UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

TIB FINANCIAL CORP.

599 9^th STREET NORTH, SUITE 101, NAPLES, FLORIDA 34102-5624

Registrant’s telephone number, including area code:           (239) 263-3344

Not Applicable

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

Indicate by check mark whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes    or No X 

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

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Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

TIB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS

(See notes to consolidated financial statements)

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TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(See notes to consolidated financial statements)

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

(See notes to consolidated financial statements)

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

(See notes to consolidated financial statements)

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TIB FINANCIAL CORP.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004
(Unaudited)

NOTE 1 – BASIS OF PRESENTATION & ACCOUNTING POLICIES

TIB Financial Corp. is a financial holding company headquartered in Naples, Florida. TIB Financial Corp. owns and operates TIB Bank of the Keys, which has a total of fourteen branches in Florida that are located in Monroe, Miami-Dade, Collier and Lee counties.

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. For further information and an additional description of the Company’s accounting policies, refer to the Company’s annual report for the year ended December 31, 2003.

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. (corporation dissolved in March 2004 – see Note 2), and Keys Insurance Agency, Inc. (assets sold in August 2003 – see Note 11) and the Bank’s two subsidiaries, TIB Government Loan Specialists, Inc. (corporation dissolved in March 2004 – see Note 2) and TIB Investment Center Inc., collectively known as the Company. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain amounts previously reported on have been reclassified to conform to the current period presentation.

As used in this document, the terms “we,” “us,” “our,” “TIB Financial,” and “Company” mean TIB Financial Corp. and its subsidiaries (unless the context indicates another meaning), and the term “Bank” means TIB Bank of the Keys and its subsidiaries (unless the context indicates another meaning).

RECENT DEVELOPMENTS

On April 15, 2004, we closed the sale of 1,000,000 shares of our common stock at a price of $22.00 per share before commissions and expenses which are estimated to be approximately $1,855,000. The shares were sold on a firm commitment basis through Advest, Inc. Advest, Inc. also purchased an additional 150,000 shares from the Company on May 6, 2004, at $22.00 per share before commissions and expenses. The net proceeds of the offering will be used to provide capital to support continued loan and deposit growth throughout our South Florida markets.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted within the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for loan losses are deemed critical since they involve the use of estimates and require significant management judgments. Losses on loans result from a broad range of causes from borrower specific problems, to industry issues, to the impact of the economic environment. The identification of these factors that lead to default or non-performance under a borrower loan agreement and the estimation of loss in these situations are very subjective. In addition, a dramatic change in the performance of one or a small number of borrowers can have a significant impact on the estimate of losses. Management has implemented a process that has been applied consistently to systematically consider the many variables that impact the estimation of the allowance for loan losses.

Additional information with regard to the Company’s methodology and reporting of the allowance for loan losses is included in the 2003 Annual Report and 10-K.

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NOTE 2 – ACQUISITIONS AND DIVESTITURES

On May 29, 2003, TIB Software & Services sold its remaining interest in ERAS Joint Venture for $326,667. The Company recognized a pretax gain of approximately $202,000 on the transaction. In March 2004, the Company filed Articles of Dissolution dissolving the Florida corporation, TIB Software & Services, Inc.

On August 15, 2003, the Company closed the sale of the assets of Keys Insurance Agency, Inc., a wholly owned subsidiary of the Company. See Note 11 – “Discontinued Operations” for details on the transaction. In March 2004, the Company filed Articles of Dissolution dissolving the Florida corporation, Keys Insurance Agency, Inc.

In March 2004, the Company filed Articles of Dissolution dissolving the Florida corporation, TIB Government Loan Specialists, Inc. Activities performed through this corporation are now performed through TIB Bank of the Keys.

NOTE 3 – INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities available for sale at March 31, 2004 and December 31, 2003 are presented below:

NOTE 4 – LOANS

Major classifications of loans are as follows:

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NOTE 5 – ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses for the three months ended March 31, 2004 and March 31, 2003 follows:

NOTE 6 – GOODWILL AND INTANGIBLE ASSETS

Amortized intangible assets consist of the following at March 31, 2004:

Intangible amortization expense totaled $72,978 for the three months ended March 31, 2004.

Goodwill recorded at March 31, 2004 totals $155,232, and relates to our prior acquisition of a firm specializing in government guaranteed loans. There was no change in the carrying amount of goodwill from December 31, 2003.

NOTE 7 – EARNINGS PER SHARE AND COMMON STOCK

Earnings per share have been computed based on the following weighted average number of common shares outstanding for the three months ended March 31:

Stock options for 20,082 and 1,517 shares of common stock were not considered in computing diluted earnings per common share for 2004 and 2003 because they were anti-dilutive. The effect of stock options is the sole common stock equivalent for purposes of calculating diluted earnings per common share.

NOTE 8 – STOCK-BASED COMPENSATION

Total stock options granted, exercised, and expired/forfeited during the three months ended March 31, 2004, were 37,500, 57,736, and 200, respectively. As of March 31, 2004, 457,069 options for shares were outstanding.

Employee compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation.”

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NOTE 9 — 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 March 31, 2004 and December 31, 2003:

Management believes, as of March 31, 2004, 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.

As indicated in Note 1, we completed an offering of 1,150,000 shares of our common stock during the second quarter of 2004.

NOTE 10 — SEGMENT REPORTING

TIB Financial Corp. has two reportable segments in their continuing operations: community banking and merchant bankcard processing. The community banking segment’s business is to attract deposits from the public and to use such deposits to make real estate, business and consumer loans in its primary service area. The merchant bankcard processing segment processes credit card transactions for local merchants. Parent and other includes the operations of the holding company and retail investment service operations of the Bank.

The results of Keys Insurance Agency, Inc. are not included in the segment reporting as they are classified separately as discontinued operations in our consolidated financial statements (see Note 11). Total assets of Keys Insurance Agency, Inc. at March 31, 2004 and March 31, 2003 were $0 and $2,207,871 respectively.

The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing strategies.

Intercompany transactions have been ignored in preparing the segment reporting amounts below.

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

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The Company discontinued separate reporting of its “government guaranteed loan sales and servicing” segment in 2003. This segment is now included as part of the “Community Banking” segment above.

NOTE 11 – DISCONTINUED OPERATIONS

On August 15, 2003, the Company closed the sale of Keys Insurance Agency, Inc., a wholly owned subsidiary of the Company, to a former director of the Company and TIB Bank of the Keys, and his partner. The transaction was structured as a sale of the agency assets. The buyer paid $2,204,930 in cash at the closing. Of the cash payment at closing, proceeds of $2,020,938 were pursuant to a loan from TIB Bank of the Keys (a subsidiary of the Company) to the buyer. The Company recognized a loss of $14,676 on the transaction.

The results of Keys Insurance Agency, Inc. operations, which have been classified as discontinued operations in the accompanying consolidated financial statements, are summarized as follows:

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain of the matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act and as such may involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of TIB Financial Corp. 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

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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 March 31, 2004, and statement of income for the three months ended March 31, 2004. Operating results for the three months ended March 31, 2004 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2004.

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

RESULTS OF OPERATIONS

Basic and diluted earnings per share for the first quarter of 2004 were $0.29 and $0.27 respectively as compared to $0.29 and $0.28 per share in the previous year’s quarter. Basic weighted average common equivalent shares outstanding for the three months ended March 31, 2004 were 4,462,493 compared to 4,050,186. This 10.2% increase in shares outstanding resulted from the exercise of stock options and the issuance of 280,653 shares in June 2003 in connection with a private placement that raised $4.3 million in new capital.

Annualized return on average assets was 0.75% and 0.82% for the first quarter of 2004 and 2003, while return on average shareholders’ equity was 12.04% and 13.91% for the same period.

NET INTEREST INCOME

Net interest income increased $995,085, or 17.1%, to $6,828,305 in the three months ended March 31, 2004 as compared to the same period last year. The prime rate as published in the Wall Street Journal began 2003 at 4.25% and in June 2003 it declined to 4.00%. Many of the Bank’s loans are indexed to this floating rate, although they also include floors. The lower level of prime rate in the first three months of 2004 compared to the comparative period in 2003 did result in a lower average yield in the loan portfolio, however, increased volumes more than compensated for this allowing for the reported increase in interest income.

The effect of the low interest rates is to contract our net interest margin in two ways. First, a low Prime rate directly affects yields on loans tied to that index and even loans not indexed to Prime are priced reflective of overall low asset yields. Second, deposit liabilities can only be priced down so far before the interest rate is too low to attract the volume of required funding. The net effect of this rate environment is a larger reduction in asset yields, generally, than the corresponding reduction in liability costs.

We were able to mitigate the effects of the interest rate environment for the following reasons. First, even though we are at low relative levels of interest rates, net interest margins have stabilized and we were able to decrease liability costs to a similar extent that asset yields contracted. Second, we have expanded a practice of requiring an interest rate floor on many new commercial loans. This proved effective in slowing the average decline in loan yields. Finally, we continue to change our mix of assets to slightly increase the percentage of higher yielding loans.

In April 2002, the Bank began a program to acquire indirect automobile loans. We predominately buy loans from auto dealers in southwest Florida which are for the purchase of new or late model used cars. We serve customers over a broad range of creditworthiness and the required terms and rates are reflective of those risk profiles. As of March 31, 2004 we had $66.8 million of indirect auto dealer loans outstanding, compared to $24.9 million at March 31, 2003. Coupled with the appropriate safeguards, we believe this product continues to offer us an opportunity to increase asset yields while not sacrificing our primary objective of maintaining strong asset quality.

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The average yield on interest-earning assets for the first three months of 2004 was 6.06% which was a decrease of 41 basis points compared to the 6.47% yield earned during the first three months of 2003. The average cost of interest-bearing deposits declined 32 basis points from 2.04% during the first three months of 2003 to 1.72% for the comparable period in 2004, and the rate of all interest-bearing liabilities decreased 37 basis points, from 2.30% in 2003 to 1.93% in 2004. The Company’s net interest margin decreased to 4.50% in the first three months of 2004 compared to 4.56% in the first three months of 2003. We anticipate interest rates slowly trending up over the next twelve months. If this occurs or if rates remain stable, net interest margin should expand only slightly due principally to strong new loan production. However, due to the cash generated from our recent stock offering in April 2004, there will be some near term compression in net interest margin until these funds are invested. Our margin is derived from the rate difference between our average yields on our current mix of assets in excess of our average cost of liabilities. It will take a little time to invest all of the funds raised in our recent stock offering in a similar mix of assets as currently exists on our balance sheet.

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The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the three months ended March 31, 2004 and March 31, 2003.

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The table below details the components of the changes in net interest income for the three months ended March 31, 2004 and March 31, 2003. 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.

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PROVISION FOR LOAN LOSSES

The provision for loan losses increased $39,000 or 11.8% to $369,000 in the first quarter of 2004 compared to $330,000 in the comparable prior year quarter. The higher provision for loan losses in 2004 was primarily attributable to the growth in the loan portfolio. Total loans outstanding were $549.6 million at March 31, 2004, compared to $458.4 million at March 31, 2003. Net charge-offs were $238,325 during the three months ended March 31, 2004 compared to $233,102 for the same period in 2003. Management will continue to monitor the credit quality of the lending portfolio and will recognize additional provisions in the future as necessary, in the opinion of management, to maintain the allowance for loan losses at an appropriate level.

NON-INTEREST INCOME

The increase in merchant bankcard processing income is primarily a result of volume increases. Gain on sale of government guaranteed loans result from a relatively small number of transactions and, therefore, the revenue recognition from these transactions can vary considerably depending on the number of loans sold and the dollar amount of the transactions. There was one loan sold in the first three months of 2003, and none sold in the first three months of 2004. Fees on mortgage loans sold result from the immediate sale of fixed rate residential mortgages in the secondary market. The lower fees earned in the first quarter of 2004 compared to the year ago period are attributable to reduced refinancing activity, temporarily lower new sales activity, and thinner margins.

NON-INTEREST EXPENSE

At March 31, 2004 the Bank had 267 full-time employees and 17 part-time employees, compared to 252 full-time employee and 14 part time employees at March 31, 2003. The increase in staff was required to manage growth of the organization, and to assist in security and regulatory compliance.

In the category of other expense, interchange and other bankcard expensed increased approximately $290,000 over the prior year amount. This is primarily tied to volume, and is consistent with the increase in merchant bankcard processing income experienced. Our computer services expense increased approximately $79,000, primarily as a result of an increase in the number of loan and deposit accounts. Repossession and recovery costs associated with our indirect lending program increased $82,000 as a result of additional activity and volume in this portfolio. Director fees increased $55,000 due to a change in the fee structure and amount of fees paid compared to the prior year period.

INCOME TAXES

BALANCE SHEET

During the first quarter of 2004, we were able to repay $25 million of our advances from the Federal Home Loan Bank. Total advances outstanding were $20 million at March 31, 2004 as compared to $45 million at December 31, 2003.

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Shareholders’ equity totaled $43,275,075 at March 31, 2004, increasing $2,029,229 from December 31, 2003. Book value per share increased to $9.64 at March 31, 2004 from $9.31 at December 31, 2003. The Company declared a quarterly dividend of $0.1125 per share in the first quarter of 2004 and $0.11 per share in the first quarter of 2003.

On April 15, 2004, we closed the sale of 1,000,000 shares of our common stock at a price of $22.00 per share before commissions and expenses. The shares were sold on a firm commitment basis through Advest, Inc. Advest, Inc. also purchased an additional 150,000 shares from the Company on May 6, 2004, at $22.00 per share before commissions and expenses. The net proceeds of the offering will be used to provide capital to support continued loan and deposit growth throughout our South Florida markets.

NON-PERFORMING ASSETS

Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or more, repossessed personal property, and other real estate. Loans are placed on nonaccrual status when management has concerns relating to the ability to collect the loan principal and interest and generally when such loans are 90 days or more past due. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. Non-performing assets were as follows:

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. The portion of this loan guaranteed by the USDA was approximately $1.6 million at March 31, 2004 and December 31, 2003, and is accruing interest. Accrued interest on this loan totals approximately $611,000 and $590,000 at March 31, 2004 and December 31, 2003, respectively.

The Bank is pursuing a sale of the property and equipment and has incurred various expenditures. The Bank capitalized the liquidation costs and portion of the protective advances which it expects will be fully reimbursed by the USDA. Other real estate recorded on the Bank’s books totaled $192,464 at March 31, 2004 and December 31, 2003. The non-guaranteed principal and interest ($1,961,000 at March 31, 2004 and December 31, 2003) and the reimbursable capitalized liquidation costs and protective advance costs totaling approximately $546,000 and $511,000 at March 31, 2004 and December 31, 2003, respectively are included as “other assets” in the financial statements.

The Bank sold certain pieces of equipment associated with the lumber mill property. Proceeds from the sales were used to reduce the other real estate amount and liquidation cost amounts recorded on the Bank’s books. In 2003, the Bank wrote down the carrying amount of the other real estate by $262,000 based upon anticipated proceeds from the sale of the property and remaining equipment.

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Florida law requires a bank to liquidate or charge off repossessed real property within five years, and repossessed personal property within six months. The Bank was awarded title to the real property on June 12, 2001, and an adjudicated interest in the owner’s trust proceeds. The time constraints imposed by Florida law required that the personal property be disposed of or charged off by December 2001. The Bank applied to the State of Florida for an extension to carry the personal property on the Bank’s books and was granted an extension to carry the personal property on its books until June 11, 2003. Since the property had not been liquidated as of June 11th, the Bank charged-off the non guaranteed principal and interest totaling $1,961,000 at June 30, 2003, for regulatory purposes. Since we believe this amount is ultimately realizable, we did not write off this amount for financial statement purposes under generally accepted accounting principles.

The allowance for loan losses amounted to $5,346,576 and $5,215,901 at March 31, 2004 and December 31, 2003, respectively.

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

Home equity loans, indirect auto dealer loans, residential loans and consumer loans generally are not analyzed individually. These loans are grouped into pools and assigned risk categories based on their current payment status and management’s assessment of risk inherent in the various types of loans. As above, when appropriate, a specific reserve will be established for individual loans. Otherwise, we allocate an allowance for each loan classification. The allocations are based on the same factors mentioned above.

Based on an analysis performed by management at March 31, 2004, the allowance for loan losses is considered to be adequate to cover estimated loan losses in the portfolio as of that date. However, management’s judgment is based upon a number of assumptions about future events, which are believed to be reasonable, but which may or may not prove valid. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that significant additional increases in the allowance for loan losses will not be required. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

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. We manage the levels, types and maturities of earning assets in relation to the sources available to fund current and future needs to ensure that adequate funding will be available at all times.

In addition to maintaining a stable core deposit base, we maintain adequate liquidity primarily through the use of investment securities and unused borrowing capacity. 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 20 percent of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators. The credit availability approximated $142 million at March 31, 2004, under which $20 million was outstanding. Borrowings against this line of credit are collateralized by the Bank’s one-to-four family residential mortgage loans.

The Bank has an unsecured overnight federal funds purchased accommodation up to a maximum of $7.5 million from its principal correspondent bank.

In the second quarter of 2004, we completed the sale of 1,150,000 shares of our common stock at a price of $22.00 per share before commissions and expenses. The net proceeds provided additional liquidity along with additional capital to the Company. The net proceeds of the offering will be used to provide capital to support continued loan and deposit growth throughout our South Florida markets.

ASSET AND LIABILITY MANAGEMENT

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Closely related to liquidity management is the management of interest-earning assets and interest-bearing liabilities. The Company manages its rate sensitivity position to avoid wide swings in net interest margins and to minimize risk due to changes in interest rates.

Our interest rate sensitivity position at March 31, 2004 is presented in the table below: