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, 2004~~		Commission File Number
June 30, 2005		000-21329

TIB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


FLORIDA		65-0655973

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

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

(Address of principal executive offices) (Zip Code)

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

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

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~~þ No ~~[ ]~~

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

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		~~5,672,302~~5,747,540

Class		Outstanding as of ~~November 5, 2004~~July 31, 2005

TABLE OF CONTENTS


Part I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		~~CONSOLIDATED BALANCE SHEETS~~
		~~CONSOLIDATED STATEMENTS OF INCOME~~
		~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~
		~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
		~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
	Item 4. CONTROLS AND PROCEDURES
Part II. OTHER INFORMATION
	Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	Item 5. OTHER INFORMATION
	Item 6. EXHIBITS ~~AND REPORTS ON FORM 8-K~~
SIGNATURES
~~Ex-31.1:~~Ex-31.1 Section 302 CEO Certification ~~of President and CEO~~
~~Ex-31.2:~~Ex-31.2 Section 302 CFO Certification ~~of Executive Vice President and CFO~~
~~Ex-32.1:~~Ex-32.1 Section 906 CEO Certification ~~of President and CEO~~
~~Ex-32.2:~~Ex-32.2 Section 906 CFO Certification ~~of Executive Vice President and CFO~~

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

TIB FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)


	September 30, 2004		December 31, 2003		June 30, 2005		December 31, 2004
	(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks	$	17,363	$	17,197	$	20,488	$	27,410
Federal funds sold		—		16,484		77,550		15,528

Cash and cash equivalents		17,363		33,681		98,038		42,938

Investment securities available for sale		78,697		52,557		86,992		77,807

Loans, net of deferred loan costs and fees		620,333		540,413		775,759		655,678
Less: allowance for loan losses		6,089		5,216		7,013		6,243

Loans, net		614,244		535,197		768,746		649,435

Premises and equipment, net		26,898		21,073		25,810		27,559
Goodwill		155		155		155		155
Intangible assets, net		1,465		1,687		1,247		1,392
Accrued interest receivable and other assets		26,864		24,948		31,897		30,039

TOTAL ASSETS	$	765,686	$	669,298	$	1,012,885	$	829,325


LIABILITIES
Deposits:
Noninterest-bearing demand	$	133,888	$	121,728	$	213,328	$	152,035
Interest-bearing		504,411		432,085		656,881		535,824

Total Deposits		638,299		553,813		870,209		687,859
Federal Home Loan Bank (FHLB) advances		25,000		45,000		25,000		35,000
Short-term borrowings		9,353		4,041		17,593		12,157
Long-term borrowings		18,250		18,250		17,000		18,250
Accrued interest payable and other liabilities		7,257		6,948		12,343		7,945

TOTAL LIABILITIES		698,159		628,052		942,145		761,211


SHAREHOLDERS’ EQUITY
Preferred stock - no par value: 5,000,000 and 0 shares authorized, 0 and 0 shares issued		—		—
Common stock - - $.10 par value: 20,000,000 and 7,500,000 shares authorized, 5,672,202 and 4,431,328 shares issued		567		443
Preferred stock — no par value: 5,000,000 shares authorized, 0 and 0 shares issued						—		—
Common stock — $.10 par value: 20,000,000 and 7,500,000 shares authorized, 5,712,264 and 5,679,239 shares issued						571		568
Additional paid in capital		38,237		14,255		38,715		38,284
Retained earnings		28,291		26,203		31,386		28,968
Accumulated other comprehensive income		432		345		68		294

TOTAL SHAREHOLDERS’ EQUITY		67,527		41,246		70,740		68,114


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	765,686	$	669,298	$	1,012,885	$	829,325

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.

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


									Three months ended				Six months ended
	Three months ended				Nine months ended				June 30,				June 30,
	September 30,				September 30,				2005		2004		2005		2004
	2004		2003		2004		2003
INTEREST AND DIVIDEND INCOME
Loans, including fees	$	9,648	$	7,974	$	27,208	$	23,250	$	12,934	$	8,960	$	24,244	$	17,560
Investment securities:
U.S. Treasury securities		43		2		81		6
U.S. Government agencies and corporations		573		577		1,475		1,546
States and political subdivisions, tax-exempt		107		92		312		236
States and political subdivisions, taxable		48		60		152		184
Marketable equity securities		66		—		186		—
Taxable										708		633		1,344		1,044
Tax exempt										161		172		321		325
Interest bearing deposits in other bank		4		1		9		2		2		4		6		5
Federal Home Loan Bank Stock		16		10		40		40		31		9		58		24
Federal funds sold		23		34		102		227		389		41		598		79

TOTAL INTEREST AND DIVIDEND INCOME		10,528		8,750		29,565		25,491		14,225		9,819		26,571		19,037


INTEREST EXPENSE
Deposits		2,231		1,952		6,103		6,056		3,895		1,980		6,996		3,872
Federal Home Loan Bank advances		95		44		259		146		193		70		368		164
Short-term borrowings		19		9		40		30		110		12		183		21
Long term borrowings		402		398		1,193		1,193		391		396		774		791

TOTAL INTEREST EXPENSE		2,747		2,403		7,595		7,425		4,589		2,458		8,321		4,848


NET INTEREST INCOME		7,781		6,347		21,970		18,066		9,636		7,361		18,250		14,189

PROVISION FOR LOAN LOSSES		471		447		1,489		1,035		730		649		1,316		1,018


NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		7,310		5,900		20,481		17,031		8,906		6,712		16,934		13,171

NON-INTEREST INCOME
Service charges on deposit accounts		619		632		1,900		1,790		567		637		1,175		1,281
Investment securities gains, net		7		3		103		8		—		52		—		96
Merchant bankcard processing income		1,221		1,213		4,515		3,812		1,762		1,534		3,658		3,294
Gain on sale of government guaranteed loans		—		—		—		87
Fees on mortgage loans sold		363		589		1,406		1,800		582		645		1,074		1,043
Retail investment services		89		112		290		299
Gain on sale of investment in ERAS Joint Venture		—		—		—		202
Other income		344		347		1,033		1,065		668		463		1,066		890

TOTAL NON-INTEREST INCOME		2,643		2,896		9,247		9,063		3,579		3,331		6,973		6,604

NON-INTEREST EXPENSE
Salaries and employee benefits		3,699		3,271		10,755		9,512		4,410		3,614		8,622		7,056
Net occupancy expense		1,212		1,088		3,525		3,197		1,349		1,191		2,625		2,313
Other expense		3,013		2,681		9,591		7,983		3,311		3,348		6,876		6,578

TOTAL NON-INTEREST EXPENSE		7,924		7,040		23,871		20,692		9,070		8,153		18,123		15,947


INCOME BEFORE INCOME TAX EXPENSE		2,029		1,756		5,857		5,402		3,415		1,890		5,784		3,828

INCOME TAX EXPENSE		692		615		1,990		1,890		1,231		633		2,053		1,298

INCOME FROM CONTINUING OPERATIONS	$	1,337	$	1,141	$	3,867	$	3,512
DISCONTINUED OPERATIONS
Income from Keys Insurance Agency, Inc. operations		—		36		—		201
Income tax expense		—		14		—		75

INCOME FROM DISCONTINUED OPERATIONS		—		22		—		126

NET INCOME	$	1,337	$	1,163	$	3,867	$	3,638	$	2,184	$	1,257	$	3,731	$	2,530


BASIC EARNINGS PER SHARE:									$	0.38	$	0.23	$	0.66	$	0.51
Continuing operations	$	0.24	$	0.26	$	0.75	$	0.84
Discontinued operations		—		—		—		0.03

Basic earnings per share	$	0.24	$	0.26	$	0.75	$	0.87

DILUTED EARNINGS PER SHARE:									$	0.37	$	0.22	$	0.64	$	0.49
Continuing operations	$	0.23	$	0.25	$	0.72	$	0.80
Discontinued operations		—		—		—		0.03

Diluted earnings per share	$	0.23	$	0.25	$	0.72	$	0.83

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.

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


					Additional					Accumulated Other			Total												Accumulated
			Common		Paid in		Retained			Comprehensive			Shareholders’							Additional					Other			Total
	Shares		Stock		Capital		Earnings			Income (Loss)			Equity					Common		Paid in		Retained			Comprehensive			Shareholders’
Balance,July 1, 2004		5,657,957	$	566	$	38,090	$	27,591		($	1,081	)	$	65,166
																Shares		Stock		Capital		Earnings			Income (Loss)			Equity

Balance,April 1, 2005																	5,706,939	$	571	$	38,629	$	29,859		$	(780	)	$	68,279
Comprehensive income:
Net income				—		—		1,337			—			1,337									2,184						2,184
Other comprehensive income, net of tax expense of $913:
Other comprehensive income, net of tax expense of $509:
Net market valuation adjustment on securities available for sale				—		—		—			1,517															848
Less: reclassification adjustment for gains included in net income				—		—		—			(4	)
Other comprehensive income, net of tax														1,513															848

Comprehensive income														2,850															3,032

Exercise of stock options		14,245		1		98		—			—			99			5,325		—		58								58
Income tax benefit from stock options exercised				—		49		—			—			49							28								28
Cash dividends declared, $.1125 per share				—		—		(637	)		—			(637	)
Cash dividends declared, $.115 per share																							(657	)					(657	)

Balance,September 30, 2004		5,672,202	$	567	$	38,237	$	28,291		$	432		$	67,527
Balance,June 30, 2005																	5,712,264	$	571	$	38,715	$	31,386		$	68		$	70,740


					Additional						Accumulated Other			Total												Accumulated
			Common		Paid in			Retained			Comprehensive			Shareholders’							Additional					Other			Total
	Shares		Stock		Capital			Earnings			Income (Loss)			Equity					Common		Paid in		Retained			Comprehensive			Shareholders’
Balance,July 1, 2003		4,407,578	$	441	$	13,843		$	24,559		$	1,511		$	40,354
																	Shares		Stock		Capital		Earnings			Income (Loss)			Equity

Balance,April 1, 2004																		4,489,064	$	449	$	14,797	$	26,971		$	1,058		$	43,275
Comprehensive income:
Net income				—		—			1,163			—			1,163									1,257						1,257
Other comprehensive income, net of tax benefit of $647:
Other comprehensive income, net of tax benefit of $1,290:
Net market valuation adjustment on securities available for sale				—		—			—			(1,072	)														(2,106	)
Less: reclassification adjustment for gains included in net income				—		—			—			(2	)
Less: reclassification adjustment for gains
included in net income																											(33	)
Other comprehensive income, net of tax															(1,074	)														(2,139	)

Comprehensive income															89															(882	)

Public offering of 1,150,000 shares																		1,150,000		115		23,115								23,230
Exercise of stock options		500		—		7			—			—			7			18,893		2		105								107
Private Placement of 280,653 common shares				—		(1	)		—			—			(1	)
Cash dividends declared, $.11 per share				—		—			(485	)		—			(485	)
Income tax benefit from stock options exercised																						73								73
Cash dividends declared, $.1125 per share																								(637	)					(637	)

Balance,September 30, 2003		4,408,078	$	441	$	13,849		$	25,237		$	437		$	39,964
Balance,June 30, 2004																		5,657,957	$	566	$	38,090	$	27,591		$	(1,081	)	$	65,166

(continued)


					Additional					Accumulated Other			Total												Accumulated
			Common		Paid in		Retained			Comprehensive			Shareholders’							Additional					Other			Total
	Shares		Stock		Capital		Earnings			Income (Loss)			Equity					Common		Paid in		Retained			Comprehensive			Shareholders’
Balance,January 1, 2004		4,431,328	$	443	$	14,255	$	26,203		$	345		$	41,246
																Shares		Stock		Capital		Earnings			Income (Loss)			Equity

Balance,January 1, 2005																	5,679,239	$	568	$	38,284	$	28,968		$	294		$	68,114
Comprehensive income:
Net income				—		—		3,867			—			3,867									3,731						3,731
Other comprehensive income, net of tax expense of $54:
Other comprehensive income, net of tax benefit of $136:
Net market valuation adjustment on securities available for sale				—		—		—			151															(226	)
Less: reclassification adjustment for gains included in net income				—		—		—			(64	)
Other comprehensive income, net of tax				—		—		—						87															(226	)

Comprehensive income														3,954															3,505

Public offering of 1,150,000 shares		1,150,000		115		23,115								23,230
Exercise of stock options		90,874		9		624		—			—			633			33,025		3		338								341
Income tax benefit from stock options exercised		—		—		243								243							93								93
Cash dividends declared, $.3375 per share				—		—		(1,779	)		—			(1,779	)
Cash dividends declared, $.23 per share																							(1,313	)					(1,313	)

Balance,September 30, 2004		5,672,202	$	567	$	38,237	$	28,291		$	432		$	67,527
Balance,June 30, 2005																	5,712,264	$	571	$	38,715	$	31,386		$	68		$	70,740


					Additional					Accumulated Other			Total												Accumulated
			Common		Paid in		Retained			Comprehensive			Shareholders’							Additional					Other			Total
	Shares		Stock		Capital		Earnings			Income (Loss)			Equity					Common		Paid in		Retained			Comprehensive			Shareholders’
Balance,January 1, 2003		4,035,625	$	403	$	8,966	$	23,022		$	1,115		$	33,506
																Shares		Stock		Capital		Earnings			Income (Loss)			Equity

Balance,January 1, 2004																	4,431,328	$	443	$	14,255	$	26,203		$	345		$	41,246
Comprehensive income:
Net income				—		—		3,638			—			3,638									2,530						2,530
Other comprehensive income, net of tax benefit of $408:
Other comprehensive income, net of tax benefit of $859:
Net market valuation adjustment on securities available for sale				—		—		—			(673	)														(1,366	)
Less: reclassification adjustment for gains included in net income				—		—		—			(5	)
Less: reclassification adjustment for gains
included in net income																										(60	)
Other comprehensive income, net of tax				—		—		—						(678	)														(1,426	)

Comprehensive income														2,960															1,104

Public offering of 1,150,000 shares																	1,150,000		115		23,115								23,230
Exercise of stock options		91,800		10		568		—			—			578			76,629		8		526								534
Private Placement of 280,653 common shares		280,653		28		4,315								4,343
Cash dividends declared, $.33 per share				—		—		(1,423	)		—			(1,423	)
Income tax benefit from stock options exercised																					194								194
Cash dividends declared, $.225 per share																							(1,142	)					(1,142	)

Balance,September 30, 2003		4,408,078	$	441	$	13,849	$	25,237		$	437		$	39,964
Balance,June 30, 2004																	5,657,957	$	566	$	38,090	$	27,591		$	(1,081	)	$	65,166

(See notes to consolidated financial statements)

TIB FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE ~~(DECREASE)~~ IN CASH AND CASH EQUIVALENTS
(Unaudited)
(dollars in thousands)


	For the nine month period ended						For the six month period ended
	September 30,						June 30,
	2004			2003			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	3,867		$	3,638		$	3,731		$	2,530
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of investments		42			45
Amortization of intangible assets		222			219
Depreciation of premises and equipment		1,393			1,307
Depreciation and amortization								1,235			1,072
Provision for loan losses		1,489			1,035			1,316			1,018
Provision for losses on unfunded loan commitments		18			—
Deferred income tax benefit		(98	)		(571	)		(402	)		(360	)
Deferred net loan costs and fees		(224	)		(840	)
Investment securities net gains		(103	)		(8	)		—			(96	)
Net (gain) loss on sale/disposal of premises and equipment		—			(2	)		(312	)		6
Loss on sale of assets of Keys Insurance Agency, Inc.		—			15
Gain on sale of investment in ERAS JV		—			(202	)
Gain on sales of government guaranteed loans, net		—			(87	)
Mortgage loans originated for sale		(83,534	)		(90,336	)		(66,210	)		(62,472	)
Proceeds from sale of mortgage loans		83,117			92,136			66,645			60,150
Fees on mortgage loans sold		(1,406	)		(1,800	)		(1,074	)		(1,043	)
(Increase) decrease in accrued interest receivable and other assets		(349	)		3,774
Increase (decrease) in accrued interest payable and other liabilities		346			(1,390	)
Increase in accrued interest receivable and other assets								(522	)		(628	)
Increase in accrued interest payable and other liabilities								4,488			444

NET CASH PROVIDED BY OPERATING ACTIVITIES		4,780			6,933			8,895			621


CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale		(38,368	)		(24,846	)		(10,000	)		(38,368	)
Repayments of principal and maturities of investment securities available for sale		3,149			13,101			411			1,960
Sales of investment securities available for sale		9,281			—			—			5,099
Net sale (purchase) of FHLB stock		1,000			(390	)
Purchase of life insurance policies		(700	)		(250	)
Net sale of FHLB stock								129			325
Proceeds from sales of government guaranteed loans		569			2,241			—			569
Proceeds from sales assets of Keys Insurance Agency, Inc.		—			184
Loans originated or acquired, net of principal repayments		(79,872	)		(69,294	)		(119,774	)		(52,751	)
Proceeds from the sale of investment in ERAS JV		—			327
Purchases of premises and equipment		(8,276	)		(2,944	)		(738	)		(4,317	)
Sales of premises and equipment		98			4			609			4

NET CASH USED BY INVESTING ACTIVITIES		(113,119	)		(81,867	)		(129,363	)		(87,479	)


CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase		5,312			(1,507	)
Net increase in FHLB short-term advances		10,000			15,000
Net increase in federal funds purchased and securities sold under agreements to repurchase								5,436			2,832
Net increase (repayment) of FHLB short-term advances								(10,000	)		3,500
Repayments of FHLB long-term advances		(30,000	)		—			—			(10,000	)
Repayments of notes payable								(1,250	)		—
Net increase in demand, money market and savings accounts		43,562			17,265			91,829			49,120
Net increase in time deposits		40,924			42,934			90,521			21,461
Proceeds from exercise of stock options		633			578			341			534
Proceeds from private placement of common stock		—			4,343
Proceeds from public offering of common stock		23,230			—			—			23,230
Cash dividends paid		(1,640	)		(1,381	)		(1,309	)		(1,004	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		92,021			77,232			175,568			89,673


NET INCREASE IN CASH AND CASH EQUIVALENTS		(16,318	)		2,298			55,100			2,815
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		33,681			24,070			42,938			33,681

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	17,363		$	26,368		$	98,038		$	36,496


SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid for:
Interest							$	7,259		$	5,993
Income taxes								1,737			1,135

(See notes to consolidated financial statements)

For the nine month period ended
September 30,
2004
2003
Cash paid for:
Interest $ 8,276 $ 7,357
Income taxes 2,265 2,900

~~(See notes to consolidated financial statements)~~

TIB FINANCIAL CORP.

UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
~~September~~June 30, ~~2004~~2005
~~(Unaudited)~~(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, ~~of the Keys,~~ 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, ~~2003.~~

2004.

The consolidated statements include the accounts of TIB Financial Corp. and its wholly-owned ~~subsidiaries,~~subsidiary, TIB Bank, ofand the ~~Keys,~~Bank’s subsidiary, TIB ~~Software and Services,~~Investment Center Inc. (this corporation was dissolved in ~~March 2004 –~~January 2005 — see Note 2), and Keys Insurance Agency, Inc. (whose assets were sold in August 2003 – see Note 10) and the Bank’s two subsidiaries, TIB Government Loan Specialists, Inc. (this corporation was 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).

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~~2004 Annual Report and 10-K.

NOTE 2 –— ACQUISITIONS AND DIVESTITURES

On ~~May 29, 2003, TIB Software and Services, Inc. sold its remaining interest~~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 ~~ERAS Joint Venture for $326,667.~~cash at the closing. The Company recognized a ~~pretax~~ gain of ~~approximately $202,000~~$50 on the transaction. ~~In March 2004,~~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 ~~Software and Services,~~Investment Center, Inc.

~~On August 15, 2003,~~ Consistent with prior period disclosures regarding segments, the Company ~~closed~~does not consider the ~~sale~~divestiture of the ~~assets of Keys Insurance Agency, Inc.,~~investment center operations a wholly owned subsidiary of the Company. See Note 10 – “Discontinued Operations” for details on the transaction. In March 2004, the Company filed Articles of Dissolution dissolving Keys Insurance Agency, Inc.

significant event.

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

NOTE 3 –— INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities available for sale at ~~September~~June 30, ~~2004~~2005 and December 31, ~~2003~~2004 are presented below:

September 30, 2004
Amortized Unrealized Unrealized Estimated
(dollars in thousands)
Cost
Gains
Losses
Fair Value
U.S. Treasury securities $ 5,177 $ 33 $ — $ 5,210
U.S. Government agencies and corporations 54,248 264 556 53,956
States and political subdivisions-tax-exempt 9,826 347 4 10,169
States and political subdivisions-taxable 2,862 23 11 2,874
Marketable equity securities 3,000 533 — 3,533
Mortgage-backed securities 2,889 66 — 2,955

$ 78,002 $ 1,266 $ 571 $ 78,697


	December 31, 2003								June 30, 2005
	Amortized		Unrealized		Unrealized		Estimated		Amortized		Unrealized		Unrealized		Estimated
(dollars in thousands)	Cost		Gains		Losses		Fair Value		Cost		Gains		Losses		Fair Value

U.S. Treasury securities	$	209	$	9	$	—	$	218	$	5,180	$	3	$	55	$	5,128
U.S. Government agencies and corporations		31,357		425		663		31,119		64,187		80		768		63,499
States and political subdivisions-tax-exempt		8,838		378		59		9,157		9,595		216		3		9,808
States and political subdivisions-taxable		3,559		42		101		3,500		2,690		78		—		2,768
Marketable equity securities		3,000		395		—		3,395		3,000		490		—		3,490
Mortgage-backed securities		5,041		128		1		5,168		2,232		67		—		2,299

	$	52,004	$	1,377	$	824	$	52,557	$	86,884	$	934	$	826	$	86,992


	December 31, 2004
	Amortized		Unrealized		Unrealized		Estimated
(dollars in thousands)	Cost		Gains		Losses		Fair Value

U.S. Treasury securities	$	5,178	$	5	$	29	$	5,154
U.S. Government agencies and corporations		54,228		104		869		53,463
States and political subdivisions-tax-exempt		9,596		246		26		9,816
States and political subdivisions-taxable		2,862		17		23		2,856
Marketable equity securities		3,000		987		—		3,987
Mortgage-backed securities		2,473		58		—		2,531

	$	77,337	$	1,417	$	947	$	77,807

NOTE 4 –— LOANS

Major classifications of loans are as follows:


(dollars in thousands)	September 30, 2004		December 31, 2003		June 30, 2005		December 31, 2004


Real estate mortgage loans:
Commercial	$	338,198	$	297,221	$	411,504	$	351,346
Residential		64,624		60,104		75,540		67,204
Farmland		4,924		2,317		4,550		4,971
Construction and vacant land		41,510		32,089		85,134		49,815
Commercial and agricultural loans		62,851		63,624		62,864		64,622
Indirect auto dealer loans		83,680		59,437		108,178		91,890
Home equity loans		12,259		12,574		16,056		13,856
Other consumer loans		10,248		11,232		10,022		9,817

Total loans		618,294		538,598		773,848		653,521
Net deferred loan costs		2,039		1,815		1,911		2,157

Loans, net of deferred loan costs	$	620,333	$	540,413	$	775,759	$	655,678

NOTE 5 –— ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses for the ~~nine~~six months ended ~~September~~June 30, 2005 and June 30, 2004 ~~and September 30, 2003~~ follows:


(dollars in thousands)	2004			2003			2005			2004

Balance, January 1	$	5,216		$	4,272		$	6,243		$	5,216
Provision for loan losses charged to expense		1,489			1,035			1,316			1,018
Loans charged off		(654	)		(470	)		(604	)		(436	)
Recoveries of loans previously charged off		38			17			58			8

Balance, September 30	$	6,089		$	4,854
Balance, June 30							$	7,013		$	5,806

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 and ~~nine~~six months ended ~~September~~June 30:


	2004		2003		2005		2004
For the three months ended September 30:

For the three months ended June 30:
Basic		5,660,075		4,407,920		5,708,745		5,434,532
Dilutive effect of options outstanding		146,658		173,639		176,850		163,310

Diluted		5,806,733		4,581,559		5,885,595		5,597,842

For the nine months ended September 30:

For the six months ended June 30:
Basic		5,187,456		4,204,840		5,693,090		4,948,550
Dilutive effect of options outstanding		168,830		171,573		178,405		180,072

Diluted		5,356,286		4,376,413		5,871,495		5,128,622

Stock options for ~~32,500~~33,736 and ~~5,000~~26,909 shares of common stock were not considered in computing diluted earnings per common share for the three and six months ended ~~September~~June 30, 2004 ~~and 2003~~ because they were anti-dilutive. ~~Stock~~There were no anti-dilutive stock options ~~for 28,786 and 2,326 shares of common stock were not considered in computing diluted earnings per common share~~outstanding for the ~~nine~~three and six months ended ~~September~~June 30, ~~2004 and 2003 because they were anti-dilutive.~~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 ~~nine~~six months ended ~~September~~June 30, ~~2004,~~2005, were ~~37,500, 90,874,~~69,500, 33,025, and ~~7,900,~~13,800, respectively. As of ~~September~~June 30, ~~2004,~~2005, there were ~~416,231~~431,869 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.”

For the three months ended September 30,
(dollars in thousands, except per share amounts)
2004
2003
Net income, as reported $ 1,337 $ 1,163
Stock-based compensation expense determined under fair value based method, net of tax 48 37

Pro forma net income $ 1,289 $ 1,126

Basic earnings per share as reported $ 0.24 $ 0.26
Pro forma basic earnings per share 0.23 0.26
Diluted earnings per share as reported 0.23 0.25
Pro forma diluted earnings per share 0.22 0.25


For the nine months ended September 30,
For the three months ended June 30,
(dollars in thousands, except per share amounts)	2004		2003		2005		2004


Net income, as reported	$	3,867	$	3,638	$	2,184	$	1,257
Stock-based compensation expense determined under fair value based method, net of tax		166		134		64		47

Pro forma net income	$	3,701	$	3,504	$	2,120	$	1,210


Basic earnings per share as reported					$	0.38	$	0.23
Pro forma basic earnings per share						0.37		0.22
Diluted earnings per share as reported						0.37		0.22
Pro forma diluted earnings per share						0.36		0.22


For the six months ended June 30,
(dollars in thousands, except per share amounts)	2005		2004


Net income, as reported	$	3,731	$	2,530
Stock-based compensation expense determined under fair value based method, net of tax		126		119

Pro forma net income	$	3,605	$	2,411


Basic earnings per share as reported	$	0.66	$	0.51
Pro forma basic earnings per share		0.63		0.49
Diluted earnings per share as reported		0.64		0.49
Pro forma diluted earnings per share		0.61		0.47

109

For the nine months ended September 30,
(dollars in thousands, except per share amounts)
2004
2003
Basic earnings per share as reported $ 0.75 $ 0.87
Pro forma basic earnings per share 0.71 0.83
Diluted earnings per share as reported 0.72 0.83
Pro forma diluted earnings per share 0.69 0.80

~~On February 24,~~In December 2004, the ~~Board~~FASB issued FAS 123 (revised 2004), Share-Based Payment. Under this promulgation, companies are required to reflect costs associated with employee stock options in their income statements at fair value. In April 2005, the SEC amended the date for compliance with FAS 123 (revised 2004) so that each registrant that is not a small business issuer will be required to prepare financial statements in accordance with statement 123 (revised 2004) beginning with the first interim or annual reporting period of ~~Directors approved~~ the ~~2004 Equity Incentive Plan for directors and employees, which was also approved by the shareholders at their annual meeting held~~registrant’s first fiscal year beginning on ~~May 25, 2004. The Plan allows~~or after June 15, 2005. Accordingly, the Company ~~to continue to provide equity compensation to employees and directors in order to enable~~will begin reflecting stock option costs under the ~~Company to attract and retain qualified persons to serve as directors and employees, to enhance their equity interest~~fair value method commencing in the Company, and thereby to solidify their common interest with shareholders in enhancing the value and growth of the Company. Refer to the Company’s 2004 Proxy statement for additional information regarding the 2004 Equity Incentive Plan.

quarter beginning January 1, 2006 as required.

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 for well and adequately capitalized banks are set forth in the table below, along with the actual ratios at ~~September~~June 30, ~~2004~~2005 and December 31, ~~2003:~~2004:


													Well			Adequately
	Well			Adequately									Capitalized			Capitalized			June 30, 2005			December 31, 2004
	Capitalized			Capitalized			September 30, 2004			December 31, 2003			Requirement			Requirement			Actual			Actual
	Requirement			Requirement			Actual			Actual
Tier 1 Capital (to Average Assets)
Consolidated		³5	%		³4	%		10.4	%		7.8	%		³5	%		³4	%		8.5	%		10.0	%
Bank		³5	%		³4	%		11.0	%		8.5	%		³5	%		³4	%		8.9	%		10.5	%

Tier 1 Capital (to Risk Weighted Assets)
Consolidated		³6	%		³4	%		11.5	%		8.8	%		³6	%		³4	%		9.8	%		10.9	%
Bank		³6	%		³4	%		12.2	%		9.6	%		³6	%		³4	%		10.3	%		11.4	%

Total Capital (to Risk Weighted Assets)
Consolidated		³10	%		³8	%		13.2	%		10.6	%		³10	%		³8	%		11.2	%		12.6	%
Bank		³10	%		³8	%		13.2	%		10.5	%		³10	%		³8	%		11.2	%		12.4	%

Management believes, as of ~~September~~June 30, ~~2004,~~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.

~~We completed an offering of 1,150,000 shares of our common stock during the second quarter of 2004.~~

NOTE 9 –— SEGMENT REPORTING

TIB Financial Corp. has two reportable ~~segments in their continuing operations:~~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 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 10).

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):


			Merchant		Parent
Six months ended	Community		Bankcard		And
June 30, 2005	Banking		Processing		Other			Totals


Interest and dividend income	$	26,571	$	—	$	—		$	26,571
Interest expense		7,547		—		774			8,321

Net interest and dividend income		19,024		—		(774	)		18,250
Other income		3,295		3,658		20			6,973
Depreciation and amortization		1,231		4		—			1,235
Other expense		14,944		3,035		225			18,204

Pretax segment profit (loss)	$	6,144	$	619	$	(979	)	$	5,784


Segment Assets	$	1,012,233	$	242	$	410		$	1,012,885


			Merchant		Parent
Six months ended	Community		Bankcard		and
June 30, 2004	Banking		Processing		Other			Totals


Interest and dividend income	$	19,037	$	—	$	—		$	19,037
Interest expense		4,057		—		791			4,848

Net interest and dividend income		14,980		—		(791	)		14,189
Other income		3,104		3,294		206			6,604
Depreciation and amortization		1,049		21		2			1,072
Other expense		12,595		2,745		553			15,893

Pretax segment profit (loss)	$	4,440	$	528	$	(1,140	)	$	3,828


Segment Assets	$	760,068	$	30	$	422		$	760,520


			Merchant		Parent
Three months ended	Community		Bankcard		And
June 30, 2005	Banking		Processing		Other			Totals


Interest and dividend income	$	14,225	$	—	$	—		$	14,225
Interest expense		4,198		—		391			4,589

Net interest and dividend income		10,027		—		(391	)		9,636
Other income		1,807		1,762		10			3,579
Depreciation and amortization		616		2		—			618
Other expense		7,649		1,460		73			9,182

Pretax segment profit (loss)	$	3,569	$	300	$	(454	)	$	3,415


			Merchant		Parent
Three months ended	Community		Bankcard		and
June 30, 2004	Banking		Processing		Other			Totals


Interest and dividend income	$	9,819	$	—	$	—		$	9,819
Interest expense		2,062		—		396			2,458

Net interest and dividend income		7,757		—		(396	)		7,361
Other income		1,690		1,534		107			3,331
Depreciation and amortization		534		10		1			545
Other expense		6,586		1,312		359			8,257

Pretax segment profit (loss)	$	2,327	$	212	$	(649	)	$	1,890

NOTE 10 — SUBSEQUENT EVENT

On July 25, 2005, the Company approved the issuance of shares of its common stock as restricted stock grants to each of the seven non-employee members of the Company’s Board of Directors. Each of these directors received an award of 5,000 restricted shares under the Company’s 2004 Equity Incentive Plan previously approved by Company shareholders in 2004. The grants to the directors were effective on July 28, 2005 and will vest 1,000 shares each year over the next five years, subject to accelerated vesting upon a change in control of the Company (as defined in the Plan) or the death of the director. The grant date market value of the restricted stock grants will be recognized as an expense on a straight-line basis over the vesting period. In addition, the split-dollar life insurance benefits maintained by the Company for the same directors were terminated by the Company on July 25, 2005, and the Company has become the sole beneficiary of the related life insurance policies.

Merchant Parent
Nine months ended Community Bankcard And
September 30, 2004
Banking
Processing
Other
Totals
Interest and dividend income $ 29,565 $ — $ — $ 29,565
Interest expense 6,402 — 1,193 7,595

Net interest and dividend income (expense) 23,163 — (1,193 ) 21,970
Other income 4,435 4,515 297 9,247
Depreciation and amortization 1,580 32 3 1,615
Other expense 19,235 3,766 744 23,745

Pretax segment profit (loss) $ 6,783 $ 717 $ (1,643 ) $ 5,857

Segment Assets $ 765,241 $ 20 $ 425 $ 765,686

Merchant Parent
Nine months ended Community Bankcard and
September 30, 2003
Banking
Processing
Other
Totals
Interest and dividend income $ 25,491 $ — $ — $ 25,491
Interest expense 6,232 — 1,193 7,425

Net interest and dividend income (expense) 19,259 — (1,193 ) 18,066
Other income 4,750 3,812 501 9,063
Depreciation and amortization 1,454 35 3 1,492
Other expense 16,591 3,076 568 20,235

Pretax segment profit (loss) $ 5,964 $ 701 $ (1,263 ) $ 5,402

Segment Assets $ 645,231 $ 46 $ 440 $ 645,717

Merchant Parent
Three months ended Community Bankcard And
September 30, 2004
Banking
Processing
Other
Totals
Interest and dividend income $ 10,528 $ — $ — $ 10,528
Interest expense 2,345 — 402 2,747

Net interest and dividend income (expense) 8,183 — (402 ) 7,781
Other income 1,331 1,221 91 2,643
Depreciation and amortization 531 11 1 543
Other expense 6,640 1,021 191 7,852

Pretax segment profit (loss) $ 2,343 $ 189 $ (503 ) $ 2,029

Merchant Parent
Three months ended Community Bankcard and
September 30, 2003
Banking
Processing
Other
Totals
Interest and dividend income $ 8,750 $ — $ — $ 8,750
Interest expense 2,005 — 398 2,403

Net interest and dividend income (expense) 6,745 — (398 ) 6,347
Other income 1,571 1,213 112 2,896
Depreciation and amortization 499 12 1 512
Other expense 5,808 972 195 6,975

Pretax segment profit (loss) $ 2,009 $ 229 $ (482 ) $ 1,756

~~NOTE 10 – DISCONTINUED OPERATIONS~~

On August 15, 2003, we 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, and his partner. The transaction was structured as a sale of the agency assets. The buyer paid $2.2 million in cash at the closing. Of the cash payment at closing, proceeds of $2.0 million were pursuant to a loan from TIB Bank to the buyer. We recognized a loss of $15,000 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:~~

(dollars in thousands)
2004
2003
For the three months ended September 30:
Other income $ — $ 277
Depreciation and amortization — 7
Other expense — 234

Pretax income from discontinued operations $ — $ 36

For the nine months ended September 30:
Other income $ — $ 1,255
Depreciation and amortization — 34
Other expense — 1,020

Pretax income from discontinued operations $ — $ 201

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 ~~September~~June 30, ~~2004,~~2005, and statement of income for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2004.~~2005. Operating results for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2005.

QUARTERLY SUMMARY

Our record second quarter 2005 exemplifies the continuing successful execution of our strategic plan. Net income of $2.18 million represents an increase of 74% over $1.26 million reported for the quarter ended June 30, 2004. On a per diluted share basis, earnings were $0.37 for the second quarter of 2005 as compared to $0.22 for the second quarter of 2004. Credit quality remains excellent and we continue to see growth opportunities in our newer southwest Florida markets. We believe our island banking culture focusing on providing superior customer service is filling a significant void in our local markets and has resulted in consistent growth in earnings and assets.

The increase in net income for the second quarter of 2005 over the respective prior-year period resulted primarily from a 31% increase in net interest income from $7.36 million a year ago to $9.64 million in the current quarter. The net interest margin on a tax equivalent basis for the three months ended June 30, 2005 was 4.40% which was a slight contraction from the 4.49% reported for the three months ended June 30, 2004.

Non-interest expense for the second quarter of 2005 was $9.07 million, compared with $8.15 million for the second 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. Net occupancy and other expenses for the second quarter of 2005 increased less than 3% over the second quarter of 2004, reflecting the Company’s continued focus on cost containment.

Credit quality remained solid during the second quarter of 2005 which ended with non-performing loans representing only 0.06% of gross loans. As of June 30, 2005, the allowance for loan losses totaled $7.01 million, or 0.91% of total loans and 1,455% of non-performing loans. These figures compare with 0.98% and 464%, respectively, as of June 30, 2004.

Total assets surpassed the $1 billion milestone for the first time on June 30, 2005 as total assets reached $1.01 billion compared with $939.3 million as of March 31, 2005, and $829.3 million as of December 31, 2004. Total loan growth exceeded 31% to $773.8 million as of June 30, 2005, versus $590.4 million the prior year. Total deposits increased approximately 39% to $870.2 million as of June 30, 2005, compared with $624.4 million a year ago.

THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2004~~2005 AND ~~2003~~

2004

RESULTS OF OPERATIONS

Our net income of ~~$1,337,000~~$2.18 million for the ~~third~~second quarter of ~~2004~~2005 increased ~~$174,000, or 15.0%,~~73.7% compared to ~~$1,163,000~~$1.26 million for the same period last year. Net income from continuing operations was $1,337,000 for the third quarter of 2004, compared to $1,141,000 for the third quarter of 2003, an increase of $196,000 or 17.2%. As discussed in Note 10, the Company closed the sale of the assets of its wholly owned subsidiary, Keys Insurance Agency, Inc., in the third quarter of 2003.

Basic and diluted earnings per share for ~~continuing operations for~~ the ~~third~~second quarter of ~~2004~~2005 were ~~$0.24~~$0.38 and ~~$0.23,~~$0.37, respectively, as compared to ~~$0.26~~$0.23 and ~~$0.25~~$0.22 per share in the previous year’s quarter. ~~Basic weighted average common equivalent shares outstanding for the three months ended September 30, 2004 were 5,660,075 compared to 4,407,920 for the three months ended~~

September 30, 2003. This 28.4% increase in shares outstanding resulted from the exercise of stock options and the issuance of 1,150,000 shares in the second quarter of 2004 in connection with a public offering of our shares.

Annualized return on average assets was ~~0.72%~~0.91% and ~~0.74%~~0.69% for the ~~third~~second quarter of 2005 and 2004, ~~and 2003,~~respectively, while the annualized return on average shareholders’ equity was ~~8.06%~~12.62% and ~~11.64%~~8.31% for the same period. The decline in the return on average shareholders’ equity in the current year is primarily attributable to the 69.0% increase in shareholders’ equity from September 30, 2003 to September 30, 2004 due to the stock offering in the second quarter of 2004 and exercises of stock options.

periods.

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 ~~$1,434,000, or 22.6%~~30.9%, to ~~$7,781,000~~$9.64 million in the three months ended ~~September~~June 30, ~~2004~~2005 as compared to $7.36 million in the same period last year. The prime rate as published in the Wall Street Journal ~~began 2003 at 4.25% and in June 2003~~was 4.00% for the second quarter of 2004. At the beginning of the second quarter 2005 it ~~declined~~had risen to ~~4.00% and remained at that rate until July of 2004 when it increased to 4.25%. In August the rate increased to 4.50%~~5.75% and increased ~~again in September~~twice to ~~4.75%~~end the quarter at 6.25%. 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 ~~third~~second quarter of 2005 compared to the second quarter of 2004 ~~compared to~~is apparent in the ~~comparative period in 2003 has not yet significantly impacted~~positive impact on yields in the loan portfolio as the ~~effects of the~~ higher rates are ~~just beginning to be~~ reflected in variable loan re-pricings and new loan production. ~~Increased loan volume is~~

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 June 30, 2005 we had $108.2 million of indirect auto dealer loans outstanding, compared to $76.8 million at June 30, 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 ~~driver affecting~~objective of maintaining strong asset quality.

The average yield on interest-earning assets for the second quarter of 2005 was 6.48% which was an increase of 51 basis points compared to the 5.97% yield earned during the second quarter of 2004. The average cost of interest-bearing deposits increased 75 basis points from 1.69% during the second quarter of 2004 to 2.44% for the comparable period in 2005, and the rate of all interest-bearing liabilities increased 72 basis points, from 1.91% in 2004 to 2.63% in 2005. The Company’s net interest ~~income~~margin decreased slightly to 4.40% in the second quarter of 2005 compared to 4.49% in the second quarter of 2004. We anticipate interest rates to continue slowly trending up over the next three months. If this occurs or if rates remain stable, net interest margin should stabilize and increase slightly due principally to strong new loan production at higher interest rates. Our margin is derived from the rate difference between our average yields on our current ~~period.~~

mix of assets in excess of our average cost of liabilities.

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 ~~$24,000, or 5.4%~~12.5%, to ~~$471,000~~$0.7 million in the ~~third~~second quarter of ~~2004~~2005 compared to ~~$447,000~~$0.6 million in the comparable prior year quarter. The higher provision for loan losses in ~~2004~~2005 was primarily attributable to the ~~continued~~ growth in the loan portfolio and change in composition of the loan ~~portfolio coupled with slightly higher charge offs.~~portfolio. Total loans outstanding grew ~~$27.9 million, or 4.7%, during the third quarter of 2004, as compared to $37.3~~$56.6 million, or 7.9%, during the ~~third~~second quarter of ~~2003. The largest dollar increase~~2005, as compared to only $40.7 million, or 7.4%, during the ~~third~~second quarter of 2004 occurred in commercial real estate loans which increased $8.7 million, or 2.6%. This compares to an $8.0 million, or 2.8% increase in commercial real estate loans during the third quarter of 2003. We have also continued to expand our indirect lending portfolio.2004. At ~~September~~June 30, ~~2004,~~2005, indirect auto dealer loans accounted for ~~$83.7~~$108.2 million, or ~~13.5%~~14.0%, of our loan portfolio. This compares to an indirect lending portfolio of ~~$50.9~~$76.8 million at ~~September~~June 30, ~~2003~~2004 which represented ~~10.0%~~13.0% of our total loan portfolio.

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 ~~third~~second quarter of ~~2004~~2005 was ~~$2,643,000.~~$3.58 million. This represents a $253,000 or 8.7% decrease over the prior year quarter which totaled $2,896,000. The decrease in non-interest income is primarily attributable to a decrease of $226,000 in fees on mortgage loans sold. This decrease in fees on mortgage loans sold is primarily a result of delayed closings due to an abnormally active hurricane season in South Florida combined with a decline in South Florida market refinancing and mortgage loan application activity.

~~NON-INTEREST EXPENSE~~

~~Non-interest expense for the third quarter of 2004 was $7,924,000. This represents an $884,000, or 12.6%,~~7.4% increase over the prior year quarter which totaled ~~$7,040,000.~~$3.33 million. The increase in non-interest income is primarily attributable to an increase in merchant bankcard processing income and a gain of $267,000 on the sale of vacant land in Homestead, Florida.

NON-INTEREST EXPENSE

Non-interest expense for the second quarter of 2005 was $9.07 million. This represents an 11.2% increase over the prior year quarter which totaled $8.15 million. The increase in non-interest expense is primarily attributable to salaries and employee benefits increasing ~~$428,000, net occupancy expense increasing $124,000,~~$796,000. At June 30, 2005 the Bank had 311 full-time employees and ~~other expense increasing $332,000.~~14 part-time employees, compared to 275 full-time employees and 16 part time employees at June 30, 2004. The increases are primarily the result of costs associated with the growth of our business and continued ~~investment~~expansion into the southwest Florida market. Net occupancy and ~~expansion in~~other expenses for the ~~Southwest Florida market.~~

~~At September 30, 2004~~second quarter of 2005 increased less than 3% over the ~~Bank had 303 full-time employees, compared to 253 at September 30, 2003.~~ second quarter of 2004.

INCOME TAXES

The ~~increase in staff was required to manage the growth of the organization.~~

~~In general, as we continue to renovate facilities~~provision for income taxes includes federal and ~~add branches, the net occupancy expense category will grow overall. In December 2003, we leased a new operations facility in Homestead, Florida. Building rent expense on this property~~state income taxes. The effective tax rates were 36.0% and 33.5% for the three months ended ~~September~~June 30, 2005 and 2004, totaled $35,000. Pursuant to the opening of the Metro Parkway and Prospect Ave locations in Southwest Florida, the third quarter of 2004 included approximately $70,000 in occupancy expenses associated with the operations of these newly opened branches.

In the category of other expense, professional fees increased approximately $112,000 due primarily to increased internal control documentation and testing costs related to the implementation of the Sarbanes Oxley Act of 2002.

~~INCOME TAXES~~

The provision for income taxes related to continuing operations totaled $692,000, for an effective tax rate of 34.1%, for the three months ended September 30, 2004, and $615,000, for an effective tax rate of 35.0%, for the three months ended September 30, 2003.

~~NINE~~respectively.

SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2004~~2005 AND ~~2003~~

2004

RESULTS OF OPERATIONS

Our net income of ~~$3,867,000~~$3.73 million for the first ~~nine~~six months of ~~2004 increased $229,000, or 6.3%,~~2005 was a 47.5% increase compared to ~~$3,638,000~~$2.53 million for the same period last year. Net income from continuing operations was $3,867,000 for the first nine months of 2004, compared to $3,512,000 for the first nine months of 2003, an increase of $355,000 or 10.1%. As discussed in Note 10, the Company closed the sale of the assets of its wholly owned subsidiary, Keys Insurance Agency, Inc. in the third quarter of 2003.

Basic and diluted earnings per share for the first ~~nine~~six months of ~~2004~~2005 were ~~$0.75~~$0.66 and ~~$0.72~~$0.64, respectively, as compared to ~~$0.87~~$0.51 and ~~$0.83~~$0.49 per share in the previous year’s period. Basic weighted average common equivalent shares outstanding for the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 were ~~5,187,456~~5,693,090 compared to ~~4,204,840~~4,948,550 for the ~~nine months ended September 30, 2003.~~same period in 2004. This ~~23.4%~~15.0% increase in shares outstanding resulted from the issuance of an additional 1,150,000 shares in the second quarter of 2004 in connection with a public offering of our common stock that raised $23.2 million in new capital, ~~the issuance of 280,653 shares in June 2003 in connection with a private placement of our stock that raised $4.3 million in new capital,~~ and the exercise of stock options.

Annualized return on average assets was ~~0.71%~~0.82% and ~~0.79%~~0.72% for the first ~~nine~~six months of ~~2004~~2005 and ~~2003,~~2004, while the annualized return on average shareholders’ equity was ~~9.15%~~10.93% and ~~13.21%~~9.84% for the same ~~period. The decline in the return on average shareholders’ equity in the current year is primarily attributable to the stock offering in the second quarter of 2004.~~

periods.

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 ~~$3,904,000, or 21.6%~~28.6%, to ~~$21,970,000~~$18.25 million in the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 as compared to $14.19 million in the same period last year. The prime rate as published in the Wall Street Journal began ~~2003~~2004 at ~~4.25% and in June 2003 it declined to~~ 4.00% and remained at that rate ~~until July~~through the end of ~~2004 when it increased to 4.25%. In August~~the second quarter of the year. At the beginning of 2005 the rate ~~increased~~had risen to ~~4.50%~~5.25% and increased ~~again in September~~four times to ~~4.75%~~end the first half of 2005 at 6.25%. Many of the Bank’s loans are indexed to this floating rate, although they also include floors.

~~With short-term~~ The higher level of prime rate in the first half of 2005 compared to the comparable 2004 period is apparent in the positive impact on yields in the loan portfolio as the higher rates are reflected in variable loan re-pricings and new loan production.

The effect of rising interest rates ~~increasing slowly, or as the Federal Reserve would say, stimulus being removed at~~has been to contract our net interest margin slightly in two ways. First, a ~~measured pace, our~~relatively low prime rate directly affected yields on ~~assets~~loans tied to that index and ~~cost~~even loans not indexed to prime were priced reflective of ~~liabilities are increasing in roughly equal percentages. Both~~overall low asset yields. Due to our practice of requiring an interest rate floor on many new commercial loans, many of these ~~have~~loans had been ~~modest in degree as many loans are still below~~performing at their floors ~~and many deposits with administered~~while interest rates ~~have increased only slightly. Going forward, we would expect further market rate increases to more directly affect~~were reaching historically low levels. This proved effective in slowing the average decline in loan yields ~~and~~as rates declined, however, it has had the opposite effect as rates increased, as these assets remained at their interest rate floors until just recently. Secondly, as deposit ~~costs~~liabilities were priced as ~~more adjustable loans move through their floor levels and competitive pressures result in deposit rates increasing more rapidly. We believe he predominant driver in~~low as economically possible while attracting the volume of required funding, the net effect of this rising rate environment has been a larger increase in ~~net interest income is and will continue~~liability costs, generally, than the corresponding increase in asset yields during the current period. Due to be the ~~growth~~current level of ~~our balance sheet. Although the timing and possible effects of future changes in interest~~prime rates, ~~could be significant,~~ we expect ~~any such impact~~this margin contraction to ~~be considerably less in~~stabilize as we expect asset yields to expand to a similar extent ~~than the relative impact of asset growth.~~

that liability costs increase.

1514

In April 2002, the Bank began a program to acquire indirect automobile loans. We predominantly buy loans from auto dealers in ~~Southwest~~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 ~~September~~June 30, ~~2004~~2005 we had ~~$83.7~~$108.2 million of indirect auto dealer loans outstanding, compared to ~~$50.9~~$76.8 million at ~~September~~June 30, ~~2003.~~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 ~~nine~~six months of ~~2004~~2005 was ~~6.04% which was a decrease~~6.39%, an increase of 1638 basis points compared to the ~~6.20%~~6.01% yield earned during the first ~~nine~~six months of ~~2003.~~2004. The average cost of interest-bearing deposits ~~declined 20~~increased 61 basis points from ~~1.94%~~1.70% during the first ~~nine~~six months of ~~2003~~2004 to ~~1.74%~~2.31% for the comparable period in ~~2004,~~2005, and the rate of all interest-bearing liabilities ~~decreased 23~~increased 59 basis points, from ~~2.19%~~1.92% in ~~2003~~2004 to ~~1.96%~~2.51% in ~~2004.~~2005. The Company’s net interest margin ~~increased~~decreased to 4.40% in the first six months of 2005 compared to 4.50% in the first ~~nine~~six months of ~~2004 compared to 4.40% in the first nine months of 2003.~~2004. We anticipate interest rates ~~to continue~~ slowly trending up over the next ~~twelve~~three months. If this occurs or if rates remain stable, net interest margin should ~~be fairly consistent as our mix of assets~~stabilize and ~~liabilities should grow in roughly the same proportions that exist currently on our balance sheet.~~increase slightly due principally to strong new loan production at higher interest rates. 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.

1615

The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 and ~~September~~June 30, ~~2003.~~2004.


				2004								2003					2005								2004
	Average			Income/		Yields/			Average			Income/		Yields/			Average			Income/		Yields/			Average			Income/			Yields/
(dollars in thousands)	Balances			Expense		Rates			Balances			Expense		Rates			Balances			Expense		Rates			Balances			Expense			Rates

Interest-earning assets:
Loans (1)(2)	$	574,003		$	27,212		6.33	%	$	469,225		$	23,254		6.63	%	$	716,103		$	24,246		6.83	%	$	558,197		$	17,562			6.33	%
Investment securities (2)		66,172			2,180		4.40	%		55,080			2,094		5.08	%		77,381			1,630		4.25	%		60,830			1,355			4.48	%
Marketable equity securities – 90% tax exempt (2)		3,395			272		10.70	%		—			—		—			3,562			193		10.93	%		3,448			175			10.23	%
Interest-bearing deposits in other banks		970			9		1.18	%		327			2		0.71	%		463			6		2.53	%		948			5			0.98	%
Federal Home Loan Bank stock		1,445			40		3.70	%		1,476			40		3.62	%		2,669			58		4.38	%		1,518			24			3.21	%
Federal funds sold		13,635			102		1.00	%		26,132			227		1.16	%		43,732			598		2.76	%		17,038			79			0.94	%

Total interest-earning assets		659,620			29,815		6.04	%		552,240			25,617		6.20	%		843,910			26,731		6.39	%		641,979			19,200			6.01	%


Non-interest-earning assets:
Cash and due from banks		18,803								15,463								22,263								19,781
Investment in ERAS		—								69
Premises and equipment, net		21,209								19,247								27,272								20,776
Allowances for loan losses		(5,564	)							(4,561	)							(6,531	)							(5,405	)
Other assets		28,622								28,786								30,879								28,504

Total non-interest-earning assets		63,070								59,004								73,883								63,656

Total assets	$	722,690							$	611,244							$	917,793							$	705,635


Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts	$	75,193			214		0.38	%	$	57,636			170		0.39	%	$	92,846			385		0.84	%	$	74,269			120			0.32	%
Money market		128,056			793		0.83	%		127,772			891		0.93	%		167,087			1,560		1.88	%		126,115			494			0.79	%
Savings deposits		43,738			127		0.39	%		34,677			133		0.51	%		48,079			115		0.48	%		42,860			82			0.39	%
Time deposits		221,498			4,969		3.00	%		196,239			4,862		3.31	%		303,483			4,937		3.28	%		213,760			3,176			2.99	%

Total interest-bearing deposits		468,485			6,103		1.74	%		416,324			6,056		1.94	%		611,495			6,997		2.31	%		457,004			3,872			1.70	%

Other interest-bearing liabilities:
Short-term borrowings and FHLB advances		31,258			299		1.28	%		18,319			176		1.28	%
Short-term borrowings & FHLB advances																		40,431			551		2.75	%		32,052			185			1.16	%
Long-term borrowings		18,250			1,193		8.73	%		18,250			1,193		8.74	%		17,104			774		9.13	%		18,250			791			8.71	%

Total interest-bearing liabilities		517,993			7,595		1.96	%		452,893			7,425		2.19	%		669,030			8,322		2.51	%		507,306			4,848			1.92	%


Non-interest-bearing liabilities and shareholders’ equity:																														��
Demand deposits		139,733								114,214								168,787								138,656
Other liabilities		8,586								7,420								11,166								8,265
Shareholders’ equity		56,378								36,717								68,810								51,408

Total non-interest-bearing liabilities and shareholders’ equity		204,697								158,351								248,763								198,329


Total liabilities and shareholders’ equity	$	722,690							$	611,244							$	917,793							$	705,635


Interest rate spread (tax equivalent basis)							4.08	%							4.01	%							3.88	%								4.09	%

Net interest income (tax equivalent basis)				$	22,220							$	18,192							$	18,409							$	14,352

Net interest margin (3) (tax equivalent basis)							4.50	%							4.40	%							4.40	%								4.50	%


(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.

1716

The table below details the components of the changes in net interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 and ~~September~~June 30, ~~2003.~~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.


	2004 compared to 2003 (1)
	Due to changes in									2005 compared to 2004 (1)
							Net			Due to changes in
	Average			Average			Increase									Net
(dollars in thousands)	Volume			Rate			(Decrease)			Average			Average			Increase
										Volume			Rate			(Decrease)

Interest income
Loans (2)	$	5,004		$	(1,046	)	$	3,958		$	5,266		$	1,418		$	6,684
Investment securities (2)		387			(301	)		86			352			(77	)		275
Marketable equity securities (2)		272			—			272			6			12			18
Interest-bearing deposits in other banks		5			2			7			(4	)		5			1
Federal Home Loan Bank Stock		(1	)		1			—			23			11			34
Federal funds sold		(97	)		(28	)		(125	)		231			288			519

Total interest income		5,570			(1,372	)		4,198			5,874			1,657			7,531


Interest expense
NOW accounts		50			(6	)		44			36			229			265
Money market		2			(100	)		(98	)		203			863			1,066
Savings deposits		31			(37	)		(6	)		11			22			33
Time deposits		592			(485	)		107			1,436			325			1,761
Short-term borrowings and FHLB advances		123			—			123			60			306			366
Long-term borrowings		—			—			—			(59	)		42			(17	)

Total interest expense		798			(628	)		170			1,687			1,787			3,474


Change in net interest income	$	4,772		$	(744	)	$	4,028		$	4,187		$	(130	)	$	4,057


(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 ~~$454,000 or 43.9%~~29.3% to ~~$1,489,000~~$1.3 million in the first ~~nine~~six months of ~~2004~~2005 compared to ~~$1,035,000~~$1.0 million in the comparable prior year period. The higher provision for loan losses in ~~2004~~2005 was primarily attributable to the growth in the loan portfolio and change in composition of the loan portfolio. Total loans outstanding grew ~~$79.7~~$120.3 million, or ~~14.8%~~18.4%, during the first ~~nine~~six months of ~~2004,~~2005, as compared to ~~$68.7~~only $51.8 million, or ~~15.6%~~9.6%, during the first ~~nine~~six months of ~~2003.~~2004. The largest dollar increase during the first ~~nine~~six months of ~~2004~~2005 occurred in commercial real estate loans which increased ~~$41.0~~$60.2 million, or ~~13.8%~~17.1%. This compares to a ~~$26.2~~$32.3 million, or ~~9.9%~~10.9%, increase in commercial real estate loans during the first ~~nine~~six months of ~~2003.~~2004. We have also continued to expand our indirect lending portfolio. At ~~September~~June 30, ~~2004,~~2005, indirect auto dealer loans accounted for ~~$83.7~~$108.2 million, or ~~13.5%~~14.0%, of our loan portfolio. This compares to an indirect lending portfolio of ~~$50.9~~$76.8 million at ~~September~~June 30, ~~2003~~2004 which represented ~~only 10.0%~~13.0% of our total loan portfolio. These increases in volume and concentration of commercial real estate and indirect auto dealer loans relative to the composition of the loan portfolio translate to a greater than average increase in the provision for loan losses as our risk management policies dictate generally higher allocations of such provisions for these categories of loans.

Total loans outstanding were ~~$618.3~~$773.8 million at ~~September~~June 30, ~~2004,~~2005, compared to ~~$510.5~~$590.4 million at ~~September~~June 30, ~~2003.~~2004. Net charge-offs were ~~$616,000~~$546,000 during the ~~nine~~six months ended ~~September~~June 30, ~~2004~~2005 compared to ~~$453,000~~$428,000 for the same period in ~~2003.~~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 ~~nine~~six months of ~~2004~~2005 was ~~$9,247,000.~~$7.0 million. This represents ~~an $184,000 or 2.0%~~a 5.6% increase over the prior year period which totaled ~~$9,063,000.~~$6.6 million. The increase in non-interest income is primarily attributable to an increase ~~of $703,000~~ in merchant bankcard processing income ~~partially offset by a decrease of $394,000 in fees on mortgage loans sold,~~ and a ~~$202,000 decrease related to~~gain of $267,000 on the ~~gain on~~ sale of ~~investment~~vacant land in ~~ERAS JV recognized in the prior year period.~~Homestead, Florida.

The increase in merchant bankcard processing income is primarily a result of volume increases. Fees on mortgage loans sold result from the immediate sale of various residential mortgages (primarily fixed rate loans) in the secondary market. The lower fees earned in the first nine months of 2004 compared to the prior year period are attributable to reduced refinancing activity, lower new sales activity, and thinner margins. On May 29, 2003, we sold our remaining interest in ERAS Joint Venture and recognized a pretax gain of $202,000 on this transaction.

NON-INTEREST EXPENSE

Non-interest expense for the first ~~nine~~six months of ~~2004~~2005 was ~~$23,871,000.~~$18.1 million. This represents a ~~$3,179,000, or 15.4%,~~13.6% increase over the prior year period which totaled ~~$20,692,000.~~$15.9 million. The increase in non-interest expense is primarily attributable to salaries and employee benefits increasing ~~$1,243,000, net occupancy~~$1.6 million. At June 30, 2005 the Bank had 311 full-time employees and 14 part-time employees, compared to 275 full-time employees and 16 part time employees at June 30, 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. The majority of the other increases in the non-interest expense ~~increasing $328,000, and other expense increasing $1,608,000. The increases~~category are ~~primarily~~ the result of costs associated with the growth of our ~~business and continued expansion into the Southwest Florida market.~~

~~At September 30, 2004, the Bank had 303 full-time employees, compared to 253 at September 30, 2003. The increase in staff was required to manage the growth of the organization.~~

In the category of other expense, interchange and other bankcard expense increased approximately $648,000 over the prior year amount. These expenses are primarily tied to volume, and are consistent with the increase in merchant bankcard processing income we experienced. We did, however, experience an increase in the rates charged by our card associations in April 2004 that also contributed to this increase. Also, in the first nine months of 2004, we incurred $196,000 in employee relocation costs. These costs were incurred to relocate various employees, including the Company’s Chief Executive Officer, in connection with the relocation of our corporate headquarters from the Florida Keys to the Southwest Florida area. Another factor contributing to the increase in other expense was the increase in professional fees of approximately $184,000 over the prior year period due primarily to increased internal control documentation and testing costs related to the implementation of the Sarbanes Oxley Act of 2002.

business.

INCOME TAXES

~~The change in income tax expense is primarily attributable to the growth in income before income taxes.~~

The provision for income taxes ~~related to continuing operations totaled $1,990,000, for an~~includes federal and state income taxes. The effective tax rate ~~of 34.0%~~was 35.5%, for the ~~nine~~six months ended ~~September~~June 30, ~~2004,~~2005, and ~~$1,890,000, for an effective tax rate of 35.0%~~33.9%, for the ~~nine~~six months ended ~~September~~June 30, ~~2003.~~

2004.

BALANCE SHEET

Total assets at ~~September~~June 30, ~~2004~~2005 were ~~$765,686,000,~~$1.01 billion, up ~~14.4%~~22.1% from total assets of ~~$669,298,000~~$829.3 million at December 31, ~~2003.~~2004. Asset growth was primarily funded by an increase in deposits of ~~$84,486,000,~~$182.4 million, or ~~15.3%~~26.5%. Loans net of deferred loan costs increased ~~$79.9~~$120.1 million, or ~~14.8%~~18.3%, to ~~$620.3~~$775.8 million for the first ~~nine~~six months of ~~2004~~2005 from year end ~~2003.~~2004. The largest dollar increase came in the commercial real estate loan category which increased ~~$41.0~~$60.2 million, or ~~13.8%~~17.1%. WeAlthough we have ~~also~~ continued to expand our indirect dealer auto loan ~~program.~~program, it has begun to stabilize in percentage in proportion to the loan portfolio as a whole. At ~~September~~June 30, ~~2004,~~2005, indirect auto loans accounted for ~~$83.7~~$108.2 million, or ~~13.5%~~14.0%, of our loan portfolio as compared to ~~$59.4~~$91.9 million, or ~~11.0%~~14.1%, at December 31, ~~2003.~~2004. Also, in the same period, investment securities increased ~~$26.1 million as a result of purchases of securities from funds generated from the stock offering in the second quarter of 2004.~~

$9.2 million.

During the first ~~nine~~six months of ~~2004,~~2005, we reduced our advances from the Federal Home Loan Bank by ~~$20.0~~$10.0 million. Total advances outstanding were $25.0 million at ~~September~~June 30, ~~2004~~2005 as compared to ~~$45.0~~$35.0 million at December 31, ~~2003.~~

2004.

Shareholders’ equity totaled ~~$67.5~~$70.7 million at ~~September~~June 30, ~~2004,~~2005, increasing ~~$26.3~~$2.6 million from December 31, ~~2003.~~2004. Book value per share increased to ~~$11.90~~$12.38 at ~~September~~June 30, ~~2004~~2005 from ~~$9.31~~$11.99 at December 31, ~~2003.~~2004. The Company declared a quarterly dividend of $0.115 per share in both the first and second quarters of 2005 and $0.1125 per share in ~~each of~~both the first ~~three~~quarter and second quarters of ~~2004 and $0.11 per share in each~~2004.

During the second quarter of ~~the first three quarters of 2003.~~

~~On April 15,~~ 2004, we ~~closed the sale of 1,000,000~~sold 1,150,000 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. Theresulting in net proceeds ~~of the offering,~~ totaling $23.2 million which provided capital necessary 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:


(dollars in thousands)	September 30, 2004			December 31, 2003			June 30, 2005			December 31, 2004

Total nonaccrual loans	$	1,174		$	390		$	482		$	704
Accruing loans delinquent 90 days or more (a)		—			—			—			—

Total non-performing loans	$	1,174		$	390		$	482		$	704

Repossessed personal property (indirect auto dealer loans)		720			598			673			688
Other real estate owned (b)		190			193			190			882
Other assets (b)		2,528			2,472			2,705			2,665

Total non-performing assets	$	4,612		$	3,653		$	4,050		$	4,939


Allowance for loan losses	$	6,089		$	5,216		$	7,013		$	6,243

Non-performing assets as a percent of total assets		0.60	%		0.55	%		0.40	%		0.60	%
Non-performing loans as a percent of gross loans		0.19	%		0.07	%		0.06	%		0.11	%
Allowance for loan losses as a percent of non-performing loans		518.65	%		1,336.33	%		1,455.0	%		886.8	%

~~(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 $10,000,000 loan to construct a lumber mill in northern 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 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 $1,886,000) based on the fair value of the underlying-collateral. The portion of this loan guaranteed by the USDA was approximately $1.6 million at September 30, 2004 and December 31, 2003, and is accruing interest. Accrued interest on this loan totals approximately $654,000 and $590,000 at September 30, 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 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 totaled $190,000 and $193,000 at September 30, 2004 and December 31, 2003, respectively. The non-guaranteed principal and interest ($1,961,000 at September 30, 2004 and December 31, 2003) and the reimbursable capitalized liquidation costs and protective advance costs totaling approximately $567,000 and $511,000 at September 30, 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.

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

2018

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.


(a)		Non-performing loans exclude 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 June 30, 2005 and December 31, 2004, and is accruing interest. Accrued interest on this loan totals approximately $731,000 and $677,000 at June 30, 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 June 30, 2005 and December 31, 2004. The non-guaranteed principal and interest ($2.0 million at June 30, 2005 and December 31, 2004) and the reimbursable capitalized liquidation costs and protective advance costs totaling approximately $744,000 and $704,000 at June 30, 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 ~~$6,089,000~~$7.0 million and ~~$5,216,000~~$6.2 million at ~~September~~June 30, ~~2004~~2005 and December 31, ~~2003,~~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 ~~September~~June 30, ~~2004,~~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 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 subject to the pledging of sufficient collateral. At ~~September~~June 30, ~~2004,~~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 ~~$158.0~~$175.6 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. ~~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

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 ~~September~~June 30, ~~2004~~2005 is presented in the table below:


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

Interest-earning assets:
Loans	$	245,829		$	42,286		$	36,794		$	226,579		$	66,806		$	618,294		$	350,509		$	27,327		$	43,434		$	284,072		$	68,507		$	773,849
Investment securities-taxable		1,311			—			—			38,265			25,419			64,995			1,072			—			10,180			38,578			23,864			73,694
Investment securities-tax exempt		232			—			—			2,875			7,062			10,169			—			—			—			4,617			5,191			9,808
Marketable equity securities		3,533			—			—			—			—			3,533			3,490			—			—			—			—			3,490
Federal Home Loan Bank stock		1,250			—			—			—			—			1,250			2,781			—			—			—			—			2,781
Federal funds sold																				77,550			—			—			—			—			77,550
Interest bearing deposit in other bank		519			—			—			—			—			519			201			—			—			—			—			201

Total interest-bearing assets		252,674			42,286			36,794			267,719			99,287			698,760			435,603			27,327			53,614			327,267			97,562			941,373


Interest-bearing liabilities:
NOW accounts		83,835			—			—			—			—			83,835			85,479			—			—			—			—			85,479
Money Market		127,376			—			—			—			—			127,376			179,815			—			—			—			—			179,815
Savings Deposits		47,247			—			—			—			—			47,247			49,884			—			—			—			—			49,884
Time deposits		29,160			38,999			48,875			128,915			5			245,954			35,143			92,673			114,991			98,891			5			341,703
Notes payable		—			—			—			—			5,250			5,250			—			—			—			—			4,000			4,000
Subordinated debentures		5,000			—			—			—			8,000			13,000			5,000			—			—			—			8,000			13,000
Other borrowings		34,353			—			—			—			—			34,353			42,593			—			—			—			—			42,593

Total interest-bearing liabilities		326,971			38,999			48,875			128,915			13,255			557,015			397,914			92,673			114,991			98,891			12,005			716,474


Interest sensitivity gap	$	(74,297	)	$	3,287		$	(12,081	)	$	138,804		$	86,032		$	141,745		$	37,689		$	(65,346	)	$	(61,377	)	$	228,376		$	85,557		$	224,899


Cumulative interest sensitivity gap	$	(74,297	)	$	(71,010	)	$	(83,091	)	$	55,713		$	141,745		$	141,745		$	37,689		$	(27,657	)	$	(89,034	)	$	139,342		$	224,899		$	224,899


Cumulative sensitivity ratio		(10.6	)%		(10.2	)%		(11.9	)%		8.0	%		20.3	%		20.3	%		4.0	%		(2.9	)%		(9.5	)%		14.8	%		23.9	%		23.9	%

We are cumulatively liability sensitive ~~through~~in the ~~one year~~4 to 6 months and 7 to 12 months time ~~period,~~periods, and asset sensitive in the 3 months or less and the over one year timeframes above. Certain liabilities such as non-indexed 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. Accordingly, if market interest rates should decrease, it is anticipated that the net interest margin would decrease. Because of non-interest bearing liabilities, total interest-earning assets are substantially greater than the total interest-bearing liabilities and therefore it is anticipated that over time the effects on net interest income from changes in asset yield will be greater than the change in expense from liability cost. Therefore, if rates increase it is anticipated that 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, we believe the ~~$83~~$89 million one year cumulative negative sensitivity gap may exaggerate the probable effects on earnings in a ~~changing~~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. 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 and decrease asset sensitivity due to the fact that these loans behave similar to fixed rate loans in periods over 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 we have experienced steady growth in deposits, no net run off in any deposit category is assumed in the interest rate sensitivity table. It is our policy to maintain our cumulative one year gap ratio in the –20% to +10% range. At ~~September~~June 30, ~~2004,~~2005, we were within this range with a one year cumulative sensitivity ratio of ~~- -11.9%~~-9.5%.

See also Item 3, “Quantitative and Qualitative Disclosures About Market Risk.”

COMMITMENTS

The Bank is a party to financial instruments with off-balance sheet risk ~~entered into~~ 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 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 other party to financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of these instruments. The Bank uses the same credit policies in making commitments to extend credit and generally uses the same credit policies for letters of credit as it does for on-balance sheet instruments.

Commitments to extend credit are legally binding agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since some of these commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At ~~September~~June 30, ~~2004,~~2005, total unfunded loan commitments were approximately ~~$87.7~~$172.7 million.

Standby letters of credit are conditional commitments issued by the Bank to assure the performance or financial obligations of a customer to a third party. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. The Bank generally holds collateral and/or obtains personal guarantees supporting these commitments. 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~~June 30, ~~2004,~~2005, commitments under standby letters of credit aggregated approximately ~~$2.4~~$2.3 million.

The Company believes the likelihood of the unfunded loan commitments and unfunded letters of credit either needing to be totally funded or funded at the same time is low. However, should significant funding requirements occur, we have ~~sufficient~~ available borrowing capacity from various sources as discussed in the “Liquidity” section above.

Item 3. QUANTITATIVE AND QUALITATIVE ~~DISCLOSURE~~DISCLOSURES ABOUT MARKET RISK

Market risk is the risk that a financial institution’s earnings and capital, or its ability to meet its business objectives, will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity rates, equity prices, credit spreads and/or commodity prices. The Company has assessed its market risk as predominately interest rate risk.

~~The following interest~~

Interest rate sensitivity ~~analysis information~~ as of ~~September~~June 30, ~~2004~~2005 was ~~developed~~analyzed using a 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~~gradual and parallel shift in the yield ~~curve in the amounts shown.~~

~~These rate~~curve. Rate changes are matched with known repricing ~~intervals and~~intervals. The bank uses standardized assumptions ~~for new growth net~~run against bank data by an outsourced provider of ~~expected prepayments.~~Asset Liability reporting. The ~~assumptions are based primarily on experience in the Company’s market under varying rate environments. The imbedded options~~analysis indicates that the ~~Company’s loan customers possess~~bank is benefited in an increasing rate environment more than it is harmed by a decreasing rate environment. This is primarily due to ~~refinance are considered for purposes of this analysis along with scheduled and unscheduled principal reductions offset by anticipated loan orginations.~~

~~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,fact that 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 $214 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 in the recent past and currently since we have had assets earning yields higher than would behave been 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 not constrain income gains in a rising rate market. As rates increase beyond approximately 150 basis points from their current level the effect on net interest income turns around and begins to expand positively due to an increasing percentage ofmarket once these loans ~~going~~have moved past their floors. Also, the passage of time moderates the negative near term impact of rising rates as new loans are by definition originated at the current, now higher, rate levels. 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, wholesale funding, and Fed Funds positions to offset the ~~repricing~~re-pricing characteristics of the deposit liabilities.

~~Projections for the next twelve months are as follows:~~

Interest Rates Decrease
Interest Rates Interest Rates Increase
(dollars in thousands)
200 BP
100 BP
Remain Constant
100 BP
200BP
Interest Income $ 40,739 $ 43,284 $ 45,882 $ 48,254 $ 51,077
Interest Expense 8,604 10,423 13,023 15,993 18,962

Net Interest Income $ 32,135 $ 32,861 $ 32,859 $ 32,261 $ 32,115

Change in net income after tax vs. constant rates $ (452 ) $ 1 $ (373 ) $ (464 )

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Corporation’s 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 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 as of the end of the period covered by this ~~report, the Chief Executive Officer and Chief Financial Officer of the Company~~report. Based upon that evaluation, they have concluded that the ~~Company’s~~Corporation’s disclosure controls and procedures ~~were adequate. No significant deficiencies or~~are effective in ensuring that material ~~weaknesses in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize, and report financial data have been identified.~~

~~No fraud that involves management or other employees who have a significant role in the Company’s internal controls has been discovered.~~

~~Changes in internal controls~~

~~The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent~~information related to the ~~date of the evaluation of those controls~~Company is made known to them by ~~the Chief Executive Officer and Chief Financial Officer; including any corrective actions with regard to significant deficiencies and material weaknesses.~~

~~Limitations on the Effectiveness of Controls~~

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all errors and all improper conduct. A control system, no matter how well conceived and operated can provide only reasonable, not absolute, assurance that the objectives of the controls system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any,others within the ~~Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.~~

Corporation.

Part II. OTHER INFORMATION

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

~~Not applicable~~

At the Annual Meeting of Shareholders of TIB Financial Corp. held April 26, 2005, ballot totals for the reelection of Directors standing for reelection were as follows:

DIRECTORS

FOR

AGAINST

ABSTAIN

Edward V. Lett

4,955,687

21,130

—

The directors continuing in office following the meeting were: Richard C. Bricker, Jr., Gretchen K. Holland, Paul O. Jones, Jr. M.D., Edward V. Lett, Thomas J. Longe, John G. Parks, Jr., Marvin F. Schindler, and Otis T. Wallace.

Ballot totals for the approval of the Amendment to Restated Articles of Incorporation were as follows:


FOR		AGAINST	ABSTAIN

	4,925,154	38,307	13,356

Total shares voted were 4,976,817 which represented 87.6% of the outstanding shares.

Item 5. OTHER INFORMATION

Not applicable

2622

Item 6. EXHIBITS ~~AND REPORTS ON FORM 8-K~~

~~(a) Exhibits~~

(a)

Exhibits

Exhibit 31.1 – Chief Executive Officer’s certification required under Section 302 of Sarbanes-Oxley Act of 2002

Exhibit 31.2 – Chief Financial Officer’s certification required under Section 302 of Sarbanes-Oxley Act of 2002

Exhibit 32.1 – Chief Executive Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002

Exhibit 32.2 – Chief Financial Officer’s certification required under Section 906 of Sarbanes-Oxley Act of 2002

~~(b) Reports on Form 8-K~~

~~On August 3, 2004, the Company issued a press release announcing certain financial results and additional information related to its second quarter 2004 earnings.~~

~~On November 4, 2004, the Company issued a press release announcing certain financial results and additional information related to its third quarter 2004 earnings.~~

SIGNATURES

Pursuant to 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.
~~Date: November 10, 2004~~	~~/s/~~ /s/ Edward V. Lett
Date: August 9, 2005	Edward V. Lett
	President and Chief Executive Officer



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

2823


	Interest Rates Decrease					Interest Rates		Interest Rates Increase
(dollars in thousands)	200 BP			100 BP		Remain Constant		100 BP			200BP
Interest Income	$	40,739		$	43,284	$	45,882	$	48,254		$	51,077
Interest Expense		8,604			10,423		13,023		15,993			18,962

Net Interest Income	$	32,135		$	32,861	$	32,859	$	32,261		$	32,115

Change in net income after tax vs. constant rates	$	(452	)	$	1			$	(373	)	$	(464	)