE>
<CAPTION>

(Dollars in thousands)                     1998          1997            1996            1995           1994
-----------------------------------     ----------    -----------     ----------      ---------      --------- 
<S>                                      <C>            <C>            <C>            <C>            <C>      
Commercial, financial & agricultural     $ 164,354      $ 123,974      $ 115,110      $  93,423      $  94,388
Construction loans                           5,960         10,011          7,391          5,441          1,290
Residential real estate                     62,544         42,599         35,097         35,947         27,885
Consumer loans                              13,810          9,695          7,554          4,250            636
Less: unearned income                         (370)          (533)          (607)          (691)          (757)
Less: allowance for loan loss               (2,517)        (2,202)        (1,930)        (1,701)        (1,566)
                                         =========      =========      =========      =========      =========
Net loans                                $ 243,781      $ 183,544      $ 162,615      $ 136,669      $ 121,876
                                         =========      =========      =========      =========      =========

</TABLE>

The maturity distribution of the Company's loan portfolio at December 31, 1998
was as follows:

<TABLE>
<CAPTION>
                                                          Loans maturing
                                         -----------------------------------------------
                                          Within       1 to 5       After 5
(Dollars in thousands)                    1 Year        Years        Years        Total
----------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>     
Commercial, financial & agricultural     $ 26,237     $ 40,199     $ 97,918     $164,354
Construction Loans                          5,960           --           --        5,960
Residential real estate                     1,501        6,482       54,561       62,544
Consumer loans                              4,044        6,265        3,501       13,810
                                         --------     --------     --------     --------
Total Loans                              $ 37,742     $ 52,946     $155,980     $246,668
                                         ========     ========     ========     ========


</TABLE>

<TABLE>
<CAPTION>

                                                  Loans maturing
                                 -----------------------------------------------
                                  Within       1 to 5       After 5
(Dollars in thousands)            1 Year        Years        Years       Total
--------------------------------------------------------------------------------
<S>                              <C>          <C>          <C>          <C> 
Loans with:
Predetermined interest rates     $  7,612     $ 11,532     $  9,274     $ 28,418
Floating or adjustable rates       30,130       41,414      146,706      218,250
                                 --------     --------     --------     --------
Total Loans                      $ 37,742     $ 52,946     $155,980     $246,668
                                 ========     ========     ========     ========
</TABLE>


ALLOWANCE AND PROVISION FOR LOAN LOSSES

The allowance for loan losses represents a reserve for potential losses in the
loan portfolio. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with particular
emphasis on non-accruing, past due, and other loans that management believes
require special attention.

For problem loans, management's review of the adequacy of the allowance for
loan losses consists of an evaluation of the financial strengths of the
borrower, the related collateral, and the effects of economic conditions.
General reserves against the remaining loan portfolio are based on analysis of
historical loan loss ratios, loan charge-offs, delinquency trends, and previous
collection experience, along with an assessment of the effects of external
economic conditions.

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. The
Company's provision for loan losses for 1998 was $360,000 as compared to
$300,000 in 1997, reflecting the Company's strong growth in loan outstandings
and negligible charge-offs. The Company's provision for loan losses




                                      21
<PAGE>   25
for 1997 was $300,000 as compared to $240,000 in 1996.

The allowance for loan losses represented 1.02% of total loans at December 31,
1998 compared to 1.18% and 1.17% at year end 1997 and 1996, respectively. The
determination of the adequacy of the allowance for loan losses is based on
management's judgment about factors affecting loan quality; collectability and
assumptions about the economy. Management considers the year end allowance
appropriate and adequate to cover possible losses in the loan portfolio;
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 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 the Company's allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.


  

                                    22




<PAGE>   26

Transactions in the allowance for loan losses are summarized for the years
ended December 31,
<TABLE>
<CAPTION>

(In thousands)                                         1998        1997       1996       1995        1994
------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>       <C>        <C>
Analysis of allowance for loan losses:

   Balance at beginning of year                         $ 2,202    $ 1,930    $ 1,701    $ 1,567     $ 1,449

Charge-offs:
   Commercial, Financial & Agricultural                      14         --         --         --          --
   Residential Real Estate                                   14         --         --         --           3
   Consumer Loans                                            54         40         12          1          --
                                                    --------------------------------------------------------
     Total charge-offs                                       82         40         12          1           3

Recoveries:
   Commercial, Financial & Agricultural                       3         --         --         --          --
   Residential Real Estate                                   --         --         --         --           1
   Consumer Loans                                            34         12          1          -          --
                                                   ---------------------------------------------------------
     Total recoveries                                        37         12          1         --           1
                                                    ------------------------------------ -------------------

     Net charge-offs                                         45         28         11          1           2
                                                    --------------------------------------------------------

Provision for loan losses                                   360        300        240        135         120
                                                    --------------------------------------------------------

Allowance for loan
   losses at end of year                                $ 2,517    $ 2,202    $ 1,930    $ 1,701     $ 1,567
                                                    ========================================================

Ratio of net charge-offs to average
   net loans outstanding                                   0.02%      0.02%      0.01%      0.00%       0.01%
                                                    ========================================================
</TABLE>

Management considers the adequacy of the allowance for loan losses in its
entirety, however, to comply with regulatory reporting requirements, management
has allocated the allowance for loans losses as shown in the table below into
components by loan type at each year end. Management does not intend to imply
that actual future charge-offs will necessarily follow the allocations
described below.
<TABLE>
<CAPTION>

(In thousands)                      1998               1997               1996                1995                1994
------------------------------------------------------------------------------------------------------------------------------
                               Allowance    % of   Allowance   % of   Allowance    % of   Allowance   % of   Allowance    % of
                                   $       Loans       $      Loans       $       Loans       $      Loans       $       Loans
                             -------------------------------------------------------------------------------------------------
<S>                           <C>          <C>     <C>        <C>     <C>         <C>     <C>        <C>     <C>        <C>  
Commercial, Financial
    & Agricultural                1,853    66.6      1,631    66.5       1,456    69.6      1,318    67.2       1,307    76.0
Construction Loans                    0     2.4          0     5.4           0     4.5          0     3.9           0     1.0
Residential Real Estate             463    25.4        400    22.9         367    21.3        324    25.8         250    22.5
Consumer Loans                      201     5.6        171     5.2         107     4.6         59     3.1          10     0.5
                             -------------------------------------------------------------------------------------------------
                                  2,517     100%     2,202     100%      1,930     100%     1,701     100%      1,567     100%
                             =================================================================================================

</TABLE>



                                      23


<PAGE>   27

NON-PERFORMING ASSETS

<TABLE>
<CAPTION>

(Dollars in thousands)                                  1998         1997        1996        1995          1994
----------------------------------------------          ----         ----        ----        ----          ----
<S>                                                     <C>          <C>         <C>         <C>           <C>  
Loans 90 days past due                                    --           --          --          --            --
Loans on nonaccrual                                      521          273         430          82            --
Other Real Estate Owned                                   --           --          --          --           386
                                                        ====         ====        ====        ====          ====
Total non-performing assets                              521          273         430          82           386
                                                        ====         ====        ====        ====          ====
Percentage of total loans and other real estate         0.21%        0.15%       0.26%       0.06%         0.31%
</TABLE>

If the collectibility of interest on a loan appears doubtful, the accrual
thereof is discontinued. Nonaccrual loans totaled $521,000, $273,000, $430,000
and $82,000 at December 31, 1998, 1997, 1996 and 1995, respectively. If such
loans had been on a full-accrual basis, interest income would have been
approximately $32,000, $16,000, $16,000 and $3,000 higher in 1998, 1997, 1996
and 1995, respectively. Interest income recognized on these loans totaled
approximately $21,000, $14,000, $27,000 and $5,000, respectively. There were no
restructured loans at December 31, 1998, 1997, 1996 or 1995.

In 1994 there were no nonaccrual or restructured loans. However, interest lost
on in-substance foreclosures and other real estate owned amounted to $30,000.
No interest income was recorded on these loans in 1994 since they were also in
the same status at the end of 1993.

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 114 (SFAS 114) "Accounting by Creditors for Impairment of a Loan"
as amended by Statement of Financial Accounting Standards No. 118 (SFAS 118),
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosure" on January 1, 1995. The Company had no loans which were considered
impaired under the provisions of SFAS 114.

LIQUIDITY AND RATE SENSITIVITY

Liquidity represents the ability to provide steady sources of funds for loan
commitments and investment activities, as well as to provide sufficient funds
to cover deposit withdrawals and payments of debt, off-balance sheet
obligations and operating obligations. Funds can be obtained from operations by
converting assets to cash, by attracting new deposits, by borrowing, by raising
capital and other ways.

Major sources of increases in cash and cash equivalents are as follows for the
three years ending December 31:
<TABLE>
<CAPTION>

                                             1998              1997              1996
                                        ------------------------------------------------
<S>                                     <C>               <C>               <C>         
Provided by operating activities        $  3,303,781      $  4,745,371      $  3,193,424
Used by investing activities             (64,486,841)      (27,123,436)      (16,960,596)
Provided by financing activities          61,055,510        33,287,415        18,557,162
                                        ------------      ------------      ------------
Net increase (decrease) in cash and
         cash equivalents               $   (127,550)     $ 10,909,350      $  4,789,990
</TABLE>

The Bank has a $5.0 million line of credit from its principal correspondent and
a repurchase agreement with another financial institution which allows
borrowing up to 95% of the market valuation of securities pledged for this
purpose. The majority of the Company's unpledged securities could be used as
collateral for this agreement. Further, in 1997 the Bank gained membership in
the Federal Home Loan Bank of Atlanta. This allows the Bank an additional line
of credit of $27.0 million at year end 1998. Borrowings against this line of
credit would be collateralized by the Bank's one-to-four family residential
mortgage loans.




                                      24
<PAGE>   28

Scheduled maturities and paydowns of loans and investment securities are a
continual source of liquidity. Also, adjustable rate residential real estate
loans originated since 1995, as shown with the 1997 and 1996 sales, are salable
in the secondary mortgage market at par or better and therefore provide a
secondary source for liquidity.

At December 31, 1998, the Bank's loan to deposit ratio was 75.9% compared to a
ratio of 74.9% at December 31, 1997. Management monitors and assesses the
adequacy of the Company's liquidity position on a monthly basis to ensure that
sufficient sources of liquidity are maintained and available.

Under state banking law, regulatory approval will be required if the total of
all dividends declared in any calendar year by the Bank exceeds the Bank's net
profits to date for that year combined with its retained net profits for the
preceding two years. Retained earnings of the Bank available for payment of
dividends without prior regulatory approval at December 31, 1998 is
approximately $4,246,000. These dividends represent the Company's primary
source of liquidity.

The Company's interest rate sensitivity position at December 31, 1998 is
presented in the table below.
<TABLE>
<CAPTION>

                                         3 months         4 to 6         7 to 12          1 to 5        Over 5
(Dollars in thousands)                   or less          months          months           years         years         Total
-------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>             <C>            <C>              <C>            <C>           <C>
Interest-earning assets:
Loans                                   $  84,188       $  24,811       $  27,989       $  72,965      $  36,715      $ 246,668
Investment securities-taxable               2,000           3,457           8,652          17,489         26,070         57,668
Investment securities-tax exempt              936             258                             997          6,142          8,333
Federal funds sold                          6,565                                                                         6,565
                                        ---------       ---------       ---------       ---------      ---------      ---------
Total interest-bearing assets              93,689          28,526          36,641          91,451         68,927        319,234
                                        ---------       ---------       ---------       ---------      ---------      ---------

Interest-bearing liabilities:
NOW accounts (A)                           14,334                                                         21,501         35,835
Money Market                              131,002                                                                       131,002
Savings Deposits (B)                                                       14,685                                        14,685
Other time deposits                        14,322          14,448          21,755          24,635              3         75,163
Federal funds purchased                                                                                                       0
Short-term borrowings                         670                                                                           670

                                        ---------       ---------       ---------       ---------      ---------      ---------
Total interest-bearing liabilities        160,328          14,448          36,440          24,635         21,504        257,355
                                        ---------       ---------       ---------       ---------      ---------      ---------

Interest sensitivity gap                  (66,639)         14,078             201          66,816         47,423         61,879
                                        =========       =========       =========       =========      =========      =========

Cumulative interest sensitivity gap     $ (66,639)      $ (52,561)      $ (52,360)      $  14,456      $  61,879      $  61,879
                                        =========       =========       =========       =========      =========      =========

Cumulative sensitivity ratio                (20.9%)         (16.5%)         (16.4%)           4.5%          19.4%
                                        =========       =========       =========       =========      =========      =========

</TABLE>

(A)  40% of outstanding balance considered repricable immediately and 60%
     repricable in the furthest time period.

(B)  Savings Deposits considered repricable in the one year time horizon.


The Company is cumulatively asset sensitive in the 1 to 5 years and over 5
years time frame and cumulatively



                                      25

<PAGE>   29

liability sensitive in each of the 3 month or less, 4 to 6 months, and 7 to 12
month timeframes. Certain liabilities such as NOW and passbook savings
accounts, while technically subject to immediate repricing in response to
changing market rates, historically do not reprice as quickly nor to the extent
as other interest sensitive accounts. Therefore, to include the entire balance
of these liability accounts in the earliest repricing method would be
unrealistic. To compensate for the fact that changes in general market interest
rates will not be fully reflected in changes in NOW rates, only 40% of NOW
balances is included as immediately rate sensitive based on the Company's own
and industry repricing experience. Also, passbook savings will not reprice as
quickly as market rates and therefore the repricing of savings deposits is
included in the 7 to 12 month repricing period, based on the Company's
repricing experience. Because of non-interest bearing liabilities, total
interest-earning assets are substantially greater than the total
interest-bearing liabilities and therefore over time the effects on net
interest income from changes in asset yield will be greater than the change in
expense from liability cost. Accordingly, if market interest rates should
eventually decrease, the net interest margin should decrease. Conversely, if
rates increase the net interest margin would over time increase.

Interest-earning assets and other time deposits are presented based on their
contractual terms. It is anticipated that run off in any deposit category will
be approximately offset by new deposit generation. Since the Company has
experienced steady growth in deposits, no net run off in any deposit category
is assumed in the interest rate sensitivity table. It is the Company's policy
to maintain its cumulative one year gap ratio in the -.15 to +.15 range.

INVESTMENT PORTFOLIO

Maturities of investment securities at December 31, 1998 (amortized cost):
<TABLE>
<CAPTION>

                                                             After 1 Year         After 5 Years                         Mortgaged
                                       Within 1 Year        Within 5 Years       Within 10 Years    After 10 Years        Backed
                                     --------------------------------------------------------------------------------------------
(Dollars in thousands)               Amount       Yield     Amount      Yield    Amount    Yield    Amount    Yield       Amount
---------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>    <C>         <C>      <C>       <C>      <C>       <C>       <C>
Securities Held to Maturity:
   U.S. Treasury Securities          $ 4,008       6.06%    $10,075      6.24%
   U.S. Gov't Sponsored Agencies                              7,999      6.03%   $25,162    6.19%
   States and municipals (A)
   Other                                                                                             $   908   6.82%
                                     -------       ----     -------     -----    -------    ----     -------   ----       ------
        Total held to maturity         4,008       6.06%     18,074      6.15%    25,162    6.19%        908   6.82%          --
                                     -------       ----     -------     -----    -------    ----     -------   ----       ------

Securities Available for sale:
   U.S. Treasury Securities            5,022       5.42%
   States and municipals (A)           1,188      12.70%        941     10.91%     3,748    7.11%      2,237   7.09%      $4,022
   Mortgaged Backed Securities
   Other                                 450       9.84%
                                     -------       ----     -------     -----    -------    ----     -------   ----       ------
        Total available for sale       6,660       7.02%        941     10.91%     3,748    7.11%      2,237   7.09%       4,022
                                     -------       ----     -------     -----    -------    ----     -------   ----       ------

Total                                $10,668       6.66%    $19,015      6.38%   $28,910    6.31%    $ 3,145   7.01%      $4,022
                                     =======       ====     =======     =====    =======    ====     =======   ====       ======

</TABLE>

                                      26


<PAGE>   30

Yield by classification of investment securities at December 31, 1998
(amortized cost):
<TABLE>
<CAPTION>

(Dollars in thousands)                    Yield    Totals
---------------------------------------------------------
<S>                                       <C>    <C> 
Securities Held to Maturity:
     U.S. Treasury Securities             6.19%  $14,083
     U.S. Gov't Sponsored Agencies        6.15%   33,161
     Other (B)                            6.82%      908
                                          ----   -------
          Total held to maturity          6.17%   48,152
                                          ----   -------

Securities Available for Sale:
     U.S. Treasury Securities             5.42%    5,022
     States and municipals (A)            8.36%    8,114
     Mortgaged Backed Securities          5.89%    4,022
     Other                                9.84%      450
                                          ----   -------
          Total available for sale        5.73%   17,608
                                          ----   -------

Total                                     6.06%  $65,760
                                          ====   =======
</TABLE>


(A)  Weighted average yields on tax-exempt obligations have been computed by
     grossing up actual tax-exempt income to a fully taxable equivalent basis
     using a federal tax rate of 34%.

(B)  Represents investment in common stock of Independent Bankers' Bank of
     Florida stock which pays no dividends and an investment in the Federal
     Home Loan Bank of Atlanta.

The following table presents the amortized cost, market value, unrealized
gains, and unrealized losses for the major categories of the Company's
investment portfolio for each reported period:

(Dollars in thousands)

Held to Maturity  - December 31, 1998       
<TABLE>
<CAPTION>

                                                  Amortized          Unrealized       Unrealized         Market
                                                    Cost               Gains            Losses            Value
                                                 --------------------------------------------------------------------
<S>                                              <C>            <C>              <C>               <C>
U.S. Treasury Securities                         $14,083             $   248           $    --            $14,331
U.S. Government agencies and corporations         33,161                 177               109             33,229
Other investments                                    908                  --                --                908
                                                 =======             =======           =======            =======
                                                 $48,152             $   425           $   109            $48,468
                                                 =======             =======           =======            =======
</TABLE>

Available for Sale - December 31, 1998
<TABLE>
<CAPTION>

                                                 Amortized           Unrealized       Unrealized         Market
                                                   Cost                 Gains            Losses            Value
                                                 --------------------------------------------------------------------
<S>                                              <C>                  <C>               <C>              <C>  
U.S. Treasury Securities                         $ 5,022             $    21            $   --            $ 5,043
States and political subdivisions                  8,114                 219                --              8,333
Mortgage-backed securities                         4,022                   4                12              4,014
Other debt securities                                450                   8                --                458
                                                 =======             =======            ======            =======
                                                 $17,608             $   252            $   12            $17,848
                                                 =======             =======            ======            =======


</TABLE>



                                      27


<PAGE>   31

Held to Maturity - December 31, 1997
  
<TABLE>
<CAPTION>
                                                    Amortized   Unrealized   Unrealized   Market
                                                      Cost        Gains        Losses      Value
                                                 -------------------------------------------------
<S>                                              <C>            <C>          <C>         <C>
U.S. Treasury Securities                              $15,978     $   157     $    --     $16,135
States and political subdivisions                       7,374         293          --       7,667
U.S. Government agencies and corporations              12,001          21          15      12,007
Other investments                                         865          --          --         865
                                                      =======     =======     =======     =======
                                                      $36,218     $   471     $    15     $36,674
                                                      =======     =======     =======     =======

</TABLE>
Available for Sale - December 31, 1997
<TABLE>
<CAPTION>
                                                    Amortized   Unrealized    Unrealized    Market
                                                      Cost         Gains        Losses       Value
                                                 ---------------------------------------------------
<S>                                              <C>            <C>           <C>         <C>
U.S. Treasury Securities                              $ 9,044     $    --     $    34     $ 9,010
Mortgage-backed securities                              9,056          20          88       8,988
Other debt securities                                     450          23          --         473
                                                      =======     =======     =======     =======
                                                      $18,550     $    43     $   122     $18,471
                                                      =======     =======     =======     =======
</TABLE>



Held to Maturity - December 31, 1996
<TABLE>
<CAPTION>

                                                    Amortized    Unrealized   Unrealized    Market
                                                      Cost          Gains       Losses       Value
                                                   -------------------------------------------------
<S>                                                <C>           <C>          <C>           <C> 
U.S. Treasury Securities                              $ 7,965     $     1     $     7        $ 7,959
States and political subdivisions                       5,355         303           1          5,657
U.S. Government agencies and corporations                 992           9          --          1,001
Other investments                                          75          --          --             75
                                                      =======     =======     =======        =======
                                                      $14,387     $   313     $     8        $14,692
                                                      =======     =======     =======        =======

</TABLE>

Available for Sale - December 31, 1996
<TABLE>
<CAPTION>

                                                    Amortized    Unrealized   Unrealized     Market
                                                      Cost          Gains       Losses       Value
                                                  --------------------------------------------------
<S>                                               <C>            <C>          <C>            <C>  
U.S. Treasury Securities                              $21,220     $    22     $   130        $21,112
Mortgage-backed securities                             15,076          26         208         14,894
Other debt securities                                     449          35          --            484
                                                      =======     =======     =======        =======
                                                      $36,745     $    83     $   338        $36,490
                                                      =======     =======     =======        =======

</TABLE>



                                      28


<PAGE>   32

DEPOSITS

The following table presents the average amount outstanding and the average
rate paid on deposits by the Company for the years ended December 31, 1998,
1997, and 1996.
<TABLE>
<CAPTION>

                                          1998                   1997                     1996
                                  Average    Average    Average       Average     Average      Average
(Dollars in thousands)            Amount      Rate      Amount         Rate       Amount         Rate
------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>        <C>           <C>        <C>       <C>  
Noninterest-bearing deposits     $ 58,058               $ 46,323                 $ 41,755

Interest-bearing deposits
   NOW Accounts                    32,198      1.43%      28,122       1.40%       30,235        1.56%
   Money market                    99,567      4.85%      55,543       4.85%       13,256        2.53%
   Savings deposit                 23,005      2.48%      28,474       2.73%       41,380        2.97%
   Other time deposits             70,671      5.63%      71,565       5.52%       75,689        5.51%
                                 ---------------------------------------------------------------------
Total                            $283,499      3.47%    $230,027       3.40%     $202,315        3.07%
                                 =====================================================================

</TABLE>

The following table presents the maturity of the Company's time deposits at
December 31, 1998:
<TABLE>
<CAPTION>


                                  Deposits     Deposits
                                  $100,000     Less than
(Dollars in thousands)          and Greater     $100,000     Total
------------------------------------------------------------------
<S>                             <C>            <C>         <C>
Months to maturity:
   3 or less                       $ 4,813     $ 8,634     $13,447
   3 to 6                            3,970      10,668      14,638
   6 through 12                      7,107      14,993      22,100
   Over 12                           8,803      16,175      24,978
                                   -------------------------------
Total                              $24,693     $50,470     $75,163
                                   ===============================


</TABLE>



                                      29

<PAGE>   33
CAPITAL ADEQUACY

There are various primary measures of capital adequacy for banks and bank
holding companies such as risk based capital guidelines and the leverage
capital ratio. See "Business - Supervision and Regulation - Capital 
Regulations."

As of December 31, 1998, the Bank exceeded its required levels of capital for a
Bank categorized by the FDIC as well capitalized under the regulatory framework
for prompt corrective action. The Bank's risk-based capital ratio of Tier 1
capital to risk-weighted assets was 9.4%, its risk-based ratio of total capital
to risk-weighted assets was 10.4%, and its leverage ratio was 7.6%. See Note 11
to the Consolidated Financial Statements.


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. The Company has
been able to maintain an adequate level of equity, as previously mentioned and
copes with the effects of inflation by managing its interest rate sensitivity
gap position through its asset/liability management program, and by
periodically adjusting its pricing of services and banking products to take
into consideration current costs.


1998 ACCOUNTING PRONOUNCEMENTS

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." This
statement is effective for financial statements issued for periods beginning
after December 15, 1997. Under SFAS 130, a company is required to show changes
in assets and liabilities as comprehensive income in the statement of
stockholders equity or in alternative comprehensive income statement
presentations. The adoption of SFAS 130 did not have a significant impact on
the financial condition or results of operations of the Company.

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures About Segments of an
Enterprise and Related Information." This statement is effective for financial
statements issued for periods beginning after December 15, 1997. SFAS 131
requires disclosures of certain financial information by segments of a
company's business.

In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
requires companies to recognize all derivatives contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999, however, early adoption is allowed.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. The Company adopted the new
standard as of July 1, 1998. The effect on the financial statements at July 1,
1998 which resulted from the transfer of approximately $11.9 million in
investment securities from the held to maturity category to the available for
sale category was an increase in other comprehensive income market valuation
reserve of approximately $176,000.

In October 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 




                                      30

                                       
<PAGE>   34

No. 134 (SFAS 134), "Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." SFAS 134 is effective for the first fiscal quarter after December
15, 1998. This statement amends SFAS 65 by revising the accounting for retained
securities and beneficial interests. Management of the Company does not believe
that the adoption of SFAS 134 will have a material impact on the consolidated
financial condition or results of operations of the Company.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

All financial institutions have financial instruments which are subject to
market risk comprised of interest rate risk, foreign currency exchange rate
risk, commodity price risk and other relevant market risks, such as equity
price risks. The Company has assessed its market risk as predominately interest
rate risk.

The following interest rate sensitivity analysis information as of December 31,
1998 was developed using simulation analysis of the Bank's sensitivity to
changes in net interest income under varying assumptions for changes in market
interest rates. Specifically, the model derives expected interest income and
interest expense resulting from an immediate and parallel shift in the yield
curve in the amounts shown.

These rate changes are matched with known repricing intervals and assumptions
for new growth net of expected prepayments. The assumptions are based primarily
on experience in the Bank's market under varying rate environments. The
imbedded options that the Bank's loan customers possess, to refinance, are not
considered significant for purposes of this analysis given the large majority
of adjustable rate loans in the portfolio.

This analysis intentionally exaggerates interest sensitivity. For the sake of
simplicity and comparability, an immediate change in rates is assumed. However,
any significant change in actual market rates would be phased in over probably
an extended period of time. This phase in would reduce the net interest income
effects for any absolute change in rates. The target Federal Funds rate has
been 4.75% since November of 1998.

The Bank attempts to retain interest rate neutrality by generating mostly
adjustable rate loans and managing the securities and Fed Funds positions to
offset the repricing characteristics of the deposit liabilities. This process
was complicated in 1998 by the continued popularity of the indexed money market
account. The growth of this account as an interest sensitive liability,
immediately repriceable, has caused the Bank to be liability sensitive in the
very short term and cumulatively through a one year horizon. In 1999, this
mismatch, though still not material, will be monitored and some adjustments
made if deemed necessary.
<TABLE>
<CAPTION>


(Dollars in thousands)                              Interest Rates Decrease         Interest Rates    Interest Rates   Increase
                                                    200 BP           100 BP         Remain Constant      100 BP         200BP
                                                                                        Budget
                                                ---------------- ---------------- -------------------- ----------- ----------------
<S>                                                <C>             <C>              <C>                 <C>           <C>
1999 Interest Income                               $ 24,587        $ 25,775            $ 26,981         $ 28,668      $ 29,856
1999 Interest Expense                                 7,645           9,175              10,687           12,569        14,109
                                                   --------        --------             -------         --------      -------
Net Interest Income                                  16,942          16,600              16,294           16,099        15,747
                                                   --------        --------            --------         --------      --------
Change in net income after tax vs. budget          $    404        $    191            $     --         $   (122)     $   (341)


</TABLE>





                                      31
<PAGE>   35

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements, notes thereto and report of independent
certified public accountants thereon included on the following pages are
incorporated herein by reference.


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----     
<S>                                                                                             <C>
Report of Independent Certified Public Accountants (BDO Seidman, LLP)...........................33

Independent Auditors Report (Bricker & Melton, PA)..............................................34

Consolidated Balance Sheets for the Years
Ended December 31, 1998 and 1997 ...............................................................35

Consolidated Statements of Income for the
Years Ended December 31, 1998, 1997 and 1996....................................................36

Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996 ..................................................37-38

Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996 ........................................................39-40

Notes to Consolidated Financial Statements for
the Years Ended December 31, 1998, 1997 and 1996 ..............................................41-67

</TABLE>



                                       32
<PAGE>   36

[BDO LETTERHEAD]


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
TIB Financial Corp.
Key Largo, Florida

We have audited the accompanying consolidated balance sheet of TIB Financial
Corp. and subsidiaries as of December 31, 1998, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of TIB Financial Corp.'s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of TIB Financial Corp. and subsidiaries as of
December 31, 1997, and for the years ended December 31, 1997 and 1996, were
audited by Bricker & Melton, P.A., whose practice has been combined with our
Firm and whose report dated February 13, 1998, expressed an unqualified opinion
on those statements.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the 1998 consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position of
TIB Financial Corp. and subsidiaries as of December 31, 1998, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.


/s/ BDO SEIDMAN, LLP
------------------------------ 
    BDO SEIDMAN, LLP


February 19, 1999
Duluth, Georgia


                                       33

<PAGE>   37

                               [B&M LETTERHEAD]


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
TIB Financial Corp.
Key Largo, Florida


         We have audited the accompanying consolidated balance sheets of TIB
Financial Corp. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the two years ended December 31, 1997. These
consolidated financial statements are the responsibility of TIB Financial
Corp.'s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of TIB Financial Corp. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

                                         BRICKER & MELTON, P.A.



February 13, 1998
Duluth, Georgia




                                      34

<PAGE>   38

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

December 31,                                                                             1998             1997
------------                                                                       -------------      -------------  
<S>                                                                                <C>                <C>
ASSETS

Cash and due from banks (Note 2)                                                   $  18,136,735      $  12,554,285
Federal funds sold                                                                     6,565,000         12,275,000
Investment securities held to maturity (market value of $48,467,772 and
  $36,674,391, respectively) (Note 3)                                                 48,152,543         36,218,073
Investment securities available for sale (Note 3)                                     17,848,010         18,471,445
Investment in ERAS Joint Venture                                                         789,752                 --

Loans, net of deferred loan fees (Notes 4, 10 and 12)                                246,298,179        185,746,103
Less: Allowance for loan losses (Note 4)                                               2,517,234          2,201,974
                                                                                   -------------      -------------
Loans, net                                                                           243,780,945        183,544,129

Premises and equipment, net (Note 5)                                                  12,880,360         10,034,088
Accrued interest receivable                                                            2,614,662          1,750,703
Intangible assets, net                                                                 1,791,780            425,497
Other assets (Note 8)                                                                  2,916,063          2,685,600
                                                                                   -------------      -------------  

TOTAL ASSETS                                                                       $ 355,475,850      $ 277,958,820
                                                                                   =============      =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits (Note 6):
     Noninterest-bearing demand                                                    $  68,370,649      $  52,060,404
     Interest-bearing demand and money market                                        166,837,456        116,679,922
     Savings                                                                          14,685,319         13,092,101
     Time deposits of $100,000 or more                                                24,693,379         22,358,564
     Other time deposits                                                              50,469,928         44,630,828
                                                                                   -------------      -------------   
Total deposits                                                                       325,056,731        248,821,819

  Short-term borrowings (Note 7)                                                         669,569          2,007,178
  Accrued interest payable                                                             1,984,516          1,747,904
  Other liabilities (Note 8)                                                           1,197,500            818,362
                                                                                   -------------      -------------    
Total liabilities                                                                    328,908,316        253,395,263
                                                                                   -------------      -------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 12)

STOCKHOLDERS' EQUITY (Note 11)
  Common stock - $.10 par value: 7,500,000 shares authorized, 4,449,795 and
    4,371,954 shares issued                                                              444,979            437,195
  Surplus                                                                              7,202,321          6,507,072
  Retained earnings                                                                   19,328,022         17,668,290
  Accumulated other comprehensive income - market valuation reserve on
    investment securities available for sale (Note 3)                                    150,000            (49,000)
  Less:  Treasury stock, 50,000 shares, at cost                                         (557,788)                --
                                                                                   -------------      -------------  
Total stockholders' equity                                                            26,567,534         24,563,557
                                                                                   -------------      -------------  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $ 355,475,850      $ 277,958,820
                                                                                   =============      =============
</TABLE>

          See accompanying notes to consolidated financial statements.




                                      35
<PAGE>   39


                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>


Years ended December 31,                                                              1998             1997           1996
-----------------------                                                            -----------     -----------    ------------
<S>                                                                                <C>             <C>            <C> 
INTEREST INCOME
  Loans, including fees                                                            $18,745,954     $17,019,190     $15,037,810
  Investment securities:
     U.S. Treasury securities                                                        1,282,611       1,679,344       1,883,460
     U.S. Government agencies and corporations                                       2,288,922         962,435       1,094,824
     States and political subdivisions, tax-exempt                                     561,784         399,619         373,110
     Other investments                                                                 105,386          63,886          44,125
  Federal funds sold                                                                   720,606         433,300          69,420
                                                                                   -----------      ----------      ----------
Total interest income                                                               23,705,263      20,557,774      18,502,749
                                                                                   -----------      ----------      ----------

INTEREST EXPENSE
  Interest-bearing demand and money market                                           5,291,184       3,084,772         808,402
  Savings                                                                              570,408         777,784       1,230,686
  Time deposits of $100,000 or more                                                  1,428,832       1,371,237       1,426,049
  Other time deposits                                                                2,546,736       2,578,490       2,743,791
  Short-term borrowings                                                                 78,114          63,873         297,832
                                                                                    ----------      ----------      ----------
Total interest expense                                                               9,915,274       7,876,156       6,506,760
                                                                                    ----------      ----------      ----------

NET INTEREST INCOME                                                                 13,789,989      12,681,618      11,995,989

PROVISION FOR LOAN LOSSES (Note 4)                                                     360,000         300,000         240,000
                                                                                    ----------      ----------      ----------
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                                 13,429,989      12,381,618      11,755,989
                                                                                    ----------      ----------      ----------  

OTHER INCOME
  Service charges on deposit accounts                                                1,731,523       1,640,033       1,245,915
  Investment securities gains, net (Note 3)                                            130,985          10,664          18,478
  Merchant bank card processing income                                               2,174,057       2,109,363       1,709,116
  Equity in undistributed earnings of ERAS Joint Venture                                19,975              --              --
  Gain on sale of government guaranteed loans                                          988,465         439,768          17,314
  Gain on sale of mortgage loans                                                            --         118,863         173,468
  Fees on mortgage loans sold at origination                                           461,126         363,973         359,562
  Retail investment services                                                           419,333         319,286              --
  Other income                                                                         473,258         317,454         260,072
                                                                                    ----------      ----------      ----------
Total other income                                                                   6,398,722       5,319,404       3,783,925
                                                                                    ----------      ----------      ----------

OTHER EXPENSE
  Salaries and employee benefits (Note 9)                                            7,158,584       6,504,945       5,535,872
  Net occupancy expense                                                              2,248,425       1,825,207       1,691,870
  Other expense (Note 14)                                                            5,094,906       4,446,412       3,520,205
                                                                                    ----------      ----------      ----------
Total other expense                                                                 14,501,915      12,776,564      10,747,947
                                                                                    ----------      ----------      ----------

INCOME BEFORE INCOME TAX EXPENSE                                                     5,326,796       4,924,458       4,791,967

INCOME TAX EXPENSE (Note 8)                                                          1,885,800       1,718,600       1,589,000
                                                                                    ----------      ----------      ---------- 

NET INCOME                                                                         $ 3,440,996     $ 3,205,858     $ 3,202,967
                                                                                    ==========      ==========      ==========
  
BASIC EARNINGS PER COMMON SHARE (Note 1)                                           $       .78     $       .74     $       .75
                                                                                    ==========      ==========      ==========

DILUTED EARNINGS PER COMMON SHARE (Note 1)                                         $       .74     $       .70     $       .72
                                                                                    ==========      ==========      ==========

</TABLE>

          See accompanying notes to consolidated financial statements.


                                      36

<PAGE>   40


                      TIB FINANCIAL CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                          Accumulated Other                   
                                                                                            Comprehensive                          
                                                                                            Income-Market                          
                                              Comprehensive      Retained      Treasury       Valuation       Common               
                                   Total          Income         Earnings       Stock          Reserve        Stock      Surplus
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>               <C>           <C>        <C>                <C>        <C>  
BALANCE, December 31, 1995      $21,063,146                     $14,663,648     $ --          $ 178,005      $ 70,975   $6,150,518
Comprehensive income:
  Net income                      3,202,967     $3,202,967        3,202,967       --                 --            --           --
  Other comprehensive income,
    net of tax benefit of
    $202,658:
      Net market valuation
        adjustment on
        securities available
        for sale                   (339,069)      (339,069)              --       --                 --            --           --
      Add: reclassification
        adjustment for gains
        included in net income        2,313          2,313               --       --                 --            --           --
                                                ----------  
Other comprehensive income,
  net of tax                             --       (336,756)              --       --           (336,756)           --           --
                                                ----------  
Comprehensive income                     --     $2,866,211               --       --                 --            --           --
                                                ==========  
Exercise of stock options           350,942                              --       --                 --         2,130      348,812
Two-for-one stock split                  --                              --       --                 --        70,974      (70,974)
Cash dividends declared, $.39
  per share                      (1,659,382)                     (1,659,382)      --                 --            --           --
                                -----------     ----------      -----------     ------        ---------      --------   ----------
BALANCE, December 31, 1996       22,620,917                      16,207,233       --           (158,751)      144,079    6,428,356
Three-for-one stock split
  subsequent to December 31,
  1996                                   --                              --       --                 --       288,157     (288,157)
                               ------------     ----------      -----------     ------        ---------      --------   ----------
BALANCE, December 31, 1996,
  after retroactive
  restatement for stock split    22,620,917                      16,207,233       --           (158,751)      432,236    6,140,199
Comprehensive income:
  Net income                      3,205,858     $3,205,858        3,205,858       --                 --            --           --
  Other comprehensive income,
    net of tax expense of
    $65,658:
      Net market valuation
        adjustment on
        securities available
        for sale                    112,372        112,372               --       --                 --            --           --
      Less: reclassification
        adjustment for gains
        included in net income       (2,621)        (2,621)              --       --                 --            --           --
                                                ----------                                                                       
Other comprehensive income,
  net of tax                             --        109,751               --       --            109,751            --           --
                                                ----------

Comprehensive income                     --     $3,315,609               --       --                 --            --           --
                                                ==========
Exercise of stock options           273,266                              --       --                 --         4,959      268,307
Income tax benefit from stock
  options exercised                  98,566                              --       --                 --            --       98,566
Cash dividends declared, $.40
  per share                      (1,744,801)                     (1,744,801)      --                 --            --           --
                               ------------                     -----------     ------        ---------      --------   ----------
                                                                                                                           
BALANCE, December 31, 1997     $ 24,563,557                     $17,668,290     $ --          $ (49,000)     $437,195   $6,507,072
                               ============                     ===========     ======        =========      ========   ==========
</TABLE>

    See accompanying notes to consolidated financial statements. (Continued)

                                      37
<PAGE>   41


                      TIB FINANCIAL CORP. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)

<TABLE>
<CAPTION>
                                                                                      Accumulated Other                          
                                                                                        Comprehensive                          
                                                                                        Income--Market                          
                                               Comprehensive   Retained     Treasury      Valuation        Common        
                                   Total          Income       Earnings       Stock        Reserve         Stock       Surplus
--------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>              <C>          <C>          <C>           <C>              <C>         <C> 
BALANCE, December 31, 1997      $24,563,557                   $17,668,290  $       --     $ (49,000)      $437,195    $6,507,072
Comprehensive income:
  Net income                      3,440,996       $3,440,996    3,440,996          --            --             --            --
  Other comprehensive income,                                                                                                  
    net of tax expense of                                                                                                      
    $120,000:                                                                                                                  
      Net market valuation                                                                                                     
        adjustment on                                                                                                          
        securities available                                                                                                   
        for sale                    103,831          103,831           --          --            --             --            --
      Add: cumulative                                                                                                          
        adjustment related to                                                                                                  
        adoption of SFAS 133                                                                                                   
        and related                                                                                                            
        reclassification of                                                                                                    
        certain securities                                                                                                     
        from held--to--maturity                                                                                                  
        to available--for--sale     176,000          176,000           --          --            --             --            --
      Less: reclassification                                                                                                   
        adjustment for gains                                                                                                   
        included in net income      (80,831)         (80,831)          --          --            --             --            --
                                                  ----------
Other comprehensive income,                                                                                                    
  net of tax                             --          199,000           --          --       199,000             --            --
                                                 -----------
Comprehensive income                     --       $3,639,996           --          --            --             --            --
                                                 ===========
Exercise of stock options           349,892                            --          --            --          6,117       343,775
Income tax benefit from stock                                                                                                  
  options exercised                 138,566                            --          --            --             --       138,566
Compensation paid through                                                                                                      
  issuance of common stock          214,575                            --          --            --          1,667       212,908
Purchase of treasury stock         (557,788)                           --    (557,788)           --             --            --
Cash dividends declared,                                                                                                       
  $.4025 per share               (1,781,264)                   (1,781,264)         --            --             --            --
                                -----------      -----------  -----------   ---------    ----------      ---------    ----------
BALANCE, December 31, 1998      $26,567,534                   $19,328,022   $(557,788)    $ 150,000       $444,979    $7,202,321
                                ===========      ===========  ===========   ==========   ==========      =========    ========== 
</TABLE>

          See accompanying notes to consolidated financial statements.




                                      38

<PAGE>   42


                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

Years ended December 31,                                                            1998              1997              1996
------------------------                                                       ------------      ------------      ------------
<S>                                                                            <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                     
  Net income                                                                   $  3,440,996      $  3,205,858      $  3,202,967
  Adjustments to reconcile net income to net cash provided by
     operating activities:
       Net amortization of investments                                                6,309            81,707           201,344
       Amortization of intangible assets                                             96,487            46,833            59,967
       Depreciation of premises and equipment                                     1,022,160           798,295           761,001
       Provision for loan losses                                                    360,000           300,000           240,000
       Deferred income tax (benefit)                                                (47,655)          (87,997)          (87,000)
       Deferred net loan fees                                                      (162,260)          (74,024)          (84,807)
       Investment securities (gains), net                                          (130,985)          (10,664)          (18,478)
       Compensation paid through issuance of common stock                           214,575                --                --
       Gain on sales/conversion of premises and equipment                            (2,540)           (3,002)           (1,166)
       Gains on sales of government guaranteed loans                               (988,465)         (439,768)          (17,314)
       Gains on sales of mortgage loans                                                  --          (118,863)         (173,648)
       (Increase) decrease in interest receivable                                  (863,959)          (69,960)           28,314
       Increase in interest payable                                                 196,413             4,250           310,938
       Increase in intangible assets                                                (27,348)          (69,025)         (141,276)
       (Increase) decrease in other assets                                         (302,808)          880,738          (944,246)
       Increase (decrease) in other liabilities                                     491,397           300,993          (143,172)
       Other                                                                          1,464                --                --
                                                                               ------------      ------------      ------------  

Net cash provided by operating activities                                         3,303,781         4,745,371         3,193,424
                                                                               ------------      ------------      ------------ 

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of investment securities held to maturity                           (44,813,928)      (27,870,735)       (5,951,250)
  Sales of investment securities available for sale                               9,966,994         5,083,984         8,013,906
  Repayments of principal and maturities of investment
     securities available for sale                                                2,979,575        13,004,356         5,591,954
  Maturities of investment securities held to maturity                           21,000,000         6,075,000         1,706,000
  Proceeds from sales of government guaranteed loans                             11,458,514         7,400,314         1,075,630
  Proceeds from sales of mortgage loans                                                  --         6,062,024        11,564,515
  Investment in ERAS Joint Venture                                                 (791,216)               --                --
  Purchase of Small Business Consultants, Inc.                                           --          (275,000)               --
  Net cash received in purchase of branch from Coconut Grove
     Bank                                                                         9,665,577                --                --
  Loans originated or acquired, net of principal repayments                     (70,904,605)      (34,058,909)      (38,550,111)
  Purchases of premises and equipment                                            (3,053,387)       (2,578,505)         (415,670)
  Sales of premises and equipment                                                     5,635            34,035             4,430
                                                                               ------------      ------------      ------------ 

Net cash used by investing activities                                          $(64,486,841)     $(27,123,436)     $(16,960,596)
                                                                               ============      ============      ============
</TABLE>

    See accompanying notes to consolidated financial statements. (Continued)



                                      39

<PAGE>   43

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>


Years ended December 31,                                                     1998              1997              1996
------------------------                                                 ------------     -------------      ------------
<S>                                                                      <C>               <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase (decrease) in federal funds purchased and                                                                  
     securities sold under agreements to repurchase                      $ (1,337,609)     $ (9,084,248)     $  6,907,375
  Net increase in demand, money market and savings accounts                61,394,697        56,341,652         6,524,755
  Time deposits accepted, net of repayments                                 2,973,798       (12,503,413)        6,001,236
  Proceeds from exercise of stock options                                     349,892           273,266           350,942
  Treasury stock repurchased                                                 (557,788)               --                --
  Cash dividends paid                                                      (1,767,480)       (1,739,842)       (1,227,146)
                                                                         ------------      ------------      ------------ 

Net cash provided by financing activities                                  61,055,510        33,287,415        18,557,162
                                                                         ------------      ------------      ------------ 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         (127,550)       10,909,350         4,789,990

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                             24,829,285        13,919,935         9,129,945
                                                                         ------------      ------------      ------------ 

CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $ 24,701,735      $ 24,829,285      $ 13,919,935
                                                                         ============      ============      ============
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
   Interest                                                              $  9,678,662      $  7,871,906      $  6,159,810
   Income taxes                                                             1,745,000         1,637,000         1,656,000

</TABLE>

Subsequent to the adoption of Statement of Financial Accounting Standards No.
133 (SFAS 133), in July 1998, investment securities held to maturity totaling
$11,898,815 were transferred to investment securities available for sale. (See
Note 1 - New Accounting Pronouncements - Accounting for Derivative Instruments
and Hedging Activities.)

The Company purchased the banking facilities and assumed the Homestead deposit
base of the Coconut Grove Bank. Net cash received in connection with the
acquisition is calculated as follows:

<TABLE>
<S>                                                                      <C>
Deposit and other liabilities assumed                                    $ 11,919,139
Less cash paid for:
  Premises and equipment                                                     (818,140)
  Core deposit premium                                                     (1,435,422)
                                                                         ------------

                                                                         $  9,665,577 
                                                                         ============
</TABLE>
  

          See accompanying notes to consolidated financial statements.


                                      40
<PAGE>   44


                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

TIB Financial Corp. and subsidiaries provide full-service commercial banking
services in Monroe and South Dade counties, Florida.

The accounting and reporting policies of TIB Financial Corp. and subsidiaries
conform to generally accepted accounting principles and to general practices
within the banking industry. The following is a summary of the more significant
of these policies.

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the balance sheet and revenues and expenses for the period. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses. Management believes that the
allowance for loan losses is adequate. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for loan losses. Such agencies may require
additions to the allowance for loan losses based on their judgments about
information available to them at the time of their examination.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of TIB Financial
Corp. (Parent Company) and its two wholly-owned subsidiaries, TIB Bank of the
Keys (Bank) and TIB Software and Services, Inc., and the Bank's two
subsidiaries, TIB Government Loan Specialists, Inc. and TIB Investment &
Insurance Center, Inc., collectively known as the Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.

CORPORATE REORGANIZATION

During 1996, the Parent Company was formed providing for a reorganization
whereby the Bank became a wholly-owned subsidiary of the Parent Company. The
transaction was approved unanimously by the Bank's shareholders and accounted
for on a historical cost basis similar to a pooling of interests and,
accordingly, the accompanying consolidated financial statements are prepared as
if the reorganization occurred January 1, 1996.

BANK SUBSIDIARIES

In 1997, the Bank formed two subsidiaries. On June 13, 1997, the Bank acquired
the assets of Small Business Consultants, Inc., a Florida corporation
specializing in the government guaranteed loan consulting business, for a
purchase price of $275,000. The Bank received assets with a fair value of
$63,235. The excess of the proceeds paid over the fair value of the assets
received was recorded as goodwill and is being amortized over a period of 15
years. On July 31, 1997, the Bank formed TIB Investment & Insurance Center,
Inc. for the purpose of selling investment products to the public.



                                      41



<PAGE>   45

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


PARENT COMPANY SUBSIDIARY

In 1998, the Parent Company's subsidiary, TIB Software and Services, Inc.,
acquired a 30 percent interest in ERAS Joint Venture (the "Venture"), a general
partnership, in exchange for a total consideration of $791,216. Goodwill
associated with the transaction totaled $643,214 and is being amortized over a
period of ten years. The investment in the Venture is being accounted for using
the equity method. The Venture's primary business is item processing and the
design, development, installation and maintenance of accounting software for
financial institutions.

INVESTMENT SECURITIES

Investment securities which management has the ability and intent to hold to
maturity are reported at cost, adjusted for amortization of premium and
accretion of discount. Investment securities available for sale are reported at
fair value, with unrealized gains and losses reported as a separate component
of stockholders' equity, net of the related tax effect. Other investments are
reported at cost, and accordingly, earnings are reported when interest is
accrued or when dividends are received.

Premium and discount on all investment securities are amortized (deducted) and
accreted (added), respectively, to interest income on the effective-yield
method over the period to the maturity of the related securities. Premium and
discount on mortgage-backed securities are amortized (deducted) and accreted
(added), respectively, to interest income on the effective interest method over
the period to maturity of the related securities, taking into consideration
assumed prepayment patterns.

Gains or losses on disposition are computed by the specific identification
method for all securities.

LOANS

Loans are reported at the gross amount outstanding, reduced by net deferred
loan fees and a valuation allowance for loan losses. Interest income on loans
is recognized over the terms of the loans based on the unpaid daily principal
amount outstanding. If the collectibility of interest appears doubtful, the
accrual thereof is discontinued. Loan origination fees, net of direct loan
origination costs, are deferred and recognized as income over the life of the
related loan on a level-yield basis. Gains on sales of government guaranteed
loans are recognized as income when the sales occur.

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing
Rights," an amendment of Statement of Financial Accounting Standards No. 65
(SFAS 65), "Accounting for Certain Mortgage Banking Activities." The provisions
of SFAS 122 denote the accounting distinction between rights to service
mortgage loans that are acquired through loan origination and those acquired
through purchase. The adoption of SFAS 122 did not have a significant impact on
the financial condition or results of operations of the Company.

Fixed rate mortgage loans are originated by the Bank and sold to a third party
immediately without recourse. All fees are recognized as income at the time of
the sale.


                                      42
<PAGE>   46

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans that may become uncollectible. Management's judgment in determining the
adequacy of the allowance is based on evaluations of the collectibility of
loans and takes into consideration such factors as changes in the nature and
volume of the loan portfolio, current economic conditions that may affect the
borrower's ability to pay, overall portfolio quality and review of specific
problem loans. Periodic revisions are made to the allowance when circumstances
which necessitate such revisions become known. Recognized losses are charged to
the allowance for loan losses, while subsequent recoveries are added to the
allowance.

The Bank accounts for impaired loans in accordance with Statement of Financial
Accounting Standards No. 114 (SFAS 114), "Accounting by Creditors for
Impairment of a Loan," as amended by Statement of Financial Accounting
Standards No. 118 (SFAS 118), "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosure." Management, considering current
information and events regarding the borrowers' ability to repay their
obligations, considers a loan to be impaired when it is probable that the Bank
will be unable to collect all amounts due according to the contractual terms of
the loan. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future cash flows
discounted at the note's effective interest rate. Impairment losses are
included in the allowance for loan losses through a charge to the provision.
Cash receipts on impaired loans are applied to reduce the principal amount of
such loans until the principal has been recovered and are recognized as
interest income, thereafter.

PREMISES AND EQUIPMENT

Premises and equipment are reported at cost less accumulated depreciation. For
financial reporting purposes, depreciation is computed using primarily 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. When property is disposed
of, any gain or loss is reflected in income. For Federal tax reporting
purposes, depreciation is computed using primarily accelerated methods.

OTHER REAL ESTATE

Other real estate represents property acquired through in-substance
foreclosure, foreclosure, or in settlement of loans and is reported at the
lower of cost or fair value less estimated selling expenses. Losses incurred in
the acquisition of foreclosed properties are charged against the allowance for
loan losses at the time of foreclosure. Subsequent write-downs of other real
estate are charged against the current period's operations.

MERCHANT BANK CARD PROCESSING INCOME

The Bank participates in merchant credit card processing for a number of
businesses in the local area. The Bank receives a percentage of each
transaction which it processes.




                                      43

<PAGE>   47
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


INTANGIBLE ASSETS

Intangible assets include amounts for excess servicing fees on government
guaranteed loans, organizational expenses, deposit base premiums and goodwill.
Excess servicing rights are being amortized over the expected life of the
related loan. The Parent Company organizational expenses are being amortized
over five years using the straight-line method. The deposit base premium is
being amortized using the straight-line method over an estimated life of 10
years. Goodwill is amortized over varying periods, from 10 to 15 years, using
the straight-line method.

Long-lived assets, including certain fixed assets and intangibles, are
evaluated regularly for other-than-temporary impairment. If circumstances
suggest that the value of such assets may be impaired and a write-down would be
material, an assessment of recoverability is performed prior to any write-down.
Impairment on intangibles is evaluated at each balance sheet date or whenever
events or changes in circumstances indicate that the carrying amount should be
assessed. Impairment, if any, is recognized through a valuation allowance with
a corresponding charge recorded in the income statement.

INCOME TAXES

The tax effects of transactions is recorded at current tax rates in the periods
the transactions are reported for financial statement purposes. Deferred income
taxes are established for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. The Company files its tax returns on a consolidated basis.

COMMON STOCK SPLITS

On March 26, 1996, the Board of Directors declared a two-for-one common stock
split distributable on May 14, 1996, to shareholders of record at the close of
business on May 2, 1996, resulting in 709,740 additional shares of common stock
being issued. On February 25, 1997, the Board of Directors declared a
three-for-one common split distributable on March 18, 1997, to shareholders of
record at the close of business on February 25, 1997, resulting in 2,889,576
additional shares of common stock being issued. In the consolidated financial
statements, all per share amounts, number of shares outstanding and market
prices have been restated to reflect these stock splits as if they had occurred
January 1, 1996. An amount equal to the $.10 par value of the additional shares
outstanding after the stock splits has been transferred from surplus to common
stock.

EARNINGS PER COMMON SHARE

Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." This statement
is effective for financial statements issued for periods ending after December
15, 1997. This statement supersedes Accounting Principles Board Opinion No. 15
(APB 15), "Earnings Per Share," and simplifies earnings per share computations
by replacing primary earnings per share with basic earnings per share, which
shows no effects from dilutive securities. Entities with complex capital
structures have to show diluted earnings per share, which is similar to the
fully diluted earnings per share computation under APB 15.





                                      44


<PAGE>   48
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Basic earnings per common share has been computed based on the weighted average
number of common equivalent shares outstanding during the period. Stock
options, as described in Note 11, are considered to be common stock equivalents
for purposes of calculating diluted earnings per common share. The common stock
splits have been treated retroactively as occurring on January 1, 1996, for
earnings per share computation purposes.

The reconciliation of basic earnings per share to diluted earnings per share is
as follows:

<TABLE>
<CAPTION>

                                                                             Net              Common         Per Share
                                                                          Earnings            Shares           Amount
                                                                         ----------         ---------       ------------
<S>                                                                      <C>                <C>              <C> 
 For the year ended December 31, 1998:
    Basic earnings per common share                                      $3,440,996         4,415,949           $ .78
    Effect of dilutive stock options                                             --           208,431            (.04)
                                                                         ----------         ---------           -----
 Diluted earnings per common share                                       $3,440,996         4,624,380           $ .74
                                                                         ==========         =========           ===== 
 For the year ended December 31, 1997:
    Basic earnings per common share                                      $3,205,858         4,354,547           $ .74
    Effect of dilutive stock options                                             --           247,828            (.04)
                                                                         ----------         ---------           -----

 Diluted earnings per common share                                       $3,205,858         4,602,375           $ .70
                                                                         ==========         =========           ===== 

 For the year ended December 31, 1996:
    Basic earnings per common share                                      $3,202,967         4,280,712           $ .75
    Effect of dilutive stock options                                             --           143,964            (.03)
                                                                         ----------         ---------           -----

 Diluted earnings per common share                                       $3,202,967         4,424,676           $ .72
                                                                         ==========         =========           ===== 
</TABLE>

STOCK-BASED COMPENSATION

The Company accounts for stock options under Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." Under APB
25, because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

Effective January 1, 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." As provided by SFAS 123, the Company has elected to
continue applying the provisions of APB 25 in determining its net income
relative to stock-based compensation. The Company has adopted the SFAS 123
requirement that a company disclose the pro forma net income and pro forma
earnings per share for the years ending December 31, 1998, 1997 and 1996, as if
the alternative fair-value-based accounting method in SFAS 123 had been used in
determining net income. The adoption of SFAS 123 did not have a significant
impact on the financial condition or results of operations of the Company.



                                      45

<PAGE>   49
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FINANCIAL INSTRUMENTS

In the ordinary course of business, the Bank has entered into off-balance-sheet
financial instruments consisting of commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they are funded or related fees are incurred or received.

The Company does not invest in off-balance-sheet derivative financial
instruments such as swaps, options, futures or forward contracts.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company uses the following methods and assumptions in estimating fair
values of financial instruments (see Note 15):

Cash and cash equivalents - The carrying amount of cash and cash equivalents
approximates fair value.

Investment securities - The fair value of investment securities held to
maturity and available for sale is estimated based on bid quotations received
from independent pricing services. The carrying amount of other investments
approximates fair value.

Loans - For variable rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For all other
loans, fair values are calculated by discounting the contractual cash flows
using estimated market discount rates which reflect the credit and interest
rate risk inherent in the loan, or by using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities.

Deposits - The fair value of deposits with no stated maturity, such as demand,
NOW and money market, and savings accounts, is equal to the amount payable on
demand at year-end. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows using the rates currently offered
for deposits of similar remaining maturities.

Short-term borrowings - The carrying amount of federal funds purchased and
other short-term borrowings maturing within 30 days approximates fair value.

Accrued interest - The carrying amount of accrued interest receivable and
payable approximates fair value.

Off-balance-sheet instruments - The fair value of commitments to extend credit
to fund commercial, consumer, real estate-construction and real estate-mortgage
loans and to fund standby letters of credit is equal to the amount of
commitments outstanding at December 31, 1998. This is based on the fact that
the Company generally does not offer lending commitments or standby letters of
credit to its customers for long periods, and therefore, the underlying rates
of the commitments approximate market rates.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods.







                                      46

<PAGE>   50

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RECLASSIFICATIONS

Certain reclassifications have been made in the 1997 and 1996 financial
statements to conform with the 1998 presentation.

NEW ACCOUNTING PRONOUNCEMENTS

Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities

Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 125 is
effective for such transactions entered into subsequent to December 31, 1996,
and for certain excess servicing rights recorded at December 31, 1996. Under
SFAS 125, a company recognizes the financial and servicing assets it controls
and the liabilities it has incurred and derecognizes financial assets when
control has been surrendered and liabilities when extinguished. The Financial
Accounting Standards Board has issued Statement of Financial Accounting
Standards No. 127 (SFAS 127), "Deferral of the Effective Date of FASB Statement
No. 125," which delayed the effective date of certain provisions of SFAS 125
until 1998. The adoption of SFAS 125 and SFAS 127 did not have a significant
impact on the financial condition or results of operations of the Company.

Reporting Comprehensive Income

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." This
statement is effective for financial statements issued for periods beginning
after December 15, 1997. Under SFAS 130, a company is required to show changes
in assets and liabilities as comprehensive income in the consolidated
statements of changes in stockholders' equity or in alternative comprehensive
income statement presentations. The adoption of SFAS 130 did not have a
significant impact on the financial condition or results of operations of the
Company.

Disclosure About Segments of an Enterprise and Related Information

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information." This statement is effective for financial
statements issued for periods beginning after December 15, 1997. SFAS 131
requires disclosures of certain financial information by segments of a
company's business. (See Note 16.)

Accounting for Derivative Instruments and Hedging Activities

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires companies to recognize
all derivative contracts as either assets or liabilities in the balance sheet
and to measure them at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999;






                                      47

<PAGE>   51

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

however, early adoption is allowed. Historically, the Company has not entered
into derivative contracts either to hedge existing risks or for speculative
purposes. The Company adopted the new standard as of July 1, 1998. The effect
on the consolidated financial statements at July 1, 1998, which resulted from
the transfer of investment securities, with an amortized cost of $11,898,815,
from the held-to-maturity category to the available-for-sale category, was an
increase in the other comprehensive income market valuation reserve of
approximately $176,000.

PENDING ACCOUNTING PRONOUNCEMENTS

In October 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 134 (SFAS 134), "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise." SFAS 134 is effective for the
first fiscal quarter after December 15, 1998. This statement amends SFAS 65 by
revising the accounting for retained securities and beneficial interests.
Management of the Company does not believe that the adoption of SFAS 134 will
have a material impact on the consolidated financial condition or results of
operations of the Company.


2.   CASH AND DUE FROM BANKS

A bank is required to maintain average reserve balances with the Federal
Reserve Bank, on deposit with national banks or in cash. The Bank's average
reserve requirement as of December 31, 1998, was approximately $3,514,000.
The Bank maintained cash balances which were adequate to meet this requirement.


3.   INVESTMENT SECURITIES

The amortized cost and estimated market value of investment securities held to
maturity are as follows:

<TABLE>
<CAPTION>

                                                  AMORTIZED           UNREALIZED        UNREALIZED         MARKET
 DECEMBER 31, 1998                                   COST                GAINS            LOSSES            VALUE
 -----------------                              ------------          ----------        ----------       ----------
<S>                                             <C>                   <C>               <C>              <C> 
 U.S. Treasury securities                        $14,083,195           $247,542         $     --        $14,330,737
 U.S. Government agencies and                                                                                           
    corporations                                  33,161,248            177,062          109,375         33,228,935
 Other investments                                   908,100                 --               --            908,100
                                                 -----------           --------         --------        -----------

                                                 $48,152,543           $424,604         $109,375        $48,467,772
                                                 ===========           ========         ========        ===========

</TABLE>


                                       48


<PAGE>   52

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
  
                                                 Amortized           Unrealized         Unrealized             Market
 December 31, 1997                                  Cost                Gains             Losses               Value
 -----------------                             -------------          ---------         ----------         -------------
<S>                                            <C>                   <C>                <C>                <C>  
 U.S. Treasury securities                      $  15,978,285          $ 157,355         $       --         $  16,135,640
 States and political subdivisions                 7,373,701            293,750                 --             7,667,451
 U.S. Government agencies and                                                                                           
    corporations                                  12,001,487             20,693             15,480            12,006,700
 Other investments                                   864,600                 --                 --               864,600
                                               -------------          ---------         ----------          ------------
                                               $  36,218,073          $ 471,798         $   15,480          $ 36,674,391
                                               =============          =========         ==========          ============   
</TABLE>

The amortized cost and estimated market value of investment securities
available for sale are as follows:
<TABLE>
<CAPTION>


                                                  AMORTIZED          UNREALIZED          UNREALIZED            MARKET
 DECEMBER 31, 1998                                  COST                GAINS              LOSSES               VALUE
 -----------------                              ------------          ---------          -----------       -------------
<S>                                             <C>                   <C>                <C>               <C>
 U.S. Treasury securities                       $  5,021,513          $  21,437           $     --          $  5,042,950
 States and political subdivisions                 8,114,069            219,112                 --             8,333,181
 Mortgage-backed securities                        4,022,557              4,020             12,379             4,014,198
 Other debt securities                               449,871              7,810                 --               457,681
                                                ------------          ---------          ---------          ------------
                                                $ 17,608,010           $252,379          $  12,379          $ 17,848,010
                                                ============          =========          =========          ============   

</TABLE>


<TABLE>
<CAPTION>



                                                Amortized            Unrealized         Unrealized             Market
 December 31, 1997                                Cost                 Gains             Losses                 Value
 -----------------                             -------------         ----------        -----------         -------------
<S>                                            <C>                   <C>                <C>                <C>
 U.S. Treasury securities                      $   9,044,333         $       --         $   33,753         $   9,010,580
 Mortgage-backed securities                        9,056,448             20,064             88,253             8,988,259
 Other debt securities                               449,664             22,942                 --               472,606
                                               -------------         ----------         ----------         -------------
                                               $  18,550,445         $   43,006         $  122,006         $  18,471,445
                                               =============         ==========         ==========         =============   
</TABLE>

Other investments consist of stock in the Independent Bankers' Bank of Florida
and the Federal Home Loan Bank of Atlanta. Other debt securities consist of
corporate debt securities.

The net unrealized gain (loss) on available-for-sale securities at December 31,
1998 and 1997, net of the related deferred taxes of $90,000 and $(30,000), is
$150,000 and $(49,000), respectively, and is included as a separate component
of stockholders' equity.

The amortized cost and estimated market value of investment securities held to
maturity and available for sale at December 31, 1998, by contractual maturity,
are shown as follows. Expected maturities differ from contractual maturities
because borrowers may have the right to call or repay obligations without call
or prepayment penalties.




                                      49

<PAGE>   53
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                  INVESTMENT SECURITIES                    INVESTMENT SECURITIES
                                                    HELD TO MATURITY                         AVAILABLE FOR SALE
                                              -------------------------------           ------------------------------
                                                 AMORTIZED          MARKET                AMORTIZED          MARKET
 DECEMBER 31, 1998                                 COST              VALUE                   COST             VALUE
 -----------------                            ------------       ------------           ------------      ------------ 
<S>                                           <C>                <C>                    <C>               <C>
 Due in one year or less                      $  4,007,908       $  4,032,500           $  6,659,717      $  6,694,237
 Due after one year through five years          18,074,476         18,323,547                941,072           997,337
 Due after five years through ten years         25,162,059         25,203,625              3,748,218         3,858,198
 Due after ten years                               908,100            908,100              2,236,446         2,284,040
 Mortgage-backed securities                             --                 --              4,022,557         4,014,198
                                              ------------       ------------           ------------      ------------
                                              $ 48,152,543       $ 48,467,772           $ 17,608,010      $ 17,848,010
                                              ============       ============           ============      ============ 
</TABLE>

Proceeds from sales of investment securities available for sale during 1998,
1997 and 1996, respectively, were $9,966,994, $5,083,984 and $8,013,906 with
gross gains of $129,537, $4,201 and $3,706 and no gross losses. Maturities and
principal repayments of investment securities available for sale during 1998,
1997 and 1996 were $2,979,575, $13,004,356 and $5,591,954, respectively. Gross
gains realized from calls and mandatory redemptions of held-to-maturity
securities during 1998, 1997 and 1996 were $1,448, $6,463 and $14,772,
respectively.

Investment securities having carrying values of approximately $13,261,000 and
$10,964,000 at December 31, 1998 and 1997, respectively, were pledged to secure
public funds on deposit, securities sold under agreements to repurchase, and
other purposes as required by law. The Bank's pledged securities are held in
safekeeping.


4.    LOANS

Major classifications of loans are as follows:
<TABLE>
<CAPTION>

 December 31,                                                              1998               1997
 ------------                                                           ------------       ------------
<S>                                                                     <C>                <C>
 Commercial, financial and agricultural                                 $163,798,992       $123,787,065
 Real estate--construction                                                 5,960,092         10,010,565
 Real estate--individual                                                  62,544,350         42,598,799
 Installment and simple interest individual                               13,810,146          9,695,260
 Other                                                                       554,830            186,905
                                                                        ------------       ------------
 Total loans                                                             246,668,410        186,278,594
 Net deferred loan fees                                                      370,231            532,491
                                                                        ------------       ------------
 Loans, net of deferred loan fees                                      $ 246,298,179       $185,746,103
                                                                       =============        ===========   
</TABLE>




                                      50

<PAGE>   54
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Substantially all loans are made to borrowers in the Bank's primary market area
of Monroe and South Dade counties, in which the primary industry is tourism.
Therefore, a substantial portion of the Bank's loan customers and outstanding
loans are related to the tourism industry. At December 31, 1998 and 1997, the
Bank had approximately $212,269,000 and $163,334,000, respectively, of its
portfolio secured by real estate.

Nonaccrual and restructured loans totaled $521,000 and $273,000 at December 31,
1998 and 1997, respectively. If such loans had been on a full-accrual basis,
interest income would have been approximately $32,000 and $16,000 higher in
1998 and 1997, respectively. Interest income recognized on these loans totaled
approximately $21,000 and $14,000, respectively.

At December 31,1998 and 1997, the Bank had no loans which are impaired under
SFAS 114.

The following is a summary of transactions in the allowance for loan losses:
<TABLE>
<CAPTION>


 Years ended December 31,                                               1998                1997               1996
 ------------------------                                             ----------          ----------         ----------
<S>                                                                   <C>                 <C>               <C>
 Balance, beginning of year                                           $2,201,974          $1,929,719         $1,700,823
 Provision charged to expense                                            360,000             300,000            240,000
 Loans charged off                                                       (82,020)            (39,514)           (11,734)
 Recoveries of loans previously charged off                               37,280              11,769                630
                                                                       ---------          ----------         ---------- 
 Balance, end of year                                                 $2,517,234          $2,201,974         $1,929,719
                                                                      ==========          ==========         ==========
</TABLE>


5.    PREMISES AND EQUIPMENT

Premises and equipment are comprised of the following:
<TABLE>
<CAPTION>

 December 31,                                                                              1998                1997
 ------------                                                                          ------------        ------------ 
<S>                                                                                    <C>                 <C>
 Land                                                                                  $  3,220,536        $  2,850,113
 Buildings                                                                                7,820,544           6,821,417
 Furniture, fixtures and equipment                                                        6,154,871           5,108,260
 Construction in progress                                                                 1,411,247               7,000
                                                                                       ------------        ------------
                                                                                         18,607,198          14,786,790
 Less accumulated depreciation                                                           (5,726,838)         (4,752,702)
                                                                                       ------------        ------------
 Premises and equipment, net                                                            $12,880,360         $10,034,088
                                                                                       ============        ============
</TABLE>

The charge to operating expense for depreciation totaled $1,022,160, $798,295
and $761,001 in 1998, 1997 and 1996, respectively.



                                      51

<PAGE>   55
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Bank is obligated under operating leases for office space. The leases
expire in periods varying from one to nineteen years, and some have renewal
options for subsequent periods. Future minimum lease payments are as follows at
December 31, 1998:

<TABLE>
<CAPTION>

 Years ending December 31,
 -------------------------
<S>                                                              <C>     
      1999                                                       $ 52,958
      2000                                                         22,135
      2001                                                         22,135
      2002                                                         22,135
      2003                                                         16,756
      Thereafter                                                  130,000
                                                                 --------
                                                                 $266,119
                                                                 ========
</TABLE>

Rental expense for the years ended December 31, 1998, 1997 and 1996, was
approximately $93,000, $79,000 and $40,000, respectively.


6.   TIME DEPOSITS

At December 31, 1998, the scheduled maturities of time deposits are as follows:

<TABLE>
<CAPTION>

 Years ending December 31,
 -------------------------              
<S>                                                           <C>
      1999                                                    $50,184,718
      2000                                                     10,973,300
      2001                                                      2,792,662
      2002 and thereafter                                      11,212,627
                                                              -----------
                                                              $75,163,307
                                                              ===========
</TABLE>

7.   SHORT-TERM BORROWINGS

Short-term borrowings include federal funds purchased, wholesale and retail
securities sold under agreements to repurchase, and a Treasury, Tax and Loan
note option. The Bank utilizes these short-term borrowings, which generally
represent overnight borrowing transactions, for liquidity purposes.

The Bank has unsecured lines of credit for federal funds purchased from other
banks totaling $5,000,000 at December 31, 1998. Securities sold under
agreements to repurchase (wholesale) represent a wholesale agreement with a
correspondent bank which is collateralized by a U.S. Treasury note. The Bank
also has several securities sold under repurchase agreements (retail) with
commercial account holders whereby the Bank sweeps the customer's accounts on a
daily basis and pays interest on these amounts. These agreements are
collateralized by investment securities chosen by the Bank. (See Note 3.)




                                      52
<PAGE>   56
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Bank accepts Treasury, Tax and Loan deposits from certain commercial
depositors and remits these deposits to the appropriate government authorities.
The Bank can hold up to $1,700,000 of these deposits more than a day under a
note option agreement with its regional federal reserve bank and pay interest
on those funds held. The Bank pledges certain investment securities against
this account. (See Note 3.)

In 1997, the Bank invested in Federal Home Loan Bank stock for the purpose of
establishing credit lines with the Federal Home Loan Bank. The credit
availability to the Bank is $27 million, and any advances are secured by the
Bank's one-to-four-family residential mortgage loans. No advances were made on
this credit line in 1998 or 1997.

The following table reflects the average daily outstanding, year-end
outstanding, maximum month-end outstanding and the weighted average rates paid
for each of the four categories of short-term borrowings:

<TABLE>
<CAPTION>

 Years ended December 31,                                                                    1998                  1997
 ------------------------                                                                 -----------          ------------
<S>                                                                                      <C>               <C>
 FEDERAL FUNDS PURCHASED:
   Balance:
     Average daily outstanding                                                            $   334,398          $     56,699
     Year-end outstanding                                                                          --                    --
     Maximum month-end outstanding                                                          3,169,000                    --
   Rate:
     Weighted average                                                                             5.9%                  6.0%

 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (WHOLESALE):
   Balance:
     Average daily outstanding                                                            $   221,918           $   147,945
     Year-end outstanding                                                                          --                    --
     Maximum month-end outstanding                                                                 --             3,000,000
   Rate:
     Weighted average                                                                             5.8%                  5.9%

 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (RETAIL):
   Balance:
     Average daily outstanding                                                            $   244,895           $   353,976
     Year-end outstanding                                                                     371,004               217,659
     Maximum month-end outstanding                                                            371,004               689,202
   Rate:
     Weighted average                                                                             4.0%                  4.4%

 TREASURY, TAX AND LOAN NOTE OPTION:
   Balance:
     Average daily outstanding                                                            $   808,629           $   715,046
     Year-end outstanding                                                                     298,565             1,789,519
     Maximum month-end outstanding                                                          1,700,000             1,789,519
   Rate:
     Weighted average                                                                             4.4%                  4.9%

</TABLE>




                                      53


<PAGE>   57

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   INCOME TAXES

The following are the components of income tax expense as provided:
<TABLE>
<CAPTION>

 Years ended December 31,                                                1998                1997               1996
 ------------------------                                             ----------          ----------         ----------
<S>                                                                   <C>                 <C>                <C>
 Current income tax provision
   Federal                                                            $1,674,965          $1,569,264         $1,440,000
   State                                                                 258,490             237,333            236,000
                                                                      ----------          ----------         ----------
                                                                       1,933,455           1,806,597          1,676,000
 Deferred income tax provision (benefit)                                 (47,655)            (87,997)           (87,000)
                                                                      ----------          ----------         ----------
                                                                      $1,885,800          $1,718,600         $1,589,000
                                                                      ==========          ==========         ==========
</TABLE>

A reconciliation of income tax computed at the Federal statutory income tax
rate to total income taxes is as follows:
<TABLE>
<CAPTION>

 Years ended December 31,                                                1998                1997               1996
 ------------------------                                             ----------          ----------         ----------
<S><                                                                  <C>                 <C>                <C>
 Pretax income                                                        $5,326,796          $4,924,458         $4,791,967
                                                                      ==========          ==========         ==========

 Income taxes computed at Federal statutory tax rate                  $1,811,000          $1,674,000         $1,629,300
 Increase (decrease) resulting from:
   Tax-exempt interest rate                                             (170,400)           (123,000)          (120,250)
   State income taxes                                                    170,600             157,000            155,800
   Other, net                                                             74,600              10,600            (75,850)
                                                                      ----------          ----------         ----------
                                                                      $1,885,800          $1,718,600         $1,589,000
                                                                      ==========          ==========         ==========

</TABLE>

The following summarizes the tax effects of temporary differences which
comprise the net deferred tax asset:
<TABLE>
<CAPTION>

 December 31,                                                                                1998               1997
 ------------                                                                              ---------          ---------
<S>                                                                                        <C>                <C>
 Reserve for loan losses                                                                   $ 801,493          $ 682,956
 Unrealized losses on securities available for sale                                               --             30,000
                                                                                           ---------          ---------    
 Total gross deferred tax assets                                                             801,493            712,956
                                                                                           ---------          ---------    
 Accumulated depreciation                                                                   (397,181)          (316,999)
 Deferred loan fees                                                                               --            (14,197)
 Gain on building swap                                                                       (81,349)           (83,547)
 Unrealized gains on securities available for sale                                           (90,000)                --
 Other                                                                                       (10,311)            (3,216)
                                                                                           ---------          ---------    
 Total gross deferred tax liabilities                                                       (578,841)          (417,959)
                                                                                           ---------          ---------    
 Net deferred tax asset                                                                    $ 222,652          $ 294,997
                                                                                           =========          =========

</TABLE>




                                      54
<PAGE>   58
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.   EMPLOYEE BENEFIT PLAN

Effective January 1, 1994, the Bank established an Employee Stock Ownership
Plan containing Internal Revenue Code Section 401(k) Provisions. The Plan is a
complete amendment, restatement, and consolidation of the TIB Bank of the Keys
401(k) Plan, originally effective January 1, 1990, and the Employee Profit
Sharing Trust, originally effective January 1, 1978.

The Plan covers all employees who are qualified as to age and length of
service. Three types of contributions can be made to the Plan by the Bank and
participants: basic voluntary contributions which are discretionary
contributions made by all participants; a matching contribution, whereby the
Bank will match 25 percent of salary reduction contributions up to 4 percent of
compensation, not to exceed a maximum contribution of $1,000 per employee; and
an additional discretionary contribution made by the Bank allocated to the
accounts of participants on the basis of total relative compensation. The Bank
contributed $171,000, $161,000 and $168,000 to the plan in 1998, 1997 and 1996,
respectively. As of December 31, 1998, the Plan contained approximately 118,000
shares of the Company's common stock.


10.  RELATED PARTY TRANSACTIONS

As of December 31, 1998 and 1997, the Bank had direct and indirect loans
outstanding to certain of its officers, directors and their related business
interests which aggregated $12,356,737 and $8,953,452, respectively. During
1998, additional loans and credit line extensions, net of expirations, totaled
$5,803,550. Loan repayments and guarantor releases totaled $2,400,265. These
loans were made in the ordinary course of business in conformity with normal
credit terms, including interest rates and collateral requirements prevailing
at the time for comparable transactions with other borrowers. These individuals
and their related interests also maintain customary demand and time deposit
accounts with the Bank.


11.  STOCKHOLDERS' EQUITY

The Company and the Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's consolidated financial statements. The
regulations require the Company and the Bank to meet specific capital adequacy
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's capital amounts and classifications are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the following tables) of Tier 1 capital (as defined in the
regulations) to total average assets (as defined), and minimum ratios of Tier 1
and total capital (as defined) to risk weighted assets (as defined). As of
December 31, 1998, the most recent notification from the Federal Deposit
Insurance Corporation and the Federal Reserve Board categorized the Bank and
the Company, respectively, as well capitalized under the regulatory framework
for prompt corrective action. There are no conditions or events since those
notifications that management believes has changed the Company's or the Bank's
category. To be considered well capitalized and adequately capitalized (as
defined) under the regulatory framework for prompt corrective action, the
Company and 




                                      55
<PAGE>   59

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank must maintain minimum Tier 1 leverage, Tier 1 risk-based, and
total risk-based ratios as set forth in the following tables. The actual
capital amounts and ratios are also presented in the following tables.
<TABLE>
<CAPTION>

                                                                           ADEQUATELY                                     
                                            WELL CAPITALIZED               CAPITALIZED                                    
 DECEMBER 31, 1998                             REQUIREMENT                 REQUIREMENT                    ACTUAL
 ---------------------------------------------------------------------------------------------------------------------
                                           AMOUNT         RATIO          AMOUNT       RATIO         AMOUNT       RATIO
                                           ------         -----          ------       -----         ------       ----- 
<S>                                     <C>               <C>          <C>            <C>        <C>             <C>   
 Tier 1 Capital (to Average                                                                                             
    Assets)                                                                                                             
                                                                                                                  
      Consolidated                      >$15,711,000       >5.0%       $ 9,427,000     3.0%      $24,731,000      7.9%
                                        -                  -                                                       
      Bank                              > 15,688,000       >5.0%         9,413,000     3.0%       23,676,000      7.6%
                                        -                  -
 Tier 1 Capital (to Risk                                                                                                
    Weighted Assets)                                                                                                    
                                                                                                                
      Consolidated                      >$15,217,000       >6.0%       $10,145,000     4.0%      $24,731,000      9.8%
                                        -                  -                                                    
      Bank                              > 15,163,000       >6.0%        10,108,000     4.0%       23,676,000      9.4%
                                        -                  -
 Total Capital (to Risk Weighted                                                                                        
    Assets)                                                                                                             

      Consolidated                      >$25,362,000      >10.0%       $20,290,000     8.0%      $27,248,000     10.7%
                                        -                 -
      Bank                              > 25,271,000      >10.0%        20,217,000     8.0%       26,193,000     10.4%
                                        -                 -
</TABLE>

<TABLE>
<CAPTION>
  
                                                                           ADEQUATELY                                     
                                            WELL CAPITALIZED               CAPITALIZED                                    
 DECEMBER 31, 1997                             REQUIREMENT                 REQUIREMENT                    ACTUAL
 ---------------------------------------------------------------------------------------------------------------------
                                           AMOUNT         RATIO          AMOUNT       RATIO         AMOUNT       RATIO
                                           ------         -----          ------       -----         ------       ----- 
<S>                                     <C>               <C>          <C>            <C>        <C>             <C>   
 Tier 1 Capital (to Average                                                                                             
    Assets)                                                                                                             
                                                                                                                    
      Consolidated                      >$12,853,000       >5.0%       $ 7,712,000     3.0%      $24,388,000      9.5%
                                        -                  -                                            
      Bank                              > 12,842,000       >5.0%         7,705,000     3.0%       23,827,000      9.3%
                                        -                  - 
 Tier 1 Capital (to Risk                                                                                                
    Weighted Assets)                                                                                                    
                                                                                                            
      Consolidated                      >$11,532,000       >6.0%       $ 7,688,000     4.0%      $24,388,000     12.7%
                                        -                  -                                                       
      Bank                              > 11,518,000       >6.0%         7,679,000     4.0%       23,827,000     12.4%
                                        -                  - 
 Total Capital (to Risk Weighted                                                                                        
    Assets)                                                                                                             
                                                                                                         
      Consolidated                      >$19,220,000       >10.0%      $15,376,000     8.0%      $26,590,000     13.8%
                                        -                  -                                            
      Bank                              > 19,197,000       >10.0%       15,358,000     8.0%       26,029,000     13.6%
                                        -                  -
</TABLE>




                                      56
<PAGE>   60

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management believes, as of December 31, 1998, that the Company and the Bank
meet all capital requirements to which it is subject.

Under state banking law, regulatory approval will be required if the total of
all dividends declared in any calendar year by the Bank exceeds the Bank's net
profits to date for that year combined with its retained net profits for the
preceding two years. Retained earnings of the Bank available for payment of
dividends without prior regulatory approval at December 31, 1998, is
approximately $4,246,000.

STOCK OPTION PLAN

Under the Bank's 1994 Incentive Stock Option and Nonstatutory Stock Option Plan
("the Plan"), the Company may grant stock options to persons who are now or who
during the term of the Plan become directors, officers, or key executives as
defined by the Plan. Stock options granted under the Plan may either be
incentive stock options or nonqualified stock options for federal income tax
purposes. The Board of Directors of the Company may grant nonqualified stock
options to any director, and incentive stock options or nonqualified stock
options to any officer, key executive, administrative, or other employee
including an employee who is a director of the Company. Subject to the
provisions of the Plan, the maximum number of shares of common stock of the
Company that may be optioned or sold is 978,000 shares. Such shares may be
treasury, or authorized but unissued, shares of common stock of the Company.

The exercise price for common stock under each nonqualified stock option must
equal 100 percent of the fair market value of the stock at the time the option
is granted, or, if greater, the par value of the stock on the date of grant.
The exercise price for stock under each incentive stock option shall not be
less than the greater of 100 percent of the fair market value of the stock at
the time the option is granted or the par value of the stock on the date of
grant. 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.

The Company applies APB 25 and related Interpretations in accounting for its
stock-based compensation plan. Accordingly, no compensation cost has been
recognized. Had compensation cost for the Company's stock-based compensation
plan been determined based on the fair value at the grant dates for awards
under the plan consistent with the method of SFAS 123, the Company's net income
and earnings per share would have been the pro forma amounts indicated as
follows:






                                      57


<PAGE>   61


                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

 Years ended December 31,                                                1998               1997                1996
 ------------------------                                             ----------         ----------          ----------
<S>                                                                   <C>                <C>                 <C>
 Net income
   As reported                                                        $3,440,996         $3,205,858          $3,202,967
   Pro forma                                                           3,362,204          3,163,751           3,194,108

 Basic earnings per common share
   As reported                                                        $       78         $      .74          $      .75
   Pro forma                                                                 .76                .73                 .75

 Diluted earnings per common share
   As reported                                                        $      .74         $      .70          $      .72
   Pro forma                                                                 .73                .69                 .72

</TABLE>

The fair value of each option is estimated as of the date of grant using the
Black-Scholes Option Pricing Model and the following weighted average
assumptions for options granted in 1998 and 1997:

<TABLE>
<CAPTION>

                                                                        1998                1997               1996
                                                                     -----------        ------------       ------------
<S>                                                                 <C>                 <C>                <C>
 Dividend yield                                                             3.3%                3.0%               4.8%
 Risk-free interest rate                                            4.7% TO 5.6%        5.4% to 7.0%       6.4% to 6.7%
 Expected lives                                                          9 years             9 years            9 years
 Volatility                                                                  .41                 .48                  0




</TABLE>



                                      58

<PAGE>   62
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of the Company's fixed stock option plan as of and for
the three years ended December 31, 1998, is presented below:

<TABLE>
<CAPTION>
                                                                               Exercise Price           Weighted Average
                                                               Shares               Range                Exercise Price
 -----------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>            <C>            <C>
 BALANCE, December 31, 1995                                   612,600       $ 5.49    -    $ 6.23            $ 5.53
   Granted                                                    120,000         8.33    -      9.00              8.45
   Exercised                                                  (63,900)        5.49    -      5.50              5.49
   Expired                                                    (62,400)        5.49    -      5.50              5.49
 -----------------------------------------------------------------------------------------------------------------------

 BALANCE, December 31, 1996                                   606,300         5.49    -      9.00              6.11
   Granted                                                    125,300         9.00    -     14.50             12.16
   Exercised                                                  (49,590)        5.49    -      8.33              5.51
   Expired                                                    (42,000)        5.49    -      9.00              6.57
 -----------------------------------------------------------------------------------------------------------------------

 BALANCE, December 31, 1997                                   640,010         5.49    -     14.50              7.31
   Granted                                                     75,500        10.88    -     14.00             13.10
   Exercised                                                  (61,175)        5.49    -      9.00              5.72
   Expired                                                    (43,250)        5.49    -     13.50              7.84
 -----------------------------------------------------------------------------------------------------------------------

 BALANCE, December 31, 1998                                   611,085       $ 5.49    -    $14.50            $ 8.15
========================================================================================================================

</TABLE>

<TABLE>
<CAPTION>
<S>                                                           <C>
 Options exercisable at December 31, 1998                     221,985

 Options exercisable at December 31, 1997                     224,510                                                   

 Options exercisable at December 31, 1996                     223,800                                                   


 Weighted average fair value of options granted during                                                                   
    1998                                                        $5.05                                                    

 Weighted average fair value of options granted during                                                                  
    1997                                                        $5.60                                                    

 Weighted average fair value of options granted during                                                                  
    1996                                                       $  .74                                                    
=====================================================================
</TABLE>





                                      59
<PAGE>   63

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about fixed stock options
outstanding, after the effect of the three-for-one stock split in 1997:
<TABLE>
<CAPTION>

                                                   DECEMBER 31, 1998
---------------------------------------------------------------------------------------------------------------------
                                            Outstanding Options                              Options Exercisable
                                ------------------------------------------------        -----------------------------
                                                         Weighted                                                   
                                                          Average       Weighted                             Weighted
        Range of                      Number             Remaining      Average              Number          Average
        Exercise                  Outstanding at        Contractual     Exercise         Exercisable at      Exercise
         Price                  December 31, 1998          Life          Price          December 31, 1998     Price
 --------------------------------------------------------------------------------------------------------------------
<S>            <C>              <C>                     <C>             <C>              <C>                 <C>
     $5.49  -    $5.50               304,585                6.0         $  5.49              153,985          $  5.49
                  6.23                30,000                6.6            6.23               30,000             6.23
      8.33  -     9.00               120,200                7.6            8.62               23,900             8.65
     10.88  -    13.25                25,500                9.4           12.22                   --               --
     13.50  -    14.50               130,800                8.8           13.56               14,100            13.72
 --------------------------------------------------------------------------------------------------------------------

                                     611,085                7.1         $  8.15              221,985          $  6.45
 ====================================================================================================================
</TABLE>


<TABLE>
<CAPTION>


                                                   December 31, 1997
 --------------------------------------------------------------------------------------------------------------------
                                            Outstanding Options                             Options Exercisable
                                -----------------------------------------------         -----------------------------
                                                         Weighted                                                       
                                                          Average      Weighted                              Weighted
        Range of                     Number             Remaining      Average               Number          Average
        Exercise                Outstanding at          Contractual    Exercise          Exercisable at      Exercise
          Price                December 31, 1997           Life        Price            December 31, 1997    Price
 --------------------------------------------------------------------------------------------------------------------
<S>            <C>             <C>                      <C>            <C>              <C>                  <C>   
     $5.49  -   $5.50               380,610                 7.0        $  5.49              178,410           $  5.49
                 6.23                30,000                 7.6           6.23               30,000              6.23
      8.33  -    9.00               142,600                 8.5           8.60               16,100              8.63
     13.50  -   14.50                86,800                 9.6          13.56                   --                --
 --------------------------------------------------------------------------------------------------------------------

                                    640,010                 7.7        $  7.31              224,510           $  5.82
 ====================================================================================================================
</TABLE>


12.   COMMITMENTS AND CONTINGENCIES

The Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. These instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the consolidated
balance sheets. The contract amounts of these instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.



                                      60
<PAGE>   64

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Bank's exposure to credit loss in the event of nonperformance by the
customer on the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require the payment of a fee. At December 31, 1998 and 1997, total commitments
to extend credit were approximately $29,760,000 and $19,728,000, respectively,
in unfunded loan commitments. The Bank's experience has been that approximately
85 percent of loan commitments are drawn upon by customers.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. Since most of the letters of credit
are expected to expire without being drawn upon, they do not necessarily
represent future cash requirements. At December 31, 1998 and 1997, commitments
under standby letters of credit aggregated approximately $902,000 and $315,000,
respectively. In 1998 and 1997, the Bank was not required to perform on a
standby letter of credit.

The Bank evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on management's credit evaluation of the
borrower. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, residential real estate and
income-producing commercial properties on those commitments for which
collateral is deemed necessary.

The Bank has employment agreements with three of its executive officers. Such
agreements provide for minimum salary levels, adjustable solely at the
discretion of the Board of Directors. These agreements contain certain
provisions whereby, in the event a change in ownership control occurs, the term
of the employment agreements would become 24 months. If such a change in
ownership control had occurred as of December 31, 1998, the commitment for
future salary payments on these contracts would have been $800,000.

As of December 31, 1998, the Parent Company has directly guaranteed to the Bank
a $3,000,000 debt obligation for an extension of credit to the Phoenix Group.
The Bank has loaned a total of $6,000,000 to the Phoenix Group. In connection
with this guarantee, the Parent Company has the option to purchase $3,000,000
of the debt from the Bank and convert such debt to a 50 percent ownership in
the Phoenix Group during a 36-month period beginning in October 1998. The
overall lending arrangement matures in October 2001.


13.   STOCK REPURCHASES

On September 22, 1998, the Company's Board of Directors voted to repurchase
50,000 shares of the Company's stock in 1998. This repurchase resulted in
50,000 outstanding shares of treasury stock, at a cost of $557,788 at December
31, 1998. In addition, on December 15, 1998, the Company's Board of Directors
voted to repurchase up to 50,000 shares of the Company's stock in 1999.






                                      61

<PAGE>   65
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.   SUPPLEMENTAL FINANCIAL DATA

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

<TABLE>
<CAPTION>

 Years ended December 31,                                                1998                1997               1996
 ------------------------                                             ----------          ----------           --------
<S>                                                                   <C>                 <C>                  <C>
 Merchant bank card processing expenses                               $1,269,411          $1,159,235           $938,341
 Other merchant charges                                                  323,079             341,949            251,572
 Operating supplies                                                      397,543             338,541            290,327
 Computer services                                                       861,368             596,627            572,239
 Legal and professional fees                                             510,356             511,964            397,565
 Marketing and community relations                                       496,442             417,408            224,593
 Postage, courier, and armored car                                       325,137             285,391            239,598

</TABLE>


15.   FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments are as
follows:

<TABLE>
<CAPTION>


                                                          1998                                      1997  
                                           -----------------------------------    ------------------------------------
                                              Carrying               Estimated           Carrying           Estimated
 December 31,                                  Value                Fair Value            Value             Fair Value
 ---------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                   <C>                <C>                 <C>     
 Financial assets:                                                                                                      
    Cash and cash equivalents               $  24,702,000         $  24,702,000      $  24,829,000       $  24,829,000
    Investment securities held to                                                                                       
      maturity                                 48,153,000            48,468,000         36,218,000          36,674,000
    Investment securities available                                                                                     
      for sale                                 17,848,000            17,848,000         18,471,000          18,471,000
    Loans                                     243,781,000           244,942,000        183,544,000         182,227,000
    Accrued interest receivable                 2,615,000             2,615,000          1,751,000           1,751,000

 Financial liabilities:
    Noncontractual deposits                 $ 249,893,000         $ 249,893,000      $ 181,832,000       $ 181,832,000
    Contractual deposits                       75,163,000            75,701,000         66,989,000          67,137,000
    Short-term borrowings                         670,000               670,000          2,007,000           2,007,000
    Accrued interest payable                    1,985,000             1,985,000          1,748,000           1,748,000

 Off-balance-sheet instruments:
    Undisbursed credit lines                                      $  29,760,000                          $  19,728,000
    Standby letters of credit                                           902,000                                315,000

</TABLE>



                                      62


<PAGE>   66
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.   SEGMENT REPORTING

TIB Financial Corp. has three reportable segments: community banking, merchant
bank card processing, and government guaranteed loan sales and servicing. The
community banking segment's business is to attract deposits from the public and
to use such deposits to make real estate, business and consumer loans in its
primary service area. The merchant bank card processing segment processes
credit card transactions for local merchants. The government guaranteed loan
segment originates and sells the government guaranteed portion of loans that
qualify for government guaranteed loan programs, such as those offered by the
Small Business Administration and the U.S. Department of Agricultural Rural 
Development Business and Industry Program.

The accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies. The Company evaluates performance
based on profit or loss from operations before income taxes.

The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different marketing strategies. The government guaranteed
loan segment was acquired as a unit, and the management at the time of the
acquisition was retained.
<TABLE>
<CAPTION>

                                                                     GOVERNMENT                                      
                                                  MERCHANT           GUARANTEED                                      
 YEAR ENDED                      COMMUNITY        BANK CARD          LOAN SALES              ALL                      
 DECEMBER 31, 1998                BANKING         PROCESSING        AND SERVICING           OTHER             TOTAL
 -----------------------------------------------------------------------------------------------------------------------
<S>                            <C>                 <C>               <C>                 <C>             <C>
 Interest income               $  23,705,263       $        --         $        --       $      --       $  23,705,263
 Interest expense                 (9,915,274)               --                  --              --          (9,915,274)
 -----------------------------------------------------------------------------------------------------------------------

 Net interest income              13,789,989                --                  --              --          13,789,989

 Other income                      2,702,451         2,174,057           1,082,906         419,333           6,378,747
 Equity in income of                                                                                                    
    ERAS Joint Venture                    --                --                  --          19,975              19,975
 Depreciation and                                                                                                       
    amortization                  (1,004,062)           (2,312)            (13,728)         (2,058)         (1,022,160)
 Other expense                   (11,125,553)       (1,798,014)           (585,169)       (331,019)        (13,839,755)
 ---------------------------------------------------------------------------------------------------------------------

 Pretax segment profit          $  4,362,825       $   373,731         $   484,009       $ 106,231       $   5,326,796
 =====================================================================================================================

 Segment assets                 $354,331,980       $   101,050         $   245,441       $ 797,379       $ 355,475,850
 =====================================================================================================================

</TABLE>





                                      63
<PAGE>   67
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>


                                                                      Government                                      
                                                    Merchant          Guaranteed                                      
 Year ended                      Community         Bank Card          Loan Sales         All                      
 December 31, 1997                Banking          Processing       and Servicing       Other             Total
 ------------------------------------------------------------------------------------------------------------------
<S>                            <C>                <C>               <C>               <C>              <C>      
 Interest income               $ 20,557,774       $        --         $      --       $      --        $ 20,557,774
 Interest expense                (7,876,156)               --                --              --          (7,876,156)
 ------------------------------------------------------------------------------------------------------------------

 Net interest income             12,681,618                --                --              --          12,681,618

 Other income                     2,392,795         2,109,363           497,960         319,286           5,319,404
 Depreciation and                                                                                                       
    amortization                   (788,817)             (648)           (7,395)         (1,435)           (798,295)
 Other expense                  (10,096,971)       (1,650,157)         (277,440)       (253,701)        (12,278,269)
 ------------------------------------------------------------------------------------------------------------------

 Pretax segment profit         $  4,188,625       $   458,558         $ 213,125       $  64,150        $  4,924,458
 ==================================================================================================================
 
 Segment assets                $277,651,788       $    29,003         $ 270,208       $   7,821        $277,958,820
 ==================================================================================================================
</TABLE>

<TABLE>
<CAPTION>

                                                                      Government                                      
                                                    Merchant          Guaranteed                                      
 Year ended                      Community         Bank Card          Loan Sales         All                      
 December 31, 1996                Banking          Processing       and Servicing       Other             Total
 ------------------------------------------------------------------------------------------------------------------
<S>                            <C>                <C>               <C>               <C>              <C>      
 Interest income               $ 18,502,749       $        --         $      --       $      --        $ 18,502,749
 Interest expense                (6,506,760)               --                --              --          (6,506,760)
 ------------------------------------------------------------------------------------------------------------------

 Net interest income             11,995,989                --                --              --          11,995,989

 Other income                     2,074,809         1,709,116                --              --           3,783,925
 Depreciation and                                                                                                       
    amortization                   (760,609)             (392)               --              --            (761,001)
 Other expense                   (8,879,001)       (1,347,945)               --              --         (10,226,946)
-------------------------------------------------------------------------------------------------------------------

 Pretax segment profit         $  4,431,188       $   360,779         $      --       $      --        $  4,791,967
===================================================================================================================

 Segment assets                $241,033,172       $    17,381         $      --       $      --        $241,050,553
===================================================================================================================

</TABLE>

Revenues are almost exclusively derived from customers within the United
States. The Company does not have a single customer that accounts for 10
percent or more the Company's revenue.



                                      64


<PAGE>   68
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17. CONDENSED FINANCIAL INFORMATION OF TIB FINANCIAL CORP.


                            CONDENSED BALANCE SHEETS
                                 (Parent Only)

<TABLE>
<CAPTION>

December 31,                                                                               1998                1997
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                 <C>
ASSETS

Cash on deposit with subsidiary                                                        $   118,266         $   295,236
Dividends and other receivables                                                            474,424             440,949
Investment in bank subsidiary                                                           25,437,549          24,002,596
Investment in nonbank subsidiary                                                           789,752                  --
Organization expenses                                                                       75,347             103,603
Other assets                                                                               123,175             158,368
----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                           $27,018,513         $25,000,752
======================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Dividends payable                                                                   $   450,979         $   437,195
----------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
   Common stock                                                                            444,979             437,195
   Surplus                                                                               7,202,321           6,507,072
   Retained earnings                                                                    19,328,022          17,668,290
   Market valuation reserve on investment securities available                                                         
     for sale                                                                              150,000             (49,000)
   Treasury stock, 50,000 shares, at cost                                                 (557,788)                 --
----------------------------------------------------------------------------------------------------------------------

Total stockholders' equity                                                              26,567,534          24,563,557
----------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $27,018,513         $25,000,752
======================================================================================================================

</TABLE>




                                       65
<PAGE>   69
                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                         CONDENSED STATEMENTS OF INCOME
                                 (Parent Only)
<TABLE>
<CAPTION>


Years ended December 31,                                                1998                1997               1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                 <C>                <C> 
OPERATING INCOME
   Dividend from bank subsidiary                                     $2,414,915          $1,766,229         $1,852,324
----------------------------------------------------------------------------------------------------------------------

 Total operating income                                               2,414,915           1,766,229          1,852,324
----------------------------------------------------------------------------------------------------------------------

OPERATING EXPENSE
   Amortization of intangibles                                           49,695              28,255              9,418
   Other expense                                                        285,351             269,752             33,945
----------------------------------------------------------------------------------------------------------------------

Total operating expense                                                 335,046             298,007             43,363
----------------------------------------------------------------------------------------------------------------------

Income before income tax benefit and equity in               
   undistributed earnings of subsidiaries                             2,079,869           1,468,222          1,808,961

Income tax benefit                                                      105,200             105,400             16,300
----------------------------------------------------------------------------------------------------------------------

Income before equity in undistributed earnings of subsidiary          2,185,069           1,573,622          1,825,261

Equity in undistributed earnings of nonbank subsidiary                   19,975                  --                 --

Equity in undistributed earnings of bank subsidiary                   1,235,952           1,632,236          1,377,706
----------------------------------------------------------------------------------------------------------------------

NET INCOME                                                           $3,440,996          $3,205,858         $3,202,967
======================================================================================================================

</TABLE>



                                      66

<PAGE>   70

                      TIB FINANCIAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (Parent Only)

<TABLE>
<CAPTION>

 Years ended December 31,                                                1998                1997               1996
 -----------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                 <C>                <C>
 CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                       $ 3,440,996         $ 3,205,858        $ 3,202,967
    Equity in undistributed earnings of bank subsidiary               (1,235,952)         (1,632,236)        (1,377,706)
    Equity in undistributed earnings of nonbank subsidiary               (19,975)                 --                 --
    Amortization of intangibles                                           49,695              28,255              9,418
    Decrease (increase) in other assets                                  140,283             (30,752)          (611,276)
    Compensation paid through issuance of common stock                   214,575                  --                 --
 ----------------------------------------------------------------------------------------------------------------------

 Net cash provided by operating activities                             2,589,622           1,571,125          1,223,403
 ----------------------------------------------------------------------------------------------------------------------

 CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from exercise of stock options                              349,892             273,266            350,942
    Cash dividends paid                                               (1,767,480)         (1,739,842)        (1,227,146)
    Treasury stock repurchased                                          (557,788)                 --                 --
    Investment in ERAS Joint Venture                                    (791,216)                 --                 --
    Capital contributed to bank subsidiary                                    --                  --           (156,512)
    Proceeds from note payable                                                --                  --            124,000
    Repayment of note payable                                                 --                  --           (124,000)
 ----------------------------------------------------------------------------------------------------------------------

 Net cash used by financing activities                                (2,766,592)         (1,466,576)        (1,032,716)
 ----------------------------------------------------------------------------------------------------------------------

 NET (DECREASE) INCREASE IN CASH                                        (176,970)            104,549            190,687

 CASH, BEGINNING OF YEAR                                                 295,236             190,687                 --
 ----------------------------------------------------------------------------------------------------------------------

 CASH, END OF YEAR                                                  $    118,266         $   295,236        $   190,687
=======================================================================================================================

</TABLE>



                                       67
<PAGE>   71


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on accounting and
financial disclosure for the fiscal year ended December 31, 1998. Effective
August 8, 1996, BDO Seidman, LLP ("BDO") (formerly Bricker & Melton, P.A. whose
practice has been combined with BDO) was appointed by the Board of Directors of
the Company and the Bank to serve as the initial certifying accountant for the
Company's financial statements and the certifying accountant for the Bank's
financial statements. BDO replaced KPMG Peat Marwick ("KPMG") as the certifying
accountant for the Bank, which is not a reporting company. KPMG did not serve
as the certifying accountant for the Company's financial statements. The
Company previously filed a Form 8-K (Securities and Exchange Commission File
No. 33-03499) disclosing the foregoing appointment, which is incorporated
herein by reference.




                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the caption "Election of Directors",
"Management", and "Filings Under Section 16(A) Beneficial Ownership Reporting
Compliance" in the Proxy Statement to be utilized in connection with the
Company's 1999 Annual Shareholders Meeting is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information contained under the caption "Compensation of Executive Officers
and Directors" in the Proxy Statement to be utilized in connection with the
Company's 1999 Annual Shareholders Meeting is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the caption "Principal Shareholders" in the
Proxy Statement to be utilized in connection with the Company's 1999 Annual
Shareholders Meeting is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement to be utilized in connection with the
Company's 1999 Annual Shareholders Meeting is incorporated herein by reference.




                                      68

<PAGE>   72


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      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 

<TABLE>
<CAPTION>

         Exhibit Numbers
         ---------------

<S>               <C>
         3.1*     Articles of Incorporation
         3.2*     Bylaws
         4.1*     Specimen Stock Certificate
         10.1*    Employment Contract between Edward V. Lett and TIB Bank of
                  the Keys**
         10.2*    401(K) Savings and Employee Stock Ownership Plan**
         10.3*    Employee Incentive Stock Option Plan**
         10.4*    Employment Contract between Daniel W. Taylor and TIB Bank of
                  the Keys**
         10.5*    Employment Contract between Millard J. Younkers, Jr. and TIB
                  Bank of the Keys**
         10.6*    Employment Contract between Edward V. Lett and TIB Bank of
                  the Keys (as amended September 24, 1996)**
         21.1     Subsidiaries of the Company. 
         23.1     Consent of BDO Seidman, LLP  
         23.2     Consent of Bricker & Melton, P.A. 
         27       Financial Data Schedule

         ---------------
         *        Items 3.1 through 4.1, and 10.1 through 10.6, as listed
                  above, were previously filed by the Company as Exhibits (with
                  the same respective Exhibit Number as indicated herein) to
                  the Company's Registration Statements (Registration Nos.
                  333-03499 and 333-24101) and such documents are incorporated
                  herein by reference.
         **       Represents a management contract or a compensation plan or 
                  or arrangement required to be filed as an exhibit.



</TABLE>

(b)      REPORTS ON FORM 8-K

         On October 8, 1998, the Company filed a report on Form 8K with respect
         to shares repurchased by the Company.




                                      69

<PAGE>   73


                                   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 23, 1999.

TIB FINANCIAL CORP.

By:  /s/ EDWARD V. LETT
   ----------------------------------
        Edward V. Lett
        President, CEO, and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 23, 1999.

<TABLE>
<CAPTION>
         SIGNATURE                                       TITLE

<S>                                            <C>

/s/  EDWARD V. LETT
-------------------------------------
Edward V. Lett                                 President (Principal Executive
                                                         Officer), CEO and 
                                                         Director
/s/  B.G. CARTER 
-------------------------------------
B.G. Carter                                    Director


/s/  DR. ARMANDO J. HENRIQUEZ 
-------------------------------------
Dr. Armando J. Henriquez                       Director


/s/  GRETCHEN K. HOLLAND  
-------------------------------------
Gretchen K. Holland                            Director


/s/  JAMES R. LAWSON 
-------------------------------------
James R. Lawson                               Director


/s/  SCOTT A. MARR   
-------------------------------------
Scott A. Marr                                 Director


/s/  DEREK D. MARTIN-VEGUE
-------------------------------------
Derek D. Martin-Vegue                         Director


/s/  JOSEPH H. ROTH, JR.
-------------------------------------
Joseph H. Roth, Jr.                           Director

</TABLE>



                                      70

<PAGE>   74
<TABLE>
<S>                                          <C>
/s/ Marvin F. Schindler
-------------------------------------
Marvin F. Schindler                           Director


/s/ Richard J. Williams
-------------------------------------
Richard J. Williams                           Director


/s/ David P. Johnson
--------------------------------------
David P. Johnson                              Principal Financial Officer
                                              and Principal Accounting Officer
</TABLE>




                                      71