TIB FINANCIAL CORP - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended SEPTEMBER 30, 2002		Commission File Number 0-29132

TIB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


FLORIDA		65-0655973

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

99451 OVERSEAS HIGHWAY, KEY LARGO, FLORIDA 33037-7808

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 305-451-4660

Not Applicable

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by 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 o

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:


Common Stock, $0.10 Par Value		4,020,525

Class		Outstanding as of November 1, 2002

TABLE OF CONTENTS


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Part II. OTHER INFORMATION
Item 4. CONTROLS AND PROCEDURES
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
Accountants' Report
CEO Certification
CFO Certification

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

TIB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS


			September 30, 2002		December 31, 2001

			(Unaudited)
ASSETS
Cash and due from banks			$	19,462,184	$	21,269,909
Federal funds sold				17,373,000		—
Investment securities held to maturity				—		18,505,912
Investment securities available for sale				54,651,279		35,473,748
Loans, net of deferred loan costs and fees				410,290,954		378,946,753
Less: allowance for loan losses				4,001,763		3,793,842

	Loans, net			406,289,191		375,152,911
Premises and equipment, net				18,571,226		17,633,154
Goodwill				2,305,405		2,305,405
Intangible assets, net				2,055,291		2,276,006
Other assets				23,577,774		21,375,200

	TOTAL ASSETS		$	544,285,350	$	493,992,245

LIABILITIES
Deposits:
	Noninterest-bearing demand			93,399,199	$	82,110,626
	Interest-bearing demand and money market			179,990,542		175,742,070
	Savings			31,312,701		26,132,494
	Time deposits of $100,000 or more			69,567,511		56,345,992
	Other time deposits			87,646,431		75,404,677

		Total Deposits		461,916,384		415,735,859
Federal Home Loan Bank advances				20,000,000		25,000,000
Short-term borrowings				5,681,124		733,760
Notes payable				5,250,000		5,250,000
Trust preferred securities				13,000,000		13,000,000
Other liabilities				5,831,790		5,600,534

	TOTAL LIABILITIES			511,679,298		465,320,153

STOCKHOLDERS’ EQUITY
Common stock — $.10 par value: 7,500,000 shares authorized, 4,018,125 and 3,946,100 shares issued				401,812		394,610
Additional paid in capital				8,697,753		8,221,937
Retained earnings				22,243,487		20,019,145
Accumulated other comprehensive income				1,263,000		36,400

		TOTAL STOCKHOLDERS’ EQUITY		32,606,052		28,672,092

	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	544,285,350	$	493,992,245

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


			Three months ended					Nine months ended
			September 30,					September 30,

			2002		2001			2002			2001

INTEREST INCOME
Loans, including fees			$	7,002,674	$	7,326,628		$	20,421,818		$	22,035,054
Investment securities:
		U.S. Treasury securities		40,160		41,390			122,119			120,548
		U.S. Government agencies and corporations		542,842		688,146			1,759,617			2,291,790
		States and political subdivisions, tax-exempt		65,705		68,725			198,657			205,854
		States and political subdivisions, taxable		106,498		89,697			282,759			204,615
		Other investments		19,849		86,299			107,197			186,843
Interest bearing deposits in other bank				1,026		337			4,094			2,022
Federal funds sold				116,796		142,158			267,854			885,904

	TOTAL INTEREST INCOME			7,895,550		8,443,380			23,164,115			25,932,630

INTEREST EXPENSE
Interest-bearing demand and money market				559,213		1,219,752			1,530,117			4,404,706
Savings				59,167		118,008			170,266			370,931
Time deposits of $100,000 or more				688,476		878,884			2,028,955			2,881,197
Other time deposits				831,951		1,131,640			2,498,307			3,713,427
Long term debt – trust preferred securities				285,062		277,028			855,628			705,632
Federal Home Loan Bank advances				95,372		—			293,840			—
Notes payable				121,243		174,910			359,792			519,042
Short-term borrowings				16,445		15,117			28,971			43,734

	TOTAL INTEREST EXPENSE			2,656,929		3,815,339			7,765,876			12,638,669

	NET INTEREST INCOME			5,238,621		4,628,041			15,398,239			13,293,961
PROVISION FOR LOAN LOSSES				125,000		335,000			407,000			605,000

	NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			5,113,621		4,293,041			14,991,239			12,688,961
OTHER INCOME
Service charges on deposit accounts				547,556		545,565			1,625,138			1,670,352
Investment securities gains, net				5,118		284,339			143,245			286,205
Merchant bankcard processing income				961,952		890,699			3,421,796			3,223,976
Gain on sale of government guaranteed loans				—		20,465			23,179			55,022
Fees on mortgage loans sold at origination				404,985		214,096			1,078,363			731,669
Commissions on sales by Keys Insurance Agency, Inc.				488,257		410,571			1,422,970			1,131,901
Retail investment services				36,862		77,853			168,281			152,057
Equity in loss, including goodwill amortization, from investment in ERAS Joint Venture				—		(75,963	)		(1,570	)		(172,728	)
Other income				287,530		494,272			872,197			1,056,744

	TOTAL OTHER INCOME			2,732,260		2,861,897			8,753,599			8,135,198
OTHER EXPENSE
Salaries and employee benefits				2,894,743		2,574,623			8,430,040			7,411,584
Net occupancy expense				1,006,880		898,284			2,932,015			2,513,454
Other expense				2,162,600		2,091,308			7,075,841			6,637,637

	TOTAL OTHER EXPENSE			6,064,223		5,564,215			18,437,896			16,562,675

	INCOME BEFORE INCOME TAX EXPENSE			1,781,658		1,590,723			5,306,942			4,261,484
INCOME TAX EXPENSE				561,000		557,600			1,793,800			1,489,100

	NET INCOME		$	1,220,658	$	1,033,123		$	3,513,142		$	2,772,384

BASIC EARNINGS PER SHARE:			$	0.30	$	0.26		$	0.88		$	0.71
DILUTED EARNINGS PER SHARE:			$	0.29	$	0.25		$	0.85		$	0.68

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)


												Accumulated
												Other				Additional
						Comprehensive			Retained			Comprehensive		Common		Paid in
			Total			Income			Earnings			Income (Loss)		Stock		Capital

Balance at December 31, 2001			$	28,672,092					$	20,019,145		$	36,400	$	394,610	$	8,221,937
Comprehensive Income
	Net Income			3,513,142		$	3,513,142			3,513,142
	Other comprehensive income, net of tax expense of $739,100:
		Unrealized holding gain on securities transferred into the available for sale category from the held to maturity category		270,480			270,480
		Net market valuation adjustment on securities available for sale		1,045,504			1,045,504
		Less: reclassification adjustment for gains included in net income		(89,384	)		(89,384	)

	Other comprehensive income, net of tax						1,226,600						1,226,600

	Comprehensive income					$	4,739,742

Exercise of stock options				479,993											7,202		472,791
Income tax benefit from stock options exercised				3,025													3,025
Cash dividends declared, $.3225 per share				(1,288,800	)					(1,288,800	)

Balance at September 30, 2002			$	32,606,052					$	22,243,487		$	1,263,000	$	401,812	$	8,697,753


												Accumulated
												Other					Additional
						Comprehensive			Retained			Comprehensive			Common		Paid in
			Total			Income			Earnings			Income (Loss)			Stock		Capital

Balance at December 31, 2000			$	26,236,654					$	17,815,366		$	145,000		$	390,241	$	7,886,047
Comprehensive Income
	Net Income			2,772,384		$	2,772,384			2,772,384
	Other comprehensive income, net of tax benefit of $52,000:
		Net market valuation adjustment on securities available for sale		(85,000	)		(85,000	)					(85,000	)

	Comprehensive income					$	2,687,384

Exercise of stock options				187,025												3,175		183,850
Income tax benefit from stock options exercised				36,688														36,688
Issuance of stock for BonData Group Limited, Inc. acquisition				68,244												564		67,680
Cash dividends declared, $.3225 per share				(1,266,354	)					(1,266,354	)

Balance at September 30, 2001			$	27,949,641					$	19,321,396		$	60,000		$	393,980	$	8,174,265

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)


		For the nine month period ended
		September 30,

		2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income		$	3,513,142		$	2,772,384
Adjustments to reconcile net income to net cash provided by operating activities:
	Net amortization of investments		75,961			38,873
	Amortization of intangible assets		220,715			335,824
	Depreciation of premises and equipment		1,133,362			1,017,336
	Provision for loan losses		407,000			605,000
	Deferred income tax provision (benefit)		(182,768	)		(186,100	)
	Deferred net loan fees/costs		(360,946	)		(361,111	)
	Investment securities (gains), net		(143,245	)		(286,205	)
	Net gain on sale/disposal of premises and equipment		(2,493	)		(71,078	)
	Gain on sales of government guaranteed loans, net		(23,179	)		(55,022	)
	(Gain) loss on sale of servicing rights		2,532			(163,071	)
	Net proceeds received from servicing rights sale		33,079			—
	Increase in other assets		(2,802,727	)		(783,760	)
	Increase in other liabilities		233,178			198,956
	Equity in loss, including goodwill amortization, from investment in ERAS JV		1,570			172,728

	NET CASH PROVIDED BY OPERATING ACTIVITIES		2,105,181			3,234,754

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities held to maturity			—			(223,609	)
Purchases of investment securities available for sale			(19,194,484	)		(19,418,629	)
Repayments of principal and maturities of investment securities available for sale			8,530,057			5,350,598
Sales of investment securities available for sale			12,025,792			15,838,469
Maturities of investment securities held to maturity			—			16,500,000
Proceeds from sales of government guaranteed loans			541,980			1,196,283
Loans originated or acquired, net of principal repayments			(31,701,135	)		(57,388,036	)
Purchases of premises and equipment			(2,097,041	)		(3,915,783	)
Surrender value of purchased life insurance policies			—			(820,000	)
Purchase of BonData Group Limited, Inc.			—			(204,750	)
Sales of premises and equipment			28,100			16,398

	NET CASH USED IN INVESTING ACTIVITIES		(31,866,731	)		(43,069,059	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in federal funds purchased and securities sold under agreements to repurchase			4,947,364			958,550
Net decrease in FHLB advances			(5,000,000	)		—
Net increase in demand, money market and savings accounts			20,717,252			33,125,159
Net increase (decrease) in time deposits			25,463,273			(8,412,144	)
Proceeds from issuance of trust preferred			—			5,000,000
Debt issuance costs paid			—			(170,816	)
Proceeds from exercise of stock options			479,993			187,025
Cash dividends paid			(1,281,057	)		(1,262,334	)

	NET CASH PROVIDED BY FINANCING ACTIVITIES		45,326,825			29,425,440

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			15,565,275			(10,408,865	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			21,269,909			23,565,494

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	36,835,184		$	13,156,629

TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
TIB FINANCIAL CORP.


SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid for:
	Interest	$	8,620,180	$	13,303,739
	Income taxes		2,091,000		1,880,000

In June 2002, the Company transferred investment securities in the held to maturity category with a book value totaling $18,507,916 to the available for sale category.

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for TIB Financial Corp. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2002 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2002. For further information, refer to the Company’s consolidated financial statements and footnotes thereto for the year ended December 31, 2001.

The consolidated statements include the accounts of TIB Financial Corp. and its wholly-owned subsidiaries, TIB Bank of the Keys, TIB Software and Services, Inc., TIBFL Statutory Trust I, TIBFL Statutory Trust II, and Keys Insurance Agency, Inc. and the Bank’s two subsidiaries, TIB Government Loan Specialists, Inc. and TIB Investment Center Inc., collectively known as the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain amounts previously reported on have been reclassified to conform with current period presentation.

NOTE 2 – INVESTMENT SECURITIES

Securities available-for-sale are securities which management believes may be sold prior to maturity for liquidity or other reasons and are reported at fair value, with unrealized gains and losses, net of related income taxes, reported as a separate component of stockholders’ equity. Securities held-to-maturity are those securities for which management has both the ability and intent to hold to maturity and are carried at amortized cost.

In June 2002, the Company transferred all investments securities in the held-to-maturity category with a book value totaling $18,507,916 to the available-for-sale category. The difference between amortized historical cost and fair value for this portfolio of $433,461 was recorded net of tax in other comprehensive income. Therefore, there were no securities classified as held-to-maturity at September 30, 2002.

The amortized cost and estimated fair value of investment securities held-to-maturity at December 31, 2001 is presented below:


	December 31, 2001

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. Treasury securities	$	205,897	$	4,572	$	—	$	210,469
U.S. Government agencies and corporations		16,674,255		297,653		—		16,971,908
Other investments		1,625,760		—		—		1,625,760

	$	18,505,912	$	302,225	$	—	$	18,808,137

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

The amortized cost and estimated fair value of investment securities available for sale at September 30, 2002 and December 31, 2001 are presented below:


	September 30, 2002

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. Treasury securities	$	205,080	$	10,706	$	—	$	215,786
U.S. Government agencies and corporations		23,240,957		876,487		—		24,117,444
States and political subdivisions-tax-exempt		5,520,607		399,271		—		5,919,878
States and political subdivisions-taxable		6,767,142		160,201		—		6,927,343
Mortgage-backed securities		15,267,733		577,335		—		15,845,068
Other investments		1,625,760		—		—		1,625,760

	$	52,627,279	$	2,024,000	$	—	$	54,651,279


	December 31, 2001

	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

U.S. Treasury securities	$	3,017,174	$	71,896	$	—	$	3,089,070
U.S. Government agencies and corporations		105,757		712		—		106,469
States and political subdivisions-tax-exempt		5,742,409		90,163		693		5,831,879
States and political subdivisions-taxable		5,016,978		49,216		269,075		4,797,119
Mortgage-backed securities		18,359,772		84,675		5,236		18,439,211
Corporate bonds		3,173,358		36,642		—		3,210,000

	$	35,415,448	$	333,304	$	275,004	$	35,473,748

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

NOTE 3 – LOANS

Loans are reported at the gross amount outstanding, reduced by net deferred loan costs and fees and an 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 sale occurs.

Major classifications of loans are as follows:


		September 30, 2002		December 31, 2001

Real estate mortgage loans:
	Commercial	$	242,555,496	$	233,025,987
	Residential		70,444,458		68,372,957
	Construction		18,536,355		6,433,674
Commercial loans			47,077,972		46,927,000
Consumer loans			15,344,014		9,636,806
Home equity loans			16,124,629		14,707,222

	Total loans		410,082,924		379,103,646
Net deferred loan costs (fees)			208,030		(156,893	)

	Loans, net of deferred loan costs (fees)	$	410,290,954	$	378,946,753

NOTE 4 – 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 current economic conditions that may affect the borrower’s ability to pay, overall portfolio quality, review of specific problem loans, and changes in the nature and volume of the loan portfolio. 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.

As indicated above, the determination of the allowance for loan losses rests upon management’s judgment. Management’s judgment is based upon a number of assumptions, which are believed to be reasonable, but 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.

Activity in the allowance for loan losses for the nine months ended September 30, 2002 and September 30, 2001 follows:


	2002			2001

Balance, January 1	$	3,793,842		$	3,267,873
Provision charged to expense		407,000			605,000
Loans charged off		(239,652	)		(401,279	)
Recoveries of loans previously charged off		40,573			17,406

Balance, September 30	$	4,001,763		$	3,489,000

NOTE 5 – EARNINGS PER SHARE AND COMMON STOCK

Basic earnings per share have been computed based on the weighted average number of common equivalent shares outstanding during the period. Stock options are considered to be common stock equivalents for purposes of calculating diluted earnings per share.

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


			Net Earnings		Common Shares		Per Share Amount

For the three months ended September 30, 2002:
	Basic earnings per common share		$	1,220,658		4,013,014	$	.30
	Effect of dilutive stock options			—		155,367		(.01	)

		Diluted earnings per common share	$	1,220,658		4,168,381	$	.29

For the three months ended September 30, 2001:
	Basic earnings per common share		$	1,033,123		3,930,021	$	.26
	Effect of dilutive stock options			—		183,975		(.01	)

		Diluted earnings per common share	$	1,033,123		4,113,996	$	.25


			Net Earnings		Common Shares		Per Share Amount

For the nine months ended September 30, 2002:
	Basic earnings per common share		$	3,513,142		3,982,619	$	.88
	Effect of dilutive stock options			—		154,895		(.03	)

		Diluted earnings per common share	$	3,513,142		4,137,514	$	.85

For the nine months ended September 30, 2001:
	Basic earnings per common share		$	2,772,384		3,917,271	$	.71
	Effect of dilutive stock options			—		181,406		(.03	)

		Diluted earnings per common share	$	2,772,384		4,098,677	$	.68

NOTE 6 – STOCK BASED COMPENSATION

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 Company’s Board of Directors 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 Company common stock 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. If options granted under the Plan expire or terminate for any reason without having been exercised in full, the shares not purchased shall again be available for option for the purposes of the Plan.

Total options granted, exercised, and expired during the nine months ended September 30, 2002, were 164,000, 72,025, and 80,886, respectively. As of September 30, 2002, 596,491 options for shares were outstanding.

NOTE 7 – RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 141, “Business Combinations” and SFAS No.142, “Goodwill and Other Intangible Assets”. SFAS No. 141 addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination and SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination whether acquired individually or with a group of other assets. These standards require all future business combinations to be accounted for using the purchase method of accounting. Goodwill will no longer be amortized but instead will be subject to impairment tests at least annually. The Company adopted SFAS No. 141 on July 1, 2001, and adopted SFAS 142 on January 1, 2002. During the second quarter of 2002, the Company engaged a third party to evaluate possible impairment of Keys Insurance Agency, Inc.’s goodwill. The remainder of the Company’s goodwill was evaluated internally. Based on the evaluations, the Company has concluded that there is no impairment of goodwill at this time. The Company will continue to evaluate goodwill for impairment on an annual basis.

SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, addresses accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 144 establishes a single accounting model for long-lived assets to be disposed of by sale and expands on the guidance provided by SFAS No. 121 with respect to cash flow estimations. SFAS No. 144 is effective for the Company’s fiscal year beginning January 1, 2002. There will be no current impact of adoption on its financial position or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 145, “Rescission of SFAS No. 4, 44, 64, Amendment of SFAS No. 13, and Technical Corrections.” SFAS No. 4, which was amended by SFAS No. 64, required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. SFAS No. 13 was amended to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The adoption of SFAS No. 145 will not have a current impact on the Company’s consolidated financial statements.

In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Under recently cleared Derivatives Implementation Group (DIG) Statement 133 Implementation Issue C13, “Scope Exceptions: When a Loan Commitment is Included in the Scope of Statement 133,” the issuer (but not the holder) must apply Statement 133 to loan commitments related to the origination or acquisition of mortgage loans that will be held for resale. The guidance takes effect the first day of a reporting entity’s first fiscal quarter beginning after April 10, 2002 (that is, July 1, 2002, for the Company). The adoption of this guidance did not have a current impact on the Company’s financial statements.

In July 2002, the FASB approved the issuance of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Generally, SFAS No. 146 stipulates that defined exit costs (including restructuring and employee termination costs) are to be recorded on an incurred basis rather than on a commitment basis as is presently required. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company currently anticipates that adoption of this statement in 2003 will not have a material impact on its financial statements.

In October 2002, the FASB issued SFAS 147, “Accounting of Certain Financial Institutions.” The statement removes acquisitions of financial institutions, except for transactions between two or more mutual enterprises, from the scope of SFAS 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with SFAS 141, “Business Combinations,” and SFAS 142, “Goodwill and Other Intangible Assets.” In addition, this statement amends SFAS 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” to include in its scope long-term customer-relationship intangible assets of financial institutions. This statement is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to the impairment and disposal accounting for certain acquired long-term customer-relationship intangible assets are effective on October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets are effective on October 1, 2002. The Company is currently evaluating the impact the adoption of this statement will have on it financial statements.

NOTE 8 — SEGMENT REPORTING

TIB Financial Corp. has four reportable segments: community banking, merchant bankcard processing, insurance sales, 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 bankcard processing segment processes credit card transactions for local merchants. The insurance agency offers a full line of commercial and residential coverage as well as life, health and annuities. 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.

Segment information is presented in accordance with SFAS 131, “Disclosures about Segments of an Enterprise and Related Information.” This standard is based on a management approach, which requires segmentation based upon the Company’s internal organization and disclosure of operating results based upon internal accounting methods.

The results of the Company’s segments are as follows:


			Merchant		Government		Insurance
Three months ended	Community		Bankcard		Guaranteed		Agency		All
September 30, 2002	Banking		Processing		Loans Sales and Servicing		Sales		Other			Totals

Interest income	$	7,886,556	$	—	$	—	$	—	$	8,994		$	7,895,550
Interest expense		2,249,952		—		—		—		406,977			2,656,929

Net interest income		5,636,604		—		—		—		(397,983	)		5,238,621
Other income		1,215,051		961,952		30,138		488,257		36,862			2,732,260
Depreciation and amortization		423,366		11,370		660		16,191		1,251			452,838
Other expense		4,394,158		790,926		22,571		387,827		140,903			5,736,385

Pretax segment profit (loss)	$	2,034,131	$	159,656	$	6,907	$	84,239	$	(503,275	)	$	1,781,658


			Merchant		Government			Insurance
Three months ended	Community		Bankcard		Guaranteed			Agency		All
September 30, 2001	Banking		Processing		Loans Sales and Servicing			Sales		Other			Totals

Interest income	$	8,426,461	$	—	$	—		$	—	$	16,919		$	8,443,380
Interest expense		3,362,729		—		—			—		452,610			3,815,339

Net interest income		5,063,732		—		—			—		(435,691	)		4,628,041
Other income		1,511,635		890,699		47,102			410,571		77,853			2,937,860
Equity in loss, including goodwill amortization, from investment in ERAS JV		—		—		—			—		(75,963	)		(75,963	)
Depreciation and amortization		400,439		10,581		7,736			28,269		1,187			448,212
Other expense		4,142,024		767,076		71,467			345,973		124,463			5,451,003

Pretax segment profit (loss)	$	2,032,904	$	113,042	$	(32,101	)	$	36,329	$	(559,451	)	$	1,590,723


			Merchant		Government		Insurance
Nine months ended	Community		Bankcard		Guaranteed		Agency		All
September 30, 2002	Banking		Processing		Loans Sales and Servicing		Sales		Other			Totals

Interest income	$	23,137,426	$	—	$	—	$	—	$	26,689		$	23,164,115
Interest expense		6,548,439		—		—		—		1,217,437			7,765,876

Net interest income		16,588,987		—		—		—		(1,190,748	)		15,398,239
Other income		3,633,866		3,421,796		108,256		1,422,970		168,281			8,755,169
Equity in loss from investment in ERAS JV		—		—		—		—		(1,570	)		(1,570	)
Depreciation and amortization		1,266,615		32,928		7,613		43,117		3,804			1,354,077
Other expense		13,038,008		2,783,409		68,792		1,155,401		445,209			17,490,819

Pretax segment profit (loss)	$	5,918,230	$	605,459	$	31,851	$	224,452	$	(1,473,050	)	$	5,306,942

Segment Assets	$	540,696,794	$	74,288	$	158,684	$	2,323,790	$	1,031,794		$	544,285,350


			Merchant		Government			Insurance
Nine months ended	Community		Bankcard		Guaranteed			Agency			All
September 30, 2001	Banking		Processing		Loans Sales and Servicing			Sales			Other			Totals

Interest income	$	25,882,095	$	—	$	—		$	—		$	50,535		$	25,932,630
Interest expense		11,410,775		—		—			—			1,227,894			12,638,669

Net interest income		14,471,320		—		—			—			(1,177,359	)		13,293,961
Other income		3,659,064		3,223,976		140,928			1,131,901			152,057			8,307,926
Equity in loss, including goodwill amortization, from investment in ERAS JV		—		—		—			—			(172,728	)		(172,728	)
Depreciation and amortization		1,173,574		31,668		23,054			121,304			3,560			1,353,160
Other expense		11,487,185		2,730,295		219,073			1,011,871			366,091			15,814,515

Pretax segment profit (loss)	$	5,469,625	$	462,013	$	(101,199	)	$	(1,274	)	$	(1,567,681	)	$	4,261,484

Segment Assets	$	467,023,688	$	85,286	$	174,033		$	2,317,803		$	1,946,119		$	471,546,929

NOTE 9 – GOODWILL AND INTANGIBLE ASSETS

In accordance with SFAS 142, the following information is presented on the Company’s goodwill and intangible assets:


Amortized Intangible Assets		Gross Carrying		Accumulated
at September 30, 2002:		Amount		Amortization		Net Book Value

Core Deposit Intangible		$	2,941,234	$	929,602	$	2,011,632
Excess Servicing Fees			110,495		66,836		43,659

	Total	$	3,051,729	$	996,438	$	2,055,291

Intangible amortization expense totaled $220,715 for the nine months ended September 30, 2002.

There were no changes in the carrying amount of goodwill for the nine months ended September 30, 2002. The components of goodwill were as follows:


	Government
	Guaranteed Loan		Insurance Agency		Investment in ERAS
	Sales and Servicing		Sales		JV (a)		Totals

Balance as of January 1, 2002 and September 30, 2002	$	155,232	$	2,010,211	$	139,962	$	2,305,405

(a) Investment in ERAS JV is reported as “All Other” in the segment reporting table in Note 8.

The following tables indicate what reported net income would have been had goodwill not been amortized:


		For the nine months ended

		September 30, 2002		September 30, 2001

Reported net income		$	3,513,142	$	2,772,384
Add back: Goodwill amortization, net of tax effect			—		93,455

Adjusted net income		$	3,513,142	$	2,865,839

Basic earnings per share:
	Reported net income	$	0.88	$	0.71
	Goodwill amortization		—		0.02

	Adjusted net income	$	0.88	$	0.73

Diluted earnings per share:
	Reported net income	$	0.85	$	0.68
	Goodwill amortization		—		0.02

	Adjusted net income	$	0.85	$	0.70


		For the three months ended

		September 30, 2002		September 30, 2001

Reported net income		$	1,220,658	$	1,033,123
Add back: Goodwill amortization, net of tax effect			—		22,762

Adjusted net income		$	1,220,658	$	1,055,885

Basic earnings per share:
	Reported net income	$	0.30	$	0.26
	Goodwill amortization		—		0.01

	Adjusted net income	$	0.30	$	0.27

Diluted earnings per share:
	Reported net income	$	0.29	$	0.25
	Goodwill amortization		—		0.01

	Adjusted net income	$	0.29	$	0.26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The following discussion addresses the factors that have affected the financial condition and results of operations of TIB Financial Corp. (the “Company”) as reflected in the unaudited consolidated statement of condition as of September 30, 2002, and statement of income for the three and nine months ended September 30, 2002.

The Company’s net income of $1,220,658 for the third quarter of 2002 was a 18.2% increase compared to $1,033,123 for the same period last year. The $187,535 increase in net income is attributed to the net of the following: an increase of $820,580 or 19.1%, in net interest income after provision for loan losses; a decrease of $129,637, or 4.5%, in other income; an increase in other expense of $500,008, or 9.0%; and an increase in income tax expense of $3,400 or 0.6%. Basic and diluted earnings per share for the third quarter of 2002 were $0.30 and $0.29 respectively as compared to $0.26 and $0.25 per share in the previous year’s quarter.

The Company’s net income of $3,513,142 for the first nine months of 2002 was a 26.7% increase compared to $2,772,384 for the same period last year. The $740,758 increase in net income is attributed to the net of the following: an increase of $2,302,278 or 18.1%, in net interest income after provision for loan losses; an increase of $618,401, or 7.6%, in other income; an increase in other expense of $1,875,221, or 11.3%; and an increase in income tax expense of $304,700 or 20.5%. Basic and diluted earnings per share for the first nine months of 2002 were $0.88 and $0.85 respectively as compared to $0.71 and $0.68 per share in the previous year’s quarter.

Book value per share increased to $8.11 at September 30, 2002 from $7.27 at December 31, 2001. The Company paid a quarterly dividend of $0.1075 per share in each of the first, second, and third quarters of 2002 and 2001.

Performance of banks is often measured by various ratio analyses. Two widely recognized indicators are return on average equity and return on average assets. Annualized return on average equity for the nine months ended September 30, 2002 was 15.05% on average equity of $30,509,000, compared to 13.57% on average equity of $27,243,000 for the same period in 2001. Annualized return on average assets of $527,169,000 for the nine months ended September 30, 2002 was 0.87%, compared to 0.78% on average assets of $473,849,000 for the same period in 2001.

The Company’s expansion into Southwest Florida began in 2001 with the opening of two new branch facilities. On July 16, 2001, its office on J & C Boulevard in Naples opened and is located in an industrial park and trade center. This facility is targeted to serve the small to midsize commercial customer and houses the commercial lending offices for the area. On December 3, 2001, a full service retail branch opened in Bonita Springs and is situated in the fast growing area north of Naples in southern Lee County. Currently under construction is the Company’s third branch which is located in downtown Naples and is expected to open in the fourth quarter of 2002. Opening new branch facilities is dilutive to earnings in the near term but is a factor in achieving sustainable long-term growth.

Net interest income is one measurement of how management has balanced the Company’s interest rate sensitive assets and liabilities. The Company’s net interest income is its principal source of income. Interest earning assets for the Company include loans, federal funds sold, interest bearing deposits in other banks, and investment securities. The Company’s interest-bearing liabilities include its deposits, federal funds purchased, notes payable related to Company shares repurchased, trust preferred securities, advances from the Federal Home Loan Bank, and other short-term borrowings. Net interest income increased $2,104,278, or 15.8%, to $15.4 million, in the nine months ended September 30, 2002 as compared to the same period last year. The prime rate as published in the Wall Street Journal began 2001 at 9.5% and by December 2001 it had declined to 4.75%. Many of the Bank’s loans are indexed to this floating rate which has been stable at 4.75% since December 2001. Offsetting this decline in interest income, the Company has been able to reprice maturing high-rate certificates of

deposit and other funding sources resulting in a reduction in interest expense compared to the prior year. The average yield on interest earning assets for the first nine months of 2002 was 6.55% which was a decrease of 159 basis points compared to the 8.14% yield earned during the first nine months of 2001. The average cost of interest bearing deposits declined 211 basis points from 4.45% during the first nine months of 2001 to 2.34% for the comparable period in 2002, and the rate of all interest bearing liabilities decreased 211 basis points, from 4.73% in 2001 to 2.62% in 2002. The Company’s net interest margin increased to 4.36% in the first nine months of 2002 compared to 4.19% in the first nine months of 2001.

The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the nine months ended September 30, 2002 and September 30, 2001.


			2002								2001

			AVERAGE			INCOME/		YIELDS			AVERAGE			INCOME/		YIELDS
(Dollars in thousands)			BALANCES			EXPENSE		RATES			BALANCES			EXPENSE		RATES

Interest-earning assets:
	Loans (1)(2)		$	395,061		$	20,440		6.92	%	$	337,331			22,035		8.73	%
	Investment securities — taxable			53,265			2,272		5.70	%		59,091			2,804		6.34	%
	Investment securities – tax exempt (2)			5,545			301		7.26	%		5,738			312		7.27	%
	Interest bearing deposits in other banks			307			4		1.78	%		51			2		5.27	%
	Federal funds sold			21,329			268		1.68	%		25,643			886		4.62	%

Total interest-earning assets				475,507			23,285		6.55	%		427,854			26,039		8.14	%

Non-interest-earning assets:
	Cash and due from banks			13,553								12,387
	Investment in ERAS			255								939
	Premises and equipment, net			17,462								16,428
	Allowances for loan losses			(3,897	)							(3,221	)
	Other assets			24,289								19,462

Total non-interest earning assets				51,662								45,995

Total assets			$	527,169							$	473,849

Interest-bearing liabilities:
	Interest bearing deposits:
		NOW accounts	$	50,496			211		0.56	%	$	42,404			430		1.36	%
		Money market		129,807			1,319		1.36	%		128,485			3,975		4.14	%
		Savings deposits		29,575			170		0.77	%		24,119			371		2.06	%
		Other time deposits		145,621			4,527		4.16	%		146,453			6,594		6.02	%

Total interest-bearing deposits				355,499			6,227		2.34	%		341,461			11,370		4.45	%
	Other interest-bearing liabilities:
	Notes payable			5,250			360		9.16	%		5,250			519		13.22	%
	Short-term borrowings and FHLB advances			22,441			323		1.92	%		1,349			44		4.34	%
	Trust preferred securities			13,000			856		8.80	%		9,136			706		10.33	%

Total interest-bearing liabilities				396,190			7,766		2.62	%		357,196			12,639		4.73	%

Non-interest bearing liabilities and stockholders’ equity:
	Demand deposits			94,806								82,376
	Other liabilities			5,664								7,034
	Stockholders’ equity			30,509								27,243

Total non-interest bearing liabilities and stockholders’ equity				130,979								116,653

Total liabilities and stockholders’ equity			$	527,169							$	473,849

Interest rate spread									3.93	%							3.41	%

Net interest income						$	15,519							$	13,400

Net interest margin (3)									4.36	%							4.19	%

(1) Average loans include non-performing loans.

(2) Interest income and rates include the effects of a tax equivalent adjustment using a Federal tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis.

(3) Net interest margin is net interest income divided by average total interest-earning assets.

The table below details the components of the changes in net interest income. 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.


		2002 compared to 2001 (1) Due to changes in

								Net
		Average			Average			Increase
(In thousands)		Volume			Rate			(Decrease)

INTEREST INCOME
Loans (2)		$	4,801		$	(6,396	)	$	(1,595	)
Investment Securities (2)			(273	)		(270	)		(543	)
Interest bearing deposits in other banks			5			(3	)		2
Federal Funds sold			(129	)		(489	)		(618	)

	Total interest income		4,404			(7,158	)		(2,754	)

INTEREST EXPENSE
NOW Accounts			112			(331	)		(219	)
Money Market			68			(2,724	)		(2,656	)
Savings deposits			111			(312	)		(201	)
Other time deposits			(37	)		(2,030	)		(2,067	)
Notes payable			—			(159	)		(159	)
Trust preferred securities			318			(168	)		150
Short-term borrowings and FHLB advances			333			(54	)		279

	Total interest expense		905			(5,778	)		(4,873	)

Change in net interest income		$	3,499		$	(1,380	)	$	2,119

(1) The change in interest due to both rate and volume has been allocated to the volume and rate components in proportion to the relationship of the dollar amounts of the absolute change in each.

(2) Interest income includes the effects of a tax equivalent adjustment using a federal tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis.

Based on management’s evaluation of specific loans and inherent losses within the loan portfolio and other factors, the provision for loan losses was $125,000 for the third quarter of 2002 as compared to $335,000 for the third quarter of 2001. Gross charged off loans for the third quarter of 2002 were $25,682 with recoveries of $26,882, compared to $25,732 in charge offs and $10,258 in recoveries in the third quarter of 2001.

The provision for loan losses was $407,000 for the first nine months of 2002 as compared to $605,000 in the first nine months of 2001. Gross charged off loans for the first nine months of 2002 were $239,652 with recoveries of $40,573, resulting in an annualized net charge-off rate of .06% of total loans. Approximately $211,000 of the current year charge off relates to the non-guaranteed portion of one loan. This compares to net charge offs during the same period last year of $383,873. Approximately $352,000 of the prior year charge-off relates to the nonguaranteed portion of two loans made to one customer.

The Company’s formalized process for assessing the adequacy of the allowance for loan losses and the resultant need, if any, for periodic provisions to the allowance charged to income, includes both individual loan analyses and loan pool analyses. Individual loan analyses are periodically performed on loan relationships of a significant size, or when otherwise deemed necessary, and primarily encompass commercial real estate and other commercial loans. The result is that commercial real estate loans and commercial loans are divided into the following risk categories: Pass, Special Mention and Substandard or worse. When appropriate a specific reserve will be established for individual loans. Otherwise, the Company allocates an allowance for each risk category. The allocations are based on factors including perceived economic conditions (local, national and global), perceived strength of the Company’s management, recent trends in loan loss history, and concentrations of credit.

Home equity loans, residential loans and consumer loans generally are not analyzed individually. These loans are grouped into pools and assigned risk categories based on their current payment status and management’s assessment of risk inherent in

the various types of loans. As above, when appropriate, a specific reserve will be established for individual loans. Otherwise, the Company allocates an allowance for each loan classification. The allocations are based on the same factors mentioned above.

The allowance for loan losses amounted to $4,001,763 and $3,793,842 at September 30, 2002 and December 31, 2001, respectively. Based on an analysis performed by management at September 30, 2002, the allowance for loan losses is considered to be adequate to cover loan losses in the portfolio as of that date. However, because of the inherent uncertainty of the assumptions we use in our loan analyses, management cannot assure that loan losses in future periods will not exceed the allowance for loan losses or that additional allocations to the allowance will not be required.

Non-performing assets include non-accrual loans, accruing loans contractually past due 90 days or more, and other real estate. Loans are placed on non-accrual status when management has concerns relating to the ability to collect the loan principal and interest and generally when such loans are 90 days or more past due. A loan is considered impaired if it is in a nonaccruing status. Non-performing assets for the periods ended September 30, 2002 and December 31, 2001 were as follows:


	September 30, 2002			December 31, 2001

Loans on nonaccrual	$	548,455		$	1,590,391
Loans 90 days past due (a)		—			—
Other real estate owned (b)(d)		1,550,074			550,000
Other assets (b)		2,389,888			2,290,432

Total non-performing assets	$	4,488,417		$	4,430,823

Percentage of non-performing assets to total loans (c)		1.08	%		1.16	%

(a) Loans 90 days past due exclude loans on nonaccrual that are reported separately.

(b) The Bank had made a loan originally totaling $10,000,000 to construct a lumber mill in north Florida. Of this amount, $6,400,000 had been sold by the Bank to other lenders. The loan was partially guaranteed as to principal and interest by the U.S. Department of Agriculture (USDA). In addition to business real estate and equipment, the loan was collateralized by the business owner’s interest in a trust. Under provisions of the trust agreement, beneficiaries cannot receive trust assets until November 2010. At December 31, 2000, the loan was past due greater than 90 days but was still maintained as an accruing loan because of the USDA guarantee and collateral value. During 2001, upon completion of foreclosure on the underlying collateral, the non-guaranteed portion of this loan and interest accrued through the foreclosure date was reclassified into other real estate ($550,000) and other assets (approximately $1,886,000) based on the fair value of the underlying-collateral. In addition, the bank has capitalized liquidation costs and protective advances totaling approximately $429,000 and $404,000 at September 30, 2002 and December 31, 2001, respectively, which the Bank expects to be fully reimbursed by the USDA. The non guaranteed principal and interest ($1,961,000 at September 30, 2002 and $1,886,000 at December 31, 2001) and the capitalized costs totaling approximately $429,000 and $404,000 at September 30, 2002 and December 31, 2001, respectively are included as “other assets” in the table above. The portion of this loan guaranteed by the USDA was approximately $1.6 million at September 30, 2002 and December 31, 2001, and is accruing interest. Accrued interest on this loan totals approximately $481,000 and $409,000 at September 30, 2002 and December 31, 2001, respectively. Under the USDA program, eligible portions of both principal and interest are covered under the USDA guarantee. Management believes the present value of all assets pledged as collateral for this loan exceeds the unpaid amount.

Florida Statutes require that repossessed real property be liquidated or charged off within five years, and repossessed personal property be liquidated or charged off within six months. The Bank was awarded title to the property on June 12, 2001, and, therefore, the time constraints imposed by Florida Statutes required that the personal property be disposed of by December 10, 2001. The Bank applied to the State of Florida for an extension to carry the repossessed personal property on the Bank’s books. The Department of Banking and Finance of the State of Florida granted an extension to the Bank to carry the personal property on its books until December 11, 2002. On June 4, 2002, the Bank requested another extension from the State. The Bank is currently awaiting their response. There is no assurance that this extension will be granted and, therefore, the possibility exists that the non guaranteed principal and interest totaling $1,961,000 at September 30, 2002, may need to be charged off for regulatory purposes in December 2002 if the property has not yet been liquidated. Since the Company believes this amount is ultimately realizable, the Company does not anticipate that this amount will be required to be written off on its financial statements prepared under generally acceptable accounting principles. Even if the amount was required to be charged off for regulatory purposes, the Bank and the Company would have remained well capitalized at September 30, 2002, under the capital adequacy guidelines established by the federal bank regulators.

(c) For the purpose of this computation, total loans include other real estate owned and other assets.

(d) Other real estate owned increased approximately $1.0 million from December 31, 2001 to September 30, 2002, due to the repossession of two commercial properties in the second quarter of 2002.

Other income for the third quarter of 2002 was $2,732,260. This represents a $129,637 decrease over the prior year quarter. For the nine month period ended September 30, 2002, other income increased $618,401 to $8,753,599 from $8,135,198 in the comparable period last year. The 7.6% increase in non interest income is attributable to an increase of $197,820 in merchant bankcard processing income; a $291,069 increase in commissions on sales by Keys Insurance; a $16,224 increase in retail investment services; a $171,158 decrease in equity in loss, including goodwill amortization, from the investment in ERAS JV; a $346,694 increase in fees on mortgage loans sold at origination; offset by a decrease of $45,214 in service charges on deposit accounts, a $31,843 decrease in gain on sale of government guaranteed loans; a $142,960 decrease in net investment security gains; and a $184,547 decrease in other income . The increases in merchant bankcard, commissions on sales by Keys Insurance, fees on mortgage loans sold at origination, and retail investment services income is primarily a result of volume increases, and also additional activity as a result of the Company’s expansion into Southwest Florida. The net gain from the sale of securities will vary based upon the sales and calls of the individual securities in the investment portfolio. In the third quarter of 2001, the Company liquidated approximately $15.8 million in securities primarily to fund the growth in loan outstandings. This sale resulted in a gain of $267,897. In 2002, the gain is primarily the result of the sale of two corporate securities which netted a gain of approximately $65,000 in the first quarter of 2002 and the sale of two agency securities in the second quarter of 2002 that netted a gain of approximately $64,000. Prior to January 1, 2002, the Company accounted for its investment in ERAS JV under the equity method. This resulted in a net loss of $172,728 in the first nine months of 2001. On December 31, 2001, the Company sold two thirds of its 30% interest in ERAS JV. At the resulting 10% ownership, the remaining investment in ERAS is accounted for under the cost method in 2002.

Other expense for the third quarter of 2002 was $6,064,223. This represents a $500,008, or 9.0% increase over the prior year quarter. For the nine month period ended September 30, 2002, other expense increased $1,875,221 to $18,437,896 from $16,562,675 in the comparable period last year. The 11.3% increase in non interest expense is attributable to salaries and employee benefits increasing $1,018,456, net occupancy expense increasing $418,561, and other expense increasing $438,204. A significant portion of these increases are a result of the two new locations the Bank opened during the second half of 2001. The addition of these facilities has caused the Bank to hire additional personnel and incur additional operating costs.

Total assets at September 30, 2002 were $544,285,350, up 10.2% from total assets of $493,992,245 at December 31, 2001. Loans net of deferred loan costs and fees increased $31,344,201 to $410,290,954 for the first nine months of 2002 from year end 2001. Also, in the same period, federal funds sold increased $17,373,000, and investment securities increased $671,619. Asset growth was primarily funded by an increase in deposits of $46,180,525, or 11.1%. At September 30, 2002, the Company had $5,681,124 in short-term borrowings compared to $733,760 at December 31, 2001. Short-term borrowings consist of securities sold under agreements to repurchase and Treasury tax deposits. Advances from the Federal Home Loan Bank totaled $20 million at September 30, 2002 as compared to $25 million at December 31, 2001.

The Company entered into an agreement with the Company’s largest shareholder effective July 1, 2000, to purchase 525,000 shares of the Company’s common stock in exchange for four subordinated debt instruments of the Company totaling $5,250,000. The interest rate on these original notes was 13%, with interest payments required quarterly. The principal balance was payable in full on October 1, 2010, the maturity date of the notes, and the notes could be prepaid by the Company at par any time after July 1, 2003. Subsequent to December 31, 2001, the Company renegotiated the notes payable. Effective January 1, 2002, the interest rate was reduced to 9%, the option to prepay was extended to July 1, 2007, and the maturity date was extended to January 1, 2012. The debt issued by the Company qualifies as Tier 2 capital at the holding company level under applicable regulatory capital guidelines.

In July 2001, the Company participated in a pooled offering of trust preferred securities in the amount of $5 million. The Company formed TIBFL Statutory Trust II (the “Trust”), a wholly-owned statutory trust subsidiary, for the purpose of issuing the trust preferred securities. The trust used the proceeds from the issuance of the trust preferred securities to acquire junior subordinated notes of the Company. The trust preferred securities essentially mirror the debt securities, carrying a cumulative preferred dividend at a variable rate equal to the interest rate on the debt securities (three month LIBOR plus 358 basis points). The initial rate in effect at the time of issuance was 7.29% and is subject to change quarterly. The rate in effect at September 30, 2002 is 5.39%. The debt securities and the trust preferred securities each have 30-year lives. The trust preferred securities and the debt securities are callable by the Company or the Trust, at their respective option after five years, and at varying premiums and sooner in specific events, subject to prior approval by the Federal Reserve Board, if then required. For federal regulatory purposes, the Company plans to treat the trust preferred securities as Tier 1 capital up to the maximum amount allowed, and the remainder as Tier 2 capital.

On October 31, 2000, the Company purchased Keys Insurance Agency of Monroe County, Inc. from a Company director. Keys Insurance Agency, Inc. (the new name subsequent to the purchase) has three offices in the Florida Keys and one office in Naples. Keys Insurance Agency, Inc. offers a full line of commercial and residential hazard insurance coverage as well as life and health insurance and annuities. Total consideration paid at closing for the agency was $1,870,000. This was comprised of $220,000 in the Company’s common stock and $1,650,000 in cash paid at closing. Under the purchase agreement, annual cash payments of $110,000 are to be made following each of the first three anniversaries of the closing date, subject to the agency’s ability to achieve certain earning thresholds. Any of this additional consideration that is paid at the end of each contingency period, will at that time be recorded as goodwill and increase the total recorded purchase price of the agency. No amount was required to be paid in 2001 or 2002.

On September 25, 2001, Keys Insurance Agency, Inc. purchased BonData Group Limited, Inc., a Ft. Myers, Florida based insurance agency specializing in surety bond underwriting and placement. Total consideration paid at closing for the agency was $273,000. This was comprised of approximately $68,000 in the Company’s common stock and approximately $205,000 in cash. Under the purchase agreement, annual cash payments of $24,000 are to be made following each of the first two anniversaries of the closing date, subject to the agency’s ability to achieve certain earning thresholds. Any of this additional consideration that is paid at the end of each contingency period, will at that time be recorded as goodwill and increase the total recorded purchase price of the agency. No amount was required to be paid in 2002.

In June of 2002, the Company transferred investment securities in the held to maturity category to the available for sale category. The book value at the time of transfer was $18,507,916 and the market value was $18,941,377. Securities in the available for sale category allow for more flexibility in managing the investments for the Bank. Since changes in market value do not affect the regulatory capital ratios of the Bank there is no compelling reason to not have the ability to sell securities when appropriate. Securities maintained in the held to maturity portfolio does limit the volatility of GAAP capital, however, as the Bank has trended toward higher loan to deposit ratios (therefore low investments to asset ratios) the probable amount of this volatility has become much less significant relative to the size of the Bank.

CAPITAL ADEQUACY

Federal banking regulators have established certain capital adequacy standards required to be maintained by banks and bank holding companies. The minimum requirements established in the regulations are set forth in the table below, along with the actual ratios at September 30, 2002 and December 31, 2001:


		Well			Adequately
		Capitalized			Capitalized			September 30, 2002			December 31, 2001
		Requirement			Requirement			Actual			Actual

Tier 1 Capital (to Average Assets)
	Consolidated	>	5	%	>	4	%		7.0	%		7.1	%
	Bank	>	5	%	>	4	%		8.3	%		8.5	%
Tier 1 Capital (to Risk Weighted Assets)
	Consolidated	>	6	%	>	4	%		8.6	%		8.4	%
	Bank	>	6	%	>	4	%		10.2	%		10.2	%
Total Capital (to Risk Weighted Assets)
	Consolidated	>	10	%	>	8	%		11.4	%		11.6	%
	Bank	>	10	%	>	8	%		11.1	%		11.1	%

Management believes, as of September 30, 2002, that the Company and the Bank met all capital requirements to which they are subject. The Company has included in Tier 1 Capital a portion of the trust preferred securities that were issued in September 2000 and July 2001.

LIQUIDITY

The goal of liquidity management is to ensure the availability of an adequate level of funds to meet the loan demand and deposit withdrawal needs of the Company’s customers. The Company manages the levels, types and maturities of earning assets in relation to the sources available to fund current and future needs to ensure that adequate funding will be available at all times.

The Bank has invested in Federal Home Loan Bank stock for the purpose of establishing credit lines with the Federal Home Loan Bank. The credit availability to the Bank is equal to 14 percent of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators. The credit availability approximated $75.8 million at September 30, 2002, under which $20 million was outstanding. Any advances are secured by the Bank’s one-to-four family residential mortgage loans.

The Bank has an unsecured line of credit for federal funds purchased from its principal correspondent bank totaling $7,500,000. 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.

COMMITMENTS

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 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 September 30, 2002, total commitments to extend credit were approximately $61.7 million in unfunded loan commitments.

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 September 30, 2002, commitments under standby letters of credit aggregated approximately $2.1 million.

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.

RATE SENSITIVITY

The Company’s interest rate sensitivity position at September 30, 2002 is presented in the table below.


	3 months			4 to 6			7 to 12			1 to 5			Over 5
(Dollars in thousands)	or less			Months			Months			years			Years			Total

Interest-earning assets:
Loans	$	185,018		$	32,579		$	29,658		$	100,351		$	62,477		$	410,083
Investment securities-taxable		2,884			3,048			—			21,069			21,730			48,731
Investment securities-tax exempt		350			—			129			844			4,597			5,920
Federal funds sold		17,373			—			—			—			—			17,373
Interest bearing deposit in other bank		195			—			—			—			—			195
Note receivable		264			—			—			—			—			264

Total interest-bearing assets		206,084			35,627			29,787			122,264			88,804			482,566

Interest-bearing liabilities:
NOW accounts (A)		20,058			—			—			—			30,087			50,145
Money Market		129,846			—			—			—			—			129,846
Savings Deposits (B)		—			—			31,313			—			—			31,313
Other time deposits		34,142			37,186			40,044			45,741			101			157,214
Notes payable		—			—			—			—			5,250			5,250
Trust preferred securities		5,000			—			—			—			8,000			13,000
Other borrowings		25,681			—			—			—			—			25,681

Total interest-bearing liabilities		214,727			37,186			71,357			45,741			43,438			412,449

Interest sensitivity gap	$	(8,643	)	$	(1,559	)	$	(41,570	)	$	76,523		$	45,366		$	70,117

Cumulative interest sensitivity gap	$	(8,643	)	$	(10,202	)	$	(51,772	)	$	24,751		$	70,117		$	70,117

Cumulative sensitivity ratio		(1.8	)%		(2.1	)%		(10.7	)%		5.1	%		14.5	%		14.5	%

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

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

The Company is cumulatively liability sensitive in the 3 month or less, 4 to 6 months, and 7 to 12 month time frames and cumulatively asset sensitive in each of the 1 to 5 year, and over 5 year 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 period 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 decrease, the net interest margin would decrease. Conversely, if rates increase the net interest margin would over time increase and this is particularly true over longer time horizons since the Company has more total assets subject to rate changes than total liabilities that are rate sensitive.

Even in the near term, the $51.8 million one year cumulative negative sensitivity gap exaggerates the probable effects on earnings in a rising rate environment for two reasons. First, the liabilities subject to repricing are predominately not indexed to any specific market rate and therefore offer the Company the opportunity to delay or diminish any rate repricings. Second, a static gap model does not factor the effects of growing volumes which would likely include greater additional rate sensitive assets than rate sensitive liabilities. Further, in this current rate environment, the Bank has been originating loans with interest rate floors. The effect of this has been to decrease the volatility of net interest margin due to the fact that these loans behave similar to fixed rate loans in periods that have a significant range of interest rate changes.

Interest-earning assets and other time deposits are presented based on their contractual terms. It is anticipated that run off in any deposit category will be approximately offset by new deposit generation. Since 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 –20% to +10% range. At September 30, 2002, the Company was within this range with a one year cumulative sensitivity ratio of –10.5%.

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 September 30, 2002 was developed using simulation analysis of the Company’s sensitivity to changes in net interest income under varying assumptions for changes in market interest rates. Specifically, the model derives expected interest income and interest expense resulting from an immediate and parallel shift in the yield curve in the amounts shown.

These rate changes are matched with known repricing intervals and assumptions for new growth net of expected prepayments. The assumptions are based primarily on experience in the Company’s market under varying rate environments. The imbedded options that the Company’s loan customers possess to refinance are considered for purposes of this analysis and cause the larger decreases in income in a declining rate scenario versus the income increases in the same size rising rate scenario.

This analysis intentionally exaggerates interest sensitivity. For the sake of simplicity and comparability, an immediate change in rates is assumed. However, any significant change in actual market rates would probably be phased in over an extended period of time. This phase in would reduce the net interest income effects for any absolute change in rates. Also, the Company has been originating adjustable rate commercial loans with interest rate floors that are currently at rates higher than the index and margin on the loans would indicate. An example would be a loan at Prime plus 1% but with a 7.0% floor. The Company currently has in excess of $90 million of these types of loans where the loan rates are at the floors. The effects of this are twofold. First, this has benefited our margins currently since we have assets earning yields higher than would be the case absent the floor rates. Second, in a declining rate environment and in a limited rising rate environment those “adjustable” rate loans act like fixed rate loans. This limits the Company’s loss of interest income when rates decline but does constrain income gains in a rising rate market. In general, having this significant amount of loans at their floors reduces the Company’s overall rate sensitivity.

The Company attempts to retain interest rate neutrality by generating mostly adjustable rate loans and managing the securities and Fed Funds positions to offset the repricing characteristics of the deposit liabilities.


	Interest Rates Decrease							Interest Rates Increase
						Interest Rates
(Dollars in thousands)	200 BP			100 BP		Remain Constant		100 BP			200BP

2002 Interest Income	$	29,841		$	31,943	$	34,108	$	36,086		$	38,369
2002 Interest Expense		7,380			8,597		10,971		13,280			15,589

Net Interest Income		22,461			23,346		23,137		22,806			22,780

Change in net income after tax vs. constant rates	$	(422	)	$	130			$	(207	)	$	(223	)

Part II. OTHER INFORMATION

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive Officer, President, and Chief Financial Officer of the Company concluded that the Company’s disclosure controls and procedures were adequate.

(b) Changes in Internal Controls. The Company made no significant changes in its internal controls or other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive Officer, President, and Chief Financial Officer.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit 99.1 — Report of Independent Certified Public Accountants

(b) Exhibit 99.2 – Chief Executive Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002

(c) Exhibit 99.3 – Chief Financial Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002

(d) No reports on Form 8-K were filed during the quarter ended September 30, 2002.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		TIB FINANCIAL CORP.

		/s/ Edward V. Lett
Date:	November 14, 2002	Edward V. Lett
		President and Chief Executive Officer

		/s/ David P. Johnson
		David P. Johnson Executive Vice President and Chief Financial Officer

CERTIFICATIONS

I, Edward V. Lett, President and CEO, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TIB Financial Corp.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date:	November 14, 2002

		/s/ Edward V. Lett
		Edward V. Lett, President and Chief Executive Officer

I, David P. Johnson, Executive Vice President and CFO, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TIB Financial Corp.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


Date:	November 14, 2002

		/s/ David P. Johnson
		David P. Johnson, Executive Vice President and Chief Financial Officer

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(1)		Average loans include non-performing loans.

(2)		Interest income and rates include the effects of a tax equivalent adjustment using a Federal tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis.

(3)		Net interest margin is net interest income divided by average total interest-earning assets.

(1)		The change in interest due to both rate and volume has been allocated to the volume and rate components in proportion to the relationship of the dollar amounts of the absolute change in each.

(2)		Interest income includes the effects of a tax equivalent adjustment using a federal tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis.

(a)		Loans 90 days past due exclude loans on nonaccrual that are reported separately.

(b)		The Bank had made a loan originally totaling $10,000,000 to construct a lumber mill in north Florida. Of this amount, $6,400,000 had been sold by the Bank to other lenders. The loan was partially guaranteed as to principal and interest by the U.S. Department of Agriculture (USDA). In addition to business real estate and equipment, the loan was collateralized by the business owner’s interest in a trust. Under provisions of the trust agreement, beneficiaries cannot receive trust assets until November 2010. At December 31, 2000, the loan was past due greater than 90 days but was still maintained as an accruing loan because of the USDA guarantee and collateral value. During 2001, upon completion of foreclosure on the underlying collateral, the non-guaranteed portion of this loan and interest accrued through the foreclosure date was reclassified into other real estate ($550,000) and other assets (approximately $1,886,000) based on the fair value of the underlying-collateral. In addition, the bank has capitalized liquidation costs and protective advances totaling approximately $429,000 and $404,000 at September 30, 2002 and December 31, 2001, respectively, which the Bank expects to be fully reimbursed by the USDA. The non guaranteed principal and interest ($1,961,000 at September 30, 2002 and $1,886,000 at December 31, 2001) and the capitalized costs totaling approximately $429,000 and $404,000 at September 30, 2002 and December 31, 2001, respectively are included as “other assets” in the table above. The portion of this loan guaranteed by the USDA was approximately $1.6 million at September 30, 2002 and December 31, 2001, and is accruing interest. Accrued interest on this loan totals approximately $481,000 and $409,000 at September 30, 2002 and December 31, 2001, respectively. Under the USDA program, eligible portions of both principal and interest are covered under the USDA guarantee. Management believes the present value of all assets pledged as collateral for this loan exceeds the unpaid amount.

		Florida Statutes require that repossessed real property be liquidated or charged off within five years, and repossessed personal property be liquidated or charged off within six months. The Bank was awarded title to the property on June 12, 2001, and, therefore, the time constraints imposed by Florida Statutes required that the personal property be disposed of by December 10, 2001. The Bank applied to the State of Florida for an extension to carry the repossessed personal property on the Bank’s books. The Department of Banking and Finance of the State of Florida granted an extension to the Bank to carry the personal property on its books until December 11, 2002. On June 4, 2002, the Bank requested another extension from the State. The Bank is currently awaiting their response. There is no assurance that this extension will be granted and, therefore, the possibility exists that the non guaranteed principal and interest totaling $1,961,000 at September 30, 2002, may need to be charged off for regulatory purposes in December 2002 if the property has not yet been liquidated. Since the Company believes this amount is ultimately realizable, the Company does not anticipate that this amount will be required to be written off on its financial statements prepared under generally acceptable accounting principles. Even if the amount was required to be charged off for regulatory purposes, the Bank and the Company would have remained well capitalized at September 30, 2002, under the capital adequacy guidelines established by the federal bank regulators.

(c)		For the purpose of this computation, total loans include other real estate owned and other assets.

(d)		Other real estate owned increased approximately $1.0 million from December 31, 2001 to September 30, 2002, due to the repossession of two commercial properties in the second quarter of 2002.

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

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

	(a)		Evaluation of Disclosure Controls and Procedures. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive Officer, President, and Chief Financial Officer of the Company concluded that the Company’s disclosure controls and procedures were adequate.

	(b)		Changes in Internal Controls. The Company made no significant changes in its internal controls or other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive Officer, President, and Chief Financial Officer.

	(a)		Exhibit 99.1 — Report of Independent Certified Public Accountants

	(b)		Exhibit 99.2 – Chief Executive Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002

	(c)		Exhibit 99.3 – Chief Financial Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002

	(d)		No reports on Form 8-K were filed during the quarter ended September 30, 2002.