**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      DC 20549


**____________**


**FORM
      10-QSB**





(Mark
      One)





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




For
      the quarterly period ended September 30, 2006








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





For
      the
      transition period from ______________ to _____________




Commission
      file number 000
      -
      51408





FIRST
      VALLEY BANCORP, INC.


(Exact
      name of registrant as specified in its charter)




CONNECTICUT
              04-3806732





(State
              or other jurisdicition of incorporation or organization)
            (IRS
                Employer Identification No.)







FOUR
      RIVERSIDE AVENUE, BRISTOL, CT, 06010


(Address
      of principal executive offices)





860-582-8868


(Issuer’s
      telephone number)





N/A


(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the issuer: (1) has filed all reports required to be
      filed
      by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past
      12 months (or 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.





YesX
            No





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).


Yes__
            NoX





Indicate
      by check mark whether the r egistrant
      is a shell company as defined in Rule 12b-2 of the Exchange Act  o YES


x NO





As
      of
      October 31, 2006, there were 1,194,550 shares of the registrant’s common stock
      outstanding.





Transitional
      Small Business Disclosure Format Yes ____  No X





Table
      of
      Contents





PagePart
                I
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements:Consolidated
                Statements of Financial Condition as of
              September
                30, 2006 and December 31, 2005
            3Consolidated
                Statements of Income for the three and nine
              month
                periods ended September 30, 2006 and 2005
            4Consolidated
                Statements of Cash Flows for the three and
              nine
                month periods ended September 30, 2006 and 2005
            5Notes
                to Consolidated Financial Statements
            6
                -
                9Item
                2.
            Management’s
                Discussion and Analysis or
                Plan
                  of Operation
            10
                - 20Item
                3.
            Controls
                and Procedures
            20Part
                II
            OTHER
                INFORMATIONItem
                1.
            Legal
                Proceedings
            20Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            20Item
                3.
            Defaults
                Upon Senior Securities
            20Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            20Item
                5.
            Other
                InformationItem
                6.
            Exhibits
            20SIGNATURES
            
            21CERTIFICATIONS
            
            22
                - 27




2


**FIRST
                  VALLEY BANCORP, INC. AND SUBSIDIARY FORM 10-QSB QUARTERLY
                  REPORT****SEPTEMBER
                  30, 2006**Part
                  1   FINANCIAL INFORMATIONItem
                  1  Financial Statements:
  **CONSOLIDATED
                  STATEMENTS OF FINANCIAL CONDITION****(in
                  thousands except share data)**September
                  30,
              
              December
                  31,2006
              
              2005(Unaudited)**ASSETS**Cash
                  and due from depository institutions
              
              $
              6,471
              
              $
              3,447Federal
                  funds sold and money market accounts
              
              
              16,666
              
              
              9,220Investment
                  securities
              
              
              27,225
              
              
              33,907Loans
                  receivable, net
              
              
              128,941
              
              
              109,773Premises
                  and equipment, net
              
              
              1,786
              
              
              1,435FHLBB
                  Stock, at cost
              
              
              931
              
              
              855Accrued
                  income receivable
              
              
              763
              
              
              680Deferred
                  income taxes
              
              
              838
              
              
              904Other
                  assets
              
              
              1,132
              
              
              705**TOTAL
                  ASSETS**
              
              **$**
              **184,753**
              
              **$**
              **160,926****LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Deposits:Non-interest
                  bearing
              
              $
              18,567
              
              $
              17,166Interest
                  bearing
              
              
              142,705
              
              
              112,034Total
                  deposits
              
              
              161,272
              
              
              129,200Borrowed
                  funds
              
              
              11,527
              
              
              19,117Mortgagors'
                  escrow accounts
              
              
              81
              
              
              176Other
                  liabilities
              
              
              1,275
              
              
              2,733Total
                  Liabilities
              
              
              174,155
              
              
              151,226Commitments
                  and contingenciesStockholders'
                  Equity:Common
                  stock, no par value; authorized 3,000,000 shares;issued
                  and outstanding 1,194,550 and 1,186,236 atSeptember
                  30, 2006 and December 31, 2005, respectively
              
              
              899
              
              
              892Additional
                  paid-in capital
              
              
              8,273
              
              
              8,194Retained
                  earnings
              
              
              1,763
              
              
              1,054Accumulated
                  other comprehensive loss
              
              
              (337
              )
              
              (440
              )Total
                  Stockholders' Equity
              
              
              10,598
              
              
              9,700**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              **$**
              **184,753**
              
              **$**
              **160,926**See
                  notes to consolidated financial
                  statements


3


**FIRST
                  VALLEY BANCORP, INC. AND SUBSIDIARY FORM 10-QSB QUARTERLY
                  REPORT****SEPTEMBER
                  30, 2006**
  **CONSOLIDATED
                  STATEMENTS OF INCOME (UNAUDITED)****(in
                  thousands except share data)**Three
                  Months Ended
              
              Nine
                  Months EndedSeptember
                  30,
              
              September
                  30,Interest
                  income:
              
              
              2006
              
              
              2005
              
              
              2006
              
              
              2005Interest
                  on loans
              
              $
              2,373
              
              $
              1,510
              
              $
              6,535
              
              $
              4,228Interest
                  and dividends on investments
              
              
              501
              
              
              426
              
              
              1,229
              
              
              1,186Total
                  interest income
              
              
              2,874
              
              
              1,936
              
              
              7,764
              
              
              5,414Interest
                  expense:Deposits
                  and escrow
              
              
              1,183
              
              
              609
              
              
              2,804
              
              
              1,582Borrowed
                  funds
              
              
              185
              
              
              137
              
              
              629
              
              
              289Total
                  interest expense
              
              
              1,368
              
              
              746
              
              
              3,433
              
              
              1,871Net
                  interest income
              
              
              1,506
              
              
              1,190
              
              
              4,331
              
              
              3,543Provision
                  for loan losses
              
              
              89
              
              
              94
              
              
              238
              
              
              255Net
                  interest income after provision for loan losses
              
              
              1,417
              
              
              1,096
              
              
              4,093
              
              
              3,288Noninterest
                  income:Service
                  charges and other fees
              
              
              138
              
              
              99
              
              
              330
              
              
              290Realized
                  gains (losses) on investments
              
              
              -
              
              
              -
              
              
              (86
              )
              
              -Total
                  noninterest income
              
              
              138
              
              
              99
              
              
              244
              
              
              290Noninterest
                  expenses:Salaries
              
              
              591
              
              
              452
              
              
              1,542
              
              
              1,262Employee
                  benefits and taxes
              
              
              107
              
              
              85
              
              
              300
              
              
              253Occupancy
                  and equipment
              
              
              205
              
              
              165
              
              
              570
              
              
              494Professional
                  fees
              
              
              52
              
              
              35
              
              
              152
              
              
              110Marketing
              
              
              31
              
              
              19
              
              
              90
              
              
              71Office
                  supplies
              
              
              20
              
              
              16
              
              
              55
              
              
              54Outside
                  service fees
              
              
              41
              
              
              63
              
              
              143
              
              
              170Organizational
                  costs
              
              
              -
              
              
              98
              
              
              -
              
              
              98Other
              
              
              112
              
              
              77
              
              
              303
              
              
              247Total
                  noninterest expenses
              
              
              1,159
              
              
              1,010
              
              
              3,155
              
              
              2,759Income
                  before income tax expense
              
              
              396
              
              
              185
              
              
              1,182
              
              
              819Income
                  tax expense
              
              
              150
              
              
              57
              
              
              473
              
              
              308**NET
                  INCOME**
              
              **$**
              **246**
              
              **$**
              **128**
              
              **$**
              **709**
              
              **$**
              **511**Basic
                  income per share
              
              $
              0.21
              
              $
              0.11
              
              $
              0.60
              
              $
              0.43Diluted
                  income per share
              
              $
              0.20
              
              $
              0.10
              
              $
              0.57
              
              $
              0.41Weighted-average
                  shares outstanding - basic
              
              
              1,194,118
              
              
              1,186,061
              
              
              1,189,827
              
              
              1,184,450Weighted-average
                  shares outstanding - diluted
              
              
              1,247,578
              
              
              1,240,092
              
              
              1,243,287
              
              
              1,238,481See
                  notes to consolidated financial statements


4


**FIRST
                  VALLEY BANCORP, INC. AND SUBSIDIARY FORM 10-QSB QUARTERLY
                  REPORT****SEPTEMBER
                  30, 2006****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (UNAUDITED)****(in
                  thousands)**Nine
                  Months Ended September 30,**Cash
                  flows from operating activities**
              
              
              2006
              
              
              2005Net
                  income
              
              $
              709
              
              $
              511Adjustments
                  to reconcile net income tocash
                  provided by operating activities:Realized
                  (gains) losses on investments
              
              
              86
              
              
              -Depreciation
              
              
              170
              
              
              178Provision
                  for loan losses
              
              
              238
              
              
              255Amortization
                  of debt issuance costs
              
              
              4
              
              
              1Amortization
                  (accretion) of premiums (discounts), net
              
              
              76
              
              
              132Common
                  stock issued as compensation
              
              
              40
              
              
              73Net
                  Change in:Accrued
                  income receivable
              
              
              (83
              )
              
              (1
              )Deferred
                  loan fees
              
              
              98
              
              
              38Other
                  assets
              
              
              (502
              )
              
              (359
              )Other
                  liabilities
              
              
              (1,458
              )
              
              988Net
                  cash provided (used) by operating activities
              
              
              (622
              )
              
              1,816**Cash
                  flows from investing activities**Proceeds
                  from maturities, calls and paydownsof
                  available-for-sale securities
              
              
              8,466
              
              
              17,746Proceeds
                  from sales of available-for-sale securities
              
              
              3,122
              
              
              -Purchase
                  of available-for-sale securities
              
              
              (4,900
              )
              
              (17,072
              )Loan
                  originations net of principal payments
              
              
              (19,504
              )
              
              (15,988
              )Purchases
                  of premises and equipment
              
              
              (521
              )
              
              (118
              )Net
                  cash used by investing activities
              
              
              (13,337
              )
              
              (15,432
              )**Cash
                  flows from financing activities**Change
                  in DDA, NOW, money market andsavings
                  accounts
              
              
              23,471
              
              
              3,661Change
                  in time deposit accounts
              
              
              8,601
              
              
              10,858Proceeds
                  from borrowed funds
              
              
              19,000
              
              
              10,439Repayments
                  of borrowed funds
              
              
              (26,594
              )
              
              (9,000
              )Change
                  in mortgagors' escrow accounts
              
              
              (95
              )
              
              (67
              )Proceeds
                  from issuance of common stock
              
              
              46
              
              
              -Net
                  cash provided by financing activities
              
              
              24,429
              
              
              15,891Net
                  change in cash and cash equivalents
              
              
              10,470
              
              
              2,275Cash
                  and cash equivalents at beginning of period
              
              
              12,667
              
              
              10,033**Cash
                  and cash equivalents at end of period**
              
              $
              23,137
              
              $
              12,308***Supplemental
                  Disclosures***Cash
                  paid during the period for:Interest
              
              $
              3,495
              
              $
              1,751Income
                  taxes
              
              $
              655
              
              $
              514See
                  notes to consolidated financial statements


5


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006






**Notes
      to Consolidated Financial Statements**


**(Unaudited)**








**Note
      1.** **Business**


Effective
      July 1, 2005, Valley Bank (the “Bank”), a Connecticut state-chartered commercial
      bank located in Bristol, Connecticut, reorganized into a bank holding company
      structure. As a result, a new bank holding company called First Valley Bancorp,
      Inc. (the “Company”) was formed and the Bank became the wholly owned subsidiary
      of the Company. The Board believes that the reorganization will increase the
      corporate flexibility of the Bank, will allow the Bank to better take advantage
      of additional business opportunities, and will provide the Bank with operational
      and competitive benefits.





The
      Bank
      is engaged principally in the business of attracting deposits from the general
      public and investing those deposits in small business, real estate, residential
      and consumer loans. The Bank’s deposits are insured by the Federal Deposit
      Insurance Corporation within prescribed limits. The Bank is subject to
      competition from other financial institutions throughout the region. The Bank
      is
      also subject to the regulations of certain state and federal agencies and
      undergoes periodic examinations by those regulatory authorities.








**Note
      2.** **Basis
      of presentation**


The
      interim consolidated financial statements of the Company include those of the
      Company and its wholly owned subsidiary, Valley Bank. Inter-company transactions
      have been eliminated. The Company does not consolidate its subsidiary, FVB
      Capital Trust I, as described in Note 8. The accounting and reporting policies
      of the Company conform to generally accepted accounting principles in the United
      States of America and to general practices within the banking industry. Such
      policies have been followed on a consistent basis.





In
      preparing the financial statements, management is required to make estimates
      and
      assumptions that affect the reported amounts of assets and liabilities as of
      the
      date of the balance sheet, and income and expenses for the period. Actual
      results could differ from those estimates.





Material
      estimates that are particularly susceptible to significant change in the
      near-term relate to the determination of the allowance for losses on loans.
      While management uses available information to recognize losses on loans, future
      additions to the allowance may be necessary based on changes in credit quality
      and economic conditions, particularly in Connecticut.





The
      data
      presented for the three and nine months ended September 30, 2006 and 2005
      reflect, in the opinion of management, all adjustments (consisting only of
      normal recurring adjustments) which are necessary to present fairly the results
      for such interim periods.


6


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006


Interim
      results at and for the three and nine months ended September 30, 2006 are not
      necessarily indicative of the results that may be expected for the fiscal year
      ended December 31, 2006.





**Note
      3.** **Comprehensive
      Income**


Statement
      of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”
establishes standards for disclosure of comprehensive income, which includes
      net
      income and any changes in equity from non-owner sources that are not recorded
      in
      the income statement (such as changes in the net unrealized gains (losses)
      on
      securities).





The
      Company’s one source of other comprehensive income is the net unrealized gain
      (loss) on securities.


Nine
                Months Ended(in
                thousands)
            
            September
                30,2006
            
            2005Net
                Income
            
            $
            709
            
            $
            511Other
                comprehensive income (loss):Net
                unrealized holding gains (losses) on securities available for
                sale
            
            
            82
            
            
            (178
            )Reclassification
                adjustment for loss recognized in net income
            
            
            86
            
            
            -Other
                comprehensive income (loss) before tax expense
            
            
            168
            
            
            (178
            )Income
                tax expense (benefit) related to items of other comprehensive income
                (loss)
            
            
            65
            
            
            (70
            )Other
                comprehensive income (loss) net of tax
            
            
            103
            
            
            (108
            )**Total
                comprehensive income**
            
            **$**
            **812**
            
            **$**
            **403**





**Note
      4.** **Income
      per Share**


The
      Company has computed and presented income per share in accordance with Statement
      of Financial Accounting Standards No. 128.





**Note
      5.** **Commitment
      to Extend Credit**


The
      Company is party to financial instruments with off-balance sheet risk in the
      normal course of business to meet the financing needs of its customers. These
      financial instruments include commitments to extend credit. These commitments
      involve, to varying degrees, elements of credit and interest rate risk in excess
      of the amount recognized in the statement of financial condition.





The
      contractual amounts of outstanding commitments at September 30, 2006 and
      December 31, 2005 were as follows:


(in
                thousands)September
                30, 2006
            December
                31, 2005Commitments
                to extend credit:Loan
                commitments
            
            $
            3,926
            
            $
            11,684Unadvanced
                lines of credit
            
            
            22,203
            
            
            21,931Standby
                letters of credit
            
            
            2,139
            
            
            1,089Outstanding
                commitments
            
            $
            28,268
            
            $
            34,704


7


FIRST
          VALLEY BANCORP, INC. FORM
          10-QSB QUARTERLY REPORT
 SEPTEMBER
          30, 2006






**Note
      6.** **Stock
      Based Compensation**


The
      Company has a long-term incentive plan authorizing various types of market
      and
      performance based incentive awards that may be granted to directors, officers
      and employees.
      Information regarding stock options as of September 30, 2006 is summarized
      below:




Number
                  of shares
              
              Weighted
                  Average Exercise
                PriceOutstanding
                  at December 31, 2005
              
              
              124,050
              
              $
              8.21Granted
              
              
              -
              
              
              -Exercised
              
              
              5,808
              
              
              8.00Forfeited
              
              
              -
              
              
              -Outstanding
                  at September 30, 2006
              
              
              118,242
              
              $
              8.22Options
                  exercisable at September 30, 2006
              
              
              118,242
              
              $
              8.22





In
      December 2004, the Financial Accounting Standards Board revised Statement of
      Financial Accounting Standards No. 123, *“Accounting
      for Stock-Based Compensation”* (“SFAS
      123R”). This Statement eliminated the alternative intrinsic value method of
      accounting, as permitted by Accounting Principles Board Opinion No. 25, *“Accounting
      for Stock Issued to Employees”* for
      recognizing the cost of employee services received in share-based payment
      transactions, thereby reflecting the economic consequences of those transactions
      in the financial statements. SFAS 123R requires all entities to follow the
      same
      accounting standard and account for such transactions using the fair-value-based
      method. SFAS 123R is effective for small business filers as of the first interim
      or annual period that begins after December 31, 2005.





On
      January 1, 2006, the Company adopted the provision of SFAS 123R using the
      modified prospective transition method. Under this transition method,
      compensation expense is recognized currently for all outstanding options not
      yet
      vested. All of the Company’s outstanding options were fully vested as of the
      effective date and therefore no compensation expense has been recognized.
      Previously, the Company applied APB Opinion 25, “Accounting for Stock Issued to
      Employees,” and related interpretations in accounting for its long-term
      incentive plan.





The
      following table illustrates the effect on net income and earnings per share
      as
      if the fair value based method described in SFAS No. 123R, “Accounting for
      Stock-Based Compensation” had been applied to the Bank’s long-term incentive
      plan prior to January 1, 2006.


8
 
 FIRST
          VALLEY BANCORP, INC. FORM
          10-QSB QUARTERLY REPORT
 SEPTEMBER
          30, 2006


**9
                Months****Ended***(in
                thousands except share data)*
            
            **9/30/05**Net
                income, as reported
            
            $
            511Stock-based
                employee compensationincluded
                in net income
            
            
            -Total
                stock-based employee compensationexpense
                determined under the fair valuebased
                method for all awards
            
            
            -Pro
                forma net income
            
            $
            511Earnings
                per share:Basic,
                as reported
            
            $
            0.43Diluted,
                as reported
            
            $
            0.41Basic,
                pro forma
            
            $
            0.43Diluted,
                pro forma
            
            $
            0.41





**Note
      7.** **Recent
      Accounting Pronouncements**


In
      March
      2006, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standard No. 156, “Accounting for Servicing of Financial Assets”
(“SFAS 156”). SFAS 156 requires an entity to recognize a servicing asset or
      liability measured at fair value. Additionally, SFAS 156 specifies that an
      entity must elect whether to measure servicing assets and liabilities in
      subsequent periods at fair value or amortize the asset or liability in
      proportion to and over the life of the servicing asset or liability. The
      statement is effective at the beginning of an entity’s fiscal year beginning
      after September 15, 2006. At this time, the Company does not expect that this
      statement will have a material effect on its financial statements.





**Note
      8.** **Long
      Term Debt**


In
      July
      2005, the Company formed FVB Capital Trust I (the “Trust”). The Trust has no
      independent assets or operations and was created for the sole purpose of issuing
      trust preferred securities and investing the proceeds thereof in an equivalent
      amount of junior subordinated debentures issued by the Company.





Trust
      preferred securities issued by the statutory trust are considered regulatory
      capital for purposes of determining the Company’s Tier I capital ratio and the
      Bank’s Tier I capital ratio to the extent that the trust preferred proceeds have
      been invested in the Bank’s capital.





The
      subordinated debentures, which bear an interest rate fixed at 6.42% for the
      first five years and a floating interest rate set at three-month LIBOR plus
      190
      basis points thereafter, mature on August 23, 2035 and can be redeemed at the
      Company’s option in an amount equal to 100% of the principal amount of the debt
      securities beginning in 2010 and thereafter. The trust securities have identical
      terms except the duration of the trust is 35 years.


9


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006







**Part
      I.  -  FINANCIAL INFORMATION**


**Item
      2.    Management’s Discussion and Analysis of Financial Condition
      and Results of Operations**





**Cautionary
      Statement**


Reports
      issued by First Valley Bancorp, Inc. including this quarterly report on Form
      10-QSB contain statements relating to future results of the Company that are
      considered “forward looking” within the meaning of the Private Securities
      Litigation Reform Act of 1995. These statements relate to, among other things,
      expectations concerning loan demand, growth and performance, simulated changes
      in interest rates and the adequacy of the Company’s allowance for loan losses.
      Actual results may differ materially from those expressed or implied as a result
      of certain risks and uncertainties, including but not limited to, changes in
      political and economic conditions, interest rate fluctuations, personal and
      corporate customers’ bankruptcies, inflation, acquisitions and integrations of
      acquired businesses, results from branch expansion, technological fluctuations,
      success in gaining regulatory approvals when required as well as other risks
      and
      uncertainties reported from time to time in the Company’s filings with the
      SEC.





**(a)**  **Plan
      of Operation**


Not
      applicable since the Company had revenues from operations in each of the last
      two fiscal years.





**(b)**  **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation**





**Overview**


The
      Company is the holding company for Valley Bank (the “Bank”), a Connecticut
      state-chartered commercial bank located in Bristol, Connecticut. The Bank,
      which
      has its main office in Bristol, a second full-service office in the Terryville
      section of Plymouth, and a loan production office in Southington that opened
      in
      January 2005, provides banking services to commercial and individual customers
      primarily in the town of Bristol and the neighboring communities of Burlington,
      Farmington, Plainville, Plymouth, Southington and Wolcott. The Bank offers
      to
      its business customers demand, savings and time deposit accounts and the
      granting of various types of commercial loans and commercial real estate loans.





The
      services provided by the Bank to consumers include checking, savings and time
      deposit accounts, as well as mortgage loans, consumer loans and investment
      services.





In
      January 2006, the Bank (d/b/a Riverside Investment Services) began to provide
      full-time access to advisory and investment services to consumers and businesses
      on retirement planning, individual investment portfolios, and strategic asset
      management. Riverside Investment Services offers mutual funds, life insurance
      options, tax planning, estate planning and investment portfolio analysis. 
In January 2006, the Bank's Board of Directors approved these new services
      provided by the Bank (d/b/a Riverside Investment Services).


10


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006


The
      Bank
      entered into a broker/dealer relationship with LPL (Linsco/Private Ledger)
      in
      Boston. In April 2006, the Bank appointed Thomas O. Barnes, Jr. as Manager
      of
      Riverside Investment Services. Melissa Ballash of Bristol was hired as
      administrative assistant. Riverside Investment Services is located on the second
      floor of the Bank’s main office on Four Riverside Avenue, Bristol,
      Connecticut.





Prior
      April 2006, the Bank had offered its customers investment services on a
      part-time basis through a relationship with Tracy Driscoll, Inc., a local
      insurance agency, and Bannon, Ohanesian & Lecours, Inc., a full-service,
      independent broker/dealer headquartered in West Hartford, Connecticut.





The
      Bank
      has plans to open two additional full service branches over the next six months.
      In April 2004, the Bank closed on the purchase of land and a building located
      at
      888 Farmington Avenue, Bristol, Connecticut, 06010. The building, which prior
      to
      the purchase had served as a branch office of North American Bank and Trust,
      is
      currently being leased by the Bank to Bristol Travel, Inc. The Bank is currently
      in the process of filing an application with the Department of Banking to
      operate the site as a full service branch office in the fourth quarter of 2006
      or the first quarter of 2007. It is anticipated that the new branch will be
      staffed with 5 full-time equivalent employees (“FTE’s”).





In
      January 2005, the Bank opened a loan production office in Southington. In
      January 2006, the Bank filed an application with the Department of Banking
      for a
      full service branch office in Southington. In February 2006, the Bank received
      approval from the Department of Banking to open the full service branch in
      Southington. The new full service branch, which will replace the existing loan
      production office, is expected to open in the last quarter of 2006. It is
      anticipated that the new branch will be staffed with 5 FTE’s.





In
      July
      2005, the Company announced that Mark A. Gibson, President of Quality Coils,
      Inc. and Dynalock Corporation, had been elected a director of First Valley
      Bancorp, Inc. Mr. Gibson has also been elected a director of the
      Bank.





In
      July
      2005, the Company raised approximately $4.1 million through a trust-preferred
      offering that closed on July 28, 2005. These funds will support additional
      growth by the Bank. See Note 8 for additional information.





First
      Valley Bancorp, Inc. lists its stock on the Over The Counter Bulletin Board
      at www.otcbb.com under
      the symbol “FVLY”.





The
      following discussion and analysis presents a review of the operating results
      and
      financial condition of the Company, for the three and six month periods ended
      September 30, 2006 and 2005. The discussion below should be read in conjunction
      with the financial statements and other financial data presented elsewhere
      herein.


11


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006


**FINANCIAL
      CONDITION**


**General**


Total
      assets increased by $16.3 million, or 9.7%, during the third quarter of 2006,
      and have grown by $23.8 million, or 14.8% on a year-to-date basis. Total loans
      grew by $4.0 million, or 3.2%, for the quarter, while total investment
      securities declined by $0.5 million, or 2.0%. Total deposits increased by $21.3
      million, or 15.2%, in the third quarter of 2006 and total borrowed funds
      balances declined by $4.7 million, or 29.0%, for the quarter. On a year-to-date
      basis, loans have increased by $ 19.2 million, or 17.5%, while total investment
      securities have declined by $6.7 million, or 19.7%. Deposits have increased
      by
      $32.1 million, or 24.8%, year-to-date, while borrowed funds balances have
      declined by $7.6 million, or 39.7%.





**Investment
      Securities**


The
      carrying value and estimated market values of investment securities are as
      follows:


(in
      thousands)


**September
                  30, 2006**Available-for-sale
                  securities:
              
              Amortized
              
              Gross
                  Unrealized
              
              EstimatedDebt
                  securities:
              
              Cost
              
              
              Gains
              
              
              Losses
              
              Market
                  ValueU.S.
                  agency obligations:Due
                  in less than one year
              
              $
              4,002
              
              $
              -
              
              $
              (47
              )
              $
              3,955Due
                  from one through five years
              
              
              3,999
              
              
              -
              
              
              (86
              )
              
              3,9138,001
              
              
              -
              
              
              (133
              )
              
              7,868Corporate
                  bonds:Due
                  in less than one year
              
              
              511
              
              
              -
              
              
              (6
              )
              
              505Due
                  from one through five years
              
              
              1,558
              
              
              -
              
              
              (53
              )
              
              1,5052,069
              
              
              -
              
              
              (59
              )
              
              2,010Municipal
                  bonds:Due
                  from five through ten years
              
              
              1,179
              
              
              -
              
              
              (5
              )
              
              1,174Due
                  after ten years
              
              
              1,383
              
              
              1
              
              
              -
              
              
              1,3842,562
              
              
              1
              
              
              (5
              )
              
              2,558Mortgage-backed
                  securities
              
              
              13,742
              
              
              -
              
              
              (353
              )
              
              13,389Total
                  debt securities
              
              
              26,374
              
              
              1
              
              
              (550
              )
              
              25,825Equity
                  securities:Variable
                  rate preferred securities:
              
              
              1,400
              
              
              -
              
              
              -
              
              
              1,400Total
                  available-for-sale securities
              
              $
              27,774
              
              $
              1
              
              $
              (550
              )
              $
              27,225




**December
                  31, 2005**Available-for-sale
                  securities:
              
              Amortized
              
              Gross
                  Unrealized
              
              EstimatedDebt
                  securities:
              
              Cost
              
              Gains
              
              Losses
              
              Market
                  ValueU.S.
                  agency obligations:Due
                  in less than one year
              
              $
              1,509
              
              $
              -
              
              $
              (23
              )
              $
              1,486Due
                  from one through five years
              
              
              7,499
              
              
              -
              
              
              (168
              )
              
              7,3319,008
              
              
              -
              
              
              (191
              )
              
              8,817Corporate
                  bonds:Due
                  from one through five years
              
              
              2,095
              
              
              -
              
              
              (75
              )
              
              2,020Municipal
                  bonds:Due
                  after ten years
              
              
              2,564
              
              
              -
              
              
              (15
              )
              
              2,549
 12
 FIRST
          VALLEY BANCORP, INC. FORM
          10-QSB QUARTERLY REPORT
 SEPTEMBER
          30, 2006
    Mortgage-backed
                  securities
              
              
              20,456
              
              
              1
              
              
              (436
              )
              
              20,021Total
                  debt securities
              
              
              34,123
              
              
              1
              
              
              (717
              )
              
              33,407Equity
                  securities:Variable
                  rate preferred securities:
              
              
              500
              
              
              -
              
              
              -
              
              
              500Total
                  available-for-sale securities
              
              $
              34,623
              
              $
              1
              
              $
              (717
              )
              $
              33,907




The
      Company had no realized gains or losses on investment securities during the
      three months ended September 30, 2006, and has had $86,000 of realized losses
      and no realized gains on a year-to-date basis in 2006. There were no realized
      gains or losses on investment securities during the first nine months of 2005.





**Loans**


The
      Company’s loan portfolio has increased by $19.2 million, or 17.5%, during the
      first nine months of 2006. The majority of growth was in commercial and consumer
      real estate loans. At September 30, 2006 and December 31, 2005, the composition
      of the Company’s loan portfolio was as follows (dollars in
      thousands):





**AT**
            
            **AT****September
                30, 2006**
            
            **December
                31, 2005**Commercial
                mortgages
            
            $
            67,919
            
            $
            54,653Commercial
                loans
            
            
            27,193
            
            
            22,726Residential
                mortgages
            
            
            23,133
            
            
            22,848Consumer
                and home equity loans
            
            
            12,797
            
            
            11,317131,042
            
            
            111,544Less:Deferred
                loan origination fees
            
            
            323
            
            
            225Allowance
                for loan losses
            
            
            1,778
            
            
            1,546Loans
                receivable, net
            
            $
            128,941
            
            $
            109,773Weighted
                average yield
            
            
            7.16
            %
            
            6.66
            %





**Critical
      Accounting Policies**


In
      the
      ordinary course of business, the Company has made a number of estimates and
      assumptions relating to reporting results of operations and financial condition
      in preparing its financial statements in conformity with accounting principles
      generally accepted
      in the United States of America. Actual results could differ significantly
      from
      those estimates under different assumptions and conditions. The Company believes
      the following discussion addresses the Company's only critical accounting
      policy, which is the policy that is most important to the presentation of the
      Company's financial results. This policy requires management's most difficult,
      subjective and complex judgments, often as a result of the need to make
      estimates about the effect of matters that are inherently
      uncertain.


13


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006






**Allowance
      for Loan Losses**


The
      allowance for loan losses is established by a provision charged to earnings
      and
      is maintained at a level considered adequate to provide for potential loan
      losses based on management’s evaluation of known and inherent risks in the loan
      portfolio. When a loan or portion of a loan is considered uncollectable, it
      is
      charged against the allowance for loan losses. Recoveries of loan previously
      charged off are credited to the allowance when collected.





Management
      makes regular evaluations of the loan portfolio to determine the adequacy of
      the
      level of the allowance for loan losses. Numerous factors are considered in
      the evaluation,
      including a review of certain borrowers’ current financial status and credit standing,
      available collateral, loss experience in relation to outstanding loans, the
      overall loan portfolio quality, management’s judgment regarding prevailing and
      anticipated economic conditions, and other relevant factors.





In
      addition, various regulatory agencies, as an integral part of their examination
      process, periodically
      review the Company’s allowance for loan losses. Such agencies may require the
      Company to recognize additions to the allowance based on their judgments about
      information available to them at the time of their examination.





The
      following summarizes the changes in allowance for loan losses for the nine
      months ended September 30, 2006 (dollars in thousands):




Balance,
                beginning of period
            
            $
            1,546Provision
                for loan losses
            
            
            238Chargeoffs
            
            
            (10
            )Recoveries
            
            
            4Balance,
                end of period
            
            **$**
            **1,778**





At
      September 30, 2006, the Bank had $257,000 of loans on nonaccrual status. The
      loans are considered impaired. At December 31, 2005, the Company had $337,000
      loans on nonaccrual status and considered impaired.





**Deposits**


Deposits
      have grown by $32.1 million, or 24.8%, during the first nine months of 2006.
      The
      growth was almost entirely in time deposit balances, while balances in NOW
      accounts, money market savings and regular savings, declined. The shift in
      composition reflects a general transfer of savings deposits by consumers into
      time deposits to take advantage of higher interest rates.


14


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006





At
      September 30, 2006 and December 31, 2005, the Company’s deposit balances were as
      follows (dollars in thousands):


**AT
                September 30, 2006**
            
            **AT
                December 31, 2005****Weighted**
            
            
            
            **Weighted****Average**
            
            
            
            **Average****Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate**Non-interest
                checking
            
            $
            18,567
            
            
            0.00
            %
            $
            17,166
            
            
            0.00
            %Regular
                savings
            
            
            19,776
            
            
            0.99
            %
            
            22,575
            
            
            0.77
            %Money
                market savings
            
            
            19,745
            
            
            2.92
            %
            
            23,154
            
            
            2.23
            %NOW
                accounts
            
            
            4,220
            
            
            1.37
            %
            
            4,707
            
            
            0.47
            %62,308
            
            
            1.33
            %
            
            67,602
            
            
            1.05
            %Time
                deposits
            
            
            98,964
            
            
            4.54
            %
            
            61,598
            
            
            3.52
            %Total
                Deposits
            
            **$**
            **161,272**
            
            
            **3.30**
            **%**
            **$**
            **129,200**
            
            
            **2.23**
            **%**





**Borrowed
      Funds**


At
      September 30, 2006 and December 31, 2005, the Company had $11.5 million and
      $19.1 million, respectively, in borrowed funds. The Company has used excess
      deposit flows during the year to repay maturing Federal Home Loan Bank of Boston
      ("FHLBB") Advances. The weighted average rates on borrowed funds at September
      30, 2006 and December 31, 2005 were 5.17% and 4.79%, respectively.





**Liquidity
      and Capital Resources**


At
      September 30, 2006, approximately 27% of the Company’s assets were held in cash,
      cash equivalents and securities and 70% of the Company’s assets were held in
      loans. The Company’s ratio of loans to deposits, which is used as a general
      guideline in managing the Company’s asset/liability mix, was 80% at September
      30, 2006.





The
      Company has other liquidity related policy targets and thresholds which are
      reviewed on a regular basis by the Asset/Liability Committee (“ALCO”). The
      Company reviews and sets deposit rates weekly based upon its need for funds,
      competition in the market area, and the availability and pricing of other
      funding sources.





The
      Bank
      is also a member of the FHLBB, which provides an alternative funding source
      for
      the Bank’s liquidity needs. The Bank currently has approximately $27 million of
      additional borrowing capacity at the FHLBB.





Each
      of
      the Company’s sources of liquidity is vulnerable to various uncertainties beyond
      the control of the Company. Scheduled loan and security payments are a
      relatively stable source
      of
      funds, but prepayments in loans and securities, securities calls, and deposit
      flows can all vary widely in reaction to market conditions, primarily prevailing
      interest rates.
      The Company’s financial condition is also affected by its ability at attractive
      rates and other market conditions.


15


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006


The
      Company considers its sources of liquidity to be adequate to provide for
      expected and unexpected balance sheet fluctuations and to provide funds for
      growth. Management closely monitors its liquidity/cash flow position and is
      not
      currently aware of any trends or uncertainties that would create liquidity
      problems in the near future.





The
      Company is subject to capital adequacy rules and guidelines issued by the
      Federal Reserve Bank, and the Bank is subject to capital adequacy rules and
      guidelines issued by the FDIC. The substantially parallel rules and guidelines
      require the Company to maintain certain minimum ratios of capital to adjusted
      total assets and/or risk-weighted assets.





The
      Bank’s regulatory capital ratios at September 30, 2006 were a total risk-based
      capital ratio of 11.6% and a Tier 1 capital ratio of 8.0%. Those capital ratios
      at December 31, 2005 were 12.9% and 8.8%, respectively. The Company’s regulatory
      capital ratios at September 30, 2006 and December 31, 2005 were similar to
      the
      Bank’s ratios. Both the Company’s and the Bank’s capital ratios at September 30,
      2006 were considered well capitalized for regulatory purposes.





**RESULTS
      OF OPERATIONS**


**Comparison
      of the three and nine month periods ended September 30, 2006 and
      2005**


**Net
      Income**


Net
      income for the three-month period ended September 30, 2006 was $246,000, or
      $0.21 basic income per share and $0.20 diluted income per share, compared to
      net
      income of $128,000, or $0.11 basic income per share and $0.10 diluted income
      per
      share, for the three-month period ended September 30, 2005. For the nine-month
      period ended September 30, 2006 net income was $709,000, or $0.60 basic income
      per share and $0.57 diluted income per share. That compares with net income
      of
      $511,000, or $0.43 basic income per share and $0.41 diluted income per share
      for
      the first nine months of 2005. The increase in net income in both the third
      quarter of 2006 and year-to-date 2006 is due primarily to strong growth in
      net
      interest income which more than offset higher non-interest expenses.





**Net
      Interest Income**


Net
      interest income for the three months ended September 30, 2006 was $1,506,000
      compared to $1,190,000 for the same period in 2005. For the first nine months
      of
      2006, net interest income was $4,331,000 versus $3,543,000 for the same period
      in 2005. The increase for the three-month period is due to growth in
      interest-earning assets and a small increase in the average net interest margin,
      which was 3.49% for the quarter ended September 30, 2006 compared to 3.45%
      for
      the same quarter in 2005. The increase in net interest income for the nine
      months ended September 30, 2006 is due to growth in interest-earning assets
      which more than offset a decline in the Company’s net interest margin from 3.67%
      to 3.62%.


16


**Interest
      Income**


Total
      interest income for the three-month periods ended September 30, 2006 and 2005
      was $2,874,000 and $1,936,000, respectively. For the first nine months of 2006
      and 2005, total interest income was $7,764,000 and $5,414,000, respectively.
      The
      average rate on interest-earning assets was higher by 105 basis points in the
      third quarter of 2006 versus the third quarter of 2005 while for the first
      nine
      months of 2006, the average rate on interest-earning assets was higher by 87
      basis points compared to the first nine months of the prior year. The increase
      in interest income for both the third quarter of 2006 and year-to-date 2006
      reflects generally higher short term interest rates and strong growth in the
      loan portfolio and consequently in interest earning assets. The average balance
      of total interest earning assets increased by $34.3 million and $31.1 million
      for the third quarter of 2006 and the first nine months of 2006, respectively,
      compared with the same periods in 2005.





**Interest
      Expense**


Total
      interest expense for the three-month periods ended September 30, 2006 and 2005
      was $1,368,000 and $746,000, respectively. For the first nine months of 2006
      and
      2005, total interest expense was $3,433,000 and $1,871,000, respectively. The
      average rate on deposits and borrowings was 3.65% in the third quarter of 2006
      compared to 2.53% in the same quarter of 2005, an increase of 112 basis points.
      Year to date through September 30, 2006, the average rate on deposits and
      borrowings was higher by 105 basis points compared to the first nine months
      of
      the prior year. The increase in the average rate reflects the general increase
      in short-term interest rates, a shift of savings and money market deposits
      into
      time deposits, and growth in borrowed money including the added cost of junior
      subordinated debt. The higher interest expense in both the current quarter
      and
      the first nine months of the current year reflects the higher average rate
      as
      well as strong growth in average interest-bearing liabilities which increased
      by
      $31.6 and $28.4 million, respectively, in the third quarter of 2006 and the
      first nine months of 2006 compared to the same periods in 2005.





The
      tables below shows the major categories of average assets and average
      liabilities together with their respective interest income or expense and the
      rates earned and paid by the Company (dollars in thousands):


For
                Three Months EndedSeptember
                30, 2006
            
            September
                30, 2005**Interest-Earning
                Assets:**
            
            Average
            
            Income/
            
            Average
            
            Average
            
            Income/
            
            AverageFederal
                funds sold and money
            
            
            Balance
            
            
            Expense
            
            
            Rate
            
            
            Balance
            
            
            Expense
            
            
            Ratemarket
                accounts
            
            $
            13,540
            
            $
            171
            
            
            5.02
            %
            $
            8,438
            
            $
            70
            
            
            3.29
            %Investment
                securities
            
            
            29,672
            
            
            330
            
            
            4.41
            %
            
            38,186
            
            
            356
            
            
            3.70
            %Loans
            
            
            127,899
            
            
            2,373
            
            
            7.36
            %
            
            90,199
            
            
            1,510
            
            
            6.64
            %Total
                interest-earnings assets
            
            
            171,110
            
            
            2,874
            
            
            6.66
            %
            
            136,823
            
            
            1,936
            
            
            5.61
            %Non-interest-earning
                assets
            
            
            7,901
            
            
            
            
            
            
            
            
            6,543Total
                assets
            
            $
            179,011
            
            
            
            
            
            
            
            $
            143,366




17


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006


**Interest-Bearing
                Liabilities:**NOW
                accounts
            
            3,407
            
            
            8
            
            
            0.93
            %
            
            2,963
            
            
            4
            
            
            0.54
            %Savings
                and money market accounts
            
            40,763
            
            
            194
            
            
            1.89
            %
            
            43,735
            
            
            154
            
            
            1.40
            %Time
                deposits
            
            89,867
            
            
            982
            
            
            4.33
            %
            
            56,359
            
            
            451
            
            
            3.17
            %Borrowed
                money
            
            14,434
            
            
            185
            
            
            5.08
            %
            
            13,810
            
            
            137
            
            
            3.94
            %Total
                interest-bearing liabilities
            
            148,471
            
            
            1,368
            
            
            3.65
            %
            
            116,867
            
            
            746
            
            
            2.53
            %Non-interest-bearing
                demand deposits
            
            19,091
            
            
            
            
            
            
            
            
            15,132Other
                non-interest-bearing liabilities
            
            1,
                091
            
            
            
            
            
            
            
            
            1,815Capital
                accounts
            
            10,358
            
            
            
            
            
            
            
            
            9,552Total
                liabilities and capital accounts
            $
            179,011
            
            
            
            
            
            
            
            $
            143,366Net
                interest income
            
            
            
            $
            1,506
            
            
            
            
            
            
            
            $
            1,190Net
                interest margin
            
            
            
            
            3.49
            %
            
            
            
            
            
            
            
            3.45
            %Interest
                rate spread
            
            
            
            
            3.01
            %
            
            
            
            
            
            
            
            3.08
            %





For
                Nine Months EndedSeptember
                30, 2006
            
            September
                30, 2005**Interest-Earning
                Assets:**
            
            Average
            
            
            Income/
            
            
            Average
            
            
            Average
            
            
            Income/
            
            
            AverageFederal
                funds sold and money
            
            Balance
            
            
            Expense
            
            
            Rate
            
            
            Balance
            
            
            Expense
            
            
            Ratemarket
                accounts
            $
            8,381
            
            $
            296
            
            
            4.72
            %
            $
            5,453
            
            $
            121
            
            
            2.97
            %Investment
                securities
            
            30,103
            
            
            933
            
            
            4.14
            %
            
            37,991
            
            
            1,065
            
            
            3.75
            %Loans
            
            121,691
            
            
            6,535
            
            
            7.18
            %
            
            85,615
            
            
            4,228
            
            
            6.60
            %Total
                interest-earnings assets
            
            160,175
            
            
            7,764
            
            
            6.48
            %
            
            129,059
            
            
            5,414
            
            
            5.61
            %Non-interest-earning
                assets
            
            6,745
            
            
            
            
            
            
            
            
            6,791Total
                assets
            $
            166,920
            
            
            
            
            
            
            
            $
            135,850**Interest-Bearing
                Liabilities:**NOW
                accounts
            
            3,131
            
            
            18
            
            
            0.76
            %
            
            3,042
            
            
            15
            
            
            0.66
            %Savings
                and money market accounts
            
            41,237
            
            
            519
            
            
            1.68
            %
            
            43,716
            
            
            407
            
            
            1.24
            %Time
                deposits
            
            76,641
            
            
            2,267
            
            
            3.96
            %
            
            52,271
            
            
            1,160
            
            
            2.97
            %Borrowed
                money
            
            16,874
            
            
            629
            
            
            4.98
            %
            
            10,473
            
            
            289
            
            
            3.69
            %Total
                interest-bearing liabilities
            
            137,883
            
            
            3,433
            
            
            3.33
            %
            
            109,502
            
            
            1,871
            
            
            2.28
            %Non-interest-bearing
                demand deposits
            
            17,879
            
            
            
            
            
            
            
            
            14,366Other
                non-interest-bearing liabilities
            
            1,074
            
            
            
            
            
            
            
            
            2,601Capital
                accounts
            
            10,084
            
            
            
            
            
            
            
            
            9,381Total
                liabilities and capital accounts
            $
            166,920
            
            
            
            
            
            
            
            $
            135,850Net
                interest income
            
            
            
            $
            4,331
            
            
            
            
            
            
            
            $
            3,543Net
                interest margin
            
            
            
            
            3.62
            %
            
            
            
            
            
            
            
            3.67
            %Interest
                rate spread
            
            
            
            
            3.15
            %
            
            
            
            
            
            
            
            3.32
            %


18


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006






Net
      interest income can be analyzed in terms of the impact of changing rates and
      changing volumes. The following table describes the extent to which changes
      in interest
      rates and changes in the volume of interest-earning assets and interest-bearing
      liabilities have affected the Company’s interest income and interest expense
      during the periods indicated. Information is provided in each category with
      respect to (i) changes attributable to changes in volume (changes in volume
      multiplied by the prior rate), (ii) changes attributable to changes in rates
      (changes in rates multiplied by prior volume), and (iii) the net change (dollars
      in thousands):





For
                the 3 Months Ended
            
            For
                the 9 Months EndedSeptember
                30, 2006 versus 2005
            
            September
                30, 2006 versus 2005Interest
                Income:
            
            Increase
                (Decrease) Due to
            Increase
                (Decrease) Due toFederal
                funds sold and money
            
            
            Rate
            
            
            Volume
            
            
            Total
            
            
            Rate
            
            
            Volume
            
            
            Totalmarket
                accounts
            
            $
            47
            
            $
            54
            
            $
            101
            
            $
            92
            
            $
            83
            
            $
            175Investment
                securities
            
            
            61
            
            
            (87
            )
            
            (26
            )
            
            55
            
            
            (187
            )
            
            (132
            )Loans
            
            
            178
            
            
            685
            
            
            863
            
            
            396
            
            
            1,911
            
            
            2,307Total
                interest income
            
            
            286
            
            
            652
            
            
            938
            
            
            543
            
            
            1,807
            
            
            2,350Interest
                Expense:NOW
                accounts
            
            
            3
            
            
            1
            
            
            4
            
            
            2
            
            
            -
            
            
            2Savings
                and money market accounts
            
            
            51
            
            
            (11
            )
            
            40
            
            
            123
            
            
            (11
            )
            
            112Time
                deposits
            
            
            200
            
            
            330
            
            
            530
            
            
            461
            
            
            647
            
            
            1,108Borrowed
                money
            
            
            42
            
            
            6
            
            
            48
            
            
            124
            
            
            216
            
            
            340Total
                interest expense
            
            
            296
            
            
            326
            
            
            622
            
            
            710
            
            
            852
            
            
            1,562Change
                in Net interest income
            
            $
            (10
            )
            $
            326
            
            $
            316
            
            $
            (167
            )
            $
            955
            
            $
            788





**Provision
      for Loan Losses**


The
      Company’s provision for loan losses was $89,000 in the third quarter of 2006
      compared with $94,000 for the third quarter of 2005. For the first nine months
      of 2006 the provision for loan losses was $238,000 compared to $255,000 for
      the
      same period in 2005. Management performs a quarterly review of the loan
      portfolio and based on this review sets the level of provision necessary to
      maintain an adequate loan loss allowance. At September 30, 2006, the allowance
      for loan losses totaled $1,778,000, or 1.36% of total gross loans outstanding,
      compared to $1,546,000, or 1.39% of total loans outstanding, at December 31,
      2005.





At
      September 30, 2006 and December 31, 2005, the Bank had nonperforming loans
      totaling $257,000 and $337,000, respectively.





**Noninterest
      Income**


The
      Company had $138,000 of service charges and other fees for the three months
      ended September 30, 2006 compared to $99,000 for the same period in 2005. For
      the first nine months of 2006 and 2005, service charges and other fees totaled
      $330,000 and $290,000, respectively. The first quarter of 2006 also includes
      an
      $86,000 net realized loss on investment securities.


19


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 SEPTEMBER
        30, 2006




**Noninterest
      Expense**


Total
      noninterest expenses in the third quarter of 2006 were $1,159,000 versus
      $1,010,000 in the third quarter of 2005, an increase of $149,000. Expenses
      in
      the 2005 quarter include $98,000 of one-time organizational costs related to
      the
      formation of the holding company, First Valley Bancorp, Inc. Total noninterest
      expenses for the first nine months of 2006 were $3,155,000 versus $2,759,000
      for
      the same period in 2005, an increase of $396,000. The growth in expenses in
      2006
      is primarily due to higher expenses for salaries and employee benefits, some
      of
      which are attributable to new staff for Riverside Investment Services and the
      Southington office. The Bank had 46 full-time equivalent employees at September
      30, 2006 versus 38 full-time equivalent employees at December 31,
      2005.





**Income
      Taxes**


Total
      income tax expense for the three-month periods ended September 30, 2006 and 2005
      was
      $150,000 and $57,000, respectively. The effective income tax rates for the
      respective quarters were 37.9% and 30.8%. For the first nine months of 2006
      and
      2005, income tax expense was $473,000 and $308,000, with an effective income
      tax
      rate of 40.0% and 37.6%, respectively. The lower effective rates in 2005 are
      due
      in part to a lower State income tax rate.





**(c)**  **Off
      Balance Sheet Arrangements**


There
      have been no significant changes in the Company's off balance sheet
      arrangements, which primairly consist of commitments to lend, during the quarter
      ended September 30, 2006.





**Item
      3. Controls and Procedures**


Based
      upon an evaluation as of the end of the period covered by this report, the
      Company’s Chief Executive Officer and Chief Financial Officer concluded that the
      Company’s disclosure controls and procedures are effective. There have been no
      significant changes in the Company’s internal controls or in other factors that
      could significantly affect the Company’s internal controls subsequent to the
      date of the evaluation, including any corrective actions with regard to
      significant deficiencies and material weaknesses.





**Part
      II. - OTHER INFORMATION**


Item
                1.
            Legal
                Proceedings - Not applicableItem
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds - Not
                applicableItem
                3.
            Defaults
                Upon Senior Securities - Not applicableItem
                4.
            Submission
                of Matters to a Vote of Security Holders - Not
                applicableItem
                5.
            Other
                Information - Not applicableItem
                6.
            Exhibits
                -





(a)
            Exhibits


3.1
              Certificate
                  of Incorporation of First Valley Bancorp, Inc., incorporated herein
                  by
                  reference to Registrant's July 2005 Form 8-A3.2
              Bylaws
                  of First Valley Bancorp, Inc., incorporated herein by reference
                  to
                  Registrant's July 2005 Form 8-A4.1
              Form
                  of Common Stock Certificate of First Valley Bancorp, Inc., incorporated
                  herein by reference to Registrant's July 2005 Form 8-A10.1
              Lease
                  between Valley Bank and The Carpenter Realty Co., Inc. and the
                  S.
                  Carpenter Construction Co. & Bristol Holding, LLC dated October 4,
                  1999, incorporated herein by reference to Registrant's July 2005
                  Form 8-A10.2
              Lease
                  between 888 Farmington Avenue, LLC and Bristol Travel, Inc. dba
                  Global
                  Travel Service dated April 6, 2004, incorporated herein by reference
                  to
                  Registrant's July 2005 Form 8-A10.3
              Lease
                  between Valley Bank and Forpicus, LLC dated October 12, 2004, incorporated
                  herein by reference to Registrant's July 2005 Form 8-A10.4
              Employment
                  Agreement between Valley Bank and Robert L. Messier, Jr. dated
                  July 1,
                  2004, as amended November 1, 2004, incorporated herein by reference
                  to
                  Registrant's July 2005 Form 8-A10.5
              Valley
                  Bank Amended and Restated 1999 Stock Option and Stock Compensation
                  Plan,
                  incorporated herein by reference to Registrant's July 2005 Form
                  8-A10.6
              Change
                  of Control Agreement between Valley Bank and Mark J. Blum dated
                  October 1,
                  2004, incorporated herein by reference to Registrant's July 2005
                  Form 8-A10.7
              Change
                  of Control Agreement between Valley Bank and Anthony M. Mattioli
                  dated
                  October 1, 2004, incorporated herein by reference to Registrant's
                  July
                  2005 Form 8-A10.8
              Change
                  of Control Agreement between Valley Bank and Robert L. Messier,
                  Jr. dated
                  October 1, 2004, incorporated herein by reference to Registrant's
                  July
                  2005 Form 8-A10.9
              Lease
                  between Forpicus, LLC and Valley Bank dated February 14, 2006,
                  incorporated herein by reference to Registrant's 10-QSB filed August
                  11,
                  2006.10.10
              Change
                in Control Agreement between Valley Bank and Arnaldo Marinelli dated
                July
                31, 2006.10.11
              Change in
                Control
                Agreement between Valley Bank and Donald G. LoRusso dated July 31,
                2006.


31.1
            Chief
                Executive Officer Certification pursuant to 17 CFR 240.13a-14 as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            Chief
                Financial Officer Certification pursuant to 17 CFR 240.13a-14 as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32.1
            Chief
                Executive Officer Certification pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Chief
                Financial Officer Certification pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.


20


**SIGNATURES**








In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





FIRST
                VALLEY BANCORP, INC.(Registrant)Date: 
                November 10, 2006
            /s/
                Robert L. Messier, Jr.Robert
                L. Messier, Jr.President
                and Chief ExecutiveOfficerDate: 
                November 10, 2006
            Mark
                J. BlumMark
                J. BlumExecutive
                Vice President, Treasurerand
                Chief Financial Officer








21