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 þ or No o

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

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

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

TIB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)

(See notes to consolidated financial statements)

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TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands, except earnings per share amounts)

(See notes to consolidated financial statements)

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TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(dollars in thousands, except per share amounts)

(See notes to consolidated financial statements)

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

(See notes to consolidated financial statements)

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TIB FINANCIAL CORP.
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(In thousands except for share and per share amounts)

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, which has a total of sixteen 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, 2004.

The consolidated statements include the accounts of TIB Financial Corp. and its wholly-owned subsidiary, TIB Bank, and the Bank’s subsidiary, TIB Investment Center Inc. (this corporation was dissolved in January 2005 — see Note 2), 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 and its subsidiaries (unless the context indicates another meaning).

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 2004 Annual Report and 10-K.

NOTE 2 — ACQUISITIONS AND DIVESTITURES

On December 15, 2004, the Company closed the sale of certain intangible assets which primarily comprised a book of business which served as the foundation of the Company’s investment center operations. The buyer paid $50 in cash at the closing. The Company recognized a gain of $50 on the transaction. Under the purchase agreement, additional cash payments totaling up to $60 may be paid to the Company subject to the achievement of certain production and customer and asset retention thresholds. Additionally, the Company will receive monthly cash payments of 10% of production related to new referrals made through December 31, 2005. On January 7, 2005, the Company filed Articles of Dissolution dissolving TIB Investment Center, Inc.

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NOTE 3 — INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities available for sale at March 31, 2005 and December 31, 2004 are presented below:

NOTE 4 — LOANS

Major classifications of loans are as follows:

NOTE 5 — ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses for the three months ended March 31, 2005 and 2004 follows:

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NOTE 6 — 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 shares of common stock were not considered in computing diluted earnings per common share for the three months ended March 31, 2004 because they were anti-dilutive. There were no anti-dilutive stock options outstanding for the three months ended March 31, 2005. The effect of stock options is the sole common stock equivalent for purposes of calculating diluted earnings per common share.

NOTE 7 — STOCK-BASED COMPENSATION

Total stock options granted, exercised, and expired/forfeited during the three months ended March 31, 2005, were 69,500, 27,700 and 8,000, respectively. As of March 31, 2005, there were 442,994 options for shares 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 8 — 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, 2005 and December 31, 2004:

Management believes, as of March 31, 2005, that the Company and the Bank met all capital requirements to which they are subject. The Company has included the trust preferred securities that were issued in September 2000 and July 2001 in Tier 1 and Total capital.

NOTE 9 — SEGMENT REPORTING

TIB Financial Corp. has two reportable segments: 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 Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing strategies.

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

The results of the Company’s segments are as follows (dollars in thousands):

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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 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, 2005, and statement of income for the three months ended March 31, 2005. Operating results for the three months ended March 31, 2005 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2005.

QUARTERLY SUMMARY

Our first quarter 2005 net income of $1.5 million represents an increase of 22% over $1.3 million reported for the quarter ended March 31, 2004. On a per diluted share basis, earnings were $0.26 for the first quarter of 2005 as compared to $0.27 for the first quarter of 2004 due to dilution caused by a successful public offering in April 2004 of 1.15 million new common shares which provided the capital necessary to fuel our expansion strategy in southwest Florida. Credit quality remains excellent and we continue to see growth opportunities in our newer southwest Florida markets as well as our traditional base in the Florida Keys.

The high-growth Naples-Fort Myers area continues to reaffirm the exportability of our island banking culture as our new customers are rapidly discovering what our customers in the Florida Keys have known for years. Our continued focus on providing superior customer service is filling a much needed void in our local markets, which are realizing the effects of big bank mergers and acquisitions.

The increase in net income for the first quarter of 2005 over the respective prior-year period resulted primarily from a 26% increase in net interest income from $6.8 million a year ago to $8.6 million in the current quarter. The net interest margin on a tax equivalent basis for the three months ended March 31, 2005 was 4.40%, compared with 4.50% for the three months ended March 31, 2004.

Non-interest expense for the first quarter of 2005 was $9.1 million, compared with $7.8 million for the first quarter of 2004. The increase in non-interest expense is primarily attributable to expenses associated with increased regulatory compliance and the Company’s ongoing expansion activities in the southwest Florida market, which included the addition of two new branch offices and several key senior staff personnel.

Credit quality remained solid during the first quarter of 2005 which ended with non-performing loans representing only 0.05% of gross loans. As of March 31, 2005, the allowance for loan losses totaled $6.5 million, or 0.91% of total loans and 1,673% of non-performing loans. These figures compare with 0.97% and 1,107%, respectively, as of March 31, 2004.

Total assets increased more than 32% to $939.3 million as of March 31, 2005, compared with $710.6 million a year ago. On a quarter over quarter basis, total assets increased more than 13%, which is reflective of the company’s solid organic growth since December 31, 2004. Total loans grew more than 30% to $717.2 million as of March 31, 2005, versus $549.6 million a year ago. Total deposits increased more than 29% to $799.3 million as of March 31, 2005, compared with $617.4 million a year ago.

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THREE MONTHS ENDED MARCH 31, 2005 AND 2004

RESULTS OF OPERATIONS
Our net income of $1.5 million for the first quarter of 2005 increased 21.5%, compared to $1.3 million for the same period last year. Basic and diluted earnings per share for the first quarter of 2005 were $0.27 and $0.26, respectively, as compared to $0.29 and $0.27 per share in the previous year’s quarter.

Annualized return on average assets was 0.72% and 0.76% for the first quarter of 2005 and 2004, respectively, while the annualized return on average shareholders’ equity was 9.20% and 12.04% for the same period. The decline in the return on average shareholders’ equity in the current year is primarily attributable to the 57.8% increase in shareholders’ equity from March 31, 2004 to March 31, 2005 due to the stock offering in the second quarter of 2004 and exercises of stock options.

NET INTEREST INCOME
Net interest income represents the amount by which interest income on interest-earning assets exceeds interest expense incurred on interest-bearing liabilities. Net interest income is the largest component of our income, and is affected by the interest rate environment, and the volume and the composition of interest-earning assets and interest-bearing liabilities. Our interest earning assets include loans, federal funds sold, interest bearing deposits in other banks, and investment securities. Our interest-bearing liabilities include deposits, federal funds purchased, notes payable related to Company shares repurchased, subordinated debentures, advances from the Federal Home Loan Bank, and other short term borrowings.

Net interest income increased 26.2%, to $8.6 million in the three months ended March 31, 2005 as compared to $6.8 million in the same period last year. While the prime rate as published in the Wall Street Journal remained at 4.00% for the first quarter of 2004 it increased from 5.25% at the beginning of 2005 to 5.75% by the end of the first quarter 2005. Many of the Bank’s loans are indexed to this floating rate, although they may also include floors. The higher level of prime rate in the first quarter of 2005 compared to the comparative period in 2004 is apparent in the positive impact on yields in the loan portfolio as the effects of the higher rates are reflected in variable loan re-pricings and new loan production. Increased loan volume is the primary driver affecting the increased net interest income in the current period.

In April 2002, the Bank began a program to acquire indirect automobile loans. We predominantly 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, 2005 we had $98.6 million of indirect auto dealer loans outstanding, compared to $66.8 million at March 31, 2004. 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.

The average yield on interest-earning assets for the first three months of 2005 was 6.29% which was an increase of 23 basis points compared to the 6.06% yield earned during the first three months of 2004. The average cost of interest-bearing deposits increased 44 basis points from 1.72% during the first three months of 2004 to 2.16% for the comparable period in 2005, and the rate of all interest-bearing liabilities increased 44 basis points, from 1.93% in 2004 to 2.37% in 2005. The Company’s net interest margin decreased to 4.40% in the first three months of 2005 compared to 4.50% in the first three months of 2004. We anticipate interest rates to continue slowly trending up over the next six months. If this occurs or if rates remain stable, net interest margin should be fairly consistent as our mix of assets and liabilities should grow in roughly the same proportions that exist currently on our balance sheet. 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.

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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, 2005 and March 31, 2004.

(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.

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The table below details the components of the changes in net interest income for the three months ended March 31, 2005 and March 31, 2004. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes and changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.

(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.

PROVISION FOR LOAN LOSSES
The provision for loan losses represents the charge to income necessary to adjust the allowance for loan losses to an amount that represents management’s assessment of the estimated probable credit losses inherent in our loan portfolio which have been incurred at each balance sheet date.

The provision for loan losses increased 58.8%, to $0.6 million in the first quarter of 2005 compared to $0.4 million in the comparable prior year quarter. The higher provision for loan losses in 2005 was primarily attributable to the continued growth and change in composition of the loan portfolio coupled with slightly higher charge offs. Total loans outstanding grew $63.7 million, or 9.7%, during the first quarter of 2005, as compared to $11.0 million, or 2.1%, during the first quarter of 2004. The largest dollar increase during the first quarter of 2005 occurred in commercial real estate loans which increased $42.0 million, or 12.0%. This compares to a $3.5 million, or 1.2% decrease in commercial real estate loans during the first quarter of 2004.

Total loans outstanding were $717.2 million at March 31, 2005, compared to $549.6 million at March 31, 2004. Net charge-offs were $0.3 million during the three months ended March 31, 2005 compared to $0.2 million for the same period in 2004.

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
Non-interest income for the first quarter of 2005 was $3.4 million. This represents a 3.7% increase over the prior year quarter which totaled $3.3 million. The increase in non-interest income is primarily attributable to an increase in Merchant bankcard processing income and in fees on mortgage loans sold. The increase in merchant bankcard processing income is primarily a

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result of volume increases. The increase in fees on mortgage loans sold is primarily a result of increased pass through loan volume during the 2005 quarter.

NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 2005 was $9.1 million. This represents a 16.2%, increase over the prior year quarter which totaled $7.8 million. The increase in non-interest expense is primarily attributable to salaries and employee benefits increasing $0.8 million. At March 31, 2005 the Bank had 308 full-time employees and 15 part-time employees, compared to 267 full-time employees and 17 part-time employees at March 31, 2004. The increased staffing was attributable to the opening of two branches in Southwest Florida in the second half of 2004, additions to manage growth throughout the Company and additions to assist in security and regulatory compliance. Likewise, the majority of the other increases in the non-interest expense category are the result of costs associated with the growth of our business.

INCOME TAXES
The provision for income taxes includes federal and state income taxes. The effective tax rates were 34.7% and 34.3%, for the three months ended March 31, 2005 and 2004, respectively.

BALANCE SHEET
Total assets at March 31, 2005 were $939.3 million, up 13.3% from total assets of $829.3 million at December 31, 2004. Asset growth was primarily funded by an increase in deposits of $111.4 million, or 16.2%. Loans net of deferred loan costs increased $63.6 million, or 9.7%, to $719.3 million for the first three months of 2005 from year end 2004. The largest dollar increase came in the commercial real estate loan category which increased $42.0 million, or 12.0%. Although we have continued to expand our indirect dealer auto loan program, it has begun to decrease in percentage in proportion to the loan portfolio as a whole. At March 31, 2005, indirect auto loans accounted for $98.6 million, or 13.8%, of our loan portfolio as compared to $91.9 million, or 14.1%, at December 31, 2004.

During the first three months of 2005, we reduced our advances from the Federal Home Loan Bank by $10.0 million. Total advances outstanding were $25.0 million at March 31, 2005 as compared to $35.0 million at December 31, 2004.

Shareholders’ equity totaled $68.3 million at March 31, 2005, increasing from $68.1 million at December 31, 2004. Book value per share decreased to $11.96 at March 31, 2005 from $11.99 at December 31, 2004 due primarily to the decrease in accumulated other comprehensive income related to unrealized losses on investments available-for-sale. Such unrealized losses arose primarily from increases in market interest rates. The Company declared a quarterly dividend of $0.115 per share in the first quarter of 2005 and $0.1125 per share in the first quarter of 2004.

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:

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	(a)  Excludes the $1.6 million loan discussed below that is guaranteed for both principal and interest by the U.S. Department of Agriculture (USDA).
	(b)  The Bank made a $10.0 million loan to construct a lumber mill in northern Florida. Of this amount, $6.4 million had been sold by the Bank to other lenders. The loan was partially guaranteed as to principal and interest by the USDA. In addition to business real estate and equipment, the loan was collateralized by the business owner’s interest in a trust. Under provisions of the trust agreement, beneficiaries cannot receive trust assets until November 2010.
	During 2001, upon completion of foreclosure on the underlying collateral, the non-guaranteed portion of this loan and interest accrued through the foreclosure date was reclassified into other real estate ($550,000) and other assets (approximately $1.9 million) based on the fair value of the underlying-collateral. The portion of this loan guaranteed by the USDA was approximately $1.6 million at March 31, 2005 and December 31, 2004, and is accruing interest. Accrued interest on this loan totals approximately $703,000 and $677,000 at March 31, 2005 and December 31, 2004, respectively.
	The Bank is pursuing a sale of the property and equipment and has incurred various expenditures. The Bank capitalized the liquidation costs and a portion of the protective advances which it expects will be fully reimbursed by the USDA. Other real estate recorded on the Bank’s books related to this property totaled $190,000 at March 31, 2005 and December 31, 2004. The non-guaranteed principal and interest ($2.0 million at March 31, 2005 and December 31, 2004) and the reimbursable capitalized liquidation costs and protective advance costs totaling approximately $784,000 and $704,000 at March 31, 2005 and December 31, 2004, respectively, are included as “other assets” in the financial statements.
	The Bank sold certain pieces of equipment associated with the lumber mill property. Proceeds from the sales were used to reduce the other real estate amount and liquidation cost amounts recorded on the Bank’s books. In 2003, the Bank wrote down the carrying amount of the other real estate by $262,000 based upon anticipated proceeds from the sale of the property and remaining equipment.
	Florida law requires a bank to liquidate or charge off repossessed real property within five years, and repossessed personal property within six months. The Bank was awarded title to the real property on June 12, 2001, and an adjudicated interest in the owner’s trust proceeds. The time constraints imposed by Florida law required that the personal property be disposed of or charged off by December 2001. The Bank applied to the State of Florida for an extension to carry the personal property on the Bank’s books and was granted an extension to carry the personal property on its books until June 11, 2003. Since the property had not been liquidated as of such date, the Bank charged-off the non guaranteed principal and interest totaling $2.0 million at June 30, 2003, for regulatory purposes. Since we believe this amount is ultimately realizable, we did not write off this amount for financial statement purposes under generally accepted accounting principles.

The allowance for loan losses amounted to $6.5 million and $6.2 million at March 31, 2005 and December 31, 2004, 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, 2005, 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

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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.

During 2004, as the indirect auto dealer loan portfolio began to mature, the loss history approached expected levels and the management processes, controls and monitoring and risk management tools implemented throughout recent years indicated that higher multipliers were necessary for the indirect loan portfolio. Contemporaneously, as the Florida economy has grown at an accelerated pace compared to other markets, real estate prices have escalated and local economies have benefited resulting in diminishing historical and expected loss factors. Analysis of these events resulted in these same tools indicating that lower multipliers were necessary for commercial loans collateralized by real estate. Looking forward, although the concentration of indirect auto dealer loan category has increased rapidly since the inception of this program, management believes that this growth has peaked slightly below 15% of the total loan portfolio composition. This category should continue to decrease as a percentage of the loan portfolio as we expect overall asset and loan growth to continue. As this occurs, if we make the assumption, however unlikely, that all other factors were to remain constant, we would expect that the allowance for loan losses would continue to decrease as a percentage of gross loans in the near term.

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 subject to the pledging of sufficient collateral. At March 31, 2005, there were $25.0 million in advances outstanding in addition to a $15 million letter of credit used in lieu of pledging securities to the State of Florida. In July 2004, new agreements were executed with the FHLB and a blanket floating lien pledge of the Bank’s residential 1-4 family mortgage and commercial real estate secured loans was done to bring the collateral availability up to approximately $159.7 million.

The Bank has an unsecured overnight federal funds purchased accommodation up to a maximum of $12.0 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.

ASSET AND LIABILITY MANAGEMENT

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.

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Our interest rate sensitivity position at March 31, 2005 is presented in the table below: