UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q








QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For
      the quarterly period ended
            
            Commission
      File NumberJUNE
      30, 2008
            
            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   £NoIndicate
      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
            T
      Accelerated filer
            £
      Non-accelerated filer£ Smaller
      reporting companyIndicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).  £Yes    TNoIndicate
      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
            
            14,168,997Class
            
            Outstanding
      as of  July 31, 2008








TIB
FINANCIAL CORP.


FORM
10-Q


For the
Quarter Ended June 30, 2008








INDEX







PART I.  FINANCIAL INFORMATION
            1Item
      1
            Financial
      Statements
            1Item
      2
            Management’s
      Discussion and Analysis of Financial Condition and Results
      of  Operations
            14Item
      3
            Quantitative
      and Qualitative Disclosures About Market
Risk
            30Item
      4
            Controls and
      Procedures
            31PART
      II.  OTHER INFORMATION
            32Item
      1a
            Risk
      Factors
            32Item
      4
            Submission of
      Matters to a Vote of Security Holders
            32Item
      5
            Other
      Information
            32Item
    6
            Exhibits
            32
















PART
I.  FINANCIAL INFORMATION






Item
1.  Financial Statements







TIB
      FINANCIAL CORP.
              CONSOLIDATED
      BALANCE SHEETS
              (Dollars
      in thousands, except per share amounts)June
      30,
              2008
            
            
            December
      31, 2007(Unaudited)AssetsCash
      and due from banks
            
            $
            29,080
            
            
            $
            22,315Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            76,157
            
            
            
            48,744Cash
      and cash equivalents
            
            
            105,237
            
            
            
            71,059Investment
      securities available for sale
            
            
            187,883
            
            
            
            160,357Loans,
      net of deferred loan costs and fees
            
            
            1,198,526
            
            
            
            1,129,156Less:
      Allowance for loan losses
            
            
            16,627
            
            
            
            14,973Loans,
      net
            
            
            1,181,899
            
            
            
            1,114,183Premises
      and equipment, net
            
            
            37,310
            
            
            
            38,284Goodwill
            
            
            5,147
            
            
            
            4,686Intangible
      assets, net
            
            
            3,316
            
            
            
            2,772Accrued
      interest receivable and other assets
            
            
            58,029
            
            
            
            53,398Total
      Assets
            
            $
            1,578,821
            
            
            $
            1,444,739Liabilities
      and Shareholders’ EquityLiabilitiesDeposits:Noninterest-bearing
      demand
            
            $
            158,210
            
            
            $
            143,381Interest-bearing
            
            
            979,980
            
            
            
            906,577Total
      deposits
            
            
            1,138,190
            
            
            
            1,049,958Federal
      Home Loan Bank (FHLB) advances
            
            
            167,900
            
            
            
            140,000Short-term
      borrowings
            
            
            80,376
            
            
            
            77,922Long-term
      borrowings
            
            
            63,000
            
            
            
            63,000Accrued
      interest payable and other liabilities
            
            
            30,206
            
            
            
            17,619Total
      liabilities
            
            
            1,479,672
            
            
            
            1,348,499Shareholders’
      equityPreferred
      stock – no par value: 5,000,000 shares authorized, 0 shares
      issued
            
            
            -
            
            
            
            -Common
      stock - $.10 par value: 40,000,000 shares authorized, 14,239,052 and
      12,980,885 shares issued, 14,169,160 and 12,910,993 shares
      outstanding
            
            
            1,424
            
            
            
            1,298Additional
      paid in capital
            
            
            67,185
            
            
            
            56,120Retained
      earnings
            
            
            31,822
            
            
            
            39,151Accumulated
      other comprehensive income (loss)
            
            
            (713
            )
            
            
            240Treasury
      stock, at cost, 69,892 shares
            
            
            (569
            )
            
            
            (569
            )Total
      shareholders’ equity
            
            
            99,149
            
            
            
            96,240Total
      Liabilities and Shareholders’ Equity
            
            $
            1,578,821
            
            
            $
            1,444,739See
      accompanying notes to consolidated financial statements





1


TIB
FINANCIAL CORP.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





Three
      months ended
              June
      30,
            
            
            Six
      months ended
              June
      30,(Dollars
      in thousands, except per share amounts)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Interest
      and dividend incomeLoans,
      including fees
            
            $
            19,278
            
            
            $
            21,398
            
            
            $
            39,428
            
            
            $
            42,356Investment
      securities:Taxable
            
            
            1,928
            
            
            
            1,547
            
            
            
            3,706
            
            
            
            2,981Tax-exempt
            
            
            101
            
            
            
            168
            
            
            
            213
            
            
            
            339Interest-bearing
      deposits in other banks
            
            
            33
            
            
            
            4
            
            
            
            44
            
            
            
            12Federal
      Home Loan Bank stock
            
            
            125
            
            
            
            124
            
            
            
            252
            
            
            
            236Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            312
            
            
            
            709
            
            
            
            1,056
            
            
            
            1,405Total
      interest and dividend income
            
            
            21,777
            
            
            
            23,950
            
            
            
            44,699
            
            
            
            47,329Interest
      expenseDeposits
            
            
            7,882
            
            
            
            9,614
            
            
            
            17,008
            
            
            
            19,143Federal
      Home Loan Bank advances
            
            
            1,315
            
            
            
            1,490
            
            
            
            2,798
            
            
            
            2,960Short-term
      borrowings
            
            
            352
            
            
            
            286
            
            
            
            904
            
            
            
            484Long-term
      borrowings
            
            
            819
            
            
            
            678
            
            
            
            1,724
            
            
            
            1,358Total
      interest expense
            
            
            10,368
            
            
            
            12,068
            
            
            
            22,434
            
            
            
            23,945Net
      interest income
            
            
            11,409
            
            
            
            11,882
            
            
            
            22,265
            
            
            
            23,384Provision
      for loan losses
            
            
            5,716
            
            
            
            632
            
            
            
            8,370
            
            
            
            1,104Net
      interest income after provision for loan losses
            
            
            5,693
            
            
            
            11,250
            
            
            
            13,895
            
            
            
            22,280Non-interest
      incomeService
      charges on deposit accounts
            
            
            719
            
            
            
            657
            
            
            
            1,441
            
            
            
            1,300Investment
      securities losses, net
            
            
            (1,912
            )
            
            
            -
            
            
            
            (1,002
            )
            
            
            -Fees
      on mortgage loans originated and sold
            
            
            213
            
            
            
            406
            
            
            
            445
            
            
            
            939Investment
      advisory fees
            
            
            136
            
            
            
            -
            
            
            
            261
            
            
            
            -Other
      income
            
            
            475
            
            
            
            547
            
            
            
            947
            
            
            
            1,250Total
      non-interest income
            
            
            (369
            )
            
            
            1,610
            
            
            
            2,092
            
            
            
            3,489Non-interest
      expenseSalaries
      and employee benefits
            
            
            6,358
            
            
            
            5,698
            
            
            
            12,411
            
            
            
            11,202Net
      occupancy and equipment expense
            
            
            2,186
            
            
            
            1,977
            
            
            
            4,200
            
            
            
            3,886Other
      expense
            
            
            3,320
            
            
            
            2,513
            
            
            
            8,279
            
            
            
            5,076Total
      non-interest expense
            
            
            11,864
            
            
            
            10,188
            
            
            
            24,890
            
            
            
            20,164Income
      (loss) before income taxes
            
            
            (6,540
            )
            
            
            2,672
            
            
            
            (8,903
            )
            
            
            5,605Income
      tax expense (benefit)
            
            
            (2,506
            )
            
            
            960
            
            
            
            (3,424
            )
            
            
            2,022Net
      Income (Loss)
            
            $
            (4,034
            )
            
            $
            1,712
            
            
            $
            (5,479
            )
            
            $
            3,583Basic
      earnings (loss) per common share
            
            $
            (0.29
            )
            
            $
            0.14
            
            
            $
            (0.40
            )
            
            $
            0.29Diluted
      earnings (loss) per common share
            
            $
            (0.29
            )
            
            $
            0.13
            
            
            $
            (0.40
            )
            
            $
            0.29




See
accompanying notes to consolidated financial statements


2


TIB
FINANCIAL CORP.


Consolidated
Statements of Changes in Shareholders’ Equity


(Unaudited)


(Dollars
in thousands, except per share amounts)





Shares
            
            
            Common
      Stock
            
            
            Additional
      Paid in Capital
            
            
            Retained
      Earnings
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Treasury
              Stock
            
            
            Total
      Shareholders’ EquityBalance,
      April 1, 2008
            
            
            14,142,978
            
            
            $
            1,421
            
            
            $
            66,212
            
            
            $
            36,690
            
            
            $
            (311
            )
            
            $
            (569
            )
            
            $
            103,443Comprehensive
      loss:Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,034
            )
            
            
            
            
            
            
            
            
            
            
            (4,034
            )Other
      comprehensive loss, net of tax benefit of $248:Net
      market valuation adjustment on securities available for
    sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,595
            )Add: reclassification adjustment for
              losses, net of tax of $719
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,193Other
      comprehensive loss, net of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (402
            )Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (4,436
            )Restricted
      stock grants, net of 1,089
              cancellations
            
            
            26,182
            
            
            
            3
            
            
            
            (3
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            172
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            172Private
      placement of common shares
            
            
            
            
            
            
            
            
            
            
            (11
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11
            )Income
      tax effect related to stock based compensation
            
            
            
            
            
            
            
            
            
            
            (19
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (19
            )Stock
      dividend declared, 1%
            
            
            
            
            
            
            
            
            
            
            834
            
            
            
            (834
            )
            
            
            
            
            
            
            
            
            
            
            -Balance,
      June 30, 2008
            
            
            14,169,160
            
            
            $
            1,424
            
            
            $
            67,185
            
            
            $
            31,822
            
            
            $
            (713
            )
            
            $
            (569
            )
            
            $
            99,149







Shares
            
            
            Common
      Stock
            
            
            Additional
      Paid in Capital
            
            
            Retained
      Earnings
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Treasury
              Stock
            
            
            Total
      Shareholders’ EquityBalance,
      April 1, 2007
            
            
            11,954,387
            
            
            $
            1,195
            
            
            $
            41,523
            
            
            $
            45,781
            
            
            $
            (374
            )
            
            $
            -
            
            
            $
            88,125Comprehensive
      income:Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,712
            
            
            
            
            
            
            
            
            
            
            
            1,712Other
      comprehensive loss, net of tax benefit of $638:Net
      market valuation adjustment on securities available for
    sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,023
            )Other
      comprehensive loss, net of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,023
            )Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            689Restricted
      stock grants
            
            
            25,441
            
            
            
            3
            
            
            
            (3
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            170
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            170The
      Bank of Venice acquisition
            
            
            953,844
            
            
            
            95
            
            
            
            13,861
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            13,956Exercise
      of stock options
            
            
            15,756
            
            
            
            2
            
            
            
            97
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            99Cash
      dividends declared, $.0594 per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (769
            )
            
            
            
            
            
            
            
            
            
            
            (769
            )Balance,
      June 30, 2007
            
            
            12,949,428
            
            
            $
            1,295
            
            
            $
            55,648
            
            
            $
            46,724
            
            
            $
            (1,397
            )
            
            $
            -
            
            
            $
            102,270





Continued





3


Shares
            
            
            Common
      Stock
            
            
            Additional
      Paid in Capital
            
            
            Retained
      Earnings
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Treasury
              Stock
            
            
            Total
      Shareholders’ EquityBalance,
      January 1, 2008
            
            
            12,910,993
            
            
            $
            1,298
            
            
            $
            56,120
            
            
            $
            39,151
            
            
            $
            240
            
            
            $
            (569
            )
            
            $
            96,240Cumulative-effect
      adjustment for split-dollar life insurance postretirement
      benefit
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (141
            )
            
            
            
            
            
            
            
            
            
            
            (141
            )Comprehensive
      loss:Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,479
            )
            
            
            
            
            
            
            
            
            
            
            (5,479
            )Other
      comprehensive loss, net of tax benefit of $597:Net
      market valuation adjustment on securities available for
    sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,578
            )Add:
      reclassification adjustment for
              losses, net of tax of
      $377
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            625Other
      comprehensive loss, net of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (953
            )Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (6,432
            )Restricted
      stock grants, net of 1,404
              cancellations
            
            
            31,219
            
            
            
            3
            
            
            
            (3
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            345
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            345Private
      placement of common shares
            
            
            1,212,000
            
            
            
            121
            
            
            
            9,815
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,936Exercise
      of stock options
            
            
            14,948
            
            
            
            2
            
            
            
            96
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            98Income
      tax effect related to stock based compensation
            
            
            
            
            
            
            
            
            
            
            (22
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (22
            )Stock
      dividend declared, 1%
            
            
            
            
            
            
            
            
            
            
            834
            
            
            
            (834
            )
            
            
            
            
            
            
            
            
            
            
            -Cash
      dividends declared, $.0619 per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (875
            )
            
            
            
            
            
            
            
            
            
            
            (875
            )Balance,
      June 30, 2008
            
            
            14,169,160
            
            
            $
            1,424
            
            
            $
            67,185
            
            
            $
            31,822
            
            
            $
            (713
            )
            
            $
            (569
            )
            
            $
            99,149






Shares
            
            
            Common
      Stock
            
            
            Additional
      Paid in Capital
            
            
            Retained
      Earnings
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Treasury
              Stock
            
            
            Total
      Shareholders’ EquityBalance,
      January 1, 2007
            
            
            11,837,732
            
            
            $
            1,184
            
            
            $
            40,502
            
            
            $
            44,620
            
            
            $
            (
      444
            )
            
            $
            -
            
            
            $
            85,862Comprehensive
      income:Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,583
            
            
            
            
            
            
            
            
            
            
            
            3,583Other
      comprehensive loss, net of tax benefit of $595:Net
      market valuation adjustment on securities available for
    sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (953
            )Other
      comprehensive loss, net of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (953
            )Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            2,630Restricted
      stock grants
            
            
            25,441
            
            
            
            3
            
            
            
            (3
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            313
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            313The
      Bank of Venice acquisition
            
            
            953,844
            
            
            
            95
            
            
            
            13,861
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            13,956Exercise
      of stock options
            
            
            132,411
            
            
            
            13
            
            
            
            970
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            983Income
      tax benefit related to stock based compensation
            
            
            
            
            
            
            
            
            
            
            5
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5Cash
      dividends declared, $.1188 per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,479
            )
            
            
            
            
            
            
            
            
            
            
            (1,479
            )Balance,
      June 30, 2007
            
            
            12,949,428
            
            
            $
            1,295
            
            
            $
            55,648
            
            
            $
            46,724
            
            
            $
            (1,397
            )
            
            $
            -
            
            
            $
            102,270




4


TIB
      FINANCIAL CORP.
              CONSOLIDATED
      STATEMENTS OF CASH FLOWS
              INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
              (Unaudited)Six
      Months Ended June 30,(Dollars in
      thousands)
            
            2008
            
            
            2007Cash
      flows from operating activities:Net
      income (loss)
            
            $
            (5,479
            )
            
            $
            3,583Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            1,982
            
            
            
            1,577Provision
      for loan losses
            
            
            8,370
            
            
            
            1,104Deferred
      income tax benefit
            
            
            (2,870
            )
            
            
            (143
            )Investment
      securities net realized gains
            
            
            (910
            )
            
            
            -Write-down
      of investment securities
            
            
            1,912
            
            
            
            -Stock-based
      compensation
            
            
            345
            
            
            
            313Other
            
            
            (183
            )
            
            
            (271
            )Mortgage
      loans originated for sale
            
            
            (26,267
            )
            
            
            (61,274
            )Proceeds
      from sales of mortgage loans
            
            
            29,850
            
            
            
            62,216Fees
      on mortgage loans sold
            
            
            (441
            )
            
            
            (931
            )Increase
      in accrued interest receivable and other assets
            
            
            (3,025
            )
            
            
            (1,294
            )Increase
      (decrease) in accrued interest payable and other
    liabilities
            
            
            13,226
            
            
            
            (2,046
            )Net
      cash provided by operating activities
            
            
            16,510
            
            
            
            2,834Cash
      flows from investing activities:Purchases
      of investment securities available for sale
            
            
            (80,461
            )
            
            
            (24,013
            )Sales
      of investment securities available for sale
            
            
            25,016
            
            
            
            -Repayments
      of principal and maturities of investment securities available for
      sale
            
            
            25,405
            
            
            
            9,391Acquisition
      of Naples Capital Advisors business
            
            
            (1,365
            )
            
            
            -Cash
      equivalents acquired from The Bank of Venice
            
            
            -
            
            
            
            10,176Cash
      paid for The Bank of Venice
            
            
            -
            
            
            
            (568
            )Net
      purchase of FHLB stock
            
            
            (1,269
            )
            
            
            (223
            )Loans
      originated or acquired, net of principal repayments
            
            
            (75,935
            )
            
            
            31,277Purchases
      of premises and equipment
            
            
            (661
            )
            
            
            (2,136
            )Proceeds
      from sale of loans
            
            
            -
            
            
            
            152Proceeds
      from sale of premises, equipment and intangible assets
            
            
            14
            
            
            
            525Net
      cash (used in) provided by investing activities
            
            
            (109,256
            )
            
            
            24,581Cash
      flows from financing activities:Net
      increase in demand, money market and savings accounts
            
            
            21,583
            
            
            
            56,048Net
      increase (decrease) in time deposits
            
            
            66,649
            
            
            
            (98,912
            )Net
      increase in federal funds purchased and securities sold under agreements
      to repurchase
            
            
            2,454
            
            
            
            9,812Increase
      in long term FHLB advances
            
            
            112,900
            
            
            
            50,000Repayment
      of long term FHLB advances
            
            
            (85,000
            )
            
            
            (50,000
            )Repayment
      of notes payable
            
            
            -
            
            
            
            (4,000
            )Proceeds
      from exercise of stock options
            
            
            98
            
            
            
            983Income
      tax effect related to stock-based compensation
            
            
            (22
            )
            
            
            5Proceed
      from private stock offering
            
            
            9,936
            
            
            
            -Cash
      dividends paid
            
            
            (1,674
            )
            
            
            (1,413
            )Net
      cash provided by (used in) financing activities
            
            
            126,924
            
            
            
            (37,477
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            34,178
            
            
            
            (10,062
            )Cash
      and cash equivalents at beginning of period
            
            
            71,059
            
            
            
            55,552Cash
      and cash equivalents at end of period
            
            $
            105,237
            
            
            $
            45,490Supplemental
      disclosures of cash flow:Interest
            
            $
            22,176
            
            
            $
            26,683Income
      taxes
            
            
            125
            
            
            
            1,763Fair
      value of noncash assets acquired
            
            
            -
            
            
            
            68,229Fair
      value of liabilities assumed
            
            
            -
            
            
            
            63,673Fair
      value of common stock and stock options issued
            
            
            -
            
            
            
            13,956See
      accompanying notes to consolidated financial statements


5
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)


Note
1 – Basis of Presentation & Accounting Policies





TIB
Financial Corp. is a financial holding company headquartered in Naples,
Florida.  TIB Financial Corp. (the “Company”) is a multi-bank holding
company which owns and operates TIB Bank and The Bank of Venice, with a total of
twenty banking offices in Florida that are located in Monroe, Miami-Dade,
Collier, Lee, Highlands and Sarasota counties. On January 2, 2008, the Company
acquired Naples Capital Advisors, Inc., a registered investment
advisor.





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.  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, 2007.





The
consolidated statements include the accounts of TIB Financial Corp. and its
wholly-owned subsidiaries, TIB Bank, The Bank of Venice (subsequent to its
acquisition on April 30, 2007), and Naples Capital Advisors, Inc. (“NCA”;
subsequent to its acquisition on January 2, 2008) collectively known as the
Company.  All significant inter-company accounts and transactions have
been eliminated in consolidation.  In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.  Certain amounts previously
reported on have been reclassified to conform to the current period
presentation. The share and per share amounts discussed throughout this document
have been adjusted to account for the effects of the one percent stock dividend
distributed July 17, 2008 to shareholders of record on July 7,
2008.





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 “Banks” means TIB Bank and The Bank of
Venice.





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
allowance for loan losses is a valuation allowance for probable incurred credit
losses, which is increased by the provision for loan losses and decreased by
charge-offs less recoveries.  Loan losses are charged against the
allowance when management believes the uncollectiblity of a loan balance is
confirmed.  Subsequent recoveries, if any, are credited to the
allowance.  Management estimates the allowance balance required based
on factors including past loan loss experience, the nature and volume of the
portfolio, information about specific borrower situations and estimated
collateral values, economic conditions, and other
factors.  Allocations of the allowance may be made for specific loans,
but the entire allowance is available for any loan that, in management’s
judgment, should be charged off.





The
allowance consists of specific and general components.  The specific
component relates to loans that are individually classified as impaired or loans
otherwise classified as special mention, substandard or doubtful.  The
general component covers non-classified loans and is based on historical loss
experience adjusted for current factors.





A loan is
considered impaired when it is probable that not all principal and interest
amounts will be collected according to the loan contract.  Commercial,
commercial real estate and residential real estate loans are individually
evaluated for impairment.  If a loan is considered to be impaired, a
portion of the allowance is allocated so that the carrying value of the loan is
reported at the present value of estimated future cash flows using the loan’s
existing rate or at the fair value of collateral if repayment is expected solely
from the collateral.  Large groups of smaller balance homogeneous
loans, such as consumer and indirect auto loans, are collectively evaluated for
impairment, and accordingly, they are not separately identified for impairment
disclosures.




6
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)


Investment
Securities and Other Than Temporary Impairment





Investment
securities which management has the ability and intent to hold to maturity are
reported at amortized cost.  Debt securities which may be sold prior
to maturity are classified as available for sale and are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income.
Other securities such as Federal Home Loan Bank stock are carried at cost and
are included in other assets on the balance sheets.





Interest
income includes amortization of purchase premium or
discount.  Premiums and discounts on securities are amortized on the
level-yield method without anticipating prepayments, except for mortgage backed
securities where prepayments are anticipated. Gains and losses on sales are
recorded on the trade date and determined using the specific identification
method based on the amortized cost of the security sold.





Declines
in the fair value of securities below their cost that are other than temporary
are reflected as realized losses. In estimating other-than temporary losses,
management considers: (1) the length of time and extent that fair value has been
less than cost, (2) the financial condition and near term prospects of the
issuer, and (3) the Company’s ability and intent to hold the security for a
period sufficient to allow for any anticipated recovery in fair
value.





Earnings
Per Common Share





Basic
earnings per share is net income 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 and warrants and the dilutive effect
of unvested restricted shares computed using the treasury stock
method.




Additional
information with regard to the Company’s methodology and reporting of the
allowance for loan losses and earnings per common share is included in the 2007
Annual Report on Form 10-K.





Acquisitions





The
Company accounts for its business combinations based on the purchase method of
accounting. The purchase method of accounting requires the Company to determine
the fair value of the tangible net assets and identifiable intangible assets
acquired. The fair values are based on available information and current
economic conditions at the date of acquisition. The fair values may be obtained
from independent appraisers, discounted cash flow present value techniques,
management valuation models, quoted prices on national markets or quoted market
prices from brokers. These fair value estimates will affect future earnings
through the disposition or amortization of the underlying assets and
liabilities. While management believes the sources utilized to arrive at the
fair value estimates are reliable, different sources or methods could have
yielded different fair value estimates. Such different fair value estimates
could affect future earnings through different values being utilized for the
disposition or amortization of the underlying assets and liabilities
acquired.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued Statement No. 157, “Fair Value
Measurements”.  This Statement defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements.  This Statement establishes a fair value hierarchy about
the assumptions used to measure fair value and clarifies assumptions about risk
and the effect of a restriction on the sale or use of an asset.  The
standard is effective for fiscal years beginning after November 15,
2007.  In February 2008, the FASB issued Staff Position (FSP) 157-2,
“Effective Date of FASB Statement No. 157”.  This FSP delays the
effective date of FAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value on a
recurring basis (at least annually) to fiscal years beginning after November 15,
2008, and interim periods within those fiscal years.  The impact of
adoption, on January 1, 2008 as required, was not material.





In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.”  The standard provides
companies with an option to report selected financial assets and liabilities at
fair value and establishes presentation and disclosure requirements designed to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities.  The Company
did not elect the fair value option for any financial assets or financial
liabilities as of January 1, 2008, the effective date of the
standard.




7
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)


In
September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4,
“Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements”.  This issue
requires that a liability be recorded during the service period when a
split-dollar life insurance agreement continues after participants’ employment
or retirement.  The required accrued liability will be based on either
the post-employment benefit cost for the continuing life insurance or based on
the future death benefit depending on the contractual terms of the underlying
agreement.  As a result of adopting EITF 06-4 on January 1, 2008, the
Company recognized an increase of $141 to the balance of other liabilities and a
corresponding decrease to beginning retained earnings.





In
December 2007, the FASB issued SFAS 141(R), “Business Combinations”, which is a
revision of SFAS 141, “Business Combinations”. SFAS 141(R) establishes
principles and requirements for how an acquirer in a business combination:
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree; recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and discloses information to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This Statement is effective for fiscal
years beginning after December 15, 2008, and is to be applied prospectively. The
Company is currently assessing the potential impact SFAS 141(R) will have on the
financial statements.





In March
2008, the FASB issued Statement No. 161 “Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement No. 133”.
SFAS No. 161 requires enhanced disclosures about how and why an entity uses
derivative instruments, how derivative instruments and related items are
accounted for under Statement 133 and how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The new standard is effective for the Company on January 1, 2009.
The Company is currently assessing the potential impact SFAS No. 161 will have
on the consolidated financial statements.





In May
2008, the FASB issued Statement No. 162 “The Hierarchy of Generally Accepted
Accounting Principles”. The standard identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. The new standard becomes effective 60 days following the Security
and Exchange Commission’s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411. SFAS No. 162 is not expected to have a
material impact on the Company’s consolidated financial position or results of
operations.




Note
2 – Investment Securities





The
amortized cost and estimated fair value of investment securities available for
sale at June 30, 2008 and December 31, 2007 are presented below:





June
      30, 2008Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unrealized
      Losses
            
            
            Estimated
              Fair
      ValueU.S.
      Government agencies and corporations
            
            $
            45,386
            
            
            $
            476
            
            
            $
            -
            
            
            $
            45,862States
      and political subdivisions—tax exempt
            
            
            7,950
            
            
            
            10
            
            
            
            49
            
            
            
            7,911States
      and political subdivisions—taxable
            
            
            2,454
            
            
            
            -
            
            
            
            60
            
            
            
            2,394Marketable
      equity securities
            
            
            269
            
            
            
            -
            
            
            
            -
            
            
            
            269Mortgage-backed
      securities
            
            
            119,960
            
            
            
            352
            
            
            
            1,108
            
            
            
            119,204Corporate
      bonds
            
            
            2,867
            
            
            
            -
            
            
            
            497
            
            
            
            2,370Collateralized
      debt obligations
            
            
            10,155
            
            
            
            -
            
            
            
            282
            
            
            
            9,873$
            189,041
            
            
            $
            838
            
            
            $
            1,996
            
            
            $
            187,883








December
      31, 2007Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unrealized
      Losses
            
            
            Estimated
              Fair
      ValueU.S.
      Government agencies and corporations
            
            $
            72,482
            
            
            $
            1,245
            
            
            $
            66
            
            
            $
            73,661States
      and political subdivisions—tax exempt
            
            
            9,629
            
            
            
            6
            
            
            
            51
            
            
            
            9,584States
      and political subdivisions—taxable
            
            
            2,495
            
            
            
            1
            
            
            
            21
            
            
            
            2,475Marketable
      equity securities
            
            
            1,224
            
            
            
            -
            
            
            
            -
            
            
            
            1,224Mortgage-backed
      securities
            
            
            60,161
            
            
            
            295
            
            
            
            296
            
            
            
            60,160Corporate
      bonds
            
            
            2,865
            
            
            
            -
            
            
            
            100
            
            
            
            2,765Collateralized
      debt obligations
            
            
            11,110
            
            
            
            -
            
            
            
            622
            
            
            
            10,488$
            159,966
            
            
            $
            1,547
            
            
            $
            1,156
            
            
            $
            160,357




8
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Note
3 – Loans





Major
classifications of loans are as follows:





June
      30,
              2008
            
            
            December
      31,
              2007Real
      estate mortgage loans:Commercial
            
            $
            646,223
            
            
            $
            612,084Residential
            
            
            173,729
            
            
            
            112,138Farmland
            
            
            13,655
            
            
            
            11,361Construction
      and vacant land
            
            
            156,706
            
            
            
            168,595Commercial
      and agricultural loans
            
            
            67,234
            
            
            
            72,076Indirect
      auto dealer loans
            
            
            99,208
            
            
            
            117,439Home
      equity loans
            
            
            27,535
            
            
            
            21,820Other
      consumer loans
            
            
            12,597
            
            
            
            12,154Total
      loans
            
            
            1,196,887
            
            
            
            1,127,667Net
      deferred loan costs
            
            
            1,639
            
            
            
            1,489Loans,
      net of deferred loan costs
            
            $
            1,198,526
            
            
            $
            1,129,156








Note
4 – Allowance for Loan Losses





Activity
in the allowance for loan losses for the six months ended June 30, 2008 and 2007
follows:





Six
      Months Ended
              June
      30,2008
            
            
            2007Balance,
      January 1
            
            $
            14,973
            
            
            $
            9,581Acquisition
      of The Bank of Venice
            
            
            -
            
            
            
            667Provision
      for loan losses charged to expense
            
            
            8,370
            
            
            
            1,104Loans
      charged off
            
            
            (6,751
            )
            
            
            (1,657
            )Recoveries
      of loans previously charged off
            
            
            35
            
            
            
            254Balance,
      June 30
            
            $
            16,627
            
            
            $
            9,949





Nonaccrual
      loans were as follows:




As
      of June 30, 2008
              
              
              As
      of March 31, 2008
              
              
              As
      of December 31, 2007Loan
      Type
              
              Number
      of
                Loans
              
              
              Outstanding
      Balance
              
              
              Number
      of
                Loans
              
              
              Outstanding
      Balance
              
              
              Number
      of
                Loans
              
              
              Outstanding
      BalanceResidential
      *
              
              
              27
              
              
              $
              5,207
              
              
              
              24
              
              
              $
              5,000
              
              
              
              13
              
              
              $
              4,442Commercial
      and agricultural
              
              
              3
              
              
              
              331
              
              
              
              2
              
              
              
              286
              
              
              
              4
              
              
              
              293Commercial
      real estate
              
              
              5
              
              
              
              1,532
              
              
              
              4
              
              
              
              2,372
              
              
              
              4
              
              
              
              2,619Commercial
      land development
              
              
              4
              
              
              
              13,954
              
              
              
              2
              
              
              
              13,840
              
              
              
              -
              
              
              
              -Residential
      land development
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1
              
              
              
              2,686Participations
      in residential loan pools *
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              9
              
              
              
              1,246Government
      guaranteed loan
              
              
              1
              
              
              
              343
              
              
              
              1
              
              
              
              1,641
              
              
              
              1
              
              
              
              1,641Indirect
      auto-dealer, auto and consumer loans
              
              
              95
              
              
              
              1,234
              
              
              
              272
              
              
              
              3,731
              
              
              
              238
              
              
              
              3,159$
              22,601
              
              
              
              
              
              
              $
              26,870
              
              
              
              
              
              
              $
              16,086




________


*
            Our
      ownership in the nine loan pools was exchanged for an equivalent value of
      10 specific loans from the loan pools during the first
      quarter.




9
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Impaired
loans were as follows:





June
      30,
              2008
            
            
            March
      31, 2008
            
            
            December
      31, 2007Loans
      with no allocated allowance for loan losses
            
            $
            4,301
            
            
            $
            5,783
            
            
            $
            4,448Loans
      with allocated allowance for loan losses
            
            
            18,107
            
            
            
            18,106
            
            
            
            3,748Total
            
            $
            22,408
            
            
            $
            23,889
            
            
            $
            8,196Amount
      of the allowance for loan losses allocated
            
            $
            2,258
            
            
            $
            2,274
            
            
            $
            1,401








Note
5 – Earnings Per Share and Common Stock





Earnings
per share have been computed based on the following weighted average number of
common shares outstanding for the three and six months ended June 30, 2008 and
2007:





Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Basic
            
            
            14,060,280
            
            
            
            12,548,667
            
            
            
            13,605,113
            
            
            
            12,185,530Dilutive
      effect of options outstanding
            
            
            -
            
            
            
            167,956
            
            
            
            -
            
            
            
            198,958Dilutive
      effect of restricted stock awards
            
            
            -
            
            
            
            8,022
            
            
            
            -
            
            
            
            10,766Dilutive
      effect of warrants
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Diluted
            
            
            14,060,280
            
            
            
            12,724,645
            
            
            
            13,605,113
            
            
            
            12,395,254





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:





Three
      Months Ended
              June
      30,
            
            
            Six
      Months Ended
              June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Anti-dilutive
      stock options
            
            
            594,993
            
            
            
            239,969
            
            
            
            557,149
            
            
            
            114,651Anti-dilutive
      restricted stock awards
            
            
            81,284
            
            
            
            22,154
            
            
            
            77,132
            
            
            
            1,009Anti-dilutive
      warrants
            
            
            1,212,000
            
            
            
            -
            
            
            
            765,824
            
            
            
            -


10
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Note
6 – Capital Adequacy





The
Company (on a consolidated basis) and the Banks are subject to various
regulatory capital requirements administered by federal and state banking
agencies. Failure to meet minimum capital requirements result in certain
discretionary actions by regulators that could have an effect on the Company’s
operations. The regulations require the Company and the Banks 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 Banks must maintain
minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based capital ratios.
These minimum ratios along with the actual ratios for the Company and the Banks
as of June 30, 2008 and December 31, 2007, are presented in the following
table.








Well
              Capitalized
      Requirement
            
            
            Adequately
      Capitalized Requirement
            
            
            June
      30,
              2008
              Actual
            
            
            December
      31, 2007
              ActualTier
      1 Capital (to Average Assets)Consolidated
            
            
            N/A
            
            
            
            3 4.0
            %
            
            
            8.0
            %
            
            
            8.4
            %TIB
      Bank
            
            
            3 5.0
            %
            
            
            3 4.0
            %
            
            
            7.5
            %
            
            
            7.8
            %The
      Bank of Venice
            
            
            3 5.0
            %
            
            
            3 4.0
            %
            
            
            10.0
            %
            
            
            11.9
            %Tier
      1 Capital (to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            3 4.0
            %
            
            
            9.6
            %
            
            
            10.0
            %TIB
      Bank
            
            
            3 6.0
            %
            
            
            3 4.0
            %
            
            
            8.9
            %
            
            
            9.2
            %The
      Bank of Venice
            
            
            3 6.0
            %
            
            
            3 4.0
            %
            
            
            12.4
            %
            
            
            15.5
            %Total
      Capital (to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            3 8.0
            %
            
            
            10.9
            %
            
            
            11.3
            %TIB
      Bank
            
            
            3 10.0
            %
            
            
            3 8.0
            %
            
            
            10.1
            %
            
            
            10.4
            %The
      Bank of Venice
            
            
            3 10.0
            %
            
            
            3 8.0
            %
            
            
            13.5
            %
            
            
            16.7
            %








Note
7. – Acquisition





The
Company completed the acquisition of Naples Capital Advisors, Inc., a registered
investment advisor, on January 2, 2008 in exchange for consideration consisting
of $1,333 in cash upon consummation and up to $148 in cash on each of the first
three annual anniversaries of NCA or a subsidiary of the Company receiving a
trust department license under the Florida Financial Institutions Codes subject
to NCA achieving certain total revenue milestones. Under the purchase method of
accounting, the assets and liabilities of NCA were recorded at their respective
estimated fair values as of January 2, 2008 and are included in the accompanying
balance sheet as of June 30, 2008. Purchase accounting adjustments will be
amortized or accreted into income over the estimated lives of the related assets
and liabilities. Goodwill and other intangible assets identified were
approximately $1,268.





The
acquisition of NCA spearheads the Company’s entry into a new business line of
private banking, wealth management and trust services that began operations in
the first quarter of 2008. With $94 million of assets under advisement, NCA has
an existing client base, established operations and presence in the market and
revenue to support further growth and expansion.





11
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Note
8. – Fair Value





FASB
Statement 157 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.





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 industry 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, custom
discounted cash flow modeling (Level 3 inputs).





Valuation
of collateralized debt securities





As of
June 30, 2008, the Company owned three collateralized debt obligations where the
underlying collateral is comprised primarily of corporate debt obligations of
homebuilders, REITs, real estate companies and commercial mortgage backed
securities. The company also 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 these securities are Level 3 inputs. In determining their estimated
fair value, management utilizes a discounted cash flow modeling valuation
approach. Discount rates utilized in the modeling of these securities are
estimated based upon a variety of factors including the yield at issuance of
similarly rated classes of comparably structured collateralized debt
obligations. Cash flows utilized in the modeling of these securities were based
upon actual default history of the underlying issuers and varying assumptions of
estimated future defaults of issuers. The valuation approach for the real estate
industry collateralized securities did not change during the second quarter of
2008. Management changed the valuation approach during the second quarter of
2008 of the collateralized debt obligation collateralized by trust preferred
securities of banks and insurance companies because there were no longer
observable level 2 inputs available. Therefore, custom discounted cash flow
modeling was employed to estimate the fair value of this security (Level 3
inputs).





Valuation
of Impaired loans





The fair
value of impaired loans with specific allocations of the allowance for loan
losses is generally based on recent real estate appraisals. 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 June 30, 2008 UsingJune
      30, 2008
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs (Level 2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Assets:Available
      for sale securities
            
            $
            187,883
            
            
            $
            -
            
            
            $
            178,010
            
            
            $
            9,873




12
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share
amounts)


The table
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 quarter ended June 30, 2008
and still held at June 30, 2008.





Fair
      Value Measurements Using
              Significant
      Unobservable Inputs
              (Level
      3)Collateralized
      Debt ObligationsBeginning
      balance, April 1, 2008
            
            $
            5,657Included
      in earnings – other than temporary impairment
            
            
            (956
            )Included
      in other comprehensive income
            
            
            454Transfer
      in to Level 3
            
            
            4,718Ending
      balance, June 30, 2008
            
            $
            9,873





The table
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 six months ended June 30, 2008
and still held at June 30, 2008.








Fair
      Value Measurements Using
              Significant
      Unobservable Inputs
              (Level
      3)Collateralized
      Debt ObligationsBeginning
      balance, January 1, 2008
            
            $
            6,111Included
      in earnings – other than temporary impairment
            
            
            (956
            )Transfer
      in to Level 3
            
            
            4,718Ending
      balance, June 30, 2008
            
            $
            9,873





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 June 30, 2008 UsingJune
      30, 2008
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Assets:Impaired
      loans with specific allocations of the allowance for loan
      losses
            
            $
            15,849
            
            
            $
            -
            
            
            $
            -
            
            
            $
            15,849





Impaired
loans, which are measured for impairment using the fair value of the collateral
for collateral dependent loans, had a carrying amount of $18,107, with a
valuation allowance of $2,258, resulting in specific allocations of the
allowance for loan losses of $873 for the second quarter of 2008 and $1,922 for
the six months ended June 30, 2008. The amounts of the specific allocations for
impairment are considered in the overall determination of the reserve and
provision for loan losses.




13




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:  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, 2008, and statement of
operations for the three months and six months ended June 30,
2008.  Operating results for the three months and six months ended
June 30, 2008 are not necessarily indicative of trends or results to be expected
for the year ended December 31, 2008. TIB Financial’s results of operations
during 2008 include the operations of The Bank of Venice and Naples Capital
Advisors subsequent to their acquisitions on April 30, 2007 and January 2, 2008,
respectively.








Quarterly
Summary





For the
second quarter of 2008, the Company reported a net loss of $4.0 million compared
to net income of $1.7 million for the second quarter of 2007. On a per share
basis, the net loss was $0.29 for the 2008 quarter, compared to diluted net
income of $0.13 for the comparable 2007 quarter.





The net
loss for the second quarter of 2008 compared to net income during the second
quarter of 2007 was due to the higher provision for loan losses, non-cash
charges recognized on other than temporary impairment of securities, higher
non-interest expenses, lower net interest income, a lower net interest margin
and lower non-interest income.





In
response to a variety of factors including the overall growth of the loan
portfolios, continued contraction of economic activity in local markets and net
charge–offs resulting primarily from the indirect loan portfolio, the second
quarter results include a provision for loan losses of $5.7 million. The
provision reflects net charge-offs of $4.9 million and an increase in the
reserve for loan losses of $0.8 million, to $16.6 million, or 1.39% of loans at
June 30, 2008.





Due to
the ratings downgrade and the amount of unrealized loss resulting from a
projection of lower expected cash flows, the Company concluded that the
additional loss of value on three collateralized debt obligation investment
securities was other than temporary under generally accepted accounting
principles and wrote-down these investment securities by $956,000 to their
estimated fair value. We also own equity securities of a publicly owned
company.  During the second quarter of 2008, these securities suffered
a significant further decline in market value. We determined that this
unrealized loss was other than temporary and wrote this investment down by
$956,000. Combined, the impairment and write-down of these securities resulted
in the recognition of a non-cash charge of $1.9 million. The impact on earnings
for the quarter and the six month period was approximately $1.2 million after
tax, or $0.09 per share.






14


TIB Financial also reported total
assets of $1.58 billion as of June 30, 2008, representing 9% asset growth from
December 31, 2007. Total loans increased $69.2 million, or 6%, compared to $1.13
billion at December 31, 2007. Total deposits of $1.14 billion as of June 30,
2008 increased $88.2 million, or 8%, from December 31, 2007.





Through
the challenging economic and operating environment, we have a number of positive
developments during the period which reflect our continuous focus on new
business initiatives, improvement of operating performance and response to new
opportunities including:


·
            Non
      performing loans decreased $4.3 million to $22.6 million from $26.9
      million at March 31, 2008, and were 1.9% of loans at the end of
      June.


·
            The
      restructuring of the indirect auto finance operations resulted in
      significant resolution and reduction in loan delinquency and non
      performing loans. From a first quarter peak of 6%, total loan
      delinquencies in this portfolio declined to 3.44% and non performing loans
      declined from $3.7 million to $1.2 million at the end of
    June.


·
            The
      net interest margin increased to 3.25% for the quarter compared to 3.13%
      in the first quarter.


·
            Under
      challenging financial market conditions Naples Capital Advisors increased
      assets under management to $94 million from $84 million at March 31,
      2008.


·
            The
      private banking group contributed $22.4 million in new relationship-based
      lower cost deposits and $6.5 million of loans during the first six
      months.


·
            The
      hiring of additional residential mortgage and commercial loan officers
      earlier this year has increased loan production with loans growing $59
      million during the second quarter and $69 million year to
      date.







Three
Months Ended June 30, 2008 and 2007:





Results
of Operations





For the
second quarter of 2008, our operations resulted in a net loss of $4.0 million
compared to net income of $1.7 million in the previous year’s
quarter.  On a per share basis, the net loss was $0.29 for the 2008
quarter as compared to basic and diluted earnings per share of $0.14 and $0.13,
respectively, for the comparable 2007 quarter.





Annualized
loss on average assets for the second quarter of 2008 was 1.07% compared to a
return on average assets of 0.50% for the second quarter of
2007.  Loss on average shareholders’ equity was 15.77% for the second
quarter of 2008 while the return on average shareholders’ equity was 7.03% for
the same quarter of 2007.





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 $11.4 million for the three months ended June
30, 2008, a decline from the $11.9 million reported for the same period last
year. The $2.2 million decrease in interest and dividend income for the second
quarter of 2008 over the second quarter of 2007 was mainly attributable to
decreased average rates on loan balances due primarily to the 325 basis point
decrease in the prime rates and fed funds sold rates combined with a higher
level of non-performing loans.  Partially offsetting this decline were
decreases in the interest cost of transaction accounts and short-term borrowings
due to decreases in interest rates.  Increases in balances led to an
increase in interest expense on time deposits and long-term
borrowings.





The
decline in net interest income in the second quarter of 2008 compared to the
second quarter of 2007 is due principally to a decline in the net interest
margin to 3.25% from 3.73%, respectively.






15


Interest
rates during the second quarter of 2008 were significantly lower than the prior
year period due to 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 8.25% in the
third quarter of 2007 to 5.25% by the first quarter of 2008.





Due to
the rapid and significant decline in the prime rate, the yield on our loans
declined 128  basis points and the yield of our interest earning
assets declined 130 basis points in the second quarter of 2008 compared to the
second quarter of 2007. Similarly, our deposit liability and total interest
bearing liability costs declined 100 and 109 basis points for the same periods,
respectively.





We were
unable to reduce the cost of our CDs and other interest rate sensitive deposits
and funding sources as quickly and to the same magnitude as the reductions in
our interest earning assets due to the different term structure and interest
rate sensitivity of our liabilities. As a consequence, our net interest margin
declined 48 basis points. Of this decline, approximately 23 basis points is due
to the higher level of non-performing loans and approximately $800,000 of income
not recognized on these loans during the second quarter of 2008.





Due to
the turmoil in financial markets that persisted since the third quarter of 2007,
we maintained a significantly higher level of liquidity as reflected in our
higher average balance of investment securities and federal funds sold. This
higher level of lower yielding assets also reduced the net interest margin
during the period.





Going
forward, we expect market interest rates to remain relatively stable resulting
in an additional decline in loan yields followed by a period of stability. At
the same time, we expect deposit costs will continue to decline but will
continue to be subject to the forces of competitive pressure which may result in
deposit rates decreasing more slowly. In the current interest rate environment,
we believe that, excluding the relative impact of changes in the level of
nonperforming assets, our interest margin should be relatively stable. The
predominant driver to increase net interest income is and will continue to be
the growth of our balance sheet. Although the timing and possible effects of
future changes in interest rates could be significant, we expect any such impact
to continue to be less in extent than the relative impact of earning asset
growth.





Provision
for Loan Losses





The
provision for loan losses increased to $5.7 million in the second quarter of
2008 compared to $632,000 in the comparable prior year period. Due to the
weakening economic environment, we began increasing certain quantitative and
qualitative economic risk factors employed in estimating the allowance for loan
losses during the second quarter of 2006. We further increased these factors
during each quarter of 2007 and 2008. The higher provision for loan losses in
2008 reflects continued local economic contraction, evidenced by increased
unemployment levels, especially in the greater Fort Myers, Florida area where we
have a concentration of indirect auto loan exposure. There continues to be a
lower level of real estate sales and development activity which is impacting the
value of real estate and the economy broadly. Additionally, we experienced
higher levels of nonperforming loans and delinquencies and higher levels of net
charge-offs.  An additional component of the increased provision was
the increase in total loans outstanding of $58.4 million, or 5%, during the
second quarter of 2008. Net Charge-offs were $4.9 million, or 1.70% of average
loans on an annualized basis, during the three months ended June 30, 2008,
compared to $394,000, or 0.15% of average loans on an annualized basis, for the
same period in 2007. The charge-offs resulting from the indirect loan portfolio
were $4.0 million and $257,000 in the second quarter of 2008 and 2007,
respectively .





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





The indirect loan portfolio experienced
uncharacteristically sharp increases, beyond our historical experience, in
delinquencies throughout the second half of 2007 and peaked at 6% during January
of 2008. In response, our collection and liquidation operations accelerated
dramatically, resulting in a much higher percentage of vehicles being disposed
of 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 so 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 during the first half of
2008.




16


Indirect
Loan Portfolio Statistics





As
      of or For the Quarter Ended(Dollars
      in thousands)
            
            June
      2008
            
            
            Mar
      2008
            
            
            Dec
      2007
            
            
            Sept
      2007
            
            
            June
      200730-89
      days delinquent
            
            $
            2,193
            
            
            $
            2,682
            
            
            $
            3,702
            
            
            $
            3,647
            
            
            $
            2,264Non
      accrual
            
            $
            1,220
            
            
            $
            3,543
            
            
            $
            3,135
            
            
            $
            1,708
            
            
            $
            1,087Total
      delinquencies
            
            
            3.44
            %
            
            
            5.55
            %
            
            
            5.82
            %
            
            
            4.20
            %
            
            
            2.56
            %Net
      charge offs for the quarter
            
            $
            3,951
            
            
            $
            1,662
            
            
            $
            1,199
            
            
            $
            615
            
            
            $
            257Net
      (gain)/loss on disposition of vehicles
            
            $
            (55
            )
            
            $
            1,208
            
            
            $
            650
            
            
            $
            134
            
            
            $
            54Number
      of vehicles sold during the quarter
            
            
            271
            
            
            
            245
            
            
            
            137
            
            
            
            110
            
            
            
            189Collection
      costs incurred during the quarter
            
            $
            306
            
            
            $
            240
            
            
            $
            265
            
            
            $
            155
            
            
            $
            146








Management
continuously monitors and actively manages the credit quality of the 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, our 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
nonperforming loans, which may require higher provisions for loan losses, higher
charge-offs and higher collection related expenses in future
periods.








Non-interest
Income





Non-interest
income for the second quarter of 2008 was a loss of
$369,000.  Excluding the effect of the $1.9 million write-down of
investment securities in the second quarter of 2008, non-interest income was
$1.5 million compared to $1.6 million reported in the second quarter of last
year.  The decline is primarily due to lower sales of residential
loans in the secondary market and a greater proportion of our residential
mortgage loan production being held in our portfolio.  Investment
advisory fees from Naples Capital Advisors, Inc. contributed approximately
$136,000 to non-interest income in the second quarter of 2008.





Non-interest
Expense





Non-interest
expense for the second quarter of 2008 was $11.9 million.  This
represented a 16% increase over the prior year period which totaled $10.2
million. This increase includes the operations of Naples Capital Advisors, Inc.
and three months of operations of The Bank of Venice compared to two months
during 2007.





Salary
and employee benefits increased $660,000 in the second quarter of 2008 relative
to the second quarter of 2007. The Bank of Venice represents approximately
$166,000 of the increase in this caption and Naples Capital Advisors, Inc.
represents approximately $196,000 of the increase.  Severance costs
associated with the elimination of certain employee positions accounted for
approximately $229,000 of the second quarter 2008 increase.





For the
second quarter of 2008 there was a $209,000 increase in occupancy expense as
compared to the second quarter of 2007.  In the second quarter of 2008
the occupancy costs from the operations of The Bank of Venice increased
approximately $131,000 above the costs incurred in the second quarter of 2007
subsequent to their acquisition in April 2007.  Additionally, costs
increased approximately $63,000 due to the acceleration of the amortization of
leasehold improvements related to the termination of a lease as we continue to
focus on consolidating our facilities and containing operating
costs.





The
$807,000 increase in other expense resulted in part from our indirect lending
operations and its restructuring including approximately $302,000 of increased
collections and consulting costs and a $197,000 increase in FDIC deposit
insurance.







17


Six
Months Ended June 30, 2008 and 2007:





Results
of Operations





For the
first six months of 2008, our operations resulted in a net loss of $5.5 million
compared to net income of $3.6 million in the comparable prior year
period.  On a per share basis, the net loss was $0.40 for the 2008
period as compared to diluted earnings per share of $0.29 for the comparable
2007 period.





Annualized
loss on average assets for the first six months of 2008 was 0.73% compared to a
return on average assets of 0.53% for the first six months of
2007.  Loss on average shareholders’ equity was 10.88% for the first
six months of 2008 while the return on average shareholders’ equity was 7.84%
for the same period of 2007.








Net
Interest Income





Net
interest income was approximately $22.3 million for the six months ended June
30, 2008, a decline from the $23.4 million reported for the same period last
year. The $2.6 million decrease in interest and dividend income for the first
six months of 2008 over the first six months of 2007 was mainly attributable to
decreased average rates on loans due primarily to the 325 basis point decrease
in the prime and fed funds sold rates combined with a higher level of
non-performing loans.  Partially offsetting this decline were
decreases in the interest cost of transaction accounts due to decreases in
rates.  Increases in balances led to an increase in interest expense
on short-term borrowings and FHLB advances and long-term borrowings, which more
than offset the effect of lower interest rates paid.





The
decline in net interest income in the first half of 2008 compared to the first
half of 2007 is due principally to a decline in the net interest margin to 3.19%
from 3.73%, respectively.





The
interest rate environment during the first half of 2008 was significantly lower
than the prior year period due to 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
8.25% to 5.25% by the first quarter of 2008. The prime rate declined further to
5.00% in the second quarter of 2008.





Due to
the rapid and significant decline in the prime rate, the yield on our loans
declined 109 basis points and the yield of our interest earning assets declined
114 basis points in the first half of 2008 compared to the first half of 2007.
Similarly our deposit liability and total interest bearing liability costs
declined 74 and 81 basis points for the same periods, respectively.





Due to a
high level of demand for liquidity in the global financial system and
competitive pressures in our local markets, we were unable to reduce the cost of
our CDs and other interest rate sensitive deposits and funding sources as
quickly and to the same magnitude as the reductions in our interest earning
assets. As a consequence, our net interest margin declined 54 basis points. Of
this decline, approximately 18 basis points is due to the higher level of
non-performing loans and approximately $1.2 million of income not recognized on
these loans during the six month period ended June 30, 2008.





Due to
the turmoil in financial markets that persisted since the third quarter of 2007,
we maintained a significantly higher level of liquidity as reflected in our
higher average balance of investment securities and federal funds sold. This
higher level of lower yielding assets also reduced the net interest margin
during the period.





Going
forward, we expect market interest rates to remain relatively stable resulting
in an additional decline in loan yields followed by a period of stability. At
the same time, we expect deposit costs will continue to decline but will
continue to be subject to the forces of competitive pressure which may result in
deposit rates decreasing more slowly. In the current interest rate environment,
we believe that, excluding the relative impact of changes in the level of
nonperforming assets, our interest margin should be relatively stable. However,
we still see intense demand for liquidity in the global financial system and
elevated competitive pressures in our local markets. The predominant driver to
increase net interest income is and will continue to be the growth of our
balance sheet. Although the timing and possible effects of future changes in
interest rates could be significant, we expect any such impact to continue to be
less in extent than the relative impact of earning asset growth.





18


The
following table presents average balances of the Company, the taxable-equivalent
interest earned, and the rate paid thereon during the six months ended June 30,
2008 and June 30, 2007.





2008
            
            
            2007(Dollars
      in thousands)
            
            Average
              Balances
            
            
            Income/
              Expense
            
            
            Yields/
              Rates
            
            
            Average
              Balances
            
            
            Income/
              Expense
            
            
            Yields/
              RatesInterest-earning
      assets:Loans
      (1)(2)
            
            $
            1,152,901
            
            
            $
            39,429
            
            
            
            6.88
            %
            
            $
            1,072,260
            
            
            $
            42,357
            
            
            
            7.97
            %Investment
      securities (2)
            
            
            167,020
            
            
            
            4,013
            
            
            
            4.83
            %
            
            
            137,691
            
            
            
            3,486
            
            
            
            5.11
            %Interest-bearing
      deposits in other banks
            
            
            3,149
            
            
            
            44
            
            
            
            2.79
            %
            
            
            465
            
            
            
            12
            
            
            
            5.20
            %Federal
      Home Loan Bank stock
            
            
            8,615
            
            
            
            252
            
            
            
            5.88
            %
            
            
            8,001
            
            
            
            236
            
            
            
            5.95
            %Federal
      funds sold and securities sold under agreements to resell
            
            
            76,931
            
            
            
            1,056
            
            
            
            2.76
            %
            
            
            53,766
            
            
            
            1,405
            
            
            
            5.27
            %Total
      interest-earning assets
            
            
            1,408,616
            
            
            
            44,794
            
            
            
            6.39
            %
            
            
            1,272,183
            
            
            
            47,496
            
            
            
            7.53
            %Non-interest-earning
      assets:Cash
      and due from banks
            
            
            19,623
            
            
            
            
            
            
            
            
            
            
            
            21,581Premises
      and equipment, net
            
            
            37,941
            
            
            
            
            
            
            
            
            
            
            
            35,345Allowance
      for loan losses
            
            
            (15,177
            )
            
            
            
            
            
            
            
            
            
            
            (9,439
            )Other
      assets
            
            
            53,134
            
            
            
            
            
            
            
            
            
            
            
            37,910Total
      non-interest-earning assets
            
            
            95,521
            
            
            
            
            
            
            
            
            
            
            
            85,397Total
      assets
            
            $
            1,504,137
            
            
            
            
            
            
            
            
            
            
            $
            1,357,580Interest-bearing
      liabilities:Interest-bearing
      deposits:NOW
      accounts
            
            $
            186,601
            
            
            $
            1,889
            
            
            
            2.04
            %
            
            $
            154,630
            
            
            $
            2,580
            
            
            
            3.36
            %Money
      market
            
            
            174,912
            
            
            
            2,375
            
            
            
            2.73
            %
            
            
            186,414
            
            
            
            3,882
            
            
            
            4.20
            %Savings
      deposits
            
            
            50,930
            
            
            
            312
            
            
            
            1.23
            %
            
            
            53,834
            
            
            
            413
            
            
            
            1.55
            %Time
      deposits
            
            
            538,023
            
            
            
            12,432
            
            
            
            4.65
            %
            
            
            494,557
            
            
            
            12,268
            
            
            
            5.00
            %Total
      interest-bearing deposits
            
            
            950,466
            
            
            
            17,008
            
            
            
            3.60
            %
            
            
            889,435
            
            
            
            19,143
            
            
            
            4.34
            %Other
      interest-bearing liabilities:Short-term
      borrowings and FHLB advances
            
            
            213,984
            
            
            
            3,702
            
            
            
            3.48
            %
            
            
            153,518
            
            
            
            3,444
            
            
            
            4.52
            %Long-term
      borrowings
            
            
            63,000
            
            
            
            1,724
            
            
            
            5.50
            %
            
            
            33,022
            
            
            
            1,358
            
            
            
            8.29
            %Total
      interest-bearing liabilities
            
            
            1,227,450
            
            
            
            22,434
            
            
            
            3.68
            %
            
            
            1,075,975
            
            
            
            23,945
            
            
            
            4.49
            %Non-interest-bearing
      liabilities and shareholders’ equity:Demand
      deposits
            
            
            155,978
            
            
            
            
            
            
            
            
            
            
            
            169,745Other
      liabilities
            
            
            19,480
            
            
            
            
            
            
            
            
            
            
            
            19,651Shareholders’
      equity
            
            
            101,229
            
            
            
            
            
            
            
            
            
            
            
            92,209Total
      non-interest-bearing liabilities and shareholders’ equity
            
            
            276,687
            
            
            
            
            
            
            
            
            
            
            
            281,605Total
      liabilities and shareholders’ equity
            
            $
            1,504,137
            
            
            
            
            
            
            
            
            
            
            $
            1,357,580Interest
      rate spread  (tax equivalent basis)
            
            
            
            
            
            
            
            
            
            
            2.71
            %
            
            
            
            
            
            
            
            
            
            
            3.04
            %Net
      interest income  (tax equivalent basis)
            
            
            
            
            
            $
            22,360
            
            
            
            
            
            
            
            
            
            
            $
            23,551Net
      interest margin (3) (tax equivalent basis)
            
            
            
            
            
            
            
            
            
            
            3.19
            %
            
            
            
            
            
            
            
            
            
            
            3.73
            %


_________
 (1)  Average
loans include non-performing loans.
  (3)  Net
interest margin is net interest income divided by average total interest-earning
assets.


19


Changes
in Net Interest Income





The table
below details the components of the changes in net interest income for the six
months ended June 30, 2008 and June 30, 2007.  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.





2008
      Compared to 2007 (1)
              Due
      to Changes in(Dollars
      in thousands)
            
            Average
              Volume
            
            
            Average
              Rate
            
            
            Net
      Increase
              (Decrease)Interest
      incomeLoans
      (2)
            
            $
            3,032
            
            
            $
            (5,960
            )
            
            $
            (2,928
            )Investment
      securities (2)
            
            
            712
            
            
            
            (185
            )
            
            
            527Interest-bearing
      deposits in other banks
            
            
            40
            
            
            
            (8
            )
            
            
            32Federal
      Home Loan Bank stock
            
            
            18
            
            
            
            (2
            )
            
            
            16Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            469
            
            
            
            (818
            )
            
            
            (349
            )Total
      interest income
            
            
            4,271
            
            
            
            (6,973
            )
            
            
            (2,702
            )Interest
      expenseNOW
      accounts
            
            
            461
            
            
            
            (1,152
            )
            
            
            (691
            )Money
      market
            
            
            (227
            )
            
            
            (1,280
            )
            
            
            (1,507
            )Savings
      deposits
            
            
            (21
            )
            
            
            (80
            )
            
            
            (101
            )Time
      deposits
            
            
            1,037
            
            
            
            (873
            )
            
            
            164Short-term
      borrowings and FHLB advances
            
            
            1,160
            
            
            
            (901
            )
            
            
            259Long-term
      borrowings
            
            
            931
            
            
            
            (565
            )
            
            
            366Total
      interest expense
            
            
            3,341
            
            
            
            (4,851
            )
            
            
            (1,510
            )Change
      in net interest income
            
            $
            930
            
            
            $
            (2,122
            )
            
            $
            (1,192
            )________
              (1)
      The change in interest due to both rate and volume has been allocated to
      the volume and rate components in proportion to the relationship of the
      dollar amounts of the absolute change in each.(2)
      Interest income includes the effects of a tax equivalent adjustment using
      applicable statutory tax rates in adjusting tax exempt interest on tax
      exempt investment securities and loans to a fully taxable
      basis.









20


Provision
for Loan Losses





The
provision for loan losses increased to $8.4 million in the first six months of
2008 compared to $1.1 million in the comparable prior year period. Due to the
weakening economic environment, we began increasing certain quantitative and
qualitative economic risk factors employed in estimating the allowance for loan
losses during the second quarter of 2006. We further increased these factors
during each quarter of 2007 and 2008. The higher provision for loan losses in
2008 reflects continued local economic contraction, evidenced by increased
unemployment levels, especially in the greater Fort Myers, Florida area where we
have a concentration of indirect auto loan exposure. There continues to be a
lower level of real estate sales and development activity which is impacting the
value of real estate and the economy broadly. Additionally, we experienced
increased levels of nonperforming loans and delinquencies and higher levels of
net charge-offs.  An additional component of the increased provision
was the increase in total loans outstanding of $69.2 million, or 6%, during the
the first six months of 2008. Net Charge-offs were $6.7 million, or 1.17% of
average loans on an annualized basis, during the six months ended June 30, 2008,
compared to $1.4 million, or 0.26% of average loans on an annualized basis, for
the same period in 2007. The net charge-offs resulting from the indirect loan
portfolio were $5.6 million and $1.0 million in the first six months of 2008 and
2007, respectively





Management
continuously monitors and actively manages the credit quality of the 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, our 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
nonperforming loans, which may require higher provisions for loan losses, higher
charge-offs and higher collection related expenses in future
periods.




Non-interest
Income





Non-interest
income for the first six months of 2008 was $2.1 million.  This
represented a $1.4 million, or 40%, decrease over the comparable prior year
period which totaled $3.5 million.  The decrease was primarily
attributable the $1.9 million write-down of investment securities partially
offset by gains of $910,000 realized from the sale of investment securities in
the first quarter. Excluding the effect of the net loss on securities of $1.0
million, non-interest income was $3.1 million in the current period compared to
$3.5 million in the prior year period. Investment advisory fees from Naples
Capital Advisors, Inc. contributed approximately $261,000 to the current year
total.  Also contributing to the decline were lower fees on mortgage
loans sold due to lower sales of residential loans in the secondary market and a
greater proportion of our residential loan production being held in our
portfolio.





Non-interest
Expense





Non-interest
expense for the first six months of 2008 was $24.9 million.  This
represented a 23% increase over the prior year period which totaled $20.2
million. This caption included approximately a $1.2 million increase resulting
from the operations of The Bank of Venice and $538,000 resulting from the
operations of Naples Capital Advisors, Inc. The overall increase also reflected
increased costs and losses of approximately $1.8 million attributable to our
indirect lending operations.





Salary
and employee benefits increased $1.2 million in the first six months of 2008
relative to the first six months of 2007. The Bank of Venice represents
approximately $523,000 of the increase in this caption and Naples Capital
Advisors, Inc. represents approximately $358,000 of the
increase.  Additionally, approximately $229,000 of severance costs
associated with the elimination of certain employee positions were incurred in
the first six months of 2008.





For the
first six months of 2008 there was a $314,000 increase in occupancy expense as
compared to the first six months of 2007. Excluding the $328,000 increase of
occupancy related costs from the operations of The Bank of Venice, the Company
would have had a $14,000 decrease in occupancy costs for the six month
period.  We continue to focus on consolidating our facilities and
containing operating costs.





The $3.2
million increase in other expense resulted primarily from our indirect lending
operations and its restructuring including $1.2 million in write-downs of
repossessed vehicles and related assets and approximately $805,000 of consulting
and collections fees and costs. The increase also includes $388,000 increase of
operating costs for The Bank of Venice which was acquired April 30, 2007,
$350,000 of expenses relating to and valuation allowances recorded against other
real estate owned and a $409,000 increase in FDIC deposit
insurance.






21


Balance
Sheet





Total
assets at June 30, 2008 were $1.58 billion, an increase of $134.1 million or 9%,
from total assets of $1.44 billion at December 31, 2007.  Total loans
outstanding increased $69.2 million, or 6%, to $1.20 billion during the first
six months of 2008 from year end 2007.  Also, in the same period,
investment securities increased $27.5 million. As the overall Company continues
to experience growth, securities are purchased to maintain appropriate levels of
liquid assets on the balance sheet.





At June
30, 2008 advances from the Federal Home Loan Bank were $167.9 million, a $27.9
million increase from $140.0 million at December 31, 2007.  Short-term
borrowings increased due to higher balances of repurchase agreements with
deposit customers, reflecting our business development efforts to attract new
business customers.  Total deposits of $1.14 billion as of June 30,
2008 increased $88.2 million, or 8%, from December 31, 2007.





Shareholders’
equity totaled $99.1 million at June 30, 2008, increasing $2.91 million from
December 31, 2007. This increase is primarily due to the private placement of
1.2 million shares of common stock on March 7, 2008 resulting in gross proceeds
of approximately $10.1 million. Book value per share decreased to $7.00 at June
30, 2008 from $7.45 at December 31, 2007.  The Company declared a 1%
stock dividend in the second quarter of 2008 and quarterly cash dividend of
$0.0619 per share in the first quarter of 2008 and $0.0594 per share in each of
the first two quarters of 2007.





Investment
Securities





During
the first quarter of 2008, we realized net gains of $910,000 relating to sales
of approximately $25.0 million of available for sale securities. The
reinvestment of the proceeds and additional investment resulted in a $27.5
million increase in investment securities to $187.9 million. The sales of
securities reflect a restructuring of a portion of the portfolio to reduce
interest rate risk by reducing duration while reinvesting in a comparably
yielding mix of investment securities with a shorter duration. During the second
quarter of 2008, non-cash impairment charges of $1.9 million were recognized
relating to an equity security and three collateralized debt obligation
securities. No comparable gains or losses were recognized during the first six
months of 2007.





As
previously described in the Annual Report on Form 10-K for 2007, the company
owns three collateralized debt obligation investment securities aggregating
$10.0 million  in par value that were written down to $6.1 million as
of December 31, 2007. The underlying assets in the three collateralized debt
obligations are comprised primarily of corporate debt obligations of
homebuilders, REITs and real estate companies and commercial mortgage backed
securities. These securities are floating rate securities which were rated “A”
or better by an independent and nationally recognized rating agency at the time
of our purchase. In late December 2007, these securities were downgraded below
investment grade by a nationally recognized rating agency. Due to the ratings
downgrade, and the amount of unrealized loss, management concluded that the loss
of value was other than temporary under generally accepted accounting principles
and the Company wrote these investment securities down to their estimated fair
value. As of June 30, 2008, these securities remain on nonaccrual.





As of
June 30, 2008, the estimated fair value of these securities declined to $5.2
million from $6.1 million at December 31, 2007 due to the occurrence of
additional defaults by certain underlying issuers and lower projected cash
flows. During July 2008, these securities were further downgraded by a
nationally recognized rating agency. Due to the ratings downgrade and the amount
of unrealized loss resulting from a projection of lower expected cash flows, the
company concluded that the additional loss of value was other than temporary
under generally accepted accounting principles and wrote-down these investment
securities to their estimated fair value.





The
Company also owns equity securities of a publicly owned company which we
originally acquired in 2003 for $3.0 million to obtain community reinvestment
credit. As described in the Annual Report, these securities were written down to
$1.2 million as of December 31, 2007. During the second quarter of 2008, these
securities suffered a significant further decline in fair value. Management
determined that this unrealized loss was other than temporary and wrote this
investment down by $1.0 million.





Combined,
the impairment and write-down of these securities resulted in the recognition of
a non-cash charge of $1.9 million. We regularly review each investment security
for impairment based on criteria that include the extent to which cost exceeds
market price, the duration of that market decline, the financial health of and
specific prospects for the issuer(s) and our ability and intention with regard
to holding the security to maturity. Future declines in the market value of
these or other securities may result in additional impairment charges which may
be material to the financial condition and results of operations of the
Company.





22





Loan
Portfolio Composition





The two most significant components of
our loan portfolio are classified in the notes to the accompanying unaudited
financial statements as commercial real estate and construction and vacant land.
Our goal of maintaining high standards of credit quality include a strategy of
diversification of loan type and purpose within these categories. The following
charts illustrate the composition of these portfolios as of June 30, 2008 and
December 31, 2007.








June
      30, 2008
            
            
            December
      31, 2007(Dollars
      in thousands)
            
            Commercial
      Real Estate
            
            
            Percentage
      Composition
            
            
            Commercial
      Real Estate
            
            
            Percentage
      CompositionMixed
      Use Commercial/Residential
            
            $
            110,482
            
            
            
            17
            %
            
            $
            103,937
            
            
            
            17
            %1-4
      Family and Multi Family
            
            
            84,655
            
            
            
            13
            %
            
            
            76,339
            
            
            
            13
            %Hotels/Motels
            
            
            91,139
            
            
            
            14
            %
            
            
            86,909
            
            
            
            14
            %Guesthouses
            
            
            82,560
            
            
            
            13
            %
            
            
            81,817
            
            
            
            13
            %Office
      Buildings
            
            
            98,291
            
            
            
            15
            %
            
            
            97,633
            
            
            
            16
            %Retail
      Buildings
            
            
            70,073
            
            
            
            11
            %
            
            
            64,819
            
            
            
            11
            %Restaurants
            
            
            46,335
            
            
            
            7
            %
            
            
            37,186
            
            
            
            6
            %Marinas/Docks
            
            
            20,238
            
            
            
            3
            %
            
            
            20,364
            
            
            
            3
            %Warehouse
      and Industrial
            
            
            28,900
            
            
            
            5
            %
            
            
            29,958
            
            
            
            5
            %Other
            
            
            13,550
            
            
            
            2
            %
            
            
            13,122
            
            
            
            2
            %Total
            
            $
            646,223
            
            
            
            100
            %
            
            $
            612,084
            
            
            
            100
            %








June
      30, 2008
            
            
            December
      31, 2007(Dollars
      in thousands)
            
            Construction
      and Vacant Land
            
            
            Percentage
      Composition
            
            
            Construction
      and Vacant Land
            
            
            Percentage
      CompositionConstruction:Residential – owner
      occupied
            
            $
            18,637
            
            
            
            12
            %
            
            $
            20,620
            
            
            
            12
            %Residential – commercial
      developer
            
            
            22,596
            
            
            
            15
            %
            
            
            36,107
            
            
            
            21
            %Commercial
    structure
            
            
            19,345
            
            
            
            12
            %
            
            
            14,367
            
            
            
            9
            %60,578
            
            
            
            39
            %
            
            
            71,094
            
            
            
            42
            %Land:Raw land
            
            
            15,916
            
            
            
            10
            %
            
            
            15,890
            
            
            
            9
            %Residential
    lots
            
            
            16,105
            
            
            
            10
            %
            
            
            16,775
            
            
            
            10
            %Land
    development
            
            
            30,729
            
            
            
            20
            %
            
            
            29,818
            
            
            
            18
            %Commercial
lots
            
            
            33,378
            
            
            
            21
            %
            
            
            35,018
            
            
            
            21
            %Total
      land
            
            
            96,128
            
            
            
            61
            %
            
            
            97,501
            
            
            
            58
            %Total
            
            $
            156,706
            
            
            
            100
            %
            
            $
            168,595
            
            
            
            100
            %








23


Non-performing
Assets





Non-performing
assets include non-accrual loans and investment securities, accruing loans
contractually past due 90 days or more, 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.  A loan is considered impaired when it is probable that not all
principal and interest amounts will be collected according to the loan
contract.





Non-performing
assets are as follows:





(Dollars
      in thousands)
            
            June
      30,
              2008
            
            
            December
      31, 2007Total
      non-accrual loans (a)
            
            $
            22,601
            
            
            $
            16,086Accruing
      loans delinquent 90 days or more
            
            
            -
            
            
            
            -Total
      non-performing loans
            
            
            22,601
            
            
            
            16,086Non-accrual
      investment securities (b)
            
            
            5,155
            
            
            
            3,154Repossessed
      personal property (primarily indirect auto dealer loans)
            
            
            2,706
            
            
            
            3,136Other
      real estate owned
            
            
            5,037
            
            
            
            1,846Other
      assets (c)
            
            
            2,069
            
            
            
            2,915Total  non-performing
      assets
            
            $
            37,568
            
            
            $
            27,137Allowance
      for loan losses
            
            $
            16,627
            
            
            $
            14,973Non-performing
      assets as a percent of total assets
            
            
            2.38
            %
            
            
            1.88
            %Non-performing
      loans as a percent of total loans
            
            
            1.89
            %
            
            
            1.43
            %Allowance
      for loan losses as a percent of non-performing loans
            
            
            73.57
            %
            
            
            93.08
            %Annualized
      net charge-offs as a percent of average loans
            
            
            1.17
            %
            
            
            0.45
            %


__________


(a)
            Non-accrual
      loans as of June 30, 2008 and December 31, 2007 are as
      follows:





(Dollars
      in thousands)
            
            June
      30, 2008
            
            
            December
      31, 2007Collateral
      Description
            
            Number
      of Loans
            
            
            Outstanding
      Balance
            
            
            Number
      of Loans
            
            
            Outstanding
      BalanceResidential
      **
            
            
            27
            
            
            $
            5,207
            
            
            
            13
            
            
            $
            4,442Commercial
      and agricultural
            
            
            3
            
            
            
            331
            
            
            
            4
            
            
            
            293Commercial
      real estate
            
            
            5
            
            
            
            1,532
            
            
            
            4
            
            
            
            2,619Residential
      land development
            
            
            -
            
            
            
            -
            
            
            
            1
            
            
            
            2,686Commercial
      land development
            
            
            4
            
            
            
            13,954
            
            
            
            -
            
            
            
            -Participations
      in residential loan pools **
            
            
            -
            
            
            
            -
            
            
            
            9
            
            
            
            1,246Government
      guaranteed loan
            
            
            1
            
            
            
            343
            
            
            
            1
            
            
            
            1,641Indirect
      auto-dealer, auto and consumer loans
            
            
            95
            
            
            
            1,234
            
            
            
            238
            
            
            
            3,159$
            22,601
            
            
            
            
            
            
            $
            16,086


**
            Our
      ownership in the nine loan pools was exchanged for an equivalent value of
      10 specific loans from the loan pools during the first
      quarter.






24





(b)
            In
      December 2007, the Company placed a collateralized debt security secured
      primarily by homebuilders, REITs, real estate companies and commercial
      mortgage backed securities on non-accrual. In March 2008, two additional,
      similarly secured, collateralized debt securities were placed on
      non-accrual. These three securities had a total original cost of $10.0
      million and were rated A at purchase. These securities have a current
      estimated value of $5.2 million. For additional details on this and other
      investment securities, see the section of management’s discussion and
      analysis that follows entitled “Investment
  Portfolio”.





(c)
            In
      1998, TIB Bank made a $10.0 million loan to construct a lumber mill in
      northern Florida. Of this amount, $6.4 million had been sold by the Bank
      to other lenders. The loan was 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. Under provisions of the trust agreement,
      beneficiaries cannot receive trust assets until November
    2010.





The portion of this loan guaranteed by
the USDA and held by us was approximately $1.6 million at December 31, 2007. The
loan was accruing interest until December 2006 when the Bank ceased the accrual
of interest pursuant to a ruling made by the USDA.  Accrued interest
on this loan totaled approximately $941,000 at December 31, 2007. During the
second quarter of 2008, the USDA paid the Company the principal and accrued
interest and allowed the Company to apply other proceeds previously received to
capitalized liquidation costs and protective advances.





The non-guaranteed principal and
interest ($2.0 million at June 30, 2008 and December 31, 2007) and the
reimbursable capitalized liquidation costs and protective advance costs totaling
approximately $105,000 and $954,000 at June 30, 2008 and December 31, 2007,
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.








Net activity relating to nonaccrual
loans during the second quarter of 2008 is as follows:





Nonaccrual
      Loan Activity (Other Than Indirect Auto and Consumer)
              (Dollars
      in thousands)Nonaccrual
      loans at March 31, 2008
            
            $
            23,139Loans
      returned to accrual
            
            
            (272
            )Net
      principal paid down on nonaccrual loans
            
            
            (1,482
            )Charge-offs
            
            
            (689
            )Loans
      in-substance foreclosed
            
            
            (855
            )Loans
      placed on nonaccrual
            
            
            1,526Nonaccrual
      loans at June 30, 2008
            
            $
            21,367










25


Net
activity relating to other real estate owned during the second quarter of 2008
is as follows:





OREO
      Activity
              (Dollars
      in thousands)OREO
      as of March 31, 2008
            
            $
            4,495Real
      estate foreclosed
            
            
            855Other
      increases
            
            
            -Write-down
      of value
            
            
            -Property
      sold
            
            
            (313
            )OREO
      as of June 30, 2008
            
            $
            5,037




The
allowance for loan losses is a valuation allowance for probable incurred credit
losses in the loan portfolio and amounted to approximately $16.6 million and
$15.0 million at June 30, 2008 and December 31, 2007,
respectively.  Our process for assessing the adequacy of the allowance
for loan losses and the resultant need, if any, for periodic provisions to the
allowance charged to income, includes both individual loan analyses and loan
pool analyses.  Individual loan analyses are periodically performed on
loan relationships of a significant size, or when otherwise deemed necessary,
and primarily encompass commercial real estate and other commercial
loans.  The result is that commercial real estate loans and commercial
loans are classified into the following risk categories: Pass, Special Mention,
Substandard or Loss.  The allowance consists of specific and general
components. When appropriate, a specific reserve will be established for
individual loans.  The specific component relates to loans that are
individually classified as impaired or loans otherwise classified as substandard
or worse. Otherwise, we allocate an allowance for each risk
category.  The allocations are based on factors including historical
loss rate, perceived economic conditions (local, national and global), perceived
strength of our management, recent trends in loan loss history, and
concentrations of credit.





A loan is
considered impaired when it is probable that not all principal and interest
amounts will be collected according to the loan contract. Individual commercial
and commercial real estate loans exceeding certain size thresholds established
by management are individually evaluated for impairment. If a loan is considered
to be impaired, a portion of the allowance is allocated so that the carrying
value of the loan is reported at the present value of estimated future cash
flows using the loan’s existing rate or at the fair value of collateral if
repayment is expected solely from the collateral. Impaired loans are as
follows:





(Dollars in
      thousands)
            
            June
      30,
              2008
            
            
            December
      31, 2007Loans
      with no allocated allowance for loan losses
            
            $
            4,301
            
            
            $
            4,448Loans
      with allocated allowance for loan losses
            
            
            18,107
            
            
            
            3,748Total
            
            $
            22,408
            
            
            $
            8,196Amount
      of the allowance for loan losses allocated
            
            $
            2,258
            
            
            $
            1,401




Indirect
auto 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.  As above, when appropriate, a specific reserve will be
established for individual loans.  Otherwise, we allocate an allowance
for each loan classification.  The allocations are based on the same
factors mentioned above.





Based on
an analysis performed by management at June 30, 2008, the allowance for loan
losses is considered to be adequate to cover estimated loan losses in the
portfolio as of that date. However, management’s judgment is based upon our
recent historical loss experience, the level of nonperforming and delinquent
loans, information known today and a number of assumptions about future events,
which are believed to be reasonable, but which may or may not prove
valid.  Thus, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that significant
additional increases in the allowance for loan losses will not be required. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review our allowance for loan losses. Such agencies may
require us to recognize additions to the allowance based on their judgments
about information available to them at the time of their
examination.




26





Capital
and Liquidity





The
Company's policy is to maintain capital in excess of the levels required to be
Well Capitalized for regulatory purposes.  As of June 30, 2008, the
ratio of Total Capital to Risk Weighted Assets was 10.9%.  The
decrease from the 11.3% reported as of December 31, 2007 is related to the
current year net loss partially offset by the impact on capital from the private
placement of common stock. On March 7, 2008, we consummated a private placement
transaction whereby two of Southwest Florida’s prominent families, their
representatives and their related business interests purchased 1.2 million
shares of the common stock and warrants to purchase an additional 1.2 million
shares of common stock. The warrants have an exercise price of $8.32 per share
and may be exercised at any time prior to March 7, 2011. This private placement
resulted in gross proceeds of $10.1 million. The terms of the transaction limits
the ownership of each of the two groups to 9.9% of outstanding
shares.





In August 2007, the Board authorized
the repurchase of up to 400,000 shares of the Company's outstanding common
stock, however, no shares were purchased during the second quarter of
2008.





The goal
of liquidity management is to ensure the availability of an adequate level of
funds to meet the loan demand and deposit withdrawal needs of the Company’s
customers.  We manage the levels, types and maturities of earning
assets in relation to the sources available to fund current and future needs to
ensure that adequate funding will be available at all times.





In
addition to maintaining a stable core deposit base, we maintain adequate
liquidity primarily through the use of investment securities, short term
investments such as federal funds sold and unused borrowing
capacity.  The Banks have 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 Banks is based on a percentage
of the Banks’ total assets as reported in their most recent quarterly financial
information submitted to the regulators subject to the pledging of sufficient
collateral.  At June 30, 2008, there were $167.9 million in advances
outstanding in addition to $25.0 million in letters of credit used in lieu of
pledging securities to the State of Florida to collateralize governmental
deposits.  As of June 30, 2008, collateral availability under our
agreements with the Federal Home Loan Bank provides for total borrowings of up
to approximately $245.9 million of which $53.0 million is
available.





The Banks
have unsecured overnight federal funds purchased accommodations up to a maximum
of $30.0 million from their correspondent banks. We continue to monitor our
liquidity position as part of our asset-liability management. We believe that we
have adequate funding sources through brokered deposits, unused borrowing
capacity from the FHLB, loan principal repayment and potential asset maturities
and sales to meet our foreseeable liquidity requirements.





During
the second quarter of 2008, the Company’s Board of Directors declared a 1% (one
percent) stock dividend valued at approximately $0.06 per share to holders of
record as of July 7, 2008. The stock dividend was distributed July 17, 2008 and
was comparable in value to our most recent quarterly cash dividend paid April
10, 2008. The decision to replace our quarterly cash dividend with a stock
dividend was made after consideration of the current economic and operating
environment and our desire to maintain the well capitalized position of the
Company, TIB Bank and The Bank of Venice. Both banks and the holding company
currently exceed all regulatory requirements to meet the definition of
well-capitalized. We understand that cash dividends are an important component
of investment return to our shareholders, but believe this is a prudent measure
to help sustain our strong capital position and improve future shareholder
value. The Board of Directors will continue to evaluate the amount of our
quarterly dividend and our dividend policy in light of current and expected
trends in our financial performance and financial condition.





As of
June 30, 2008, our financial holding company had cash of approximately $9.0
million, of which approximately $3.0 million is intended to be utilized to
capitalize the trust company we are in the process of organizing to complement
our wealth management, private banking and investment advisory business line.
During the second quarter of 2008, the Board of Directors authorized $7.5
million of capital to be invested in TIB Bank. $5.0 million was invested as
equity in the second quarter and $2.5 million was invested as equity in July
2008. The balance of this cash is available for providing capital support to the
subsidiary banks, the payment of interest on our trust preferred debt securities
and for other general corporate purposes.







27


Asset
and Liability Management





Closely
related to liquidity management is the management of interest-earning assets and
interest-bearing liabilities.  The Company manages its rate
sensitivity position to manage net interest margins and to minimize risk due to
changes in interest rates.





Our
interest rate sensitivity position at June 30, 2008 is presented in the table
below:








(Dollars
      in thousands)
            
            3
      Months
              or
      Less
            
            
            4
      to 6
              Months
            
            
            7
      to 12
              Months
            
            
            1
      to 5
              Years
            
            
            Over
      5
              Years
            
            
            TotalInterest-earning
      assets:Loans
            
            $
            356,137
            
            
            $
            31,015
            
            
            $
            107,022
            
            
            $
            578,628
            
            
            $
            124,084
            
            
            $
            1,196,886Investment
      securities-taxable
            
            
            39,708
            
            
            
            3,601
            
            
            
            732
            
            
            
            45,854
            
            
            
            89,809
            
            
            
            179,704Investment
      securities-tax exempt
            
            
            200
            
            
            
            -
            
            
            
            -
            
            
            
            2,410
            
            
            
            5,301
            
            
            
            7,911Marketable
      equity securities
            
            
            268
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            268FHLB
      stock
            
            
            10,149
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            10,149Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            76,157
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            76,157Interest-bearing
      deposit in other banks
            
            
            3,871
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,871Total
      interest-earning assets
            
            
            486,490
            
            
            
            34,616
            
            
            
            107,754
            
            
            
            626,892
            
            
            
            219,194
            
            
            
            1,474,946Interest-bearing
      liabilities:NOW
      accounts
            
            
            185,770
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            185,770Money
      market
            
            
            162,943
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            162,943Savings
      deposits
            
            
            51,864
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            51,864Time
      deposits
            
            
            186,618
            
            
            
            138,990
            
            
            
            130,637
            
            
            
            123,144
            
            
            
            14
            
            
            
            579,403Subordinated
      debentures
            
            
            25,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,000
            
            
            
            33,000Other
      borrowings
            
            
            145,376
            
            
            
            10,000
            
            
            
            1,250
            
            
            
            121,650
            
            
            
            -
            
            
            
            278,276Total
      interest-bearing liabilities
            
            
            757,571
            
            
            
            148,990
            
            
            
            131,887
            
            
            
            244,794
            
            
            
            8,014
            
            
            
            1,291,256Interest
      sensitivity gap
            
            $
            (271,081
            )
            
            $
            (114,374
            )
            
            $
            (24,133
            )
            
            $
            382,098
            
            
            $
            211,180
            
            
            $
            183,690Cumulative
      interest sensitivity gap
            
            $
            (271,081
            )
            
            $
            (385,455
            )
            
            $
            (409,588
            )
            
            $
            (27,490
            )
            
            $
            183,690
            
            
            $
            183,690Cumulative
      sensitivity ratio
            
            
            (18.4
            %)
            
            
            (26.1
            %)
            
            
            (27.8
            %)
            
            
            (1.9
            %)
            
            
            12.5
            %
            
            
            12.5
            %









28


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.  If market interest rates should decrease, it is anticipated
that our net interest margin would be relatively unchanged over a 12 month
period.  Also, as approximately 14% of our deposit funding is
comprised of non-interest-bearing liabilities, total interest-earning assets are
substantially greater than the total interest-bearing liabilities and therefore
it is anticipated that, over time, the effects on net interest income from
changes in asset yield will be greater than the change in expense from liability
cost.  In the next three months, we anticipate short-term interest
rates will remain stable and accordingly, we expect that our net interest margin
will be relatively stable. We expect a positive impact from the maturity and
repricing of certificates of deposit at lower interest rates, however, this may
be partially offset by the effects of continued competitive pressure on loan
production and elevated competition for deposits. Significant increases in the
level of nonperforming assets would have a negative impact on our net interest
margin. Due to the Federal Reserve’s recent monetary policy where short-term
interest rates have decreased rapidly, we anticipate that our net interest
margin will stabilize because we have positioned the Company by increasing our
liability sensitivity through variable rate borrowings and shorter term
certificates of deposit.





Even in
the near term, we believe the $409.6 million one year cumulative negative
sensitivity gap may exaggerate the probable effects on net interest income for
two primary reasons. First, the liabilities subject to re-pricing are
predominately not indexed to any specific market rate and therefore may not
fully reflect the changes in market rates in any rate re-pricings. Further, the
assets subject to re-pricing are expected to reflect fully any changes in market
rates, primarily the prime rate.





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.





Commitments





The Banks
are party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of their
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
Banks’ 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 Banks use the same credit policies in making
commitments to extend credit and generally use the same credit policies for
letters of credit as they do for on-balance sheet instruments.





Commitments
to extend credit are legally binding agreements to lend to a customer as long as
there is no violation of any condition established in the
contract.  Since some of these commitments are expected to expire
without being drawn upon, the total commitment amount does not necessarily
represent future cash requirements.  Commitments generally have fixed
expiration dates or other termination clauses and may require the payment of a
fee. At June 30, 2008, total unfunded loan commitments were approximately $141.0
million.





Standby
letters of credit are conditional commitments issued by the Banks 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 Banks generally hold collateral and/or obtain 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 June 30, 2008, commitments under standby
letters of credit aggregated approximately $2.3 million.





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






29




FASB
Statement 157





On
January 1, 2008, the Company adopted FASB Statement No. 157, Fair Value
Measurements.  As discussed in more detail in Note 8 to the unaudited
notes to consolidated financial statements, this statement defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements.  This Statement establishes a fair value
hierarchy about the assumptions used to measure fair value and clarifies
assumptions about risk and the effect of a restriction on the sale or use of an
asset.  Upon adoption, we classified the three collateralized debt
obligations, discussed in the investment portfolio section of management’s
discussion and analysis above, along with certain impaired loans, with specific
allocations of the allowance for loan losses, as assets reported at fair value
using Level 3 inputs as defined in Statement No. 157. During the second quarter
of 2008, we changed the valuation approach used to value the collateralized debt
obligation collateralized by trust preferred securities of banks and insurance
companies because there were no longer observable level 2 inputs available.
Therefore, custom discounted cash flow modeling was employed to estimate the
fair value of this security (Level 3 inputs).





Collateralized
Debt Obligations





The collateralized debt obligations
classified as Level 3 represent $9.9 million, or 5%, of the $187.9 million of
investment securities measured at fair value and 0.6% of our total assets of
$1.58 billion. As of June 30, 2008, unrealized losses of approximately $282,000
were recorded in accumulated other comprehensive income in shareholders’ equity.
These securities are illiquid and are not considered by management as a
liquidity source; accordingly, unrealized losses have no impact on our
liquidity. Additionally, unrealized gains and losses have no impact on our
regulatory capital ratios. The decline in estimated value during 2008 was
primarily due to additional events of default by individual issuers of the
securities comprising the underlying collateral of these collateralized debt
obligations along with our assumptions of the likelihood of further additional
defaults. The most significant assumptions utilized in our valuations are the
rate at which estimated cash flows are discounted and our assumptions of default
and recovery rates.





Impaired
Loans





Impaired loans with specific
allocations of the allowance for loan losses classified as Level 3 represented
$15.8 million, or 1.0% of total assets. During 2008, $1.9 million of our
allowance for loan losses was specifically allocated to impaired loans. This
allocation was considered in our evaluation of the reasonableness and
sufficiency of our allowance for loan losses and provision for loan losses
which, in turn, impact our regulatory capital ratios. As loans, in general, are
illiquid and are not considered by management as a source of liquidity, changes
in their fair value have no impact on our liquidity.






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
interest rate sensitivity as of June 30, 2008 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 Banks
use standardized assumptions run against Bank specific data by an outsourced
provider of Asset Liability reporting.  The model derives expected
interest income and interest expense resulting from both a +/- 2% parallel shift
in the yield curve and a +/- steepening/twist of the yield curve.  The
standard parallel yield curve shift is used to estimate risk related to the
level of interest rates.  While the non-parallel yield curve twist is
used to estimate risk related to the level of interest rates and changes in the
slope of the yield curve.   All rate change scenarios are
“ramped” over a three-month period.






30




Yield
curve twists change both the level and slopes of the yield curve and are more
realistic than parallel yield curve shifts and are more useful for planning
purposes.  As an example, a 200 basis point yield curve twist increase
would result in short term rates increasing approximately 200 basis points and
long term rates increasing 100 basis points.  Given the current
interest rate environment, a 200 basis point yield curve twist increase is
considered reasonable.





The
analysis indicates a 200 basis point parallel interest rate increase would
result in a decrease in net interest income of approximately $1,343,000 or a
decrease of 3% over a 12-month period.  While a 200 basis point
parallel interest rate decrease would result in a decrease in net interest
income of approximately $965,000 or a decrease of 2% over a 12-month
period.  Additionally, a 200 basis point yield curve twist increase
would result in a decrease in net interest income of approximately $2,070,000 or
a decrease of 4% over a 12-month period.





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 securities, wholesale funding,
and Fed Funds positions consistent with the re-pricing characteristics of our
deposit and other interest bearing liabilities.







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 in ensuring that
material information related to the Company is made known to them by others
within the Corporation.





(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 June 30, 2008 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.




31







PART
II.  OTHER INFORMATION




Item
1a. Risk Factors







There has not been any material change
in the risk factor disclosure from that contained in the Company's 2007 Annual
Report on Form 10-K for the year ended December 31, 2007.







Item
4.  Submission of Matters to a Vote of Security Holders







At the Annual Meeting of Shareholders
of TIB Financial Corp. held April 29, 2008, ballot totals for the election of
Directors standing for reelection were as follows:





Directors
            
            For
            Against
            AbstainHoward
      B. Gutman
            
            9,925,097
            500,923
            -John
      G. Parks
            
            9,969,741
            456,279
            -Marvin
      F. Schindler
            
            9,968,630
            457,390
            -Otis
      T. Wallace
            
            9,905,695
            520,325
            -





Total
shares voted were 10,426,020 which represented 80.7% of the outstanding
shares.





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






Item
5.  Other Information







Not
applicable







Item
6.  Exhibits







(a) Exhibits





Exhibit
      31.1
            -
            Chief
      Executive Officer’s certification required under Section 302 of
      Sarbanes-Oxley Act of 2002Exhibit
      31.2
            -
            Chief
      Financial Officer’s certification required under Section 302 of
      Sarbanes-Oxley Act of 2002Exhibit
      32.1
            -
            Chief
      Executive Officer’s certification required under Section 906 of
      Sarbanes-Oxley Act of 2002Exhibit
      32.2
            -
            Chief
      Financial Officer’s certification required under Section 906 of
      Sarbanes-Oxley Act of 2002







32




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:  August
      11, 2008
            
            /s/
      Thomas J. LongeThomas
      J. Longe
              Chairman
      and Chief Executive OfficerDate:  August
      11, 2008
            
            /s/
      Stephen J. GilhoolyStephen
      J. Gilhooly
              Executive
      Vice President, Chief Financial Officer and
  Treasurer








33