**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      DC 20549


**____________**


**FORM
      10-QSB**





(Mark
      One)





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


For
      the quarterly period ended June 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 jurisdiction 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 July 31, 2006, there were 1,194,582 shares of the registrant’s common
                stockoutstanding.





Transitional
      Small Business Disclosure Format Yes_____ No X


1


Table
      of
      Contents





PagePart
                I
            FINANCIAL
                INFORMATIONItem
                1.
            Financial
                Statements:Consolidated
                Statements of Financial Condition as of
              June
                30, 2006 and December 31, 2005
            3Consolidated
                Statements of Income for the three and six
              month
                periods ended June 30, 2006 and 2005
            4Consolidated
                Statements of Cash Flows for the three and
              six
                month periods ended June 30, 2006 and 2005
            5Notes
                to Consolidated Financial Statements
            6-9Item
                2.
            Management’s
                Discussion and Analysis orPlan
                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
            20
                - 21Item
                5.
            Other
                Information
            21Item
                6.
            Exhibits
            21SIGNATURES
            22CERTIFICATIONS
            23
                - 26




2


**FIRST
                  VALLEY BANCORP, INC. AND SUBSIDIARY FORM 10-QSB QUARTERLY
                  REPORT****JUNE
                  30, 2006**Part
                  1FINANCIAL
                  INFORMATIONItem
                  1Financial
                  Statements:**CONSOLIDATED
                  STATEMENTS OF FINANCIAL CONDITION****(in
                  thousands except share data)**June
                  30,
              
              December
                  31,2006
              
              2005(Unaudited)**ASSETS**Cash
                  and due from depository institutions
              
              
              
              
              $
              5,410
              
              $
              3,447Federal
                  funds sold and money market accounts
              
              
              
              
              
              5,390
              
              
              9,220Investment
                  securities
              
              
              
              
              
              27,769
              
              
              33,907Loans
                  receivable, net
              
              
              
              
              
              124,898
              
              
              109,773Premises
                  and equipment, net
              
              
              
              
              
              1,479
              
              
              1,435FHLB
                  Stock, at cost
              
              
              
              
              
              933
              
              
              855Accrued
                  income receivable
              
              
              
              
              
              755
              
              
              680Deferred
                  income taxes
              
              
              
              
              
              966
              
              
              904Other
                  assets
              
              
              
              
              
              824
              
              
              705**TOTAL
                  ASSETS**
              
              
              
              
              **$**
              **168,424**
              
              **$**
              **160,926****LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Deposits:Non-interest
                  bearing
              
              
              
              
              $
              18,068
              
              $
              17,166Interest
                  bearing
              
              
              
              
              
              121,916
              
              
              112,034Total
                  deposits
              
              
              
              
              
              139,984
              
              
              129,200Borrowed
                  funds
              
              
              
              
              
              16,227
              
              
              19,117Mortgagors'
                  escrow accounts
              
              
              
              
              
              172
              
              
              176Other
                  liabilities
              
              
              
              
              
              1,948
              
              
              2,733Total
                  Liabilities
              
              
              
              
              
              158,331
              
              
              151,226Commitments
                  and contingencies
              
              
              
              
              
              -
              
              
              -Stockholders'
                  Equity:Common
                  stock, no par value; authorized 3,000,000 shares;issued
                  and outstanding 1,187,932 and 1,186,236 atJune
                  30, 2006 and December 31, 2005, respectively
              
              
              
              
              
              893
              
              
              892Additional
                  paid-in capital
              
              
              
              
              
              8,220
              
              
              8,194Retained
                  earnings
              
              
              
              
              
              1,517
              
              
              1,054Accumulated
                  other comprehensive loss
              
              
              
              
              
              (537
              )
              
              (440
              )Total
                  Stockholders' Equity
              
              
              
              
              
              10,093
              
              
              9,700**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              
              
              
              **$**
              **168,424**
              
              **$**
              **160,926**See
                  notes to consolidated financial
                  statements


3


**FIRST
                  VALLEY BANCORP, INC. AND SUBSIDIARY FORM 10-QSB QUARTERLY
                  REPORT****JUNE
                  30, 2006****CONSOLIDATED
                  STATEMENTS OF INCOME (UNAUDITED)****(in
                  thousands except share data)**Three
                  Months Ended
              
              Six
                  Months EndedJune
                  30,
              
              June
                  30,Interest
                  income:
              
              
              2006
              
              
              2005
              
              
              2006
              
              
              2005Interest
                  on loans
              
              $
              2,166
              
              $
              1,412
              
              $
              4,162
              
              $
              2,718Interest
                  and dividends on investments
              
              
              344
              
              
              381
              
              
              727
              
              
              760Total
                  interest income
              
              
              2,510
              
              
              1,793
              
              
              4,889
              
              
              3,478Interest
                  expense:Deposits
                  and escrow
              
              
              868
              
              
              506
              
              
              1,620
              
              
              973Borrowed
                  funds
              
              
              205
              
              
              77
              
              
              444
              
              
              152Total
                  interest expense
              
              
              1,073
              
              
              583
              
              
              2,064
              
              
              1,125Net
                  interest income
              
              
              1,437
              
              
              1,210
              
              
              2,825
              
              
              2,353Provision
                  for loan losses
              
              
              75
              
              
              85
              
              
              150
              
              
              161Net
                  interest income after provision for loan losses
              
              
              1,362
              
              
              1,125
              
              
              2,675
              
              
              2,192Noninterest
                  income:Service
                  charges and other fees
              
              
              106
              
              
              102
              
              
              192
              
              
              191Realized
                  gains (losses) on investments
              
              
              -
              
              
              -
              
              
              (86
              )
              
              -Total
                  noninterest income
              
              
              106
              
              
              102
              
              
              106
              
              
              191Noninterest
                  expenses:Salaries
              
              
              497
              
              
              404
              
              
              950
              
              
              809Employee
                  benefits and taxes
              
              
              102
              
              
              77
              
              
              193
              
              
              169Occupancy
                  and equipment
              
              
              183
              
              
              156
              
              
              365
              
              
              329Professional
                  fees
              
              
              52
              
              
              38
              
              
              101
              
              
              74Marketing
              
              
              34
              
              
              32
              
              
              59
              
              
              52Office
                  supplies
              
              
              20
              
              
              20
              
              
              35
              
              
              37Outside
                  service fees
              
              
              56
              
              
              59
              
              
              103
              
              
              107Other
              
              
              113
              
              
              88
              
              
              190
              
              
              172Total
                  noninterest expenses
              
              
              1,057
              
              
              874
              
              
              1,996
              
              
              1,749Income
                  before income tax expense
              
              
              411
              
              
              353
              
              
              785
              
              
              634Income
                  tax expense
              
              
              170
              
              
              141
              
              
              322
              
              
              251**NET
                  INCOME**
              
              **$**
              **241**
              
              **$**
              **212**
              
              **$**
              **463**
              
              **$**
              **383**Basic
                  income per share
              
              $
              0.20
              
              $
              0.18
              
              $
              0.39
              
              $
              0.32Diluted
                  income per share
              
              $
              0.19
              
              $
              0.17
              
              $
              0.37
              
              $
              0.31Weighted-average
                  shares outstanding - basic
              
              
              1,187,719
              
              
              1,183,690
              
              
              1,187,646
              
              
              1,183,632Weighted-average
                  shares outstanding - diluted
              
              
              1,243,888
              
              
              1,227,719
              
              
              1,243,815
              
              
              1,227,661See
                  notes to consolidated financial
                  statements


4


**FIRST
                  VALLEY BANCORP, INC. AND SUBSIDIARY FORM 10-QSB QUARTERLY
                  REPORT****JUNE
                  30, 2006****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (UNAUDITED)****(in
                  thousands)**Six
                  Months Ended June 30,**Cash
                  flows from operating activities**
              
              2006
              
              2005Net
                  income
              
              $
              463
              
              $
              383Adjustments
                  to reconcile net income tocash
                  provided by operating activities:Realized
                  (gains) losses on investments
              
              
              86
              
              
              -Depreciation
              
              
              112
              
              
              119Provision
                  for loan losses
              
              
              150
              
              
              161Amortization
                  of debt issuance costs
              
              
              3
              
              
              -Amortization
                  (accretion) of premiums (discounts), net
              
              
              56
              
              
              88Common
                  stock issued as compensation
              
              
              27
              
              
              41Net
                  Change in:Accrued
                  income receivable
              
              
              (75
              )
              
              (3
              )Deferred
                  loan fees
              
              
              84
              
              
              19Other
                  assets
              
              
              (196
              )
              
              (477
              )Other
                  liabilities
              
              
              (785
              )
              
              131Net
                  cash provided (used) by operating activities
              
              
              (75
              )
              
              462**Cash
                  flows from investing activities**Proceeds
                  from maturities, calls and paydownsof
                  available-for-sale securities
              
              
              3,214
              
              
              10,891Proceeds
                  from sales of available-for-sale securities
              
              
              3,122
              
              
              -Purchase
                  of available-for-sale securities
              
              
              (500
              )
              
              (8,500
              )Loan
                  originations net of principal payments
              
              
              (15,359
              )
              
              (7,515
              )Purchases
                  of premises and equipment
              
              
              (156
              )
              
              (99
              )Net
                  cash used by investing activities
              
              
              (9,679
              )
              
              (5,223
              )**Cash
                  flows from financing activities**Change
                  in DDA, NOW, money market andsavings
                  accounts
              
              
              2,183
              
              
              (989
              )Change
                  in time deposit accounts
              
              
              8,601
              
              
              7,235Proceeds
                  from borrowed funds
              
              
              17,000
              
              
              3,000Repayments
                  of borrowed funds
              
              
              (19,893
              )
              
              (4,104
              )Change
                  in mortgagors' escrow accounts
              
              
              (4
              )
              
              3Net
                  cash provided by financing activities
              
              
              7,887
              
              
              5,145Net
                  change in cash and cash equivalents
              
              
              (1,867
              )
              
              384Cash
                  and cash equivalents at beginning of period
              
              
              12,667
              
              
              10,033**Cash
                  and cash equivalents at end of period**
              
              $
              10,800
              
              $
              10,417***Supplemental
                  Disclosures***Cash
                  paid during the period for:Interest
              
              $
              2,108
              
              $
              1,028Income
                  taxes
              
              $
              495
              
              $
              369See
                  notes to consolidated financial
                  statements


5


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


JUNE
      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 six months ended June 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
 JUNE
        30,
        2006




Interim
      results at and for the three and six months ended June 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.


Six
                Months Ended(in
                thousands)
            
            June
                30,2006
            
            2005Net
                Income
            
            $
            463
            
            $
            383Other
                comprehensive income (loss):Net
                unrealized holding gains (losses) on securities available for
                sale
            
            
            (246
            )
            
            (38
            )Reclassification
                adjustment for loss recognized in net income
            
            
            86
            
            
            -Other
                comprehensive income (loss) before tax expense
            
            
            (160
            )
            
            (38
            )Income
                tax expense (benefit) related to items of other comprehensive income
                (loss)
            
            
            62
            
            
            15Other
                comprehensive income net of tax
            
            
            (98
            )
            
            (23
            )**Total
                comprehensive income (loss)**
            
            **$**
            **365**
            
            **$**
            **360**





**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 June 30, 2006 and December
      31,
      2005 were as follows:


(in
                thousands)June
                30, 2006
            
            December
                31, 2005Commitments
                to extend credit:Loan
                commitments
            
            $
            12,515
            
            $
            11,684Unadvanced
                lines of credit
            
            
            23,834
            
            
            21,931Standby
                letters of credit
            
            
            1,291
            
            
            1,089Outstanding
                commitments
            
            $
            37,640
            
            $
            34,704


7


FIRST
        VALLEY BANCORP, INC. FORM
        10-QSB QUARTERLY REPORT
 JUNE
        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 June 30, 2006 is summarized
      below:




Number
                  of shares
              
              Weighted
                  Average Exercise
                PriceOutstanding
                  at December 31, 2005
              
              
              124,050
              
              $
              8.21Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Forfeited
              
              
              -
              
              
              -Outstanding
                  at June 30, 2006
              
              
              124,050
              
              $
              8.21Options
                  exercisable at June 30, 2006
              
              
              124,050
              
              $
              8.21




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
 JUNE
        30,
        2006


**6
                Months****Ended***(in
                thousands except share data)*
            
            **6/30/05**Net
                income, as reported
            
            $
            383Stock-based
                employee compensationincluded
                in net income
            
            
            -Total
                stock-based employee compensationexpense
                determined under the fair valuebased
                method for all awards
            
            
            -Pro
                forma net income
            
            $
            383Earnings
                per share:Basic,
                as reported
            
            $
            0.32Diluted,
                as reported
            
            $
            0.31Basic,
                pro forma
            
            $
            0.32Diluted,
                pro forma
            
            $
            0.31





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


10


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






analysis.
      In connection with these services, the Bank entered into a broker/dealer
      relationship with LPL (Linsco/Private Ledger) in Boston. Riverside Investment
      Services is located on the second floor of the Bank’s main office on Four
      Riverside Avenue, Bristol, Connecticut.





Prior
      to
      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. 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 the Company.
      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
      June 30, 2006 and 2005. The discussion below should be read in conjunction
      with
      the financial statements and other financial data presented elsewhere
      herein.


11


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






**FINANCIAL
      CONDITION**


**General**


Total
      assets increased by $6.3 million, or 3.9%, during the second quarter of 2006,
      and have grown by $7.5 or 4.7% on a year-to-date basis. Total loans grew by
      $8.3
      million, or 7.1%, while total investment securities declined by $1.2 million,
      or
      4.3%. Total deposits increased by $9.0 million, or 6.9%, in the second quarter
      of 2006 and total borrowed funds balances declined by $3.1 million, or 15.9%,
      for the quarter. On a year-to-date basis, loans have increased by $ 15.1
      million, or 13.8%, while total investment securities have declined by $6.1
      million, or 18.1%. Deposits have increased by $10.8 million, or 8.3%,
      year-to-date, while borrowed funds balances have declined by $2.9 million,
      or
      19.3%.





**Investment
      Securities**


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


(in
      thousands)


**June
                30, 2006**Available-for-sale
                securities:
            
            Amortized
            
            Gross
                Unrealized
            
            EstimatedDebt
                securities:
            
            Cost
            
            Gain
            
            Loss
            
            Market
                ValueU.S
                agency obligations:Due
                in less than one year
            
            $
            2,004
            
            $
            -
            
            $
            (28
            )
            $
            1,976Due
                from one through five years
            
            
            6,499
            
            
            -
            
            
            (184
            )
            
            6,3158,503
            
            
            -
            
            
            (212
            )
            
            8,291Corporate
                bonds:Due
                in less than one year
            
            
            516
            
            
            -
            
            
            (11
            )
            
            505Due
                from one through five years
            
            
            1,563
            
            
            -
            
            
            (84
            )
            
            1,4792,079
            
            
            -
            
            
            (95
            )
            
            1,984Municipal
                bonds:Due
                from five through ten years
            
            
            682
            
            
            -
            
            
            (19
            )
            
            663Due
                after ten years
            
            
            1,881
            
            
            -
            
            
            (49
            )
            
            1,8322,563
            
            
            -
            
            
            (68
            )
            
            2,495Mortgage-backed
                securities
            
            
            15,002
            
            
            -
            
            
            (503
            )
            
            14,499Total
                debt securities
            
            
            28,147
            
            
            -
            
            
            (878
            )
            
            27,269Equity
                securities:
            
            
            500
            
            
            -
            
            
            -
            
            
            500Total
                available-for-sale securities
            
            $
            28,647
            
            $
            -
            
            $
            (878
            )
            $
            27,769




**December
                31, 2005**Available-for-sale
                securities:
            
            Amortized
            
            Gross
                Unrealized
            
            EstimatedDebt
                securities:
            
            Cost
            
            Gain
            
            Loss
            
            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
 JUNE
          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 June 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 six months of 2005.





**Loans**


The
      Company’s loan portfolio has increased by $15.1 million, or 13.8%, during the
      first six months of 2006. The majority of growth was in commercial and consumer
      real estate loans. At June 30, 2006 and December 31, 2005, the composition
      of
      the Company’s loan portfolio was as follows (dollars in thousands):





**AT**
            
            **AT****6/30/2006**
            
            **12/31/2005**Commercial
                mortgages
            
            $
            62,407
            
            $
            54,653Commercial
                loans
            
            
            26,234
            
            
            22,726Residential
                mortgages
            
            
            24,507
            
            
            22,848Consumer
                and home equity loans
            
            
            13,749
            
            
            11,317126,897
            
            
            111,544Less:Deferred
                loan origination fees
            
            
            309
            
            
            225Allowance
                for loan losses
            
            
            1,690
            
            
            1,546Loans
                receivable, net
            
            $
            124,898
            
            $
            109,773Weighted
                average yield
            
            
            7.06
            %
            
            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
 JUNE
        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 six months
      ended June 30, 2006 (dollars in thousands):


Balance,
                beginning of period
            
            $
            1,546Provision
                for loan losses
            
            
            150Chargeoffs
            
            
            (10
            )Recoveries
            
            
            4Balance,
                end of period
            
            **$**
            **1,690**





At
      June
      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 $10.8 million, or 8.3%, during the first half of 2006. Time
      deposit balances increased. Balances in other deposit categories including
      checking and NOW accounts, money market savings and regular savings, declined.
      The increase in time deposits includes $5 million of brokered deposits. The
      shift in composition reflects a general transfer of savings deposits by
      consumers into time deposits to take advantage of higher interest rates.


14


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






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


**AT
                6/30/2006**
            
            **AT
                12/31/2005****Weighted**
            
            
            
            **Weighted****Average**
            
            
            
            **Average****Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate**Non-interest
                checking
            
            $
            18,068
            
            
            0.00
            %
            $
            17,166
            
            
            0.00
            %Regular
                savings
            
            
            20,496
            
            
            0.78
            %
            
            22,575
            
            
            0.77
            %Money
                market savings
            
            
            17,962
            
            
            2.67
            %
            
            23,154
            
            
            2.23
            %NOW
                accounts
            
            
            3,035
            
            
            0.72
            %
            
            4,707
            
            
            0.47
            %59,561
            
            
            1.11
            %
            
            67,602
            
            
            1.05
            %Time
                deposits
            
            
            80,423
            
            
            4.08
            %
            
            61,598
            
            
            3.52
            %Total
                Deposits
            
            **$**
            **139,984**
            
            
            **2.81**
            **%**
            **$**
            **129,200**
            
            
            **2.23**
            **%**





**Borrowed
      Funds**


At
      June
      30, 2006 and December 31, 2005, the Company had $16.2 million and $19.1 million,
      respectively, in borrowed funds. The weighted average rates on borrowed funds
      at
      June 30, 2006 and December 31, 2005 were 4.95% and 4.79%,
      respectively.





**Liquidity
      and Capital Resources**


At
      June
      30, 2006, approximately 23% of the Company’s assets were held in cash, cash
      equivalents and securities and 74% 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 89% at June 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 Federal Home Loan Bank of Boston (“FHLB”), which
      provides an alternative funding source for the Bank’s liquidity needs. The Bank
      currently has approximately $21 million of additional borrowing capacity at
      the
      FHLB.





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.





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.


15


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






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 June 30, 2006 were a total risk-based
      capital ratio of 12.2% and a Tier 1 capital ratio of 8.6%. Those capital ratios
      at December 31, 2005 were 12.9% and 8.8%, respectively. The Company’s regulatory
      capital ratios at June 30, 2006 and December 31, 2005 were similar to the Bank’s
      ratios. Both the Company’s and the Bank’s capital ratios at June 30, 2006 were
      considered well capitalized for regulatory purposes.





**RESULTS
      OF OPERATIONS**


**Comparison
      of the three and six month periods ended June 30, 2006 and
      2005**


**Net
      Income**


Net
      income for the three-month period ended June 30, 2006 was $241,000, or $0.20
      basic income per share and $0.19 diluted income per share, compared to net
      income of $212,000, or $0.18 basic income per share and $0.17 diluted income
      per
      share, for the three-month period ended June 30, 2005. For the six-month period
      ended June 30, 2006 net income was $463,000, or $0.39 basic income per share
      and
      $0.39 diluted income per share. That compares with net income of $383,000,
      or
      $0.32 basic income per share and $0.31 diluted income per share for the first
      six months of 2005. The increase in net income in both the second quarter of
      2006 and year-to-date 2006 is due to strong growth in net interest income which
      more than offset an $86,000 realized loss on the sale of investment securities
      and an increase in non-interest expenses.





**Net
      Interest Income**


Net
      interest income for the three months ended June 30, 2006 was $1,437,000 compared
      to $1,210,000 for the same period in 2005. For the first six months of 2006,
      net
      interest income was $2,825,000 versus $2,353,000 for the same period in 2005.
      The increase for both the three and six month periods is due to growth in
      interest-earning assets which more than offset a decline in the Company’s
      average interest rate spread and net interest margin. The net interest margin
      for the three-month periods ended June 30, 2006 and 2005 was 3.72% and 3.79%,
      respectively. The net interest margin for the first six months of 2006 and
      2005
      was 3.68% and 3.76%, respectively.





**Interest
      Income**


Total
      interest income for the three-month periods ended June 30, 2006 and 2005 was
      $2,510,000 and $1,793,000, respectively. For the first half of 2006 and 2005,
      total interest income was $4,889,000 and $3,478,000, respectively. The average
      rate on interest-earning assets was higher by 89 basis points in the second
      quarter of 2006 versus the second quarter of 2005 while for the first half
      of
      2006, the average rate on interest-earning assets was higher by 82 basis points
      compared to the first six months of the prior year. The increase in interest
      income for both the second quarter of 2006 and year-to-date 2006 reflects
      generally higher short term interest rates and strong growth in the loan


16


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






portfolio
      and consequently in interest earning assets. The average balance of total
      interest earning assets increased by $26.7 million and $28.5 million for the
      second quarter of 2006 and the first six months of 2006, respectively, compared
      with the same periods in 2005.





**Interest
      Expense**


Total
      interest expense for the three-month periods ended June 30, 2006 and 2005 was
      $1,073,000 and $583,000, respectively. For the first half of 2006 and 2005,
      total interest expense was $2,064,000 and $1,125,000, respectively. The average
      rate on deposits and borrowings was 3.05% in the first quarter of 2006 compared
      to 2.06% in the same quarter of 2005, an increase of 99 basis points. Year
      to
      date through June 30, 2006, the average rate on deposits and borrowings was
      higher by 103 basis points compared to the first half 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 the junior subordinated
      debt. The higher interest expense in both the current quarter and the first
      half
      of the current year reflects the higher average rate as well as strong growth
      in
      average interest-bearing liabilities which increased by $25.0 and $25.2 million,
      respectively, in the second quarter of 2006 and the first half 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 EndedJune
                30, 2006
            
            June
                30, 2005**Interest-Earning
                Assets:**
            
            Average
            
            Income/
            
            Average
            
            Average
            
            Income/
            
            AverageFederal
                funds sold and money
            
            Balance
            
            Expense
            
            Rate
            
            Balance
            
            Expense
            
            Ratemarket
                accounts
            
            $
            5,267
            
            $
            58
            
            
            4.42
            %
            $
            4,605
            
            $
            32
            
            
            2.79
            %Investment
                securities
            
            
            28,902
            
            
            286
            
            
            3.97
            %
            
            38,125
            
            
            349
            
            
            3.67
            %Loans
            
            
            120,710
            
            
            2,166
            
            
            7.20
            %
            
            85,429
            
            
            1,412
            
            
            6.63
            %Total
                interest-earnings assets
            
            
            154,879
            
            
            2,510
            
            
            6.50
            %
            
            128,159
            
            
            1,793
            
            
            5.61
            %Non-interest-earning
                assets
            
            
            6,885
            
            
            
            
            
            
            
            
            5,704Total
                assets
            
            $
            161,764
            
            
            
            
            
            
            
            $
            133,863**Interest-Bearing
                Liabilities:**NOW
                accounts
            
            
            2,949
            
            
            6
            
            
            0.82
            %
            
            3,120
            
            
            6
            
            
            0.77
            %Savings
                and money market accounts
            
            
            40,341
            
            
            166
            
            
            1.65
            %
            
            42,850
            
            
            123
            
            
            1.15
            %Time
                deposits
            
            
            73,147
            
            
            696
            
            
            3.82
            %
            
            51,716
            
            
            377
            
            
            2.92
            %Borrowed
                money
            
            
            16,473
            
            
            205
            
            
            4.99
            %
            
            10,208
            
            
            77
            
            
            3.03
            %Total
                interest-bearing liabilities
            
            
            132,910
            
            
            1,073
            
            
            3.24
            %
            
            107,894
            
            
            583
            
            
            2.17
            %Non-interest-bearing
                demand deposits
            
            
            17,840
            
            
            
            
            
            
            
            
            15,131Other
                non-interest-bearing liabilities
            
            
            987
            
            
            
            
            
            
            
            
            1,465Capital
                accounts
            
            
            10,027
            
            
            
            
            
            
            
            
            9,373Total
                liabilities and capital accounts
            
            $
            161,764
            
            
            
            
            
            
            
            $
            133,863


Net
                interest income
            
            
            
            
            $
            1,437
            
            
            
            
            
            
            
            $
            1,210Net
                interest margin
            
            
            
            
            
            3.72
            %
            
            
            
            
            
            
            
            3.79
            %Interest
                rate spread
            
            
            
            
            
            3.26
            %
            
            
            
            
            
            
            
            3.44
            %


17


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


For
                Six Months EndedJune
                30, 2006
            
            June
                30, 2005**Interest-Earning
                Assets:**
            
            Average
            
            Income/
            
            Average
            
            Average
            
            Income/
            
            AverageFederal
                funds sold and money
            
            Balance
            
            Expense
            
            Rate
            
            Balance
            
            Expense
            
            Ratemarket
                accounts
            
            $
            5,759
            
            $
            125
            
            
            4.38
            %
            $
            3,936
            
            $
            51
            
            
            2.61
            %Investment
                securities
            
            
            30,321
            
            
            602
            
            
            4.00
            %
            
            38,935
            
            
            709
            
            
            3.67
            %Loans
            
            
            118,537
            
            
            4,162
            
            
            7.08
            %
            
            83,285
            
            
            2,718
            
            
            6.58
            %Total
                interest-earnings assets
            
            
            154,617
            
            
            4,889
            
            
            6.38
            %
            
            126,156
            
            
            3,478
            
            
            5.56
            %Non-interest-earning
                assets
            
            
            6,157
            
            
            
            
            
            
            
            
            5,874Total
                assets
            
            $
            160,774
            
            
            
            
            
            
            
            $
            132,030**Interest-Bearing
                Liabilities:**NOW
                accounts
            
            
            2,990
            
            
            10
            
            
            0.67
            %
            
            3,081
            
            
            11
            
            
            0.72
            %Savings
                and money market accounts
            
            
            41,479
            
            
            325
            
            
            1.58
            %
            
            43,802
            
            
            252
            
            
            1.16
            %Time
                deposits
            
            
            69,919
            
            
            1,285
            
            
            3.71
            %
            
            50,194
            
            
            710
            
            
            2.85
            %Borrowed
                money
            
            
            18,114
            
            
            444
            
            
            4.94
            %
            
            10,246
            
            
            152
            
            
            2.99
            %Total
                interest-bearing liabilities
            
            
            132,502
            
            
            2,064
            
            
            3.14
            %
            
            107,323
            
            
            1,125
            
            
            2.11
            %Non-interest-bearing
                demand deposits
            
            
            17,262
            
            
            
            
            
            
            
            
            13,977Other
                non-interest-bearing liabilities
            
            
            1,065
            
            
            
            
            
            
            
            
            1,429Capital
                accounts
            
            
            9,945
            
            
            
            
            
            
            
            
            9,301Total
                liabilities and capital accounts
            
            $
            160,774
            
            
            
            
            
            
            
            $
            132,030,Net
                interest income
            
            
            
            
            $
            2,825
            
            
            
            
            
            
            
            $
            2,353Net
                interest margin
            
            
            
            
            
            3.68
            %
            
            
            
            
            
            
            
            3.76
            %Interest
                rate spread
            
            
            
            
            
            3.24
            %
            
            
            
            
            
            
            
            3.45
            %





Net
      interest income can be analyzed in terms of the impact of changing rates and
      changing volumes. The table on the next page 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):


18
 
 FIRST
          VALLEY BANCORP, INC. FORM
          10-QSB QUARTERLY REPORT
 JUNE
          30,
          2006


For
                the 3 Months Ended
            
            For
                the 6 Months EndedJune
                30, 2006 versus 2005
            
            June
                30, 2006 versus 2005Interest
                Income:
            
            Increase
                (Decrease) Due to
            
            Increase
                (Decrease) Due toFederal
                funds sold and money
            
            Rate
            
            Volume
            
            Total
            
            Rate
            
            Volume
            
            Totalmarket
                accounts
            
            $
            21
            
            $
            5
            
            $
            26
            
            $
            44
            
            $
            30
            
            $
            74Investment
                securities
            
            
            27
            
            
            (90
            )
            
            (63
            )
            
            61
            
            
            (168
            )
            
            (107
            )Loans
            
            
            130
            
            
            624
            
            
            754
            
            
            220
            
            
            1,224
            
            
            1,444Total
                interest income
            
            
            178
            
            
            539
            
            
            717
            
            
            325
            
            
            1,086
            
            
            1,411Interest
                Expense:NOW
                accounts
            
            
            -
            
            
            -
            
            
            -
            
            
            (1
            )
            
            -
            
            
            (1
            )Savings
                and money market accounts
            
            
            51
            
            
            (8
            )
            
            43
            
            
            87
            
            
            (14
            )
            
            73Time
                deposits
            
            
            134
            
            
            185
            
            
            319
            
            
            248
            
            
            327
            
            
            575Borrowed
                money
            
            
            66
            
            
            62
            
            
            128
            
            
            134
            
            
            158
            
            
            292Total
                interest expense
            
            
            251
            
            
            239
            
            
            490
            
            
            468
            
            
            471
            
            
            939Change
                in Net interest income
            
            $
            (73
            )
            $
            300
            
            $
            227
            
            $
            (143
            )
            $
            615
            
            $
            472





**Provision
      for Loan Losses**


The
      Company’s provision for loan losses was $75,000 in the second quarter of 2006
      compared with $85,000 for the second quarter of 2005. For the first half of
      2006
      the provision for loan losses was $150,000 compared to $161,000 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 June 30, 2006, the allowance for loan losses
      totaled $1,690,000, or 1.33% of total gross loans outstanding, compared to
      $1,546,000, or 1.39% of total loans outstanding, at December 31, 2005.





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





**Noninterest
      Income**


The
      Company had $106,000 of service charges and other fees for the three months
      ended June 30, 2006 compared to $102,000 for the same period in 2005. For the
      first six months of 2006 and 2005, service charges and other fees totaled
      $192,000 and $191,000, respectively. The first quarter of 2006 also includes
      an
      $86,000 net realized loss on investment securities.





**Noninterest
      Expense**


Total
      noninterest expenses in the second quarter of 2006 were $1,057,000 versus
      $874,000 in the second quarter of 2005, an increase of $183,000. Total
      noninterest expenses for the first six months of 2006 were $1,996,000 versus
      $1,749,000 for the first half of 2005, an increase of $247,000. The growth
      in
      expenses in 2006, the majority of which occurred in the second quarter, 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 44 full-time equivalent employees at June
      30,
      2006 versus 38 full-time equivalent employees at December 31,
      2005.


19


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


JUNE
      30,
      2006






**Income
      Taxes**


Total
      income tax expense for the three-month periods ended June 30, 2006 and 2005
      was
      $170,000 and $141,000, respectively. The effective income tax rates for the
      respective quarters were 41.3% and 39.9%. For the first six months of 2006
      and
      2005, income tax expense was $322,000 and $251,000, with an effective income
      tax
      rate of 41.0% and 39.6%, 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 primarily consist of commitments to lend, during the quarter
      ended June 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(a)
            The
                annual meeting of the Company’s shareholders (the "Annual Meeting") was
                held on May 22, 2006.(b)
            Not
                applicable pursuant to Instruction 3 to Item 4 of Part II of Form
                10-QSB.(c)
            The
                following is a brief description of the matters voted upon at the
                Annual
                Meeting and the number of votes cast for, against or withheld as
                well as
                the number of abstentions to each such matter:(i)
            The
                election of four directors serve three-year terms expiring in 2009
                or
                until their successors are elected (Proposal
                1);





For
            Withheld
                Authority toVote
                ForBonnie
                Crane
            916,987
            33,484David
                J. Preleski
            926,933
            23,538James
                J. Pryor
            950,471
            0Mark
                A. Gibson
            940,846
            9,625


20
 
 FIRST
          VALLEY BANCORP, INC. FORM
          10-QSB QUARTERLY REPORT
 JUNE
          30,
          2006


(ii)
            The
                ratification of the appointment of Whittlesey & Hadley, P.C. as
                independent registered public accounting firm for the year ending
                December
                31, 2006 (Proposal 2).





For
            Against
            Abstentions917,122
            32,672
            677





(d)
            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,
                2006.31.1
            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.


21


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


JUNE
      30,
      2006









**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
                August 9, 2006
            /s/
                Robert L. Messier, Jr.Robert
                L. Messier, Jr.President
                and Chief ExecutiveOfficerDate
                August 9, 2006
            /s/
                Mark J. BlumMark
                J. BlumExecutive
                Vice President, Treasurerand
                Chief Financial Officer








22