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 September 30, 2009, and statements of operations for the three months and nine months ended September 30, 2009. Operating results for the three months and nine months ended September 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, 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 third quarter of 2009, the Company reported a net loss before dividends and accretion on preferred stock of $8.1 million compared to a net loss of $2.2 million for the third quarter of 2008. The net loss allocated to common shareholders was $8.7 million, or $0.59 per share, for the third quarter of 2009, compared to a net loss of $2.2 million, or $0.15 per share, for the comparable 2008 quarter.

The higher net loss for the third quarter of 2009 compared to net loss during the third quarter of 2008 was primarily due to the provision for loan losses of $14.8 million and an increase in non-interest expenses of $3.2 million, partially offset by a $1.3 million increase in net investment security gains realized, a $1.2 million gain from the life insurance policy covering a deceased former employee, and increases in net interest income, service charges on deposit accounts, fees on mortgage loans sold and investment advisory and trust fees.

In response to the increase in non-performing loans, declines in collateral values of other nonperforming and impaired loans, further contraction of economic activity in our local markets and increased net charge-offs, the third quarter results include a provision for loan losses of $14.8 million. Total net charge-offs were $8.1 million and include $4.0 million of charge-downs to updated net realizable value for $15.5 million of loans foreclosed and transferred to OREO. The reserve for loan losses increased 26% to $32.1 million and amounted to 2.61% of loans at September 30, 2009.

Total nonaccrual loans increased by $4.4 million during the quarter to $66.2 million. Excluding indirect and consumer loans, approximately $30.8 million of loans were placed on nonaccrual during the quarter. Partially offsetting this increase were $4.5 million of net loan principal paid down and loans returned to accrual, $6.2 million of loans charged down and $15.5 million of loans foreclosed and transferred to other real estate owned.

Loans classified as nonaccrual during the quarter had the following impact on the provision and allowance for loan losses:

· two residential housing developer loan relationships, totaling $6.7 million, were reviewed and we determined that based upon the most recent appraisals available, no specific reserves were deemed necessary at this time (one of the relationships was paid down $2.5 million in October due to the sale of a house which partially collateralized the loan);

· one residential housing developer loan relationship, totaling $6.9 million, was reviewed and required a provision and specific reserve allocation of $502,000;

· two loans, one collateralized by a hotel and the other collateralized by a mixed use residential/retail building in southwest Florida, totaling $7.8 million, for which we provided additional reserves of $618,000 during the quarter resulting in allocated specific reserves of $2.0 million; and

· numerous smaller loans, primarily collateralized by commercial and residential real estate totaling $9.5 million, for which we provided additional reserves of $1.7 million during the quarter resulting in allocated specific reserves of $2.1 million.

Additionally, $7.5 million of the provision for loan losses was allocated to increase reserves on other nonaccrual and impaired loans in the current quarter. Such allocations were largely due to loans classified as impaired during the quarter and our procedures of periodically updating appraisals on nonaccrual and impaired loans. These allocations resulted in an increase of the ratio of the allowance for loan losses to nonperforming loans to 48%, as of September 30, 2009, from 41% as of June 30, 2009.

The reappraisal of $15.5 million of loans at the time of their transfer to OREO in the quarter resulted in aggregate charge-downs of $4.0 million and net of the specific reserves of $1.1 million, resulted in an additional provision for loan losses of $2.9 million.

TIB Financial reported total assets of $1.72 billion as of September 30, 2009, an increase of 7% from December 31, 2008. Total loans remained relatively flat at $1.23 billion compared to $1.22 billion at December 31, 2008 as growth in the commercial loan and residential loan portfolios offset a $26.2 million, or 32%, decline in indirect auto loans and a $32.7 million, or 22%, decline in construction and vacant land loans. Total deposits of $1.33 billion as of September 30, 2009 increased $198.0 million, or 17%, from December 31, 2008 due principally to the assumption of approximately $317 million of deposits and the operations of nine branches of the former Riverside Bank of the Gulf Coast from the FDIC in February 2009.

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. We remain very pleased with the level of retention of our new customers. Additionally, we completed the merger of our Bank of Venice subsidiary into TIB Bank. This merger will provide further operational cost savings and improve product availability for our Sarasota County customers.

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 other developments are outlined below.

· The net interest margin increased 8 basis points to 2.86% during the quarter in comparison to 2.78% in the second quarter 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 25 basis points during the quarter. We continue to maintain a higher level of 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 $10 million of new commercial loans and originated $37 million of residential mortgages during the period.

· 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 $144 million as of quarter end.

· With respect to the Riverside transaction, during the third quarter, we have retained approximately 86% of the core deposits assumed while maintaining the attractive mix and reducing the interest cost of the deposit base. We further reduced operating expenses of these operations by over $700,000 compared to the second quarter.

· At the end of the quarter, we completed the merger of The Bank of Venice into TIB Bank, integrated its operations and converted its information system.

· Our indirect auto loan portfolio declined $7.4 million, or 12%, during the quarter to $55.8 million, or 5% of total loans. Non-performing loans in this business segment decreased to $1.2 million in comparison to $1.3 million at June 30, 2009 and charge-offs during the quarter remained relatively constant at $1.8 million compared to the second quarter. Additionally, total delinquency of indirect auto loans was relatively unchanged from the second quarter.

Three Months Ended September 30, 2009 and 2008:

Results of Operations

For the third quarter of 2009, our operations resulted in a net loss before dividends on preferred stock of $8.1 million compared to a net loss of $2.2 million in the previous year's quarter. Loss allocated to common shareholders was $0.59 per share for the 2009 quarter as compared a net loss of $0.15 per share for the comparable 2008 quarter.

Annualized loss on average assets allocated to common shareholders for the third quarter of 2009 was 1.97% compared to a loss on average assets of 0.56% for the third quarter of 2008. The annualized loss on average shareholders' equity was 28.78% for the third quarter of 2009 compared to a loss of 8.77% 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 $11.8 million for the three months ended September 30, 2009, an increase from the $11.7 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 32 basis point decrease in the net interest margin from 3.18% to 2.86% substantially offset the effect of the growth of the balance sheet on net interest income.

The net interest margin of 2.86% during the quarter increased 8 basis points in comparison to 2.78% in the second quarter of 2009 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 nonaccrual loans and non-performing assets, which reduced the margin by 25 basis points during the third quarter of 2009. We continue to maintain a higher level of short-term investments in light of the continuing economic stress and elevated volatility of financial markets, which also reduced the margin.

The $1.9 million decrease in interest and dividend income for the third quarter of 2009 compared to the third quarter of 2008 was mainly attributable to decreased average rates on loan balances and investment securities due primarily to the 175 basis point decrease in the prime rate and significant declines in other market rates during the fourth quarter of 2008 and continuing throughout 2009 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 paid on deposits and borrowings. 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 third 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 5.00% in the third 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, the overall lower interest rate environment and the higher level of non-accrual loans, the yield on our loans declined 96 basis points. The yield of our interest earning assets declined 110 basis points in the third quarter of 2009 compared to the third quarter of 2008 due to the reduction in the yield on our loans and the significant increase in the volume of 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 98 basis points and the overall cost of interest bearing liabilities declined by 90 basis points compared to the third 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, 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 composition of earning assets, a reduction of the level of non-performing assets, a reduction of interest rates paid on our deposits and the overall growth of our balance sheet.

The following table presents average balances of the Company, the taxable-equivalent interest earned, and the rate paid thereon during the three months ended September 30, 2009 and September 30, 2008.

                                                   2009                                                    2008
                            Average                                                    Average          Income/
(Dollars in thousands)      Balances        Income/ Expense       Yields/ Rates        Balances         Expense        Yields/ Rates
Interest-earning
assets:
Loans (1)(2)              $  1,242,296     $          17,281                5.52 %   $  1,210,300     $    19,718                6.48 %
Investment securities
(2)                            350,981                 3,035                3.43 %        188,814           2,194                4.62 %
Money Market Mutual
Funds                            4,925                     2                0.16 %              -               -                   -
Interest-bearing
deposits in other banks         27,279                    18                0.26 %          1,151               7                2.27 %
Federal Home Loan Bank
stock                           10,447                    44                1.67 %         10,863              78                2.87 %
Federal funds sold and
securities sold under
agreements to resell             1,811                     -                0.00 %         55,680             282                2.01 %
Total interest-earning
assets                       1,637,739                20,380                4.94 %      1,466,808          22,279                6.04 %

Non-interest-earning
assets:
Cash and due from banks         28,897                                                     18,259
Premises and equipment,
net                             41,352                                                     37,074
Allowance for loan
losses                         (23,696 )                                                  (16,506 )
Other assets                    78,105                                                     55,533
Total
non-interest-earning
assets                         124,658                                                     94,360
Total assets              $  1,762,397                                               $  1,561,168

Interest-bearing
liabilities:
Interest-bearing
deposits:
NOW accounts              $    186,597                   311                0.66 %   $    178,698             712                1.59 %
Money market                   208,176                   646                1.23 %        143,737             753                2.08 %
Savings deposits               127,136                   591                1.84 %         48,850             125                1.02 %
Time deposits                  666,856                 5,053                3.01 %        603,353           6,197                4.09 %
Total interest-bearing
deposits                     1,188,765                 6,601                2.20 %        974,638           7,787                3.18 %

Other interest-bearing
liabilities:
Short-term borrowings
and FHLB advances              202,213                 1,284                2.52 %        260,207           1,958                2.99 %
Long-term borrowings            63,000                   679                4.28 %         63,000             821                5.18 %
Total interest-bearing
liabilities                  1,453,978                 8,564                2.34 %      1,297,845          10,566                3.24 %

Non-interest-bearing
liabilities and
shareholders' equity:
Demand deposits                178,795                                                    142,839
Other liabilities               18,009                                                     20,819
Shareholders' equity           111,615                                                     99,665
Total
non-interest-bearing
liabilities and
shareholders' equity           308,419                                                    263,323
Total liabilities and
shareholders' equity         1,762,397                                               $  1,561,168

Interest rate
spread (tax equivalent
basis)                                                                      2.60 %                                               2.80 %
Net interest
income (tax equivalent
basis)                                      $         11,816                                          $    11,713
Net interest margin (3)
(tax equivalent basis)                                                      2.86 %                                               3.18 %

(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.

Changes in Net Interest Income

The table below details the components of the changes in net interest income for
the three months ended September 30, 2009 and September 30, 2008. For each major
category of interest-earning assets and interest-bearing liabilities,
information is provided with respect to changes due to average volumes and
changes due to rates, with the changes in both volumes and rates allocated to
these two categories based on the proportionate absolute changes in each
category.

                                                            2009 Compared to 2008 (1)
                                                                Due to Changes in
                                                                                      Net Increase
(Dollars in thousands)                        Average Volume       Average Rate        (Decrease)
Interest income
Loans (2)                                     $           510     $       (2,947 )   $       (2,437 )
Investment securities (2)                               1,513               (672 )              841
Money Market Mutual Funds                                   2                  -                  2
Interest-bearing deposits in other banks                   23                (12 )               11
Federal Home Loan Bank stock                               (3 )              (31 )              (34 )
Federal funds sold and securities purchased
under agreements to resell                               (282 )                -               (282 )
Total interest income                                   1,763             (3,662 )           (1,899 )

Interest expense
NOW accounts                                               30               (431 )             (401 )
Money market                                              266               (373 )             (107 )
Savings deposits                                          309                157                466
Time deposits                                             603             (1,747 )           (1,144 )
Short-term borrowings and FHLB advances                  (396 )             (278 )             (674 )
Long-term borrowings                                        -               (142 )             (142 )
Total interest expense                                    812             (2,814 )           (2,002 )

Change in net interest income                 $           951     $         (848 )   $          103

(2) Interest income includes 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.

Provision for Loan Losses

The provision for loan losses increased to $14.8 million in the third quarter of 2009 compared to $4.8 million in the comparable prior year period. The higher provision for loan losses in 2009 reflects the national and local market economic recession and 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 $8.1 million, or 2.58% of average loans on an annualized basis, during the three months ended September 30, 2009, compared to $3.4 million, or 1.10% 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 $2.7 million in the third quarter of 2009 and 2008, respectively.

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.

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. For additional information on nonperforming assets and the allowance for loan losses refer to the section entitled Nonperforming Assets and Allowance for Loan Losses below.

Non-interest Income

Excluding net gains/ (losses) on investment securities, non-interest income was $3.5 million in the third quarter of 2009 compared to $1.6 million in the third quarter of 2008. The increase is due primarily to a gain of $1.2 million resulting from the death benefit received from a bank owned life insurance policy covering a former employee. Adding to the increase in non-interest income were 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 $415,000 of service charge and other income during the third quarter of 2009.

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

         (Dollars in thousands)                            2009        2008
         Service charges on deposit accounts              $   988     $   747
         Investment securities gains, net                   1,127        (126 )
         Fees on mortgage loans sold                          340         176
         Investment advisory fees                             279         153
         Debit card income                                    327         186
         Earnings on bank owned life insurance policies       157         123
         Life insurance gain                                1,186           -
         Other                                                195         188
         Total non-interest income                        $ 4,599     $ 1,447

Non-interest Expense

During the third quarter of 2009, non-interest expense increased $3.2 million, or 27%, to $15.2 million compared to $12.0 million for the third quarter of 2008. Of this increase, $1.4 million is attributed to the acquired former . . .