TIB Financial (TIBB) 10-Q 2011 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

TQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from __________________ to _______________________

Commission File Number 000-21329

TIB FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

FLORIDA		65-0655973
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
599 9th STREET NORTH, SUITE 101, NAPLES, FLORIDA 34102-5624
(Address of principal executive offices) (Zip Code)
	(239) 263-3344
(Registrant’s telephone number, including area code)
	Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  TYes   £No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  £Yes   £No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer”, “ large accelerated filer” and  “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
£ Large accelerated filer	£ Accelerated filer
£ Non-accelerated filer	T Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  £Yes    TNo
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $0.10 Par Value		12,349,935
Class		Outstanding as of April 30, 2011

TIB FINANCIAL CORP.

FORM 10-Q

For the Quarter Ended March 31, 2011

INDEX

PART I.  FINANCIAL INFORMATION	3
Item 1.  Financial Statements	3
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.  Controls and Procedures	29
PART II.  OTHER INFORMATION	29
Item 1.  Legal Proceedings	29
Item 1a. Risk Factors	29
Item 2.  unregistered sales of equity securities and use of proceeds	29
Item 3.  defaults upon senior securities	29
Item 4.  removed and reserved	29
Item 5.  Other Information	29
Item 6.  Exhibits	29

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

TIB FINANCIAL CORP. CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share data)	(Unaudited)
	March 31, 2011			December 31, 2010
Assets
Cash and due from banks	$	124,072		$	153,794
Investment securities available for sale		411,755			418,092
Loans, net of deferred loan costs and fees		1,030,377			1,004,630
Less: Allowance for loan losses		877			402
Loans, net		1,029,500			1,004,228
Premises and equipment, net		42,831			43,153
Goodwill		29,999			29,999
Intangible assets, net		11,043			11,406
Other real estate owned		19,504			25,673
Deferred income tax asset		19,005			19,973
Accrued interest receivable and other assets		41,633			50,548
Total Assets	$	1,729,342		$	1,756,866
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing demand	$	224,614		$	198,092
Interest-bearing		1,115,600			1,168,933
Total deposits		1,340,214			1,367,025
Federal Home Loan Bank (FHLB) advances		120,189			131,116
Short-term borrowings		46,892			47,158
Long-term borrowings		22,958			22,887
Accrued interest payable and other liabilities		12,108			11,930
Total liabilities		1,542,361			1,580,116
Shareholders’ equity
Common stock - $.10 par value per share: 50,000 shares authorized, 12,350 and 11,817 shares issued and outstanding, respectively		1,235			1,182
Additional paid in capital		185,039			177,316
Retained earnings		1,628			560
Accumulated other comprehensive loss		(921	)		(2,308	)
Total shareholders’ equity		186,981			176,750
Total Liabilities and Shareholders’ Equity	$	1,729,342		$	1,756,866
See accompanying notes to consolidated financial statements

3

TIB FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and shares in thousands, except per share amounts)

	Successor Company		Predecessor Company
	Three Months Ended March 31, 2011		Three Months Ended March 31, 2010
Interest and dividend income
Loans, including fees	$	13,398	$	15,999
Investment securities:
Taxable		2,336		2,144
Tax-exempt		15		67
Interest-bearing deposits in other banks		70		74
Federal Home Loan Bank stock		25		3
Total interest and dividend income		15,844		18,287
Interest expense
Deposits		2,454		4,902
Federal Home Loan Bank advances		237		1,214
Short-term borrowings		15		23
Long-term borrowings		456		654
Total interest expense		3,162		6,793
Net interest income		12,682		11,494
Provision for loan losses		485		4,925
Net interest income after provision for loan losses		12,197		6,569
Non-interest income
Service charges on deposit accounts		813		915
Fees on mortgage loans originated and sold		354		283
Investment advisory and trust fees		387		307
Loss on sale of indirect auto loans		-		(346	)
Other income		1,205		613
Investment securities gains (losses), net		12		1,642
Other-than-temporary impairment losses on investments
Gross impairment losses		-		-
Less: Impairments recognized in other comprehensive income		-		-
Net impairment losses recognized in earnings		-		-
Total non-interest income		2,771		3,414
Non-interest expense
Salaries and employee benefits		6,501		6,836
Net occupancy and equipment expense		2,048		2,284
Foreclosed asset related expense		522		1,100
Other expense		4,254		4,814
Total non-interest expense		13,325		15,034
Income (loss) before income taxes		1,643		(5,051	)
Income tax expense		575		-
Net income (loss)	$	1,068	$	(5,051	)
Preferred dividends earned by preferred shareholders and discount accretion		-		660
Net loss allocated to common shareholders	$	1,068	$	(5,711	)
Basic income (loss) per common share	$	0.09	$	(38.36	)
Diluted income (loss) per common share	$	0.07	$	(38.36	)

See accompanying notes to consolidated financial statements

4

TIB FINANCIAL CORP.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(Dollars and shares in thousands, except per share data)

Successor Company	Common Shares		Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)			Total Shareholders’ Equity
Balance, January 1, 2011		11,817	$	1,182	$	177,316	$	560	$	(2,308	)	$	176,750
Comprehensive income:
Net income								1,068					1,068
Net market valuation adjustment on securities available for sale										1,399
Less: reclassification adjustment for gains										(12	)
Other comprehensive income, net of tax expense of $837													1,387
Comprehensive income													2,455
Common stock issued in Rights Offering		533		53		7,723							7,776
Balance, March 31, 2011		12,350	$	1,235	$	185,039	$	1,628	$	(921	)	$	186,981

Predecessor Company	Preferred Shares		Preferred Stock		Common Shares		Common Stock		Additional Paid in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive (Loss)			Treasury Stock			Total Shareholders’ Equity
Balance, January 1, 2010		37	$	33,730		149	$	15	$	76,154	$	(49,994	)	$	(3,818	)	$	(569	)	$	55,518
Comprehensive loss:
Net loss												(5,051	)								(5,051	)
Net market valuation adjustment on securities available for sale															1,811
Less: reclassification adjustment for gains															(1,642	)
Other comprehensive income, net of tax expense of $321																					169
Comprehensive loss																					(4,882	)
Preferred stock discount accretion				189								(189	)								-
Stock-based compensation and related tax effect										150											150
Balance, March 31, 2010		37	$	33,919		149	$	15	$	76,304	$	(55,234	)	$	(3,649	)	$	(569	)	$	50,786

5

TIB FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited) (Dollars in thousands)
	Successor Company			Predecessor Company
	Three Months Ended March 31, 2011			Three Months Ended March 31, 2010
Cash flows from operating activities:
Net income (loss)	$	1,068		$	(5,051	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Accretion of acquired loans		(12,541	)		-
Depreciation and amortization		190			1,123
Provision for loan losses		485			4,925
Deferred income tax expense		575			-
Investment securities net realized gains		(12	)		(1,642	)
Net amortization of investment premium/discount		1,579			761
Stock-based compensation		-			150
(Gain)/Loss on sales of OREO		-			125
OREO valuation adjustments		-			512
Loss on the sale of indirect auto loans		-			346
Other		(610	)		328
Mortgage loans originated for sale		(11,936	)		(16,304	)
Proceeds from sales of mortgage loans originated for sale		18,739			17,710
Fees on mortgage loans sold		(354	)		(283	)
Change in accrued interest receivable and other assets		2,019			1,819
Change in accrued interest payable and other liabilities		187			1,405
Net cash (used in) provided by operating activities		(611	)		5,924
Cash flows from investing activities:
Purchases of investment securities available for sale		(15,474	)		(158,600	)
Sales of investment securities available for sale		2,319			69,956
Repayments of principal and maturities of investment securities available for sale		20,149			34,335
Principal repayments on loans, net of loans originated or acquired		(13,894	)		20,487
Purchases of premises and equipment		(369	)		(518	)
Proceeds from sales of loans		-			20,569
Proceeds from sale of OREO		7,459			1,229
Net cash provided by (used  in) investing activities		190			(12,542	)
Cash flows from financing activities:
Net increase (decrease) in demand, money market and savings accounts		82,975			(36,701	)
Net increase (decrease) in time deposits		(109,563	)		65,799
Net change in brokered time deposits		(223	)		(29,763	)
Net decrease in federal funds purchased and securities sold under agreements to repurchase		(266	)		(10,782	)
Repayment of long term FHLB advances		(10,000	)		-
Net proceeds from common stock rights offering		7,776			-
Net cash (used in) financing activities		(29,301	)		(11,447	)
Net decrease in cash and cash equivalents		(29,722	)		(18,065	)
Cash and cash equivalents at beginning of period		153,794			167,402
Cash and cash equivalents at end of period	$	124,072		$	149,337
Supplemental disclosures of cash paid:
Interest	$	3,897		$	5,830
Supplemental information:
Transfer of loans to OREO		1,290			21,975
See accompanying notes to consolidated financial statements

6

TIB Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and shares in thousands except per share data)

Note 1 – Basis of Presentation & Accounting Policies

TIB Financial Corp. is a bank holding company headquartered in Naples, Florida.  Prior to April 29, 2011, TIB Financial Corp. conducted its business primarily through its wholly-owned subsidiaries, TIB Bank (the “Bank”) and Naples Capital Advisors, Inc.  As described in Note 8, on April 29, 2011, the Bank merged with and into NAFH National Bank, a subsidiary of our majority shareholder in an all-stock transaction.  Unless otherwise specified, this report describes TIB Financial Corp. and its subsidiaries (collectively, the “Company”) as it existed prior to the merger of TIB Bank and NAFH National Bank.

Prior to the merger of the Bank with NAFH National Bank, the Company had a total of 27 full service banking offices.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information and an additional description of the Company’s accounting policies, refer to the Company’s annual report on Form 10-K for the year ended December 31, 2010.

Share and per share amounts have been adjusted to account for the effects of the 1 for 100 reverse stock split on December 15, 2010. As a result of the reverse stock split, every 100 shares of the Company’s common stock issued and outstanding immediately prior to the effective time were combined and reclassified into 1 share of common stock.

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.

North American Financial Holdings, Inc. Investment

            On September 30, 2010, (the “Transaction Date”) the Company completed the issuance and sale to North American Financial Holdings, Inc. (“NAFH”) of 7,000 shares of common stock, 70 shares of Series B Preferred Stock and a warrant (the “Warrant”) to purchase up to 11,667 shares of Common Stock of the Company (the “Warrant Shares”) for aggregate consideration of $175,000 (the “Investment”).  The consideration was comprised of approximately $162,840 in cash and approximately $12,160 in the form of a contribution to the Company of all 37 outstanding shares of Series A Preferred Stock previously issued to the U.S. Treasury Department (“Treasury”) under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s common stock, which NAFH purchased directly from the Treasury.  The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding.  The 70 shares of Series B Preferred Stock received by NAFH converted into an aggregate of 4,667 shares of common stock following shareholder approval of an amendment to increase the number of authorized shares of common stock to 50,000.  The Warrant is exercisable, in whole or in part, and from time to time, from September 30, 2010 to March 30, 2012, at an exercise price of $15.00 per Warrant Share.

As a result of the Investment, pursuant to which NAFH acquired approximately 99% (which has subsequently been reduced to approximately 94% as a result of the Rights Offering) of the voting securities of the Company, the Company followed the acquisition method of accounting as required by the Business Combinations Topic of the FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).  Under the rules of the SEC Staff Accounting Bulletin Topic 5J, New Basis of Accounting Required in Certain Circumstances (“SEC SAB T. 5J”) the application of “push down” accounting was required.

Acquisition accounting requires that the assets purchased, the liabilities assumed, and non-controlling interests all be reported in the acquirer’s financial statements at their fair value, with any excess of purchase consideration over the net assets being reported as goodwill.  Acquisition accounting requires that the valuation of assets, liabilities, and non-controlling interests be recorded in the acquiree’s records as well.  Accordingly, the Company’s Consolidated Financial Statements and transactional records prior to the NAFH Investment reflect the historical accounting basis of assets and liabilities and are labeled “Predecessor Company,” while such records subsequent to the NAFH Investment are labeled “Successor Company” and reflect the push down basis of accounting for the new fair values in the Company’s financial statements.  This change in accounting basis is represented in the Consolidated Financial Statements by a vertical black line which appears between the columns entitled “Predecessor Company” and “Successor Company” on the statements and in the relevant notes.  The black line signifies that the amounts shown for the periods prior to and subsequent to the NAFH Investment are not comparable.

In addition to the new accounting basis established for assets, liabilities and noncontrolling interests, acquisition accounting also requires the reclassification of any retained earnings from periods prior to the acquisition to be recognized as common share equity and the elimination of any accumulated other comprehensive income or loss and surplus within the Company’s Shareholders’ Equity section of the Company’s Consolidated Financial Statements.  Accordingly, retained earnings and accumulated other comprehensive income at March 31, 2011 and December 31, 2010 represent only the results of operations subsequent to September 30, 2010, the date of the NAFH Investment.

Pursuant to the Investment Agreement, shareholders as of July 12, 2010 received non-transferable rights to purchase a number of shares of the Company’s common stock proportional to the number of shares of common stock held by such holders on such date, at a purchase price equal to $15.00 per share, subject to certain limitations (the “Rights Offering”).  Approximately 533 shares of the Company’s common stock were issued in exchange for approximately $7,776 upon completion of the Rights Offering on January 18, 2011. Subsequent to the Rights Offering, NAFH owns 94% of the Company's outstanding common stock.

7

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.

Allowance for Loan Losses

The Company maintains an allowance for loan losses to absorb losses incurred in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the probable estimated incurred losses inherent in the loan portfolio. The allowance is increased by the provision for loan losses, which is charged against current period operating results and decreased by the amount of charge offs, net of recoveries. The Company's methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formulaic allowance and the specific allowance for impaired loans. Management develops and documents its systematic methodology for determining the allowance for loan losses by first dividing its portfolio into segments—commercial mortgage, residential mortgage, construction and vacant land, commercial and agricultural, indirect auto, home equity and other consumer loans. The Company furthers divides the portfolio segments into classes based on initial measurement attributes, risk characteristics or its method of monitoring and assessing credit risk. The classes for the Company are as follows:

•   Commercial mortgage – owner occupied, office building, hotel or motel, guest houses, retail, multi-family, farmland, and other;

•   Residential mortgage – primary residence, second residence and investment;

•   Construction and vacant land;

•   Commercial and agricultural

•   Indirect auto – prime and sub-prime;

•   Home equity ; and

•   Consumer

The allowance is calculated by applying loss factors to outstanding loans. Loss factors are based on the Company's historical loss experience and may be adjusted for significant factors that, in management's judgment, affect the collectability of the portfolio as of the evaluation date. The Company derives the loss factors for all segments from pooled loan loss factors.  Such pooled loan loss factors (for loans not individually graded) are based on expected net charge off ranges.

Loan loss factors, which are used in determining the allowance, are adjusted quarterly primarily based upon the changes in the level of historical net charge offs and parameter updates by management. Management estimates probable incurred losses in the portfolio based on a historical loss look-back period. The look-back period is representative of management’s expectations of relevant historical loss experience. Based upon the Company's evaluation process, management believes that the look-back period is generally eight quarters.

Furthermore, based on management's judgment, the Company's methodology permits adjustments to any loss factor used in the computation of the allowance for significant factors, which affect the collectability of the portfolio as of the evaluation date, but are not reflected in the loss factors. By assessing the probable estimated incurred losses in the loan portfolio on a quarterly basis, management is able to adjust specific and inherent loss estimates based upon the most recent information that has become available. This includes changing the number of periods that are included in the calculation of the loss factors and adjusting qualitative factors to be representative of the economic cycle that management expects will impact the portfolio. Updates of the loss confirmation period are done when significant events cause management to reexamine data.

At March 31, 2011, a large majority of the Company's loans are purchased credit-impaired loans. Estimates of cash flows expected to be collected for purchased credit-impaired loans are updated each reporting period. If the Company has probable decreases in expected cash flows to be collected after acquisition, the Company charges the provision for loan losses and establishes an allowance for loan losses.

The Company individually evaluates for impairment larger commercial and agricultural, construction and vacant land, and commercial mortgage loans. Residential mortgage and consumer loans are not individually evaluated for impairment unless they become delinquent and exceed $500 in recorded investment or represent troubled debt restructurings. Loans are considered impaired when the individual evaluation of current information regarding the borrower's financial condition, loan collateral, and cash flows indicates that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including interest payments. Impaired loans are carried at the lower of the recorded investment in the loan, the present value of expected future cash flows discounted at the loan's effective rate, the loan's observable market price, or the fair value of the collateral, if the loan is collateral dependent. Excluded from the impairment analysis are large groups of smaller balance homogeneous loans such as consumer, indirect auto and residential mortgage loans, which are evaluated on a pool basis. The Company's policy for recognition of interest income, charge offs of loans, and application of payments on impaired loans is the same as the policy applied to nonaccrual loans.

Significant risk characteristics considered in estimating the allowance for credit losses include the following:

•   Commercial and agricultural—industry specific economic trends and individual borrower financial condition

•   Construction and vacant land, farmland and commercial mortgage loans—type of property (i.e., residential, commercial, industrial) and geographic concentrations and risks and individual borrower financial condition

•   Residential mortgage, indirect auto and consumer—historical charge-offs and current trends in borrower's credit, property collateral, and loan characteristics

8

Loans are charged off in whole or in part when they are considered to be uncollectible. For commercial and agricultural, construction and vacant land and commercial mortgage loans, they are generally considered uncollectible based on an evaluation of borrower financial condition as well as the value of any collateral. For residential mortgage and consumer loans, this is generally based on past due status as discussed above, as well as an evaluation of borrower creditworthiness and the value of any collateral. Recoveries of amounts previously charged off are recorded as a recovery to the allowance for loan losses.

Purchased Credit-Impaired Loans

Loans acquired in a transfer, including business combinations and transactions similar to the Investment, where there is evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments, are accounted for under accounting guidance for purchased credit-impaired (“PCI”) loans. This guidance provides that the excess of the cash flows initially expected to be collected over the fair value of the loans at the acquisition date (i.e., the accretable yield) is accreted into interest income over the estimated remaining life of the purchased credit-impaired loans using the effective yield method, provided that the timing and amount of future cash flows is reasonably estimable. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for purchased credit-impaired loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

Subsequent to acquisition, estimates of cash flows expected to be collected are updated each reporting period based on updated assumptions regarding default rates, loss severities, and other factors that are reflective of current market conditions. If the Company has probable decreases in cash flows expected to be collected (other than due to decreases in interest rate indices), the Company charges the provision for credit losses, resulting in an increase to the allowance for loan losses. If the Company has probable and significant increases in cash flows expected to be collected, the Company will first reverse any previously established allowance for loan losses and then increase interest income as a prospective yield adjustment over the remaining life of the pool of loans. The impact of changes in variable interest rates are recognized prospectively as adjustments to interest income. The accounting pools of acquired loans are defined as of the date of acquisition of a portfolio of loans and are comprised of groups of loans with similar collateral types and credit risk.

Earnings (Loss) Per Common Share

Basic earnings (loss) per share is net income (loss) allocated to common shareholders divided by the weighted average number of common shares and vested restricted shares outstanding during the period. Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under stock options, warrants and restricted shares computed using the treasury stock method.

Earnings (loss) per share have been computed based the following for the periods ended:

	Successor Company		Predecessor Company
	Three Months Ended March 31, 2011		Three Months Ended March 31, 2010
Weighted average number of common shares outstanding:
Basic		12,243		148
Dilutive effect of options outstanding		-		-
Dilutive effect of restricted shares		-		-
Dilutive effect of warrants outstanding		2,720		-
Diluted		14,963		148

The dilutive effect of stock options and warrants and the dilutive effect of unvested restricted shares are the only common stock equivalents for purposes of calculating diluted earnings per common share.

Weighted average anti-dilutive stock options and warrants and unvested restricted shares excluded from the computation of diluted earnings per share are as follows:

	Successor Company		Predecessor Company
	Three Months Ended March 31, 2011		Three Months Ended March 31, 2010
Anti-dilutive stock options		7		8
Anti-dilutive restricted stock awards		-		-
Anti-dilutive warrants		13		24

9

Goodwill and Other Intangible Assets

 Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually.  Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Other intangible assets include core deposit base premiums and customer relationship intangibles arising from acquisitions and are initially measured at fair value.  The intangibles are being amortized using the straight-line method over estimated lives ranging from 5 to 15 years. Long-lived intangible assets with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such an asset is determined to be impaired when comparing undiscounted future cash flows to net book value, the impairment loss is measured by the excess of the carrying amount of the asset over its fair value as determined by an estimate of discounted future cash flows. The primary estimates which would be inherent in the impairment evaluation include fair market value, general market conditions, and projections of future operating results.

Income Taxes

 Income tax expense (or benefit) is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method.  Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

 A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.  The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Recent Accounting Pronouncements

In April 2011, the Financial Accounting Standards Board (the “FASB”) issued new guidance impacting Receivables. The new guidance amended existing guidance for assisting a creditor in determining whether a restructuring is a troubled debt restructuring. The amendments clarify the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. This guidance is effective for interim and annual reporting periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. Management is currently evaluating the impact the standard will have on the consolidated financial statements.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations, to amend ASC Topic 805, Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Adoption of this update did not have a material impact on the Company’s consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to amend ASC Topic 320, Receivables. The amendments in this update are intended to provide disclosures that facilitate financial statement users’ evaluation of the nature of credit risk inherent in the entity’s portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. Adoption of this update did not have a material impact on the Company’s consolidated financial statements.

Note 2 – Investment Securities

The amortized cost, estimated fair value and the related gross unrealized gains and losses recognized in accumulated other comprehensive income of investment securities available for sale at March 31, 2011 and December 31, 2010 are presented below:

	March 31, 2011
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agencies and corporations	$	40,638	$	9	$	318	$	40,329
States and political subdivisions—tax exempt		2,794		2		14		2,782
Marketable equity securities		102		37		-		139
Mortgage-backed securities—residential		366,781		1,141		2,495		365,427
Corporate bonds		2,113		174		-		2,287
Collateralized debt obligation		803		-		12		791
	$	413,231	$	1,363	$	2,839	$	411,755

	December 31, 2010
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agencies and corporations	$	40,980	$	15	$	296	$	40,699
States and political subdivisions—tax exempt		3,082		2		25		3,059
States and political subdivisions—taxable		2,308		-		151		2,157
Marketable equity securities		102		-		28		74
Mortgage-backed securities—residential		372,409		946		4,152		369,203
Corporate bonds		2,104		1		-		2,105
Collateralized debt obligation		807		-		12		795
	$	421,792	$	964	$	4,664	$	418,092

Proceeds from sales and calls of securities available for sale was $2,594 for the three months ended March 31, 2011. Gross gains of approximately $12 were realized on these sales and calls during the three months ended March 31, 2011.

10

The estimated fair value of investment securities available for sale at March 31, 2011 by contractual maturity, are shown as follows. Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations without call or prepayment penalties.  Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	March 31, 2011
Due in one year or less	$	276
Due after one year through five years		18,132
Due after five years through ten years		17,753
Due after ten years		10,028
Marketable equity securities		139
Mortgage-backed securities - residential		365,427
	$	411,755

Securities with unrealized losses not recognized in income, and the period of time they have been in an unrealized loss position, are as follows:

	Less than 12 Months				12 Months or Longer				Total
March 31, 2011	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agencies and corporations	$	6,949	$	318	$	-	$	-	$	6,949	$	318
States and political subdivisions—tax exempt		1,969		14				-		1,969		14
States and political subdivisions-taxable		-		-		-		-		-		-
Marketable equity securities		-		-		-		-		-		-
Mortgage-backed securities - residential		188,962		2,495		-		-		188,962		2,495
Corporate bonds		-		-		-		-		-		-
Collateralized debt obligation		791		12		-		-		791		12
Total temporarily impaired	$	198,671	$	2,839	$	-	$	-	$	198,671	$	2,839

	Less than 12 Months				12 Months or Longer				Total
December 31, 2010	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Government agencies and corporations	$	14,304	$	296	$	-	$	-	$	14,304	$	296
States and political subdivisions—tax exempt		2,458		25				-		2,458		25
States and political subdivisions-taxable		2,157		151		-		-		2,157		151
Marketable equity securities		74		28		-		-		74		28
Mortgage-backed securities - residential		213,153		4,152		-		-		213,153		4,152
Corporate bonds		-		-		-		-		-		-
Collateralized debt obligation		795		12		-		-		795		12
Total temporarily impaired	$	232,941	$	4,664	$	-	$	-	$	232,941	$	4,664

As of March 31, 2011, the Company’s security portfolio consisted of 61 securities, 30 of which were in an unrealized loss position. As of December 31, 2010, the Company’s security portfolio consisted of 62 securities, 37 of which were in an unrealized loss position.  The majority of unrealized losses are related to the Company’s mortgage-backed securities.

The mortgage-backed securities at March 31, 2011 and December 31, 2010, were issued by U.S. government-sponsored entities and agencies, institutions which the government has affirmed its commitment to support.  Unrealized losses associated with these securities are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2011 or December 31, 2010.

11

Note 3 – Loans

Major classifications of loans are as follows:

	March 31, 2011		December 31, 2010
Real estate mortgage loans:
Commercial	$	616,730	$	612,455
Residential		232,347		225,850
Construction and vacant land		40,503		38,956
Commercial and agricultural loans		60,219		60,642
Indirect auto loans		40,653		28,038
Home equity loans		30,541		29,658
Other consumer loans		8,471		8,730
Total loans		1,029,464		1,004,329
Net deferred loan costs		913		301
Loans, net of deferred loan costs	$	1,030,377	$	1,004,630

 Accretable yield, or income expected to be collected, related to purchased credit-impaired loans is as follows:

	Three Months Ended March 31, 2011
Balance, beginning of period	$	263,381
New loans purchased		-
Accretion of income		(12,541	)
Reclassifications from nonaccretable difference		-
Disposals		-
Balance, end of period	$	250,840

The contractually required payments represent the total undiscounted amount of all uncollected contractual principal and contractual interest payments both past due and scheduled for the future, adjusted for the timing of estimated prepayments and any full or partial charge-offs prior to the NAFH Investment. Nonaccretable difference represents contractually required payments in excess of the amount of estimated cash flows expected to be collected. The accretable yield represents the excess of estimated cash flows expected to be collected over the initial fair value of the PCI loans, which is their fair value at the time of the NAFH Investment. The accretable yield is accreted into interest income over the estimated life of the PCI loans using the level yield method. The accretable yield will change due to changes in:

·   the estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected;

·   the estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and

·   indices for PCI loans with variable rates of interest.

 For PCI loans, the impact of loan modifications is included in the evaluation of expected cash flows for subsequent decreases or increases of cash flows.  For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans.  At acquisition, the expected future cash flows were based on the variable rates that were in effect at that time.

 The following table presents the aging of the recorded investment in past due loans, based on contractual terms, as of March 31, 2011 by class of loans:

Non-purchased credit impaired loans	30-89 Days Past Due		Greater than 90 Days Past Due and Still Accruing/Accreting		Nonaccrual		Total
Real estate mortgage loans:
Owner occupied commercial	$	-	$	-	$	-	$	-
Office building		-		-		-		-
Hotel/motel		-		-		-		-
Guest houses		-		-		-		-
Retail		-		-		-		-
Multi-family		-		-		-		-
Other commercial		-		-		-		-
Primary residential		-		-		-		-
Secondary residential		-		-		-		-
Investment residential		-		-		-		-
Farmland		-		-		-		-
Land, lot and construction		-		-		-		-
Acquired commercial and agricultural		-		-		-		-
Prime indirect auto loans		-		-		-		-
Sub-prime indirect auto loans		-		-		-		-
Acquired home equity loans		-		-		-		-
Acquired other consumer loans		65		-		-		65
Total loans	$	65	$	-	$	-	$	65

12

Purchased credit impaired loans	30-89 Days Past Due		Greater than 90 Days Past Due and Still Accruing/Accreting		Nonaccrual		Total
Real estate mortgage loans:
Owner occupied commercial	$	3,503	$	23,613	$	-	$	27,116
Office building		2,669		1,587		-		4,256
Hotel/motel		5,126		3,547		-		8,673
Guest houses		-		-		-		-
Retail		-		-		-		-
Multi-family		-		-		-		-
Other commercial		558		9,672		-		10,230
Primary residential		907		7,904		-		8,811
Secondary residential		1,020		256		-		1,276
Investment residential		-		739		-		739
Farmland		393		1,099		-		1,492
Land, lot and construction		693		8,270		-		8,963
Commercial and agricultural		153		424		-		577
Prime indirect auto loans		118		60		-		178
Sub-prime indirect auto loans		260		56		-		316
Home equity loans		277		873		-		1,150
Other consumer loans		132		84		-		216
Total loans	$	15,809	$	58,184	$	-	$	73,993

Purchased credit-impaired loans are not classified as nonaccrual as they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for purchased credit-impaired loans and not to contractual interest payments.

There were no troubled debt restructurings as of March 31, 2011.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes loans individually by classifying the loans as to credit risk.  This analysis is performed on a monthly basis.  The Company uses the following definitions for risk ratings:

·   Pass – These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted.

·   Special Mention – Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

·   Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

·   Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table summarizes loans, excluding purchased credit-impaired loans, monitored for credit quality based on internal ratings at March 31, 2011:

	Pass		Special Mention		Substandard		Doubtful		Total
Real estate mortgage loans:
Owner occupied commercial	$	6,166	$	-	$	-	$	-	$	6,166
Office building		-		-		-		-		-
Hotel/motel		-		-		-		-		-
Guest houses		1,020		-		-		-		1,020
Retail		-		-		-		-		-
Multi-family		-		-		-		-		-
Other commercial		6,692		-		-		-		6,692
Primary residential		16,341		-		-		-		16,341
Secondary residential		12,066		-		-		-		12,066
Investment residential		186		-		-		-		186
Farmland		736		-		-		-		736
Land, lot and construction		3,678		-		-		-		3,678
Commercial and agricultural		7,007		-		-		-		7,007
Prime indirect auto loans		22,281		-		-		-		22,281
Sub-prime indirect auto loans		47		-		-		-		47
Home equity loans		10,462		-		-		-		10,462
Other consumer loans		5,090		-		80		-		5,170
Total loans	$	91,772	$	-	$	80	$	-	$	91,852

 The credit impact of purchased imparied loans is primarily determined by estimates of expected cash flows.  Such estimates are influenced by a number of credit related items which may include, but are not limited to, estimated real estate values, payment patterns, economic environment, LTV ratios and orgination dates.

13

Note 4 – Allowance for Loan Losses

Activity in the allowance for loan losses for the three months ended March 31, 2011 and 2010 follows:

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2011			Three Months Ended March 31, 2010
Balance, beginning of period	$	402		$	29,083
Provision for loan losses charged to expense		485			4,925
Loans charged off		(10	)		(6,353	)
Recoveries of loans previously charged off		-			174
Balance, end of period	$	877		$	27,829

Roll forward of allowance for loan losses for the three months ended March 31, 2011:

	December 31, 2010		Provision		Net Charge-offs			March 31, 2011
Real estate mortgage loans:
Commercial	$	7	$	151	$	-		$	158
Residential		164		177		-			341
Construction and vacant land		-		61		-			61
Commercial and agricultural loans		24		31		-			55
Indirect auto loans		184		43		(10	)		217
Home equity loans		14		16		-			30
Other consumer loans		9		6		-			15
Total loans	$	402	$	485	$	(10	)	$	877

	Allowance for Loan Losses						Loans
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit-Impaired		Individually Evaluated for Impairment		Collectively Evaluated for Impairment (1)		Purchased Credit-Impaired
Real estate mortgage loans:
Commercial	$	-	$	158	$	-	$	-	$	14,451	$	602,279
Residential		-		341		-		-		28,882		203,465
Construction and vacant land		-		61		-		-		3,678		36,825
Commercial and agricultural		-		55		-		-		7,449		52,770
Indirect auto loans		-		217		-		-		22,328		18,325
Home equity loans		-		30		-		-		10,462		20,079
Other consumer loans		-		15		-		-		4,602		3,869
Total loans	$	-	$	877	$	-	$	-	$	91,852	$	937,612

Note 5 – Capital Adequacy

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements result in certain discretionary and required actions by regulators that could have an effect on the Company’s operations. The regulations require the Company and the Bank to meet specific capital adequacy guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

To be considered well capitalized and adequately capitalized (as defined) under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios. At March 31, 2011 the Company and the Bank maintained capital ratios exceeding the requirement to be considered adequately capitalized.  These minimum amounts and ratios along with the actual amounts and ratios for the Company and the Bank as of March 31, 2011 and December 31, 2010 are presented in the following table.

	Well Capitalized Requirement			Adequately Capitalized Requirement			March 31, 2011 Actual			December 31, 2010 Actual
Tier 1 Capital (to Average Assets)
Consolidated		N/A			³ 4.0	%		9.0	%		8.2	%
TIB Bank		³ 5.0	%		³ 4.0	%		8.4	%		8.1	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		N/A			³ 4.0	%		14.2	%		13.3	%
TIB Bank		³ 6.0	%		³ 4.0	%		13.2	%		13.0	%
Total Capital (to Risk Weighted Assets)
Consolidated		N/A			³ 8.0	%		14.3	%		13.4	%
TIB Bank		³ 6.0	%		³ 8.0	%		13.3	%		13.1	%

Management believes, as of March 31, 2011, that the Company and the Bank meet all capital requirements to which they are subject.  Tier 1 Capital for the Company includes the trust preferred securities that were issued in September 2000, July 2001 and June 2006 to the extent allowable.

If a bank is classified as adequately capitalized, the bank is subject to certain restrictions.  One of the restrictions is that the bank may not accept, renew or roll over any brokered deposits (including CDARs deposits) without being granted a waiver of the prohibition by the FDIC. As of March 31, 2011, we had $12,612 of brokered deposits consisting of $2,095 of reciprocal CDARs deposits and $10,517 of traditional brokered and one-way CDARs deposits representing approximately 0.9% of our total deposits. $1,852 of CDARs deposits and $10,517 of traditional brokered deposits mature within the next twelve months. Additional restrictions include limitations on deposit pricing, the preclusion from paying “golden parachute” severance payments and the requirement to notify the bank regulatory agencies of certain significant events.

On July 2, 2009, the Bank entered into a Memorandum of Understanding, which is an informal agreement, with bank regulatory agencies that it would move in good faith to increase its Tier 1 leverage capital ratio to not less than 8% and its total risk-based capital ratio to not less than 12% by December 31, 2009 and maintain these higher ratios for as long as this agreement was in effect.  At December 31, 2009, these elevated capital ratios were not met.  On July 2, 2010, the Bank entered into a Consent Order, which is a formal agreement, with the bank regulatory agencies under which, among other things, the Bank agreed to maintain a Tier 1 capital ratio of at least 8% of total assets and a total risk based capital ratio of at least 12% within 90 days. At March 31, 2011 and December 31, 2010, TIB Bank achieved Tier 1 capital ratios of 8.4% and 8.1%, respectively, and total risk-based capital ratios of 13.3% and 13.1%, respectively, and exceeded all regulatory requirements. The Consent Order also governs certain aspects of the Bank’s operations including a requirement that it reduce the balance of assets classified substandard and doubtful by at least 70% over a two-year period, and not undertake asset growth of 5% or more per year without prior approval from the regulatory agencies. The Consent Order superseded the Memorandum of Understanding. As discussed in more detail in Note 8 to the unaudited consolidated financial statements, the Consent Order terminated on April 29, 2011 when TIB Bank was merged with and into NAFH National Bank. On September 22, 2010, the Federal Reserve Bank of Atlanta (FRB) and the Company entered into a written agreement (the “Written Agreement”) where the Company agreed, among other things, that it will not make any payments on the outstanding trust preferred securities or declare or pay any dividends without the prior written approval of the FRB.

On January 18, 2011, the Company concluded a rights offering wherein legacy shareholders of rights to purchase up to 1,489 shares of common stock, at a price of $15.00 per share, acquired 533 shares of newly issued common stock. The rights offering resulted in net proceeds of $7,776.  The record date for the rights offering was July 12, 2010.

14

Note 6 – Fair Value Measurements

ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Valuation of Securities Available for Sale

The fair values of securities available for sale are determined by: 1) obtaining quoted prices on nationally recognized securities exchanges when available (Level 1 inputs); 2) matrix pricing, which is a mathematical technique widely used in the financial markets to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs); and 3) for collateralized debt obligations and certain other assets and liabilities recorded at fair value in connection with the application of the acquisition method of accounting, custom discounted cash flow modeling (Level 3 inputs).

As of March 31, 2011, the Company owned a collateralized debt security where the underlying collateral is comprised primarily of trust preferred securities of banks and insurance companies. The inputs used in determining the estimated fair value of this security are Level 3 inputs. In determining its estimated fair value, management utilizes a discounted cash flow modeling valuation approach. Discount rates utilized in the modeling of this security are estimated based upon a variety of factors including the market yields of publicly traded trust preferred securities of larger financial institutions and other non-investment grade corporate debt. Cash flows utilized in the modeling of this security were based upon actual default history of the underlying issuers and issuer specific assumptions of estimated future defaults of the underlying issuers.

Valuation of Impaired Loans and Other Real Estate Owned

The fair value of collateral dependent impaired loans with specific allocations of the allowance for loan losses and other real estate owned is generally based on recent real estate appraisals and other available observable market information. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at March 31, 2011 Using
	March 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government agencies and corporations	$	40,329	$	-	$	40,329	$	-
States and political subdivisions—tax exempt		2,782		-		2,782		-
Marketable equity securities		139		139		-		-
Mortgage-backed securities—residential		365,427		-		365,427		-
Corporate bonds		2,287		-		2,287		-
Collateralized debt obligations		791		-		-		791
Available for sale securities	$	411,755	$	139	$	410,825	$	791

			Fair Value Measurements at December 31, 2010 Using
	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
U.S. Government agencies and corporations	$	40,699	$	-	$	40,699	$	-
States and political subdivisions—tax exempt		3,059		-		3,059		-
States and political subdivisions—taxable		2,157		-		2,157		-
Marketable equity securities		74		74		-		-
Mortgage-backed securities—residential		369,203		-		369,203		-
Corporate bonds		2,105		-		2,105		-
Collateralized debt obligations		795		-		-		795
Available for sale securities	$	418,092	$	74	$	417,223	$	795

15

TIB Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and shares in thousands except per share data)

The tables below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three ended March 31, 2011 and 2010 and held at March 31, 2011 and 2010, respectively.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Collateralized Debt Obligations
Successor Company	2011
Beginning balance, January 1,	$	795
Included in earnings – other than temporary impairment		-
Included in other comprehensive income		(4	)
Transfer in to Level 3		-
Ending balance March 31,	$	791

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Collateralized Debt Obligations
Predecessor Company	2010
Beginning balance, January 1,	$	759
Included in earnings – other than temporary impairment		-
Included in other comprehensive income		10
Transfer in to Level 3		-
Ending balance March 31,	$	769

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at March 31, 2011 Using
	March 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Other real estate owned	$	16,885	$	-	$	-	$	16,885
Other repossessed assets		108		-		108		-

			Fair Value Measurements at December 31, 2010 Using
	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Other real estate owned	$	25,673	$	-	$	-	$	25,673
Other repossessed assets		104		-		104		-

16

TIB Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and shares in thousands except per share data)

 The carrying amounts and estimated fair values of financial instruments, at March 31, 2011 and December 31, 2010 are as follows:

	March 31, 2011				December 31, 2010
Successor Company	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	124,072	$	124,072	$	153,794	$	153,794
Investment securities available for sale		411,755		411,755		418,092		418,092
Loans, net		1,029,500		992,031		1,004,228		995,744
Federal Home Loan Bank and Independent Bankers’ Bank stock		9,621	NM			9,621	NM
Accrued interest receivable		5,160		5,160		4,917		4,917
Financial liabilities:
Non-contractual deposits	$	730,995	$	730,995	$	648,019	$	648,019
Contractual deposits		609,219		609,975		719,006		719,328
Federal Home Loan Bank Advances		120,189		119,898		131,116		130,906
Short-term borrowings		46,892		46,890		47,158		47,156
Subordinated debentures		22,958		23,203		22,887		25,267
Accrued interest payable		6,525		6,525		7,260		7,260

The methods and assumptions used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest receivable and payable, non contractual which consists of demand deposits and deposits that reprice frequently and fully.  The methods for determining the fair values for securities were described previously.  For loans, contractual deposits, which consist of deposits with infrequent repricing or repricing limits and debt, fair value is based on discounted cash flows using current market rates. It was not practicable to determine the fair value of FHLB and IBB stock due to restrictions placed on their transferability.  The fair value of off balance sheet items is not considered material.

Note 7 – Other Real Estate Owned

Activity in other real estate owned is as follows:

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2011			Three Months Ended March 31, 2010
Balance, beginning of period	$	25,673		$	21,352
Real estate acquired		1,290			21,975
Changes in valuation reserve		-			(637	)
Property sold		(7,459	)		(1,741	)
Other		-			129
Balance, end of period	$	19,504		$	41,078

Note 8 – Subsequent Event

Effective April 29, 2011, the Bank, merged (the “Merger”) with and into NAFH National Bank (“NAFH Bank”), a national banking association and wholly owned subsidiary of NAFH, with NAFH Bank as the surviving entity.  NAFH is the owner of approximately 97% of the Company’s common stock.  In addition, five of the Company’s seven directors, and the Company’s Chief Executive Officer, Chief Financial Officer and Chief Risk Officer are affiliated with NAFH.

NAFH Bank was formed on July 16, 2010 in connection with the purchase and assumption of the operations of three banks – Metro Bank of Dade County (Miami, Florida), Turnberry Bank (Aventura, Florida) and First National Bank of the South (Spartanburg, South Carolina) – from the Federal Deposit Insurance Corporation (the “FDIC”).  On July 16, 2010, NAFH Bank acquired assets of approximately $1.4 billion and assumed deposits of approximately $1.2 billion in the transactions with the FDIC.  As of March 31, 2010, NAFH Bank had total assets and total deposits of approximately $1.2 billion and $849 million, respectively.  Prior to the Merger, NAFH Bank operated 23 branches, with 10 branches in South Florida and 13 branches in South Carolina.  NAFH Bank is a party to loss sharing agreements with the FDIC covering the large majority of the loans it acquired from the FDIC.

The Merger occurred pursuant to the terms of an Agreement of Merger entered into by and between the Bank and NAFH Bank, dated as of April 27, 2011 (the “Merger Agreement”).  In the Merger, each share of Bank common stock was converted into the right to receive shares of NAFH Bank common stock.  As a result of the Merger, the Company now owns approximately 53% of NAFH Bank, with NAFH owning the remaining 47%.

17

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. (the "Company") to be materially different from future results described in such forward-looking statements. Actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation:  failure to maintain adequate levels of capital and liquidity to support our operations; 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 the Company as reflected in the unaudited consolidated statement of condition as of March 31, 2011, and statements of operations for the three months ended March 31, 2011.  The Company’s financial results of operations include the operations of TIB Bank (the “Bank”) and Naples Capital Advisors, Inc.

North American Financial Holdings, Inc. (“NAFH”) Investment

On September 30, 2010, (the “Transaction Date”) the Company completed the issuance and sale to NAFH of 7,000,000 shares of Common Stock, 70,000 shares of Series B Preferred Stock and a warrant (the “Warrant”) to purchase up to 11,666,667 shares of Common Stock of the Company (the “Warrant Shares”) for aggregate consideration of $175,000,000.The consideration was comprised of approximately $162,840,000 in cash and approximately $12,160,000 in the form of a contribution to the Company of all 37,000 outstanding shares of Series A Preferred Stock previously issued to the United States Department of the Treasury under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s Common Stock, which NAFH purchased directly from the Treasury. The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding. The 70,000 shares of Series B Preferred Stock received by NAFH converted into an aggregate of 4,666,667 shares of Common Stock following shareholder approval of an amendment to the Company’s Restated Articles of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000. The Warrant is exercisable, in whole or in part, and from time to time, from September 30, 2010 to March 30, 2012, at an exercise price of $15.00 per Warrant Share.

As a result of the Investment and following the completion on January 18, 2011 of a rights offering, pursuant to which shareholders of the Company as of July 12, 2010 purchased 533,029 shares of Common Stock, NAFH owns approximately 94% of the issued and outstanding voting power of the Company. Upon the completion of the Investment, R. Eugene Taylor (Chairman), Christopher G. Marshall, Peter N. Foss, William A. Hodges and R. Bruce Singletary were named to board of directors of the Company (the “Company Board”).  Mr. Howard Gutman and Mr. Brad Boaz, currently members of the Company Board, remained as such following the closing of the Investment. All other members of the board of directors of the Company resigned effective September 30, 2010.

Because of the controlling proportion of voting securities in the Company acquired by NAFH, the Investment is considered an acquisition for accounting purposes and requires the application and push down of the acquisition method of accounting.  The accounting guidance for acquisition accounting requires that the assets acquired and liabilities assumed be recorded at their respective fair values as of the acquisition date.  Any purchase price in excess of the net assets acquired is recorded as goodwill.

The most significant fair value adjustments resulting from the application of the acquisition method of accounting were made to loans.  Accounting guidance requires that all loans held by the Company on the Transaction Date be recorded at their fair value.  The fair value of these acquired loans takes into account both the differences in loan interest rates and market rates and any deterioration in their credit quality.  Because concerns about the probability of receiving the full amount of the contractual payments from the borrowers was considered in estimating the fair value of the loans, stating the loans at their fair value results in no allowance for loan loss being provided for these loans as of the Transaction Date.  As of September 30, 2010, certain loans had evidence of credit deterioration since origination, and it was probable that not all contractually required principal and interest payments would be collected.  Such loans identified at the time of the acquisition were accounted for using the measurement provision for purchased credit-impaired (“PCI”) loans, according to the FASB Accounting Standards Codification (“ASC”) 310-30.  The special accounting for PCI loans not only requires that they are recorded at fair value at the date of acquisition and that any related allowance for loan and lease losses is not permitted to be carried forward past the Transaction Date, but it also governs how interest income will be recognized on these loans and how any further deterioration in credit quality after the Transaction Date will be recognized and reported.

As a result of the adjustments required by the acquisition method of accounting, the Company’s balance sheet and results of operations from periods prior to the Transaction Date are labeled as Predecessor Company amounts and are not comparable to balances and results of operations from periods subsequent to the Transaction Date, which are labeled as Successor Company.  The lack of comparability arises from the assets and liabilities having new accounting bases as a result of recording them at their fair values as of the Transaction Date rather than at their historical cost basis.  As a result of the change in accounting bases, items of income and expense such as the rate of interest income and expense as well as depreciation and rental expense will change.  In general, these changes in income and expense relate to the amortization of premiums or accretion of discounts to arrive at contractual amounts due. To call attention to this lack of comparability, the Company has placed a black line between the Successor Company and Predecessor Company columns in the Consolidated Financial Statements and in the tables in the notes to the statements and in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18

TIB Bank Merger with NAFH National Bank

Effective April 29, 2011, TIB Bank, merged (the “Merger”) with and into NAFH National Bank (“NAFH Bank”), a national banking association and wholly owned subsidiary of NAFH, with NAFH Bank as the surviving entity.  NAFH is the owner of approximately 94% of the Company’s common stock.  In addition, five of the Company’s seven directors, and the Company’s Chief Executive Officer, Chief Financial Officer and Chief Risk Officer are affiliated with NAFH.

NAFH Bank was formed on July 16, 2010 in connection with the purchase and assumption of the operations of three banks – Metro Bank of Dade County (Miami, Florida), Turnberry Bank (Aventura, Florida) and First National Bank of the South (Spartanburg, South Carolina) – from the Federal Deposit Insurance Corporation (the “FDIC”).

On July 16, 2010, NAFH Bank acquired assets of approximately $1.4 billion and assumed deposits of approximately $1.2 billion in the transactions with the FDIC.  As of March 31, 2011, NAFH Bank had total assets of $1.2 billion and total deposits of $850 million.  Prior to the Merger, NAFH Bank operated 23 branches, with 10 branches in South Florida and 13 branches in South Carolina.  NAFH Bank is a party to loss sharing agreements with the FDIC covering the large majority of the loans it acquired from the FDIC.

The Merger occurred pursuant to the terms of an Agreement of Merger entered into by and between the Bank and NAFH Bank, dated as of April 27, 2011 (the “Merger Agreement”).  In the Merger, each share of Bank common stock was converted into the right to receive shares of NAFH Bank common stock.  As a result of the Merger, the Company now owns approximately 53% of NAFH Bank, with NAFH owning the remaining 47%.

Consent Order

On July 2, 2010, TIB Bank entered into a Consent Order, which is a formal agreement, with the bank regulatory agencies under which, among other things, the Bank has agreed to maintain a Tier 1 capital ratio of at least 8% of total assets and a total risk based capital ratio of at least 12% within 90 days. At March 31, 2011 and December 31, 2010, TIB Bank achieved Tier 1 capital ratios of 8.4% and 8.1%, respectively and total risk-based capital ratios of 13.3% and 13.1%, respectively, and exceeded all regulatory requirements. As discussed in more detail below and in Note 8 to the unaudited consolidated financial statements, the Consent Order terminated on April 29, 2011 when TIB Bank was merged with and into NAFH National Bank. On September 22, 2010 the Federal Reserve Bank of Atlanta (“FRB”) and the Company entered into a written agreement (the “Written Agreement”) where the Company agreed, among other things, that it will not make any payments on the outstanding trust preferred securities or declare or pay any dividends without the prior written approval of the FRB.

NASDAQ Delisting

On July 7, 2010, the Company received a delisting notice from The NASDAQ Stock Market LLC, which was anticipated, due to the Company’s non-compliance with the NASDAQ’s $1.00 per share bid price requirement. The letter from the NASDAQ notified the Company that it was in violation of NASDAQ Marketplace Rule 5505 in that the bid price for its common stock was below the required listing standard and that its common stock would be delisted from the NASDAQ on July 16, 2010 unless the Company asked for a hearing before a NASDAQ Listing Qualifications Hearing Panel. This hearing was held on August 5, 2010. During the hearing the Company requested an extension to January 3, 2011 for the Company to demonstrate a closing bid price of $1.00 per share in accordance with the NASDAQ rules. The Company advised NASDAQ that the Company intended to call a special meeting of its shareholders following the closing of the NAFH Investment to approve the adoption of an amendment to the Company’s Restated Articles of Incorporation to affect a reverse stock split and thereby regain compliance with the listing rules. On September 2, 2010, the Company was advised by the NASDAQ that its request for an extension to January 3, 2011 was granted.  On December 15, 2010, the Company affected a 1 for 100 reverse stock split. Additionally, on January 18, 2011, the Company completed a Rights Offering through which 533,029 shares of the Company’s common stock were issued in exchange for approximately $8.0 million. As a result of these actions, the Company met the continued listing requirements for the NASDAQ Capital Market. Pursuant to our request, the listing of the Company’s shares was transferred to the NASDAQ Capital Market effective upon the open of trading on January 27, 2011.

19

Quarterly Summary

For the first quarter of 2011, the Company reported net income of $1.1 million.  Basic and diluted income per common share was $0.09 and $0.07, respectively. The most significant factor contributing to net income during the quarter was net interest income. The provision for loan losses of $485,000 recorded reflects the increase in the allowance for loan losses during the quarter for loans originated subsequent to the Investment by NAFH.  Other than approximately $10,000 in net charge-offs associated with loans originated subsequent to the Investment, no net charge-offs or losses on the disposition of other real estate owned were recorded as credit losses experienced were incorporated in the net credit loss expectations and discounts recorded on loans and other real estate acquired as of September 30, 2010.

Significant developments are outlined below.

•   TIB Bank, the Company’s subsidiary bank at March 31, 2011, reported leverage, tier 1 risk-based and total risk-based capital ratios of 8.4%, 13.2% and 13.3%, respectively, exceeding all regulatory requirements.

•   The Company’s net income increased by 91% to $1.1 million and $0.07 per diluted common share as compared to the quarter ended December 31, 2010.

•   The net interest margin increased to 3.34% during the quarter due to continued favorable repricing of deposit liabilities coupled with redeployment of cash to investable securities.  There continues to be a high level of cash and highly liquid investment securities maintained during the quarter which is available to be redeployed to fund higher yielding assets as such opportunities arise; however, the margin and overall earning asset yield is unfavorably impacted by these lower yielding assets.

•   The Company originated $33.9 million of residential mortgages, $18.5 million of commercial loans and $18.1 million in consumer and indirect loans to prime borrowers during the quarter.

•   Naples Capital Advisors and TIB Bank’s trust department continued to establish new investment management and trust relationships, increasing the market value of assets under management to $216 million as of March 31, 2011.

TIB Financial Corp. reported total assets of $1.73 billion as of March 31, 2011, a decrease of 1.5% from December 31, 2010.  Total loans increased to $1.03 billion compared to $1.00 billion at December 31, 2010. Total deposits of $1.34 billion, as of March 31, 2011, were approximately 2% lower than the $1.37 billion at December 31, 2010. The decline in deposits was lead by a $109.8 million decrease in time deposits, partially offset by an $83.0 million increase in non-interest bearing and interest bearing savings, NOW and money market accounts.

Results of Operations

Net income

Three months ended March 31, 2011 (Successor Company):

The Company reported net income of $1.1 million for the three months ended March 31, 2011. Basic and diluted income per common share was $0.09 and $0.07, respectively. The provision for loan losses recorded during the quarter of $485,000 reflects the current period increase in the allowance for loan losses for non-PCI loans.  Other operating expense includes a favorable resolution of a vendor dispute which resulted in a refund of approximately $208,000.

Three months ended March 31, 2010 (Predecessor Company):

For the first quarter of 2010, the Company reported a net loss before dividends on preferred stock of $5.1 million.  The loss allocated to common shareholders was $38.36 per share for the 2010 first quarter.  The loss was primarily due to no tax benefit recorded during the period as a result of the Company’s deferred tax assets being fully reserved; a $4.9 million provision for loan losses; and $1.1 million in valuation adjustments, losses on sale and operating expenses associated with foreclosed real estate (“OREO”).

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 and securities purchased under agreements to resell, interest-bearing deposits in other banks and investment securities.  Our interest-bearing liabilities include deposits, federal funds purchased, subordinated debentures, advances from the FHLB and other short term borrowings.

Rate and volume variance analyses allocate the change in interest income and interest expense between that which is due to changes in the rate earned or paid for specific categories of assets and liabilities and that which is due to changes in the average balance between two periods.  Because of the purchase accounting adjustments, the amounts for the three month period ended March 31, 2011 are not comparable to the three month period ended March 31, 2010.

20

Three months ended March 31, 2011 (Successor Company):

Net interest income was $12.7 million for the three months ended March 31, 2011. The net interest income was significantly impacted by the purchase accounting adjustments to the interest earning assets and interest bearing liabilities.  Because of the accretion of new discounts and premiums established by re-valuing the assets and liabilities to their fair values as of September 30, 2010, the rates at which interest income and expense are accrued changed from prior periods irrespective of whether market rates or contractual rates changed.  Due to the continued favorable repricing of deposit liabilities coupled with the purchase accounting adjustments the net interest margin increased to 3.34%. Additionally, the high level of cash and highly liquid investment securities maintained during the three months ended March 31, 2011, while available to be redeployed to fund higher yielding assets as such opportunities arise, have an unfavorable impact on the margin and the overall yield on earning assets is unfavorably impacted these lower yielding assets.

Going forward, we expect market short-term interest rates to remain low in the near term.  We expect deposit costs to continue to decline but they may decrease more slowly or to a lesser extent than loan yields, or they could increase due to strong demand in the financial markets and banking system for liquidity which may be reflected in elevated pricing competition for deposits. The predominant drivers affecting net interest income are the composition of earning assets, the interest rates paid on our deposits and the net change in non-performing assets.

Three months ended March 31, 2010 (Predecessor Company):

Net interest income was $11.5 million for the three months ended March 31, 2010 while the net interest margin was 2.94%. The net interest margin reflects the repricing or replacement of higher priced deposits with lower cost funding which resulted in a decrease in the overall cost of our interest bearing deposits during the first quarter of 2010. These factors were partially offset by the continued maintenance of higher levels of liquid investment securities and cash equivalents and a change in asset mix resulting in lower volumes of higher yielding loans. The net interest margin was adversely impacted by the level of nonaccrual loans and non-performing assets during the period, which reduced the margin by approximately 23 basis points during the first quarter of 2010.

Interest and dividend income for the three months of 2010 was impacted by lower balances on loans and investment securities, the higher level of non-performing loans and declines in market interest rates. Due to the lower interest rate environment and the higher level of non-accrual loans, the yield of our loans declined.

Partially offsetting the decline in interest and dividend income, were decreases in interest expense on deposits as a result of lower interest rates paid as well as other market interest rates. The average interest cost of interest bearing deposits declined during the quarter along with the overall cost of interest bearing liabilities.

21

The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the three months ended March 31, 2011 and March 31, 2010.

	Successor Company								Predecessor Company
	2011								2010
(Dollars in thousands)	Average Balances			Income/ Expense		Yields/ Rates			Average Balances			Income/ Expense		Yields/ Rates
Interest-earning assets:
Loans (1)(2)	$	1,013,147		$	13,421		5.37	%	$	1,178,851		$	16,018		5.51	%
Investment securities (2)		408,136			2,358		2.34	%		283,694			2,244		3.21	%
Interest-bearing deposits in other banks		112,602			70		0.25	%		120,197			74		0.25	%
Federal Home Loan Bank stock		9,334			25		1.09	%		10,447			3		0.12	%
Federal funds sold and securities sold under agreements to resell		3			-		0.00	%		13			-		0.00	%
Total interest-earning assets		1,543,222			15,874		4.17	%		1,593,202			18,339		4.67	%
Non-interest-earning assets:
Cash and due from banks		23,196								24,627
Premises and equipment, net		42,992								40,807
Allowance for loan losses		(272	)							(27,486	)
Other assets		115,581								69,138
Total non-interest-earning assets		181,497								107,086
Total assets	$	1,724,719							$	1,700,288
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts	$	175,559		$	130		0.30	%	$	210,514		$	192		0.37	%
Money market		203,172			368		0.73	%		203,291			529		1.06	%
Savings deposits		103,268			168		0.66	%		87,211			153		0.71	%
Time deposits		643,898			1,788		1.13	%		689,850			4,028		2.37	%
Total interest-bearing deposits		1,125,897			2,454		0.88	%		1,190,866			4,902		1.67	%
Other interest-bearing liabilities:
Short-term borrowings and FHLB advances		171,660			251		0.59	%		194,095			1,237		2.58	%
Long-term borrowings		22,911			456		8.07	%		63,000			654		4.21	%
Total interest-bearing liabilities		1,320,468			3,161		0.97	%		1,447,961			6,793		1.90	%
Non-interest-bearing liabilities and shareholders’ equity:
Demand deposits		208,580								185,156
Other liabilities		11,048								11,565
Shareholders’ equity		184,623								55,606
Total non-interest-bearing liabilities and shareholders’ equity		404,251								252,327
Total liabilities and shareholders’ equity	$	1,724,719							$	1,700,288
Interest rate spread  (tax equivalent basis)							3.20	%							2.77	%
Net interest income  (tax equivalent basis)				$	12,713							$	11,546
Net interest margin (3) (tax equivalent basis)							3.34	%							2.94	%
_______ (1)Average loans include non-performing loans. (2)Interest income and rates include the effects of a tax equivalent adjustment using applicable statutory tax rates in adjusting tax exempt interest on tax exempt investment securities and loans to a fully taxable basis. (3)Net interest margin is net interest income divided by average total interest-earning assets.

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  Non-interest Income

           The following table presents the principal components of non-interest income for the three months ended March 31, 2011 and March 31, 2010.

(Dollars in thousands)	Successor Company		Predecessor Company
	2011		2010
Service charges on deposit accounts	$	813	$	915
Investment securities gains, net		12		1,642
Fees on mortgage loans sold		354		283
Investment advisory fees		387		307
Debit card income		413		344
Earnings on bank owned life insurance policies		101		100
Loss on sale of indirect loans		-		(346	)
Management fee income		525		-
Other		166		169
Total non-interest income	$	2,771	$	3,414

The Company is unable to provide a comparable analysis in this discussion because there are no comparable periods due to the acquisition accounting adjustments discussed above. During the three months ended March 31, 2011, fees from the origination and sale of residential mortgages of $18.3 million in the secondary market were $354,000. The Company recorded $525,000 of management fee income during the first quarter of 2011 pursuant to a third party reliance agreement which covered services provided by TIB Bank employees on behalf of the Company’s affiliate, NAFH Bank.

During the three months ended March 31, 2010, investment security gains of $1.6 million were realized on the sale of $90.0 million of available for sale securities.  Fees from the origination and sale of $13.4 million of residential mortgages in the secondary market were $283,000. During the quarter a loss of $346,000 was recognized on the sale of approximately $20.1 million of indirect auto loans.

Non-interest Expense

 The following table represents the principal components of non-interest expense for the three months ended March 31,2011 and 2010:

(Dollars in thousands)	Successor Company			Predecessor Company
	2011			2010
Salary and employee benefits	$	6,501		$	6,836
Net occupancy expense		2,048			2,284
Foreclosed asset related expense		522			1,100
Legal, and other professional		884			863
Computer services		414			722
Collection costs		(7	)		43
Postage, courier and armored car		268			282
Marketing and community relations		205			382
Operating supplies		142			145
Directors’ fees		31			195
Travel expenses		39			82
FDIC and state assessments		1,121			861
Amortization of intangibles		364			389
Net gains on disposition of repossessed assets		(14	)		(52	)
Insurance, non-building		383			312
Other operating expense		424			590
Total non-interest expense	$	13,325		$	15,034

The Company is unable to provide a comparable analysis in this discussion because there are no comparable periods due to the acquisition accounting adjustments discussed above. During the first quarter of 2011, FDIC insurance costs of $1.1 million relate to higher deposit insurance premium rates in effect since the second quarter of 2010. Due to the Investment by NAFH and the corresponding improvement in our financial condition and capital position, we expect these rates to decline in the near future. Foreclosed asset related expenses of $522,000 during the first quarter of 2011 includes OREO workout related expenses along with ownership costs such as real estate taxes, insurance, and other costs to own and maintain the properties.  Other operating expense includes a refund of approximately $208,000 from a favorable resolution of a vendor dispute.

During the first quarter of 2010, foreclosed asset related expenses were $1.1 million. Of this amount, $512,000 related to OREO valuation adjustments reflecting the decline in real estate values determined by updated appraisals comparable sales and local market trends in asking prices and data from recent closed transactions.  Other OREO operating and ownership expenses were $463,000. Such costs included real estate taxes, insurance and other costs to own and maintain the properties.

23

Provision for income taxes

The provision for income taxes includes federal and state income taxes. Fluctuations in effective tax rates reflect the effect of the differences in the inclusion or deductibility of certain income and expenses, respectively, for income tax purposes. The effective income tax rate for the three months ended March 31, 2010 was approximately 35%. As of March 31, 2011 and December 31, 2010, management considered the need for a valuation allowance and, based upon its assessment of the relative weight of the positive and negative evidence available at the time of the analysis, concluded that a valuation allowance was not necessary.

No tax benefit was recorded during the three months ended March 31, 2010 due to an offsetting increase in the valuation allowance against deferred taxes.

A valuation allowance related to deferred tax assets is required when it is considered more likely than not (greater than 50% likelihood) that all or part of the benefit related to such assets will not be realized. In assessing the need for a valuation allowance, management considered various factors including the significant cumulative losses we had incurred prior to the Investment by NAFH coupled with the expectation that our future realization of deferred taxes would be limited as a result of a planned capital offering. These factors represent the most significant negative evidence that management considered in concluding that a full valuation allowance was necessary prior to the September 30, 2010 Investment by NAFH.

Our future effective income tax rate will fluctuate based on the mix of taxable and tax free investments we make and our overall level of taxable income. Additionally, there were no unrecognized tax benefits at March 31, 2011, and we do not expect the total of unrecognized tax benefits to significantly increase in the next twelve months.

Balance Sheet

Total assets at March 31, 2011 were $1.73 billion, a decrease of $27.5 million, or 2%, from total assets of $1.76 billion at December 31, 2010.  At March 31, 2011, total loans of $1.03 billion increased by $25.7 million or 3% from December 31, 2010.

At March 31, 2011, advances from the Federal Home Loan Bank, with a carrying value of $120.2 million, and a notional value of $115.0 million decreased $10.9 million from December 31, 2010.  The decrease was due to the maturity and repayment of a $10.0 million FHLB advance.

Total deposits of $1.34 billion as of March 31, 2011, decreased $26.8 million, or 2%, compared to $1.37 billion at December 31, 2010.  The decrease in deposits was comprised of a $109.8  million decrease in higher cost time deposits, partially offset by an $83.0 million increase in core deposits, primarily savings, non-interest bearing and money market deposits. Due to the change in mix, the weighted average cost of deposits decreased to 0.94% at March 31, 2011 from 1.15% as of December 31, 2010.

Shareholders’ equity totaled $187.0 million at March 31, 2011, increasing $10.2 million from December 31, 2010 due primarily to the completion of a rights offering through which 533,029 shares of the Company’s common stock were issued in exchange for approximately $7.8 million.

Loan Portfolio Composition

The most significant component of our loan portfolio, representing 60% of total loans, is classified in the notes to the accompanying unaudited financial statements as commercial real estate. Our goal of maintaining high standards of credit quality include a strategy of diversification of loan type and purpose within this category. The following chart illustrates the composition of this portfolio as of March 31, 2011 and December 31, 2010.

	March 31, 2011					December 31, 2010
(Dollars in thousands)	Commercial Real Estate		Percentage Composition			Commercial Real Estate		Percentage Composition
Mixed Use Commercial/Residential	$	92,024		15	%	$	88,887		15	%
Office Buildings		92,610		15	%		92,310		15	%
Hotels/Motels		69,003		11	%		69,177		11	%
1-4 Family and Multi Family		56,283		9	%		57,645		9	%
Guesthouses		90,217		15	%		89,868		15	%
Retail Buildings		68,160		11	%		68,800		11	%
Restaurants		39,932		6	%		40,382		7	%
Marinas/Docks		19,016		3	%		19,224		3	%
Warehouse and Industrial		28,684		5	%		28,833		5	%
Farmland		12,538		2	%		12,083		2	%
Other		48,263		8	%		45,246		7	%
Total	$	616,730		100	%	$	612,455		100	%

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Non-performing Assets and Allowance for Loan Losses

Non-performing assets include non-accrual loans and investment securities, repossessed personal property, and other real estate.  Loans and investments in debt securities are placed on non-accrual status when management has concerns relating to the ability to collect the principal and interest and generally when loans are 90 days past due.

(Dollars in thousands)	March 31, 2011			December 31, 2010
Total non-accrual loans	$	-		$	-
Accruing loans delinquent 90 days or more		58,184			56,337
Total	$	58,184		$	56,337
Non-accrual investment securities		791			795
Repossessed personal property (primarily indirect auto loans)		108			104
Other real estate owned		19,504			25,673
Other assets (*)		2,136			2,111
Total  non-performing assets	$	80,723		$	85,020
Allowance for loan losses	$	877		$	402
Non-performing assets as a percent of total assets		4.67	%		4.84	%
Non-performing loans as a percent of gross loans		N/A			N/A
Allowance for loan losses as a percent of non-performing loans		N/A			N/A

(*) In 1998, TIB Bank made a loan to construct a lumber mill in northern Florida. The loan was 80% guaranteed as to principal and interest by the U.S. Department of Agriculture (USDA). In addition to business real estate and equipment, the loan was collateralized by the business owner’s interest in a trust. As of March 31, 2011, the trust is in the process of liquidation and determining the distributions payable to the trust’s beneficiaries.

The non-guaranteed principal and interest ($2.0 million at March 31, 2011 and December 31, 2010) and the reimbursable capitalized liquidation costs and protective advance costs totaling approximately $171,000 and $146,000 at March 31, 2011 and December 31, 2010, respectively, are included as “other assets” in the financial statements.

Florida law requires a bank to liquidate or charge off repossessed real property within five years, and repossessed personal property within six months. Since the property had not been liquidated during this period, 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.

Allowance and Provision for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses in the loan portfolio.  Our formalized process for assessing the adequacy of the allowance for loan losses and the resultant need, if any, for periodic provisions to the allowance charged to income, includes both individual loan analyses and loan pool analyses.  Individual loan analyses are periodically performed on loan relationships of a significant size, or when otherwise deemed necessary, and primarily encompass commercial real estate and other commercial loans.  The result is that commercial real estate loans and commercial loans are divided into the following risk categories: Pass, Special Mention, Substandard and Loss. The allowance consists of specific and general components. When appropriate, a specific reserve will be established for individual loans based upon the risk classifications and the estimated potential for loss. The specific component relates to loans that are individually classified as impaired.  Otherwise, we estimate an allowance for each risk category.  The general allocations to each risk category 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 loans, residential loans and consumer loans generally are not analyzed individually and or separately identified for impairment disclosures. 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. The allocations are based on the same factors mentioned above.

Senior management and the Board of Directors review this calculation and the underlying assumptions on a routine basis not less frequently than quarterly.

Due to the closing of the NAFH Investment on September 30, 2010, which resulted in their ownership of approximately 99% of the Company, immediately following the Investment, significant preliminary accounting adjustments were recorded resulting in the Company’s balance sheet being revalued to fair value. The most significant adjustments related to loans which previously were recorded based upon their contractual amounts and were adjusted to reflect September 30, 2010 estimated fair values. During the first quarter of 2010, prior to the application of adjustments related to the application of the acquisition method of accounting, the provision for loan losses reflected increases in the amount of required valuation allowances on impaired loans.  As of September 30, 2010, due to the application of the acquisition method of accounting loans were recorded at fair value and no allowance for loan losses was required. The provision for loan losses during the first quarter of 2011 and the allowance for loan losses of $877,000 and $402,000, at March 31, 2011 and December 31, 2010, respectively, reflects the allowance for loan losses established for loans originated subsequent to September 30, 2010.

The provision for loan losses was impacted by many factors including changes in the value of real estate collateralizing loans, net charge-offs, the increase in loans outstanding, changes in impaired loans, historical loss rates and changes in the mix of loan types. Our provision for loan losses in future periods will also be influenced by the differences in actual credit losses resulting from the resolution of problem loans from the estimated credit losses used in determining the estimated fair value of loans as of September 30, 2010. For loans originated following the NAFH Investment, the provision for loan losses will be affected by the loss potential of impaired loans and trends in the delinquency of loans, non-performing loans and net charge offs, which cannot be reasonably predicted.

Management continuously monitors and actively manages the credit quality of the entire loan portfolio and will continue to recognize the provision required to maintain the allowance for loan losses at an appropriate level.

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Net activity relating to other real estate owned loans during the first quarter of 2011 is as follows:

OREO Activity
(Dollars in thousands)
OREO as of January 1, 2011	$	25,673
Real estate acquired		1,290
Properties sold		(7,459	)
OREO as of March 31, 2011	$	19,504

Capital and Liquidity

Capital

If a bank is not classified as well capitalized, certain operating restrictions apply. One of the restrictions is that the bank may not accept, renew or roll over any brokered deposits (including CDARs deposits) without being granted a waiver of the prohibition by the FDIC.As of March 31, 2010, we had $12.6 million of brokered deposits consisting of $2.1 million of reciprocal CDARs deposits and $10.5 million of traditional brokered deposits representing approximately 0.9% of our total deposits. CDARs deposits with notional balances of $1.9 million and traditional brokered deposits of $10.5 mature within the next twelve months. Additional restrictions include limitations on deposit pricing, the preclusion from paying “golden parachute” severance payments and the requirement to notify the bank regulatory agencies of certain significant events.

On July 2, 2009, TIB Bank entered into a Memorandum of Understanding, which is an informal agreement with bank regulatory agencies that it will move in good faith to increase its Tier 1 leverage capital ratio to not less than 8% and its total risk-based capital ratio to not less than 12% by December 31, 2009 and maintain these higher ratios for as long as this agreement is in effect.  At December 31, 2009, these elevated ratios were not met. On July 2, 2010, the Bank entered into a Consent Order, a formal agreement, with the bank regulatory agencies under which, among other things, the Bank agreed to maintain a Tier 1 capital ratio of at least 8% of total assets and a total risk based capital ratio of at least 12% within 90 days. At March 31, 2011 and December 31, 2010, TIB Bank achieved Tier 1 capital ratios of 8.4% and 8.1%, respectively and total risk-based capital ratios of 13.3% and 13.1%, respectively, and exceeded all regulatory requirements. The Consent Order also governs certain aspects of the Bank’s operations including a requirement that it reduce the balance of assets classified substandard and doubtful by at least 70% over a two-year period, and not undertake asset growth of 5% or more per year without prior approval from the regulatory agencies. The Consent Order superseded the Memorandum of Understanding. As discussed in more detail in Note 8 to the unaudited consolidated financial statements, the Consent Order terminated on April 29, 2011 when TIB Bank was merged with and into NAFH National Bank.

As of March 31, 2011 and December 31, 2010, the Company’s ratios of total capital to risk-weighted assets were 14.3% and 13.4%, respectively, and the leverage ratios were 9.0% and 8.2%, respectively, which exceeded the levels required to be considered adequately capitalized

The Company received a request from the Federal Reserve Bank of Atlanta (FRB) for the Company’s Board of Directors to adopt a resolution that it will not make any payments or distributions on the outstanding trust preferred securities without the prior written approval of the Reserve Bank.  The Board adopted this resolution on October 5, 2009. On September 22, 2010 the FRB and the Company entered into a written agreement (the “Written Agreement”) where the Company agreed, among other things, that it will not make any payments on the outstanding trust preferred securities or declare or pay any dividends without the prior written approval of the FRB.

On September 30, 2010, the Company completed the issuance and sale to NAFH of 7,000,000 shares of Common Stock, 70,000 shares of Series B Preferred Stock and a warrant (the “Warrant”) to purchase up to 11,666,667 shares of Common Stock of the Company (the “Warrant Shares”) for aggregate consideration of $175.0 million (the “Investment”). The consideration was comprised of approximately $162.8 million in cash and approximately $12.2 million in the form of a contribution to the Company of all 37,000 outstanding shares of Series A Preferred Stock previously issued to the United States Department of the Treasury under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s Common Stock, which NAFH purchased directly from the Treasury. The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding. The 70,000 shares of Series B Preferred Stock received by NAFH mandatorily converted into an aggregate of 4,666,667 shares of Common Stock following shareholder approval of an amendment to the Company’s Restated Articles of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000. The Warrant is exercisable, in whole or in part, and from time to time, from September 30, 2010 to March 30, 2012, at an exercise price of $15.00 per Warrant Share.

On January 18, 2011, the Company concluded a rights offering wherein legacy shareholders of rights to purchase up to 1,488,792 shares of common stock, at a price of $15.00 per share, acquired 533,029 shares of newly issued common stock. The rights offering resulted in net proceeds of $7.8 million.  The record date for the rights offering was July 12, 2010.

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 seek to maintain adequate liquidity primarily through the use of investment securities, short term investments such as federal funds sold 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 based on a percentage of the Bank’s total assets as reported in its most recent quarterly financial information submitted to the Federal Home Loan Bank and subject to the pledging of sufficient collateral.  At March 31, 2011, there were $115.0 million in advances outstanding, with an estimated fair value of $120.2 million, in addition to $25.2 million in letters of credit including $25.1 million used in lieu of pledging securities to the State of Florida to collateralize governmental deposits.  As of March 31, 2011, collateral availability under our agreements with the Federal Home Loan Bank provided for total borrowings of up to approximately $250.8 million of which $110.6 million was available.

The Bank had a secured repurchase agreement from its correspondent bank with a maximum credit availability of $30.0 million as of March 31, 2011. As of March 31, 2011, collateral availability under our agreement with the Federal Reserve Bank of Atlanta (“FRB”) provides for up to $35.4 million of borrowing availability from the FRB discount window. We believe that we have adequate funding sources through unused borrowing capacity from our correspondent banks and FRB, available cash, unpledged investment securities, loan principal repayment and potential asset maturities and sales to meet our foreseeable liquidity requirements.

As of March 31, 2011, our holding company had cash of approximately $11.3 million.  This cash is available for providing capital support to the Bank and for other general corporate purposes. The Company received a request from the FRB for the Company’s Board of Directors to adopt a resolution that it will not declare or pay any dividends on its outstanding common or preferred stock, nor will make any payments or distributions on the outstanding trust preferred securities or corresponding subordinated debentures without the prior written approval of the FRB.  The Board adopted this resolution on October 5, 2009.  The Company notified the trustees of its $20 million trust preferred securities due July 7, 2036 and its $5 million trust preferred securities due July 31, 2031 of its election to defer interest payments on the trust preferred securities beginning with the payments due in October 2009. In January 2010, the Company notified the trustees of its $8 million trust preferred securities due September 7, 2030 of its election to defer interest payments on the trust preferred securities beginning with the payment due March 2010.  The Company also notified the Treasury of its election to defer the dividend payment on the Series A preferred stock issued under TARP beginning in November 2009. On September 22, 2010, the Company entered into a written agreement with the FRB that, among other things, the Company will not declare or pay any dividends on its outstanding common or preferred stock, nor will make any payments or distributions on the outstanding trust preferred securities or corresponding subordinated debentures without the prior written approval of the FRB.  Deferral of the trust preferred securities is allowed for up to 60 months without being considered an event of default. Additionally, the Company may not declare or pay dividends on its capital stock, including dividends on preferred stock, or, with certain exceptions, repurchase capital stock without first having paid all trust preferred interest and all cumulative preferred dividends that are due. At this time it is unlikely that the Company will resume payment of cash dividends on its common stock for the foreseeable future. As previously discussed, on September 30, 2010, we completed the issuance and sale to NAFH of shares of the Company’s common stock, preferred stock and warrant to purchase additional shares of the Company’s stock for aggregate consideration of $175 million. Approximately $12.2 million of the consideration was in the form of a contribution to the Company of all 37,000 shares of preferred stock issued to the United States Department of the Treasury under the TARP Capital Purchase Program and the related warrant to purchase shares of the Company’s Common Stock. The Series A Preferred Stock and the related warrant were retired on September 30, 2010 and are no longer outstanding. For additional information on the NAFH investment, refer to Note 1 of the unaudited consolidated financial statements.

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Asset and Liability Management

Closely related to liquidity management is the management of the relative interest rate sensitivity of interest-earning assets and interest-bearing liabilities.  The Company manages its interest rate sensitivity position to manage net interest margins and to minimize risk due to changes in interest rates. As a secondary measure of interest rate risk, we review and evaluate our gap position as presented below as part of our asset and liability management process.

March 31, 2011 (Successor Company)
(Dollars in thousands)	3 Months or Less			4 to 6 Months			7 to 12 Months			1 to 5 Years			Over 5 Years			Total
Interest-earning assets:
Loans	$	331,109		$	75,898		$	99,388		$	353,238		$	169,831		$	1,029,464
Investment securities-taxable		35,667			11,044			-			-			362,123			408,834
Investment securities-tax exempt		-			-			276			834			1,672			2,782
Marketable equity securities		139			-			-			-			-			139
FHLB stock		9,334			-			-			-			-			9,334
Interest-bearing deposits in other banks		96,365			-			-			-			-			96,365
Total interest-earning assets		472,614			86,942			99,664			354,072			533,626			1,546,918
Interest-bearing liabilities:
NOW accounts		180,204			-			-			-			-			180,204
Money market		214,532			-			-			-			-			214,532
Savings deposits		111,645			-			-			-			-			111,645
Time deposits		99,304			65,801			155,118			288,996			-			609,219
Subordinated debentures		14,106			-			-			-			8,852			22,958
Other borrowings		46,895			-			56,542			63,644			-			167,081
Total interest-bearing liabilities		666,686			65,801			211,660			352,640			8,852			1,305,639
Interest sensitivity gap	$	(194,072	)	$	21,141		$	(111,996	)	$	1,432		$	524,774		$	241,279
Cumulative interest sensitivity gap	$	(194,072	)	$	(172,931	)	$	(284,927	)	$	(283,495	)	$	241,279		$	241,279
Cumulative sensitivity ratio		(12.5	%)		(11.2	%)		(18.4	%)		(18.3	%)		15.6	%		15.6	%

We are cumulatively liability sensitive through the five-year time period, and asset sensitive in the over five year timeframe above. Certain liabilities such as non-indexed NOW and savings accounts, while technically subject to immediate re-pricing in response to changing market rates, historically do not re-price as quickly or to the extent as other interest-sensitive accounts. Approximately 17% of our deposit funding is comprised of non-interest-bearing liabilities and total interest-earning assets are greater than the total interest-bearing liabilities. 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. Generally, we expect loan and investment yields and deposit costs to continue to decline. However, deposit rates could increase due to demand in financial markets, banking system and other local markets for liquidity which may be reflected in elevated pricing competition for deposits. The predominant drivers to increase net interest income are the volume and composition of earning assets, the interest rates paid on our deposits and the net change in non-performing assets.

Interest-earning assets and 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.

As a primary measure of our interest rate risk, we employ a financial model derived from our assets and liabilities which simulates the effect of various changes in interest rates on our projected net interest income. This financial model is our principal tool for measuring and managing interest rate risk. Many assumptions regarding the timing and sensitivity of our assets and liabilities to a change in interest rates are made. We continually review and update these assumptions. This model is updated monthly for changes in our assets and liabilities and we model different interest rate scenarios based upon current and projected economic and interest rate conditions. We analyze the results of these simulations and develop tactics and strategies to attempt to mitigate, where possible, the projected unfavorable impact of various interest rate scenarios on our projected net interest income. We also develop tactics and strategies to increase our net interest margin and net interest income that are consistent with our operating policies.

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Commitments

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  These instruments involve, to varying degrees, elements of credit 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.  Unused commercial lines of credit, which comprise a substantial portion of these commitments, generally expire within a year from their date of origination.  At March 31, 2011, total unfunded loan commitments were approximately $66.3 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 March 31, 2011, commitments under standby letters of credit aggregated approximately $1.6 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 available borrowing capacity from various sources as discussed in the “Capital and Liquidity” section above.

Item 3.  Quantitative and Qualitative 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 estimated interest rate risk as of March 31, 2011 was analyzed using simulation analysis of the Company’s sensitivity to changes in net interest income under varying assumptions for changes in market interest rates.  The Bank uses standardized assumptions run against Bank data by an outsourced provider of Asset liability modeling.  The model derives expected interest income and interest expense resulting from an immediate two percentage point increase or decrease parallel shift in the yield curve.  The standard parallel yield curve shift uses the implied forward rates and a parallel shift in interest rates to measure the relative risk of change in the level of interest rates.  

The analysis indicates an immediate 200 basis point parallel interest rate increase would result in a decrease in net interest income of approximately $1.06 million or -2% over a twelve month period.  While a 200 basis point parallel interest rate increase ramped over twenty four months would result in an increase in net interest income of approximately $1.94 million or 4% over a twelve month period.

The projected impact on our net interest income of a 200 basis point parallel increase of the yield curve and 12 month ramped 200 basis point parallel increase of interest rates are summarized below:

	March 31, 2011
	Immediate Parallel Shift		Ramped Parallel Shift
Twelve Month Period		+2%		+2%
Percentage change in net interest income		-2%		+4%

 We attempt to manage and moderate the variability of our net interest income due to changes in the level of interest rates and the slope of the yield curve by generating adjustable rate loans and managing the interest rate sensitivity of our investment securities, wholesale funding, and Fed Funds positions consistent with the re-pricing characteristics of our deposits and other interest bearing liabilities.  The above projections assume that management does not take any measures to change the interest rate sensitivity of the Bank during the simulation period.

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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 as of the end of the period covered by this report. Based upon that evaluation, they have concluded that the Corporation’s disclosure controls and procedures are effective to ensure that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and are also designed to ensure that the information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

There have been no significant changes in the Company's internal control over financial reporting during the three month period ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

There are no material pending legal proceedings to which the Company or its subsidiaries is a party or to which any of the Company’s or its subsidiaries’ property is subject. In addition, the Company is not aware of any threatened litigation, unasserted claims or assessments that could have a material adverse effect on the Company’s business, operating results or condition.

Item 1a. Risk Factors

There has not been any material change in the risk factor disclosure from that contained in the Company’s 2010 Annual Report on Form 10-K for the year ended December 31, 2010.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

There were no repurchases (both open market and private transactions) during the three months ended March 31, 2011 of any of the Company’s securities registered under Section 12 of the Exchange Act, by or on behalf of the Company, or any affiliated purchaser of the Company.

The Company has not completed any unregistered sales of equity securities during the three months ended March 31, 2011.

Item 3.  Defaults upon Senior Securities

None.

Item 4.  Removed and Reserved

Item 5.  Other Information

Not applicable.

Item 6.  Exhibits

 (a) Exhibits

Exhibit  2.1	-	Agreement of Merger of TIB Bank with and into NAFH National Bank, by and between NAFH National Bank and TIB Bank, dated as of April 27, 2011 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 3, 2011)
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

29

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:  May 16, 2011	/s/ R. Eugene Taylor
	R. Eugene Taylor Chairman and Chief Executive Officer
Date:  May 16, 2011	/s/ Christopher G. Marshall
	Christopher G. Marshall Chief Financial Officer (Principal Accounting Officer)