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: 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 June 30, 2009, and statements of operations for the three months and six months ended June 30, 2009. Operating results for the three months and six months ended June 30, 2009 are not necessarily indicative of trends or results to be expected for the year ended December 31, 2009. TIB Financial's results of operations during 2009 include the operations of TIB Bank, The Bank of Venice and Naples Capital Advisors as well as the operations of nine former branches of Riverside Bank of the Gulf Coast ("Riverside") subsequent to their assumption on February 13, 2009.

Quarterly Summary

For the second quarter of 2009, the Company reported a net loss before dividends on preferred stock of $4.9 million compared to a net loss of $4.0 million for the second quarter of 2008. The net loss allocated to common shareholders was $5.5 million, or $0.38 per share, for the second quarter of 2009, compared to a net loss of $4.0 million, or $0.28 per share, for the comparable 2008 quarter.

The higher net loss for the second quarter of 2009 compared to net loss during the second quarter of 2008 was due to higher non-interest expenses and partially offset by higher non-interest income.

In response to the increase in non-performing loans, further contraction of economic activity in local markets and increased net charge-offs, the second quarter results include a provision for loan losses of $5.8 million. The provision reflects net charge-offs of $5.8 million as the reserve for loan losses remained relatively unchanged at $25.4 million and amounted to 2.05% of loans at June 30, 2009.

Total nonaccrual loans increased by $16.2 million during the quarter to $61.8 million. Of the loans placed on nonaccrual during the quarter, $12 million related to two land development loans which we currently have reviewed and determined that no specific reserves are necessary at this time. A third relationship, a $4.8 million land development loan, was placed on nonaccrual and required the allocation of a $491,000 specific reserve.

TIB Financial reported total assets of $1.80 billion as of June 30, 2009, representing 12% asset growth from December 31, 2008. Total loans increased 1% to $1.24 billion from $1.22 billion at December 31, 2008 as growth in our commercial loan and residential loan portfolios offset an $18.8 million, or 23%, decline in indirect auto loans. Total deposits of $1.39 billion as of June 30, 2009 increased $259.2 million, or 23%, from December 31, 2008 due to the assumption of approximately $317 million of deposits and the operations of nine branches of the former Riverside from the FDIC.

We continue to execute our strategic plan and are reinvesting the proceeds provided from the assumption of the deposits of the former Riverside Bank of the Gulf Coast into quality loans generated through our relationship based approach. Operationally, we successfully completed the related information systems conversion at the end of June and are now able to manage our new customer relationships with an integrated and consistent approach.

As we aggressively address the challenges presented by the current economic and operating environment we continue to focus on new business initiatives, improvement of operating performance and resolution of non-performing assets. Significant developments are outlined below.

· The net interest margin increased 13 basis points to 2.78% during the quarter in comparison to 2.65% in the first quarter. The increase is due primarily to the investment strategy related to the acquired Riverside deposits and the continued reduction of the interest cost of our deposits and other funding. The net interest margin continues to be adversely impacted by the level of non-accrual loans and nonperforming assets, which reduced the margin by approximately 18 basis points. We continue to maintain a higher level of money market and other short-term investments in light of the continuing economic stress and elevated volatility of financial markets, which also reduced the margin.

· We continue to focus on relationship based lending and generated approximately $29 million of commercial loans and originated $42 million of residential mortgages.

· Under challenging and volatile financial market conditions, 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 $120 million as of quarter end while TIB private bankers generated net growth of deposits during the quarter of $8 million resulting in total deposits of $56 million.

· With respect to the Riverside transaction, during the second quarter, we closed one small branch office, continued to reduce the operation expenses of the acquired offices and have retained approximately 92% of the core deposits assumed while maintaining the attractive mix and reducing the interest cost of the deposit base. The planned relocation of one office and the completion of the conversion of the information systems is expected to result in additional cost savings beginning in the third quarter.

· Our indirect auto loan portfolio declined $8.6 million during the quarter to $63.2 million, or 5% of total loans. Non-performing loans in this business segment decreased to $1.3 million in comparison to $1.7 million at March 31, 2009 and charge-offs during the quarter declined to $1.8 million compared to $2.2 million in the first quarter. Additionally, total delinquency of indirect auto loans declined to 6% at quarter end down from 7% from the first quarter and 9% at December 31, 2008.

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Three Months Ended June 30, 2009 and 2008:

Results of Operations

For the second quarter of 2009, our operations resulted in a net loss before dividends on preferred stock of $4.9 million compared to a net loss of $4.0 million in the previous year's quarter. Loss allocated to common shareholders was $0.38 per share for the 2009 quarter as compared a net loss of $0.28 per share for the comparable 2008 quarter.

Annualized loss on average assets allocated to common shareholders for the second quarter of 2009 was 1.23% compared to a loss on average assets of 1.07% for the second quarter of 2008. Loss on average shareholders' equity was 16.72% for the second quarter of 2009 compared to a loss of 15.77% for the same quarter of 2008.

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.

Net interest income was approximately $11.7 million for the three months ended June 30, 2009, an increase from the $11.4 million reported for the same period last year due to the significant increase in interest earning assets and interest bearing liabilities as a result of the assumption of the Riverside deposits and investment of the proceeds and the growth of the Company. The 47 basis point decrease in the net interest margin from 3.25% to 2.78% substantially offset the effect of the growth of the balance sheet.

The net interest margin continues to be adversely impacted by the level of nonaccrual loans and non-performing assets which reduced the margin by 18 basis points during the second quarter of 2009. The utilization of the proceeds from the Riverside transaction to reduce borrowings and brokered time deposits and purchase investment securities further reduced the net interest rate spread because a greater portion of the Company's assets were comprised of lower yielding investment securities and short-term money market investments. We continue to maintain a higher level of money market and other short-term investments in light of the continuing economic stress and elevated volatility of financial markets, which has also reduced the margin.

The $919,000 decrease in interest and dividend income for the second quarter of 2009 compared to the second quarter of 2008 was mainly attributable to decreased average rates on loan balances and investment securities due primarily to the 400 basis point decrease in the prime rate and significant declines in other market rates combined with a higher level of non-performing loans. Partially offsetting this decline were decreases in the interest cost of transaction accounts, time deposits and borrowings due to commensurate decreases in interest rates. Increases in balances and changes in product mix, favoring higher yielding products, led to an increase in interest expense on savings deposits.

Interest rates during the second quarter of 2009 were significantly lower than the prior year period due to the highly stimulative monetary policies undertaken by the Federal Reserve beginning in the third quarter of 2007. As a result of the actions taken by the Federal Reserve, the prime rate declined from 5.25% in the second quarter of 2008 to 3.25% by the fourth quarter of 2008 and has remained at that level in 2009.

Due to the rapid and significant decline in the prime rate and the overall interest rate environment, the yield on our loans declined 98 basis points. The yield of our interest earning assets declined 123 basis points in the second quarter of 2009 compared to the second quarter of 2008 due to the reduction in the yield on our loans and the significant increase in lower yielding investment securities and short-term money market investments.

The lower interest rate environment also resulted in a significant decline in the interest cost of interest bearing liabilities. The average interest cost of interest bearing deposits declined 100 basis points and the overall cost of interest bearing liabilities declined by 93 basis points compared to the second quarter of 2008. Due to the rapidly declining interest rate environment, highly competitive deposit pricing on a local and national basis and the longer term structure of liabilities and their repricing sensitivity, we were not able to reduce the cost of our deposits and borrowings as quickly and to the same extent as the decline in our earning asset yield.

Going forward, we expect short-term market interest rates to remain low for an extended period of time. We expect deposit costs to continue to decline but they may decrease more slowly or to a lesser extent than loan and investment 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 to increase net interest income are the composition of earning assets and the overall growth of our balance sheet.

Provision for Loan Losses

The provision for loan losses increased to $5.8 million in the second quarter of 2009 compared to $5.7 million in the comparable prior year period. The higher provision for loan losses in 2009 reflects the continued financial challenges of our consumer and commercial customers. While we continue to observe an increase in the number of residential real estate unit sales as compared to the prior year period and even the prior quarter, the impact of foreclosures and distressed sales is evident in the reduced value of real estate. Additionally, we experienced higher levels of non-performing loans and delinquencies and higher levels of net charge-offs. Net charge-offs were $5.8 million, or 1.89% of average loans on an annualized basis, during the three months ended June 30, 2009, compared to $4.9 million, or 1.70% of average loans on an annualized basis, for the same period in 2008. The charge-offs resulting from the indirect loan portfolio were $1.8 million and $4.0 million in the second quarter of 2009 and 2008, respectively.

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Our provision for loan losses in future periods will be influenced by the loss potential of impaired loans, non-performing loans and net charge offs, which cannot be reasonably predicted.

The indirect loan portfolio experienced sharp increases, beyond our historical experience, in delinquencies beginning in the second half of 2007. This increase in delinquency reflects, in part, the significant increase in unemployment in the Fort Myers, Lee County area where our indirect auto loans are concentrated. In response, our collection and liquidation operations accelerated dramatically, resulting in substantially all of our vehicles being disposed through wholesale rather than retail channels. Contemporaneously, the market for used vehicles became increasingly saturated and a surge in fuel prices reduced demand for used vehicles, and especially for the less fuel efficient vehicles like light trucks and sport utility vehicles. These factors combined to lower our realization upon disposition on a per vehicle basis and increase the volume and severity of the losses incurred. While fuel prices have moderated, the high level of unemployment continues to adversely impact the delinquency and loan losses in this loan portfolio segment.

                                    Indirect Loan Portfolio Statistics
                                                        As of or For the Quarter Ended
(Dollars in thousands)              Jun 2009       Mar 2009       Dec 2008       Sept 2008       June 2008
30-89 days delinquent              $    2,820     $    3,245     $    5,542     $     3,782     $     2,193
Non accrual                        $    1,275     $    1,677     $    1,878     $     1,317     $     1,220
Total delinquencies                      6.47 %         6.85 %         9.05 %          5.56 %          3.44 %
Net charge offs for the quarter    $    1,842     $    2,213     $    2,300     $     2,707     $     3,951
Net (gain)/loss on disposition
of vehicles                        $      (37 )   $      (79 )   $       40     $       149     $       (55 )
Number of vehicles sold during
the quarter                               233            267            638             314             271
External collection costs
recognized during the quarter      $      118     $      104     $      464     $       331     $       306

We continuously monitor and actively manage 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. Due to the economic slowdown discussed above, both individual and business customers are exhibiting increasing difficulty in timely payment of their loan obligations. We believe that this trend may continue in the near term. Consequently, we may experience higher levels of delinquent and non-performing loans, which may require higher provisions for loan losses, higher charge-offs and higher collection related expenses in future periods.

Excluding net gains/ (losses) on investment securities, non-interest income was $2.2 million in the second quarter of 2009 compared to $1.5 million in the second quarter of 2008. The increase is due primarily to higher deposit service charges, fees from the origination and sale of residential mortgages in the secondary market and investment advisory fees. The former Riverside operations contributed $553,000 of service charge and other income during the period.

The following table represents the principal components of non-interest income for the second quarter of 2009 and 2008:

(Dollars in thousands)                            2009         2008
Service charges on deposit accounts              $ 1,202     $    719
Investment securities gains, net                      95       (1,912 )
Fees on mortgage loans sold                          318          213
Investment advisory fees                             228          136
Debit card income                                    213          196
Earnings on bank owned life insurance policies       130          123
Other                                                146          156
Total non-interest income                        $ 2,332     $   (369 )

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Non-interest Expense

Non-interest expense for the second quarter of 2009 was $16.2 million. This represented a 36.1% increase over the prior year period which totaled $11.9 million. The second quarter non-interest expense includes approximately $2.3 million attributable to the former Riverside operations.

Salaries and employee benefits increased $710,000 in the second quarter of 2009 relative to the second quarter of 2008 and includes $631,000 in the second quarter of 2009 reflecting the hiring of new employees in connection with the Riverside transaction. The balance of the increase reflects cost of living adjustments and merit increases for our employees.

For the second quarter of 2009, there was a $253,000 increase in occupancy expense as compared to the second quarter of 2008. Excluding the $483,000 of occupancy costs related to the operations of the former Riverside branch network and facilities, the Company would have had a $230,000 decrease in occupancy costs for the quarter. This decrease is a result of our continued focus on consolidating facilities and containing operating costs.

Other expenses increased $3.3 million in the second quarter of 2009 relative to the second quarter of 2008. Legal and other professional expenses increased to $860,000 due principally to approximately $200,000 of expenses incurred in the integration of the Riverside information systems and higher legal fees incurred in managing and resolving non-performing loans and assets. The second quarter of 2009 includes $887,500 in total other expenses attributable to the former Riverside operations. FDIC insurance assessments increased by $1.5 million relative to the second quarter of 2008 due primarily to a special assessment of approximately $800,000, higher deposits and a higher deposit insurance premium rate. The special assessment was charged to all FDIC insured institutions during the quarter based on assets. OREO write downs and expenses of $1.1 million during the second quarter of 2009 relate primarily to $632,000 of losses recognized on the sales of six properties. Additionally, market value adjustments of $239,000 were recognized on six other properties due to the decline in real estate values reflected in updated appraisals. Other OREO expenses include ownership costs such as real estate taxes, insurance and other costs to own and maintain the properties.

The following table represents the principal components of non-interest expense for the second quarter of 2009 and 2008:

                                                             2009                            2008
                                                          Riverside        Excluding
(Dollars in thousands)                       Total        Operations       Riverside
Salary and employee benefits               $   7,068     $        631     $      6,437     $   6,358
Net occupancy expense                          2,438              483            1,955         2,186
Legal, and other professional                    860              258              602           431
Computer services                                663              125              538           572
Collection costs                                 118                -              118           306
Postage, courier and armored car                 280               69              211           222
Marketing and community relations                241               14              227           238
Operating supplies                               194               69              125           145
Directors' fees                                  221                -              221           210
Travel expenses                                   93                3               90           105
FDIC and state assessments                     1,751              354            1,397           286
Amortization of intangibles                      419              284              135           137
Net gains on disposition of repossessed
assets                                           (36 )              -              (36 )         (50 )
OREO write downs and expenses                  1,086                -            1,086            71
Other operating expense                          762               46              716           647
Total non-interest expense                 $  16,158     $      2,336     $     13,822     $  11,864

Six Months Ended June 30, 2009 and 2008:

Results of Operations

For the first six months of 2009, our operations resulted in a net loss before dividends on preferred stock of $8.3 million compared to a net loss of $5.5 million in the first half of the previous year. Loss allocated to common shareholders was $0.66 per share for the first six months of 2009 as compared to a net loss of $0.39 per share for the comparable 2008 period.

Annualized loss on average assets allocated to common shareholders for the first six months of 2009 was 0.94% compared to a loss on average assets of 0.73% for the first six months of 2008. Loss on average shareholders' equity was 13.83% for the first six months of 2009 compared to a loss of 10.88% for the same period of 2008.

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.

Net interest income was approximately $22.5 million for the six months ended June 30, 2009, an increase from the $22.3 million reported for the same period last year due to the significant increase in interest earning assets and interest bearing liabilities as a result of the assumption of the Riverside deposits and investment of the proceeds and the growth of the Company. The 48 basis point decrease in the net interest margin from 3.19 to 2.71% substantially offset the effect of the growth of the balance sheet.

The net interest margin continues to be adversely impacted by the level of nonaccrual loans and non-performing assets which reduced the margin by 16 basis points during the six months ended June 30, 2009. The utilization of the proceeds from the Riverside transaction to reduce borrowings and brokered time deposits and purchase investment securities further reduced the net interest rate spread because a greater portion of the Company's assets were comprised of lower yielding investment securities and short-term money market investments. We continue to maintain a higher level of money market and other short-term investments in light of the continuing economic stress and elevated volatility of financial markets, which has also reduced the margin.

The $3.0 million decrease in interest and dividend income for the first half of 2009 compared to the first half of 2008 was mainly attributable to decreased average rates on loan balances and investment securities due primarily to the 400 basis point decrease in the prime rate and the significant decline in other interest rates combined with a higher level of non-performing loans. Partially offsetting this decline were decreases in the interest cost of transaction accounts, time deposits and borrowings due to decreases in deposit interest rates. Increases in balances and changes in product mix, favoring higher yielding products, led to an increase in interest expense on savings deposits.

Interest rates during the six months of 2009 were significantly lower than the prior year period due to the highly stimulative monetary policies undertaken by the Federal Reserve beginning in the third quarter of 2007. As a result of the actions taken by the Federal Reserve, the prime rate declined from 7.25% in the first quarter of 2008 to 3.25% by the fourth quarter of 2008 and has remained at that level in 2009.

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Due to the rapid and significant decline in the prime rate and the overall interest rate environment, the yield on our loans declined 110 basis points. The yield of our interest earning assets declined 136 basis points in the first half of 2009 compared to the first half of 2008 due to the reduction in the yield on our loans and the significant increase in lower yielding investment securities and short-term money market investments.

The lower interest rate environment also resulted in a significant decline in the interest cost of interest bearing liabilities. The average interest cost of interest bearing deposits declined 107 basis points and the overall cost of interest bearing liabilities also declined by 107 basis points compared to the . . .