Exhibit 13

FPB BANCORP, INC.

2005 ANNUAL REPORT



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CORPORATE PROFILE

FPB Bancorp, Inc. is a one-bank holding company incorporated in the State of Florida. FPB Bancorp, Inc. owns 100% of First Peoples Banks common stock. First Peoples Bank is a Florida state-chartered commercial bank. Our deposits are
insured by the Federal Deposit Insurance Corporation. We provide a variety of banking services to small businesses and individuals in St. Lucie, Martin, and Indian River County, Florida. We currently have three retail banking offices located in Port
St. Lucie, Fort Pierce and Stuart, Florida. A Loan Production Office (LPO) is currently open in Vero Beach, Florida, in preparation for the estimated April, 2006 opening of a fourth banking office in that area. The Company also anticipates opening
an operations center in 2006. At December 31, 2005, we had total consolidated assets of $127.3 million and total consolidated stockholders equity of $20.3 million. For the year ended December 31, 2005, we had net earnings of
$765,000.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains certain forward-looking statements which represent our expectations or beliefs, including, but not limited to, statements concerning the banking industry and our operations, performance, financial condition and
growth. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Without limiting the generality of the foregoing, words such as may, will,
expect, believe, anticipate, intend, could, should, can, estimate, or continue or the negative of other variations thereof or comparable
terminology are intended to identify forward-looking statements. These statements by their nature may involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a
variety of important factors, including competition, general economic conditions, changes in interest rates, and changes in the value of real estate and other collateral securing loans, among other things.

This statement has not been reviewed, or confirmed for accuracy or relevance, by the Federal Deposit Insurance Corporation.



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|                                                                                      |  | Page 
|CONTENTS                                                                              |  |      
|                                                                                      | 
|Financial Highlights                                                                  |  | 1    
|                                                                                      | 
|Letter to Shareholders                                                                |  | 2-3  
|                                                                                      | 
|Selected Financial Data                                                               |  | 4    
|                                                                                      | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 5-20 
|                                                                                      | 
|Consolidated Financial Statements                                                     |  | 21-46
|                                                                                      | 
|Report of Independent Registered Public Accounting Firm                               |  | 47   
|                                                                                      | 
|Board of Directors                                                                    |  | 48-49
|                                                                                      | 
|Non-Director Executive Officers                                                       |  | 50-51
|                                                                                      | 
|First Peoples Bank Officers                                                           |  | 52   
|                                                                                      | 
|Community Liaison Board                                                               |  | 53   
|                                                                                      | 
|General Information                                                                   |  | 54   
|                                                                                      | 
|Common Stock Prices and Dividends                                                     |  | 54   



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FINANCIAL HIGHLIGHTS

December 31, 2005 and 2004 or the Years Then Ended

(Dollars in thousands, except per share
figures)



|                                                     |  |      |           |   |      |   |         |  
|---------------------------------------------------- |  | ---- | --------- | - | ---- | - | ------- | -
|                                                     |  | 2005 |           |   | 2004 |  
|At Year End:                                         |  |      |           |   |      |   |         |  
|                                                     |  |     
|Assets                                               |  | $    | 127,309   |   |      | $ | 94,597  |  
|Loans, net                                           |  | $    | 95,666    |   |      | $ | 68,794  |  
|Securities                                           |  | $    | 12,244    |   |      | $ | 11,371  |  
|Deposits                                             |  | $    | 102,809   |   |      | $ | 81,936  |  
|Stockholders equity                                 |  | $    | 20,341    |   |      | $ | 7,420   |  
|Book value per share                                 |  | $    | 11.23     |   |      | $ | 9.06    |  
|Shares outstanding                                   |  |      | 1,810,588 |   |      |   | 819,120 |  
|Equity as a percentage of assets                     |  |      | 15.98     | % |      |   | 7.84    | %
|Nonperforming assets as a percentage of total assets |  |      |          | % |      |   | .52     | %
|                                                     |  |     
|For The Year:                                        |  |      |           |   |      |   |         |  
|                                                     |  |     
|Interest income                                      |  | $    | 7,243     |   |      | $ | 4,345   |  
|Net earnings                                         |  | $    | 765       |   |      | $ | 123     |  
|Earnings per share, basic                            |  | $    | .55       |   |      | $ | .15     |  
|Earnings per share, diluted                          |  | $    | .52       |   |      | $ | .15     |  
|Return on average assets                             |  |      | .64       | % |      |   | .15     | %
|Return on average equity                             |  |      | 5.42      | % |      |   | 1.67    | %
|Average equity as a percentage of average assets     |  |      | 11.85     | % |      |   | 9.02    | %
|Noninterest expenses to average assets               |  |      | 3.89      | % |      |   | 4.23    | %
|                                                     |  |     
|Yields and Rates:                                    |  |      |           |   |      |   |         |  
|                                                     |  |     
|Loan portfolio                                       |  |      | 7.15      | % |      |   | 6.67    | %
|Securities                                           |  |      | 3.36      | % |      |   | 3.12    | %
|Other interest-earning assets                        |  |      | 3.13      | % |      |   | 1.65    | %
|All interest-earning assets                          |  |      | 6.38      | % |      |   | 5.79    | %
|Deposits                                             |  |      | 2.57      | % |      |   | 1.92    | %
|Borrowings                                           |  |      | 3.21      | % |      |   | 1.91    | %
|All interest-bearing liabilities                     |  |      | 2.59      | % |      |   | 1.92    | %
|Interest-rate spread (1)                             |  |      | 3.79      | % |      |   | 3.87    | %
|Net yield on average interest earning assets (2)     |  |      | 4.67      | % |      |   | 4.36    | %

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|(1) | Average yield on all interest-earning assets less average rate paid on all interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------

|(2) | Net interest income divided by average interest-earning assets.
|--- | ---------------------------------------------------------------



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LETTER TO SHAREHOLDERS

March 10, 2006

Dear Shareholders:

We are pleased to present the Annual Report for FPB Bancorp, Inc. for the year ended December 31, 2005. It was another challenging year with several storms again
threatening Florida and Hurricane Wilma actually affecting us locally.

FPB Bancorp, Inc. had a number of very significant events occur in 2005, most
notably completing our third successful stock offering which resulted in net capital proceeds of $11.8 million. In conjunction with the offering, our stock became listed on the NASDAQ SmallCap Market under the symbol FPBI.

In June of 2005, we entered the Vero Beach, Indian River County market with a Loan Production Office. That office is headed by Senior Vice President and Area Executive
Randy Riley, who has spent over seventeen years in Indian River County. We are extremely excited about the prospect of doing business there. In July 2005, we formed a Residential Mortgage Department under the leadership of Senior Vice President and
Residential Lending Manager, Tom Eby. Tom is a veteran banker with over twenty years of experience in our area. He has hired two active residential mortgage originators who are successfully working the Treasure Coast marketplace. We are very proud
to have all of these experienced bankers as part of our team.

FPB Bancorp, Inc. experienced record earnings for 2005, with total consolidated net income
of $765 thousand for year-end, an increase of 522% over the 2004 consolidated income results. Total assets closed at $127 million, a 35% increase or $33 million over 2004. Net loans grew by $27 million, an increase of 39% and finished the year with
a combined total of $96 million. Deposits grew by 25%, or $21 million for a year-end total of $103 million. We now service over 1,338 loans and 5,068 deposit accounts.

Along with this tremendous growth comes growth in staff. We employed over 60 people by year end 2005. First Peoples Bank was very pleased to be named The Best Place to Work in both St. Lucie and Martin
Counties last year in contests sponsored by the Workforce Development Board and local Chambers of Commerce.

In October 2005 we signed a lease for a full
service branch site in Vero Beach. That office is located at 4000 20thSt. We anticipate an April, 2006 opening date
for our newest branch office. That gives us a total of four offices to serve your banking needs. Our Fort Pierce Office is located at 2500 Virginia Ave. The Stuart Office is located at 715 Colorado Ave. and our headquarters in Port St. Lucie is at
1301 Port St. Lucie Blvd. We also are negotiating to move our operations center to a bigger and more efficient location. This again is a result of our tremendous growth and that move will allow us to expand our staff as needed to service future
growth.

We continue to be a leader in the area in providing Small Business Administration (SBA) loans on the Treasure Coast. These loans are very
important to the many businesses planning expansion and area entrepreneurs starting new companies in our area. SBA loans provide funding to new and existing businesses that normally may not have the required capital or financial stability to qualify
for traditional bank financing. We have trained personnel on staff that are very experienced with SBA lending.



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Our bank remains very active in community fundraisers and charitable organizations and events. Most of our officer staff
and many of our employees are members of numerous charitable, civic and service organizations. Its all a part of our commitment and pledge to support the communities that we are a part of and in which we do business. As a result of a
shareholder question at our annual meeting last year we began tracking our community service hours in May, 2005. We logged over 1,700 volunteer hours for community service by our staff as of December 31, 2005.

We are very excited about the future of your bank in the communities that we serve. By end of second quarter 2006, we will have full service offices open in the four
major cities: Fort Pierce, Port St. Lucie, Stuart and Vero Beach. Our Long Range Planning and Building Committee is constantly evaluating potential future branch sites and opportunities to grow and expand this franchise. At First Peoples Bank, our
people........YOU, our shareholders and customers, come first. If you havent stopped in for a visit or to open your shareholder account please do so at any of our three, soon to be four, convenient full service locations.

On behalf of our directors, management and staff we again want to thank all of you for your commitment to FPB Bancorp, Inc. and First Peoples Bank and for
your support and belief in our mission to bring true community banking to our area.

Sincerely,



David W. Skiles

President & CEO



Gary A. Berger

Board Chairman



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SELECTED FINANCIAL DATA

December 31, 2005, 2004, 2003, 2002 and 2001 and the

Years Ended
December 31, 2005, 2004, 2003, 2002 and 2001

(Dollars in thousands, except per share figures)



|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|--------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | --
|                                                                                              |  | 2005 |           |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|At Year End:                                                                                  |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|                                                                                              |  |      |           |   |     
|Cash and cash equivalents                                                                     |  | $    | 12,366    |   |      |   | 9,759   |      |  |   | 7,218   |   |  |      | 7,825   |   |  |   | 2,448   |   
|Securities                                                                                    |  |      | 12,244    |   |      |   | 11,371  |      |  |   | 11,375  |   |  |      | 6,697   |   |  |   | 5,479   |   
|Loans, net                                                                                    |  |      | 95,666    |   |      |   | 68,794  |      |  |   | 48,244  |   |  |      | 41,662  |   |  |   | 32,215  |   
|All other assets                                                                              |  |      | 7,033     |   |      |   | 4,673   |      |  |   | 3,218   |   |  |      | 2,583   |   |  |   | 1,564   |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Total assets                                                                                  |  | $    | 127,309   |   |      |   | 94,597  |      |  |   | 70,055  |   |  |      | 58,767  |   |  |   | 41,706  |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Deposit accounts                                                                              |  |      | 102,809   |   |      |   | 81,936  |      |  |   | 61,064  |   |  |      | 50,265  |   |  |   | 33,933  |   
|Federal Home Loan Bank advances                                                               |  |      | 2,600     |   |      |   | 2,500   |      |  |   |        |   |  |      |        |   |  |   | 2,500   |   
|All other liabilities                                                                         |  |      | 1,559     |   |      |   | 2,741   |      |  |   | 1,619   |   |  |      | 1,189   |   |  |   | 1,183   |   
|Stockholders equity                                                                          |  |      | 20,341    |   |      |   | 7,420   |      |  |   | 7,372   |   |  |      | 7,313   |   |  |   | 4,090   |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Total liabilities and stockholders equity                                                    |  | $    | 127,309   |   |      |   | 94,597  |      |  |   | 70,055  |   |  |      | 58,767  |   |  |   | 41,706  |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|For the Period:                                                                               |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|                                                                                              |  |      |           |   |     
|Total interest income                                                                         |  | $    | 7,243     |   |      |   | 4,345   |      |  |   | 3,393   |   |  |      | 3,203   |   |  |   | 2,519   |   
|Total interest expense                                                                        |  |      | 1,939     |   |      |   | 1,074   |      |  |   | 993     |   |  |      | 1,135   |   |  |   | 1,046   |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Net interest income                                                                           |  |      | 5,304     |   |      |   | 3,271   |      |  |   | 2,400   |   |  |      | 2,068   |   |  |   | 1,473   |   
|                                                                                              |  |      |           |   |     
|Provision for loan losses                                                                     |  |      | 352       |   |      |   | 380     |      |  |   | 383     |   |  |      | 381     |   |  |   | 202     |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Net interest income after provision for loan losses                                           |  |      | 4,952     |   |      |   | 2,891   |      |  |   | 2,017   |   |  |      | 1,687   |   |  |   | 1,271   |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Noninterest income                                                                            |  |      | 930       |   |      |   | 759     |      |  |   | 620     |   |  |      | 264     |   |  |   | 214     |   
|Noninterest expenses                                                                          |  |      | 4,639     |   |      |   | 3,440   |      |  |   | 2,372   |   |  |      | 1,825   |   |  |   | 1,557   |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Earnings (loss) before income taxes                                                           |  |      | 1,243     |   |      |   | 210     |      |  |   | 265     |   |  |      | 126     |   |  |   | (72     | ) 
|Income taxes                                                                                  |  |      | 478       |   |      |   | 87      |      |  |   | 104     |   |  |      | 52      |   |  |   | (23     | ) 
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Net earnings (loss)                                                                           |  | $    | 765       |   |      |   | 123     |      |  |   | 161     |   |  |      | 74      |   |  |   | (49     | ) 
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Net earnings (loss) per basic share                                                           |  | $    | .55       |   |      |   | .15     |      |  |   | .20     |   |  |      | .11     |   |  |   | (.10    | ) 
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Net earnings (loss) per diluted share                                                         |  | $    | .52       |   |      |   | .15     |      |  |   | .20     |   |  |      | .11     |   |  |   | (.10    | ) 
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Weighted-average number of shares outstanding for basic                                       |  |      | 1,396,384 |   |      |   | 818,203 |      |  |   | 817,785 |   |  |      | 660,352 |   |  |   | 489,410 |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Weighted-average number of shares outstanding for diluted                                     |  |      | 1,462,465 |   |      |   | 818,203 |      |  |   | 817,785 |   |  |      | 660,352 |   |  |   | 489,410 |   
|                                                                                              |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|Ratios and Other Data:                                                                        |  |      |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |   
|                                                                                              |  |      |           |   |     
|Return on average assets                                                                      |  |      | .64       | % |      |   | .15     | %    |  |   | .25     | % |  |      | .14     | % |  |   | (.14    | )%
|Return on average equity                                                                      |  |      | 5.42      | % |      |   | 1.67    | %    |  |   | 2.19    | % |  |      | 1.29    | % |  |   | (1.17   | )%
|Average equity as a percentage of average assets                                              |  |      | 11.85     | % |      |   | 9.02    | %    |  |   | 11.34   | % |  |      | 11.11   | % |  |   | 12.36   | % 
|Interest-rate spread during the period                                                        |  |      | 3.79      | % |      |   | 3.87    | %    |  |   | 3.81    | % |  |      | 3.42    | % |  |   | 3.27    | % 
|Net yield on average interest-earning assets                                                  |  |      | 4.67      | % |      |   | 4.36    | %    |  |   | 4.22    | % |  |      | 4.21    | % |  |   | 4.59    | % 
|Noninterest expenses to average assets                                                        |  |      | 3.89      | % |      |   | 4.23    | %    |  |   | 3.66    | % |  |      | 3.53    | % |  |   | 4.60    | % 
|Ratio of average interest-earning assets to average interest-bearing liabilities              |  |      | 1.51      |   |      |   | 1.34    |      |  |   | 1.24    |   |  |      | 1.34    |   |  |   | 1.40    |   
|Nonperforming loans and foreclosed real estate as a percentage of total assets at end of year |  |      |          | % |      |   | .52     | %    |  |   | 2.07    | % |  |      | .29     | % |  |   | NIL     |   
|Allowance for loan losses as a percentage of total loans at end of year                       |  |      | 1.42      | % |      |   | 1.56    | %    |  |   | 1.73    | % |  |      | 1.31    | % |  |   | 1.10    | % 
|Total number of banking offices                                                               |  |      | 3         |   |      |   | 3       |      |  |   | 2       |   |  |      | 1       |   |  |   | 1       |   
|Total shares outstanding at end of year                                                       |  |      | 1,810,588 |   |      |   | 819,120 |      |  |   | 818,120 |   |  |      | 817,775 |   |  |   | 489,410 |   
|Book value per share at end of year                                                           |  | $    | 11.23     |   |      | $ | 9.06    |      |  | $ | 9.01    |   |  | $    | 8.94    |   |  | $ | 8.36    |   



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MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and our results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto, as of December 31, 2005 and 2004, included
elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.

General

FPB is a one-bank holding company
incorporated in the State of Florida. Our sole subsidiary, First Peoples Bank, is a Florida state-chartered commercial bank whose deposits are insured by the Federal Deposit Insurance Corporation. We opened for business on April 26, 1999 and
provide a variety of banking services to small businesses and individuals in St. Lucie, Martin and Indian River County, Florida. We currently have three retail banking offices located in Port St. Lucie, Fort Pierce and Stuart, Florida. An LPO (Loan
Production Office) opened in Vero, Florida in 2005, and we anticipate that a full-service branch will open in Vero Beach in approximately April, 2006. The Company also anticipates opening an operations center in 2006. At December 31, 2005, we
had total consolidated assets of $127.3 million and total consolidated stockholders equity of $20.3 million. For the year ended December 31, 2005, we had net earnings of $765,000.

Managements Strategy

We are organized as a
locally-owned, locally managed community financial institution, owned and managed by people who are actively involved in our market area and are committed to our economic growth and development. With local ownership, management, and directors, we
believe that we can be more responsive to the communities that we serve. Local ownership allows faster, more responsive and flexible decision-making, which is not available at the majority of the financial institutions in or near our market area
which consist of branch offices of large regional holding company banks with headquarters located elsewhere in the United States.

Our
principal business is to attract deposits from the general public and to invest those funds in various types of loans and other interest-earning assets. Funds are provided for the operations by the proceeds from the sale of investments, from
amortization and repayment of outstanding loans and investments, from net deposit inflow, and from borrowings. Our earnings depend primarily upon the difference between: (1) non-interest income, and the interest and fees we receive from loans,
the securities held in our investment portfolio and other investments; and (2) the expenses we incur in connection with obtaining funds for lending (including interest paid on deposits and other borrowings) and expenses relating to day-to-day
operations.

To the extent market conditions permit, our strategy is intended to insulate our interest rate gap from adverse changes in
interest rates by maintaining spreads through the adjustability of our interest-earning assets and interest-bearing liabilities. Our ability to reduce interest-rate risk in our loan and investment portfolios depends upon a number of factors, many of
which are beyond our control, including among others, competition for loans and deposits in our market area and conditions prevailing in the economy.

Our primary sources of funds for loans and for other general business purposes are our capital, deposits and loan repayments. We expect that loan repayments will be relatively stable sources of funds, while deposit
inflows and outflows will be significantly influenced by prevailing interest rates, money market rates, and general economic conditions. Generally, short-term borrowings may be used to compensate for reductions in normal sources of funds while
longer-term borrowings may be used to support expanded lending activities.

Our customers are primarily individuals, professionals, small
and medium-size businesses, and seasonal retirees located predominantly in St. Lucie, Martin and Indian River County, Florida. Our offices are currently located in Stuart, Port St. Lucie and Fort Pierce, Florida. A fourth office in Vero Beach,
Florida is estimated to open in April, 2006.



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We continually seek to develop new business through an ongoing program of personal calls on both present
and potential customers. As a local independent bank, we utilize traditional local advertising media to promote and develop loans and deposits. In addition, all of our directors have worked and lived in or near our market area for a number of years.
We believe that these factors, coupled with the past and continued involvement of the directors, officers and staff in various local community activities, will further promote our image as a locally owned independent institution, which we believe is
an important factor to our targeted customer base.

Critical Accounting Policies

Our financial condition and results of operations are sensitive to accounting measurements and estimates of matters that are inherently uncertain. When
applying accounting policies in areas that are subjective in nature, we must use our best judgment to arrive at the carrying value of certain assets. The most critical accounting policy we apply is related to the valuation of the loan portfolio.

A variety of estimates impact the carrying value of the loan portfolio including the calculation of the allowance for loan losses,
valuation of underlying collateral, the timing of loan charge-offs and the amount and amortization of loan fees and deferred origination costs.

Establishing allowance for loan losses requires the most difficult and subjective judgment of all. The allowance is established and maintained at a level we believe is adequate to cover losses resulting from the inability of borrowers to
make required payments on loans. Estimates for loan losses are arrived at by analyzing risks associated with specific loans and with the entire loan portfolio, current trends in delinquencies and charge-offs, the views of our regulators, changes in
the size and composition of the loan portfolio and peer comparisons. The analysis also requires consideration of both the local and national economic climate and direction, and changes in the interest rate environment, which may impact a
borrowers ability to pay, legislation impacting the banking industry and economic conditions specific to the banks service area. Because the calculation of the allowance for loan losses relies on our estimates and judgments relating to
inherently uncertain events, results may differ from our estimates.

The allowance for loan losses is also discussed as part of
Results of Operations and in Note 3 to the consolidated financial statements. The significant accounting policies are discussed in Note 1 to the consolidated financial statements.

Regulation and Legislation

As a bank holding
company, we are regulated by the Board of Governors of the Federal Reserve System. As a Florida state chartered commercial bank, we are subject to extensive regulation by the Florida Office of Financial Regulation, Department of Financial
Services (the Department), and the Federal Deposit Insurance Corporation (FDIC). We file reports with the Department and the FDIC concerning our activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or acquisitions of other financial institutions. Periodic examinations are performed by the Department and the FDIC to monitor our compliance with the various regulatory
requirements.



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Credit Risk

Our primary business is making business and consumer loans. That activity entails potential loan losses, the magnitude of which depend on a variety of economic factors affecting borrowers which are beyond our control. While underwriting
guidelines have been instituted and credit review procedures have been put in place to protect us from avoidable credit losses, some losses will inevitably occur. At December 31, 2005, we did not have any nonperforming assets.

Allowance for Loan Losses

The following table
presents information regarding our total allowance for loan losses as well as the allocation of such amounts to the various categories of loans at December 31, (dollars in thousands):



|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |     |  |        |  
|------------------------------------------------------------------------ |  | ------ | ----- | ------------------ | ------ | - | ------ | ---- | ------------------ |  | ------ | ------ |  | ------------------ | --- |  | ------ | -
|                                                                         |  | 2005   |       |                    | 2004   |   |        | 2003 |                   
|                                                                         |  | Amount |       | Loans toTotalLoans |        |   | Amount |      | Loans toTotalLoans |  |        | Amount |  | Loans toTotalLoans |    
|Commercial                                                               |  | $      | 576   |                    | 37.42  | % |        | $    | 468                |  | 32.27  | %      |  | $                  | 281 |  | 34.93  | %
|Commercial real estate                                                   |  |        | 478   |                    | 40.79  |   |        |      | 312                |  | 43.90  |        |  |                    | 313 |  | 33.59  |  
|Construction                                                             |  |        | 53    |                    | 4.47   |   |        |      | 36                 |  | 2.47   |        |  |                    | 26  |  | 5.35   |  
|Consumer                                                                 |  |        | 274   |                    | 17.11  |   |        |      | 255                |  | 21.10  |        |  |                    | 228 |  | 24.68  |  
|Residential real estate                                                  |  |        | 2     |                    | .21    |   |        |      | 26                 |  | .26    |        |  |                    | 4   |  | 1.45   |  
|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |     |  |        |  
|Total allowance for loan losses                                          |  | $      | 1,383 |                    | 100.00 | % |        | $    | 1,097              |  | 100.00 | %      |  | $                  | 852 |  | 100.00 | %
|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |     |  |        |  
|The allowance for loan losses as a percentage of total loans outstanding |  |        |       |                    | 1.42   | % |        |      |                    |  | 1.56   | %      |  |                    |     |  | 1.73   | %
|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |     |  |        |  

Loan Portfolio

The following table sets forth the composition of our loan portfolio at December 31, (dollars in thousands):



|                                  |  |        |        |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|--------------------------------- |  | ------ | ------ | - | --------- | ------ | - | ------ | - | ------ | --------- |  | ------ | ------ |  | - | --------- | - |  | ------ | -
|                                  |  | 2005   |        |   | 2004      |        |   | 2003   |  
|                                  |  | Amount |        |   | % ofTotal |        |   | Amount |   |        | % ofTotal |  |        | Amount |  |   | % ofTotal |  
|Commercial                        |  | $      | 36,510 |   |           | 37.42  | % |        | $ | 22,640 |           |  | 32.27  | %      |  | $ | 17,202    |   |  | 34.93  | %
|Commercial real estate            |  |        | 39,794 |   |           | 40.79  |   |        |   | 30,803 |           |  | 43.90  |        |  |   | 16,542    |   |  | 33.59  |  
|Construction                      |  |        | 4,365  |   |           | 4.47   |   |        |   | 1,731  |           |  | 2.47   |        |  |   | 2,635     |   |  | 5.35   |  
|Consumer                          |  |        | 16,688 |   |           | 17.11  |   |        |   | 14,803 |           |  | 21.10  |        |  |   | 12,160    |   |  | 24.68  |  
|Residential real estate           |  |        | 206    |   |           | .21    |   |        |   | 181    |           |  | .26    |        |  |   | 714       |   |  | 1.45   |  
|                                  |  |        |        |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|                                  |  |        | 97,563 |   |           | 100.00 | % |        |   | 70,158 |           |  | 100.00 | %      |  |   | 49,253    |   |  | 100.00 | %
|                                  |  |        |        |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|Less:                             |  |        |        |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|Deferred loan costs and fees, net |  |        | (514   | ) |           |        |   |        |   | (267   | )         |  |        |        |  |   | (157      | ) |  |        |  
|Allowance for loan losses         |  |        | (1,383 | ) |           |        |   |        |   | (1,097 | )         |  |        |        |  |   | (852      | ) |  |        |  
|                                  |  |        |        |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|Loans, net                        |  | $      | 95,666 |   |           |        |   |        | $ | 68,794 |           |  |        |        |  | $ | 48,244    |   |  |        |  
|                                  |  |        |        |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  



7



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The following table sets forth certain information on nonaccrual loans and foreclosed assets, the ratio
of such loans and other real estate owned to total assets as of the dates indicated, and certain other related information (dollars in thousands):



|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|------------------------------------------------------------------------------- |  | --------------- | - | - | ---- | - | --- | ---- |  | - | ----- | -
|                                                                                |  | At December 31, |  
|                                                                                |  | 2005            |   |   | 2004 |   |     | 2003 | 
|Nonaccrual loans:                                                               |  |                 |   |   |      |   |     |      |  |   |       |  
|Real estate loans                                                               |  | $               |  |   |      | $ | 465 |      |  | $ |      |  
|Consumer loans                                                                  |  |                 |  |   |      |   | 1   |      |  |   |      |  
|Commercial and all other loans                                                  |  |                 |  |   |      |   | 30  |      |  |   | 1,448 |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total nonaccrual loans                                                          |  |                 |  |   |      |   | 496 |      |  |   | 1,448 |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Accruing loans over 90 days delinquent:                                         |  |                 |   |   |      |   |     |      |  |   |       |  
|Real estate loans                                                               |  |                 |  |   |      |   |    |      |  |   |      |  
|Consumer loans                                                                  |  |                 |  |   |      |   |    |      |  |   |      |  
|Commercial and all other loans                                                  |  |                 |  |   |      |   |    |      |  |   |      |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total accrual loans over 90 days delinquent                                     |  |                 |  |   |      |   |    |      |  |   |      |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total nonperforming loans                                                       |  |                 |  |   |      |   | 496 |      |  |   | 1,448 |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Foreclosed assets                                                               |  |                 |  |   |      |   |    |      |  |   |      |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total nonperforming loans and foreclosed assets                                 |  | $               |  |   |      | $ | 496 |      |  | $ | 1,448 |  
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total nonperforming loans as a percentage of total loans                        |  |                 |  | % |      |   | .71 | %    |  |   | 2.94  | %
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total nonperforming loans as a percentage of total assets                       |  |                 |  | % |      |   | .52 | %    |  |   | 2.07  | %
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  
|Total nonperforming loans and real estate owned as a percentage of total assets |  |                 |  | % |      |   | .52 | %    |  |   | 2.07  | %
|                                                                                |  |                 |   |   |      |   |     |      |  |   |       |  

Allowance for Credit Losses

In originating loans, we recognize that credit losses will be experienced and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan, and, in the case of a collateralized loan, the quality of the collateral for the loan as well as general economic conditions. It is managements policy to maintain an
adequate allowance for loan losses based on, among other things, managements loan loss experience, evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality. We consider several factors in determining
the allowances, including charge-off history, the relatively low level of nonperforming assets, and the value of the underlying collateral.

The calculation of the allowance for loan losses is divided into two primary allocation groups: (1) specific allocation loans; and (2) all other passing grade loans. For specific allocation loans, we have determined an allowance
amount to set aside which we believe is sufficient to cover any potential collateral shortfall. Problem loans are identified by the loan officer, by our loan review process, by our Banks loan committee, or by the Banks regulatory
examiners. Those loans identified as problem loans are assigned a risk grade. Loans graded as special mention are multiplied by an inherent loss factor of 5%. Loans graded as substandard are generally multiplied by a loss
factor of 15%, loans graded as doubtful are generally multiplied by a loss factor of 50% and loans graded as loss are multiplied by a loss factor of 100%. In addition to the 15% and 50% on substandard and doubtful loans, the
loans are individually reviewed for any additional allowance that may be necessary. All other loans, graded as pass are multiplied by an historical experience factor to determine the appropriate level of the allowance for loan losses.



8



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We actively monitor our asset quality and to charge-off loans against the allowance for loan losses when
appropriate or to provide specific loss allowances when necessary. Although we believe we use the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the economic conditions in the assumptions used in making the initial determinations. We consider several factors in determining the allowances, including charge-off history, the relatively low level of nonperforming assets,
and the value of the underlying collateral. Furthermore, nonperforming loans at December 31, 2005, decreased to 0% of total loans, compared to .71% at December 31, 2004. During 2005, our allowance increased by $286,000, or 26.07%, and
totaled $1,383,000 at December 31, 2005. Additional allowance was made to cover the loan growth of approximately 39.06% in 2005. We believe that the allowance for loan losses was adequate at December 31, 2005.

The following table sets forth information with respect to activity in our allowance for loan losses during the years indicated (dollars in thousands):



|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|------------------------------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                                                      |  | Year Ended December 31, |      
|                                                                                      |  | 2005                    |       |   | 2004 |   |        | 2003 | 
|Allowance at beginning of year                                                        |  | $                       | 1,097 |   |      | $ | 852    |      |  | $ | 553   |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Charge-offs:                                                                          |  |                         |       |   |      |   |        |      |  |   |       |  
|Real estate loans                                                                     |  |                         |      |   |      |   |       |      |  |   |      |  
|Consumer loans                                                                        |  |                         | 17    |   |      |   | 36     |      |  |   | 71    |  
|Commercial and all other loans                                                        |  |                         | 55    |   |      |   | 111    |      |  |   | 19    |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Total charge-offs                                                                     |  |                         | 72    |   |      |   | 147    |      |  |   | 90    |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Recoveries:                                                                           |  |                         |       |   |      |   |        |      |  |   |       |  
|Real estate loans                                                                     |  |                         |      |   |      |   |       |      |  |   |      |  
|Consumer loans                                                                        |  |                         | 1     |   |      |   | 3      |      |  |   | 5     |  
|Commercial and all other loans                                                        |  |                         | 5     |   |      |   | 9      |      |  |   | 1     |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Total recoveries                                                                      |  |                         | 6     |   |      |   | 12     |      |  |   | 6     |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Provision for loan losses charged to operations                                       |  |                         | 352   |   |      |   | 380    |      |  |   | 383   |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Allowance at end of year                                                              |  | $                       | 1,383 |   |      | $ | 1,097  |      |  | $ | 852   |  
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Ratio of net charge-offs during the year to average loans outstanding during the year |  |                         | .08   | % |      |   | .25    | %    |  |   | .18   | %
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Allowance for loan losses as a percentage of total at end of year loans               |  |                         | 1.42  | % |      |   | 1.56   | %    |  |   | 1.73  | %
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  
|Allowance for loan losses as a percentage of nonperforming loans                      |  |                         |      | % |      |   | 221.17 | %    |  |   | 58.84 | %
|                                                                                      |  |                         |       |   |      |   |        |      |  |   |       |  



9



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Capital Resources and Liquidity

In managing liquidity, our objective is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for expansion. Liquidity management addresses the
ability to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise. Our primary sources of internally generated funds are principal and interest
payments on loans receivable, cash flows generated from operations, and cash flows generated by investments. External sources of funds include increases in deposits and advances from the FHLB. We also have Fed Funds lines of credit
extended by our correspondent banks to utilize for overnight cash flow needs.

Our management team monitors our liquidity position on an
on-going basis and reports regularly to our Board of Directors the level of liquidity compared to minimum levels established by Board policy. As of December 31, 2005, our level of liquidity was within the established guidelines of Board policy.

We are subject to various regulatory capital adequacy requirements promulgated by each of the FDIC and the Department. Failure to meet
minimum capital requirements can result in certain mandatory and, possibly, additional discretionary actions by federal and state regulators that, if undertaken, could have a direct material effect on our financial condition and results of
operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices.

Quantitative measures established by regulation to ensure capital adequacy require us to
maintain minimum amounts and ratios (set forth in the table below) of Total and Tier 1 capital to risk weighted assets and Tier 1 capital to average assets. As of December 31, 2005, we exceeded all applicable capital adequacy requirements.
See Regulation and Supervision - Capital Requirements.

As of December 31, 2005, our actual and required minimum
capital ratios were as follows (dollars in thousands):



|                                        |  |        |        |   |                              |   |        |                                                                       |       |  |      |        |  |   |       |  |       |  
|--------------------------------------- |  | ------ | ------ | - | ---------------------------- | - | ------ | --------------------------------------------------------------------- | ----- |  | ---- | ------ |  | - | ----- |  | ----- | -
|                                        |  | Actual |        |   | For Capital AdequacyPurposes |   |        | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |      
|                                        |  | Amount |        | % |                              |   | Amount |                                                                       | %     |  |      | Amount |  | % |      
|As of December 31, 2005:                |  |        |        |   |                              |   |        |                                                                       |       |  |      |        |  |   |       |  |       |  
|Total capital to Risk- Weighted assets  |  | $      | 11,078 |   | 12.55                        | % |        | $                                                                     | 7,059 |  | 8.00 | %      |  | $ | 8,824 |  | 10.00 | %
|Tier I Capital to Risk- Weighted Assets |  |        | 9,972  |   | 11.30                        |   |        |                                                                       | 3,530 |  | 4.00 |        |  |   | 5,294 |  | 6.00  |  
|Tier I Capital to Total Assets          |  |        | 9,972  |   | 7.75                         |   |        |                                                                       | 5,148 |  | 4.00 |        |  |   | 6,435 |  | 5.00  |  

Our primary source of cash during the year ended December 31, 2005, was from the proceeds
from net deposit inflows of $20.9 million and net proceeds from the issuance of common stock of $12.2 million. Cash was used primarily to purchase securities and to originate loans. At December 31, 2005, we had outstanding commitments to
originate loans totaling $9.2 million, available lines of credit of $13.4 million, and standby letters of credit of $474,000.



10



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Investment Activities

Our securities portfolio is managed by our Funds Management Committee in accordance with a written investment policy of the Board of Directors that addresses strategies, types and levels of permitted investments. At
December 31, 2005, our securities portfolio equaled $12.2 million, or 9.62% of total assets. Our investment portfolio is comprised of agency securities and mortgage-backed securities.

We classify securities as either available for sale or held to maturity based upon our intent and ability to hold such securities. Securities available
for sale include debt and equity securities that are held for an indefinite period of time and are not intended to be held to maturity. Securities available for sale include securities that we intend to use as part of our overall asset/liability
management strategy and that may be sold in response to changes in interest rates and resultant prepayment risk and other factors related thereto.

Securities available for sale are carried at fair value, and unrealized gains and losses (net of related tax effects) on such securities are excluded from earnings but are included in stockholders equity. Upon realization, such gains
and losses will be included in our earnings. Investment securities and mortgage-backed securities, other than those designated as available for sale are comprised of debt securities that we have the affirmative intent and ability to hold to
maturity. Securities held to maturity are carried at cost, and are adjusted for amortization of premiums and accretion of discounts over the estimated lives of the securities.

Securities

The
following table sets forth the carrying value of our securities portfolio at December 31, 2005 (in thousands):



|                                  |  |      |        |      |       
|--------------------------------- |  | ---- | ------ | ---- | ------
|                                  |  | 2005 |        | 2004
|Securities available for sale:    |  |      |        |      |       
|U.S. Government agency securities |  | $    | 7,919  |      | 6,467 
|Mortgage-backed securities        |  |      | 1,310  |      | 1,870 
|                                  |  |      |        |      |       
|                                  |  |      | 9,229  |      | 8,337 
|                                  |  |      |        |      |       
|Securities held to maturity:      |  |      |        |      |       
|U.S. Government agency securities |  |      | 2,997  |      | 2,994 
|Mortgage-backed securities        |  |      | 18     |      | 40    
|                                  |  |      |        |      |       
|                                  |  |      | 3,015  |      | 3,034 
|                                  |  |      |        |      |       
|Total                             |  | $    | 12,244 |      | 11,371
|                                  |  |      |        |      |       



11



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The following table sets forth, by maturity distribution, certain information pertaining to the
securities portfolio as follows (dollars in thousands):



|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|--------------------------------- |  | ----------------------- | ----- | ------------ | --------------------------- | - | ------------- | ---------------------------- | ------------ |  | ----- | ------------- |  | ------------ | ----- |  | ------------- | - | ------------ | - | ------ |  | ---- | -
|                                  |  | Due in One Year or Less |       |              | From One Year to Five Years |   |               | From Five Years to Ten Years |              |  | Total |              
|                                  |  | CarryingValue           |       | AverageYield |                             |   | CarryingValue |                              | AverageYield |  |       | CarryingValue |  | AverageYield |       |  | CarryingValue |   | AverageYield |  
|December 31, 2005:                |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|U.S. Government agency securities |  | $                       | 2,471 |              | 2.78                        | % |               | $                            | 7,458        |  | 3.85  | %             |  | $            | 987   |  | 5.00          | % |              | $ | 10,916 |  | 3.71 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|Mortgage-backed securities        |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   | 1,328  |  | 3.76 |  
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|Total                             |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              | $ | 12,244 |  | 3.72 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|December 31, 2004:                |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|U.S. Government agency securities |  | $                       | 3,473 |              | 2.01                        | % |               | $                            | 4,982        |  | 2.63  | %             |  | $            | 1,006 |  | 5.00          | % |              | $ | 9,461  |  | 2.69 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|Mortgage-backed securities        |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   | 1,910  |  | 3.60 |  
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  
|Total                             |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              | $ | 11,371 |  | 2.84 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |       |  |               |   |              |   |        |  |      |  

Regulatory Capital Requirements

Under FDIC regulations, we are required to meet certain minimum regulatory capital requirements. This is not a valuation allowance and has not been
created by charges against earnings. It represents a restriction on stockholders equity.

Quantitative measures established by
regulation to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios of total and Tier I capital, as defined in the regulations, to risk-weighted assets, also as defined in the regulations, and of Tier I
capital to average assets. We believe, as of December 31, 2005, that we met all capital adequacy requirements to which we are subject. See Note 15 to our consolidated financial statements for the actual capital amounts and ratios.

Market Risk

Market risk is the risk of loss from
adverse changes in market prices and rates. We do not engage in securities trading or hedging activities and do not invest in interest-rate derivatives or enter into interest rate swaps. Our market risk arises primarily from interest-rate risk
inherent in our loan and deposit-taking activities. To that end, we actively monitor and manage our interest-rate risk exposure. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting
on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of financial instruments, which reflect changes in market prices and rates, can be found in Note 7 of Notes to
Consolidated Financial Statements.

The primary objective in managing interest-rate risk is to maximize earnings and minimize the potential
adverse impact of changes in interest rates on our net interest income and capital, while adjusting our asset-liability structure to obtain the maximum yield-cost spread on that structure. We rely primarily on our asset-liability structure to manage
interest-rate risk. However, a sudden and substantial increase in interest rates may adversely impact our earnings, to the extent that the interest-earning assets and interest-bearing liabilities do not change at the same speed, to the same extent,
or on the same basis.



12



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Asset and Liability Structure

Our asset and liability management program establishes and implements various internal asset-liability decision processes, as well as communications and control procedures to aid us in managing our earnings. We
believe that these processes and procedures provide us with better capital planning, asset mix and volume controls, loan-pricing guidelines, and deposit interest-rate guidelines which should result in tighter controls and less exposure to
interest-rate risk.

The matching of assets and liabilities may be accomplished in part by examining the extent to which such assets and
liabilities are interest rate sensitive and by monitoring an institutions interest rate sensitivity gap. An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or
reprice within that time period. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. The gap ratio is computed as the
amount of rate sensitive assets less the amount of rate sensitive liabilities divided by total assets. A gap is considered positive when the amount of interest-rate sensitive assets exceeds interest-rate sensitive liabilities. A gap is considered
negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an
increase in net interest income. During a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would adversely affect net interest income.

In order to minimize the potential for adverse effects of material and prolonged increases in interest rates on the results of operations, we continue to
monitor asset and liability management policies to better match the maturities and repricing terms of our interest-earning assets and interest-bearing liabilities. Such policies have consisted primarily of: emphasizing the origination of
adjustable-rate loans; maintaining a stable core deposit base; and maintaining a significant portion of liquid assets consisting primarily of cash and short-term securities.



13



---

The following table sets forth certain information relating to interest-earning assets and
interest-bearing liabilities at December 31, 2005, that are estimated to mature or are scheduled to reprice within the period shown (dollars in thousands):



|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|------------------------------------ |  | --------------- | ------- | -- | ---------------------------------------- | - | ------ | ---------------------------------------------- |  | - | ---------------- | - |  | ----- | ------ | - |  | - | -------
|                                     |  | One Yearor Less |         |    | More than OneYear andLess thanFive Years |   |        | More than Five Years andLess
thanFifteen Years |  |   | OverFifteenYears |   |  | Total
|Mortgage and commercial loans (1):   |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Commercial                           |  | $               | 23,512  |    |                                          | $ | 10,387 |                                                |  | $ | 807              |   |  | $     | 1,804  |   |  | $ | 36,510 
|Commercial real estate               |  |                 | 8,382   |    |                                          |   | 28,089 |                                                |  |   | 3,049            |   |  |       | 274    |   |  |   | 39,794 
|Construction                         |  |                 | 1,791   |    |                                          |   | 2,574  |                                                |  |   |                 |   |  |       |       |   |  |   | 4,365  
|Consumer                             |  |                 | 5,046   |    |                                          |   | 10,371 |                                                |  |   | 1,271            |   |  |       |       |   |  |   | 16,688 
|Residential mortgage                 |  |                 | 206     |    |                                          |   |       |                                                |  |   |                 |   |  |       |       |   |  |   | 206    
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Total loans                          |  |                 | 38,937  |    |                                          |   | 51,421 |                                                |  |   | 5,127            |   |  |       | 2,078  |   |  |   | 97,563 
|                                     |  |                 |         |    |                                         
|Interest-bearing deposits with banks |  |                 | 229     |    |                                          |   |       |                                                |  |   |                 |   |  |       |       |   |  |   | 229    
|Federal funds sold                   |  |                 | 9,268   |    |                                          |   |       |                                                |  |   |                 |   |  |       |       |   |  |   | 9,268  
|Securities (2)                       |  |                 | 2,471   |    |                                          |   | 8,352  |                                                |  |   | 1,709            |   |  |       | 18     |   |  |   | 12,550 
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Total rate-sensitive assets          |  |                 | 50,905  |    |                                          |   | 59,773 |                                                |  |   | 6,836            |   |  |       | 2,096  |   |  |   | 119,610
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Deposit accounts (3):                |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Money market deposits                |  | $               | 26,267  |    |                                          | $ |       |                                                |  | $ |                 |   |  | $     |       |   |  | $ | 26,267 
|NOW deposits                         |  |                 | 4,808   |    |                                          |   |       |                                                |  |   |                 |   |  |       |       |   |  |   | 4,808  
|Savings deposits                     |  |                 | 6,996   |    |                                          |   |       |                                                |  |   |                 |   |  |       |       |   |  |   | 6,996  
|Certificates of deposit              |  |                 | 32,799  |    |                                          |   | 11,565 |                                                |  |   |                 |   |  |       |       |   |  |   | 44,364 
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Total deposit accounts               |  |                 | 70,870  |    |                                          |   | 11,565 |                                                |  |   |                 |   |  |       |       |   |  |   | 82,435 
|                                     |  |                 |         |    |                                         
|Federal Home Loan Bank advance       |  |                 | 2,500   |    |                                          |   |       |                                                |  |   | 100              |   |  |       |       |   |  |   | 2,600  
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Total rate-sensitive liabilities     |  |                 | 73,370  |    |                                          |   | 11,565 |                                                |  |   | 100              |   |  |       |       |   |  |   | 85,035 
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|GAP (repricing differences)          |  | $               | (22,465 | )  |                                          | $ | 48,208 |                                                |  | $ | 6,736            |   |  | $     | 2,096  |   |  | $ | 34,575 
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Cumulative GAP                       |  | $               | (22,465 | )  |                                          | $ | 25,743 |                                                |  | $ | 32,479           |   |  | $     | 34,575 |   |  |   |        
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        
|Cumulative GAP/total assets          |  |                 | (17.65  | )% |                                          |   | 20.22  | %                                              |  |   | 25.51            | % |  |       | 27.16  | % |  |   |        
|                                     |  |                 |         |    |                                          |   |        |                                                |  |   |                  |   |  |       |        |   |  |   |        

---

|(1) | In preparing the table above, adjustable-rate loans are included in the period in which the
interest rates are next scheduled to adjust rather than in the period in which the loans mature. Fixed-rate loans are scheduled, including repayment, according to their maturities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Securities are scheduled through the maturity dates and include Federal Home Loan Bank stock.
|--- | ---------------------------------------------------------------------------------------------

|(3) | Money-market, NOW, and savings deposits are regarded as readily accessible withdrawable
accounts. All other time deposits are scheduled through the maturity dates.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

The following table reflects the contractual principal repayments by period of the loan portfolio at
December 31, 2005 (in thousands):



|                          |  |                 |        |                            |   |                          |  |               |     |                   |   |        |  |   |      
|------------------------- |  | --------------- | ------ | -------------------------- | - | ------------------------ |  | ------------- | --- | ----------------- | - | ------ |  | - | -----
|Years Ending December 31, |  | CommercialLoans |        | CommercialReal EstateLoans |   | ResidentialMortgageLoans |  | ConsumerLoans |     | ConstructionLoans
|2006                      |  | $               | 8,788  |                            | $ | 10,301                   |  | $             | 83  |                   | $ | 5,787  |  | $ | 1,791
|2007                      |  |                 | 4,742  |                            |   | 6,830                    |  |               | 30  |                   |   | 3,490  |  |   | 903  
|2008                      |  |                 | 3,642  |                            |   | 4,266                    |  |               | 28  |                   |   | 2,868  |  |   | 62   
|2009-2010                 |  |                 | 4,768  |                            |   | 4,271                    |  |               | 39  |                   |   | 3,235  |  |   | 205  
|2011-2012                 |  |                 | 2,851  |                            |   | 3,003                    |  |               | 22  |                   |   | 619    |  |   | 139  
|2013 & beyond             |  |                 | 11,719 |                            |   | 11,123                   |  |               | 4   |                   |   | 689    |  |   | 1,265
|                          |  |                 |        |                            |   |                          |  |               |     |                   |   |        |  |   |      
|Total                     |  | $               | 36,510 |                            | $ | 39,794                   |  | $             | 206 |                   | $ | 16,688 |  | $ | 4,365
|                          |  |                 |        |                            |   |                          |  |               |     |                   |   |        |  |   |      

Of the $70.8 million of loans due after 2006, 34.41% of such loans have fixed interest rates and
65.59% have adjustable interest rates.

The following table sets forth total loans originated and repaid during the period ended
December 31 (in thousands):



|                                             |  |      |         |   |      |   |         |  
|-------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                             |  | 2005 |         |   | 2004 |  
|Originations:                                |  |      |         |   |      |   |         |  
|                                             |  |     
|Commercial loans                             |  | $    | 30,314  |   |      | $ | 9,330   |  
|Commercial real estate loans                 |  |      | 20,582  |   |      |   | 23,357  |  
|Residential mortgage loans                   |  |      |        |   |      |   |        |  
|Consumer loans                               |  |      | 15,168  |   |      |   | 10,432  |  
|Construction loans                           |  |      | 6,445   |   |      |   | 2,905   |  
|                                             |  |      |         |   |      |   |         |  
|Total loans originated                       |  |      | 72,509  |   |      |   | 46,024  |  
|                                             |  |     
|Principal reductions and participations sold |  |      | (45,104 | ) |      |   | (25,119 | )
|                                             |  |      |         |   |      |   |         |  
|Increase in total loans                      |  | $    | 27,405  |   |      | $ | 20,905  |  
|                                             |  |      |         |   |      |   |         |  

Deposit Activities and Other Sources of Funds

Deposits are the major source of funds for our lending and investment activities. In addition, we also generate funds from loan principal repayments and
prepayments, and from the maturities and cash flow of investment securities. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by general interest
rates and money-market conditions. Borrowings from the Federal Home Loan Bank of Atlanta (the FHLB) may be used on a short-term basis to compensate for reductions in the availability of funds from other sources, or for long-term funding
purposes. We have Fed Funds lines of credit extended by our correspondent banks to utilize for overnight cash flow needs. We have no other borrowing arrangements.

Deposit instruments include NOW accounts, demand deposit accounts, money-market accounts, statement savings accounts and certificates of deposit. Deposit
account terms vary, with the principal differences being the minimum balance deposit, early withdrawal penalties and interest rate. We review our deposit mix and pricing on a frequent basis.



15



---

We believe that we are competitive in the type of accounts and interest rates we offer on our deposit
products. We determine deposit interest rates based on a number of conditions, including rates paid by competitors, rates on U.S. Treasury securities, rates offered on various FHLB advance programs, and the deposit growth rate we are seeking to
achieve.

We may use premiums to attract new deposit accounts. Such premiums would be reflected in an increase in our advertising and
promotion expense, as well as our cost of funds. We also actively solicit business checking accounts and individual retirement accounts.

The following table shows the distribution of, and certain other information relating to deposit accounts by type (dollars in thousands):



|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|--------------------------------- |  | --------------- | ------- | ------------ | ------ | - | ------ | - | ------------ |  | ------ | -
|                                  |  | At December 31, |        
|                                  |  | 2005            |         |              | 2004   |  
|                                  |  | Amount          |         | % ofDeposits |        |   | Amount |   | % ofDeposits | 
|Demand deposits                   |  | $               | 20,374  |              | 19.82  | % |        | $ | 20,568       |  | 25.10  | %
|Money-market deposits             |  |                 | 26,267  |              | 25.55  |   |        |   | 19,515       |  | 23.82  |  
|NOW deposits                      |  |                 | 4,808   |              | 4.68   |   |        |   | 2,891        |  | 3.53   |  
|Savings deposits                  |  |                 | 6,996   |              | 6.80   |   |        |   | 7,872        |  | 9.61   |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Subtotal                          |  |                 | 58,445  |              | 56.85  |   |        |   | 50,846       |  | 62.06  |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Certificate of deposits:          |  |                 |         |              |        |   |        |   |              |  |        |  
|0% - 0.99%                        |  |                 | 52      |              | .05    |   |        |   | 244          |  | .30    |  
|1.00% - 1.99%                     |  |                 | 187     |              | .18    |   |        |   | 3,628        |  | 4.43   |  
|2.00% - 2.99%                     |  |                 | 6,713   |              | 6.53   |   |        |   | 20,140       |  | 24.58  |  
|3.00% - 3.99%                     |  |                 | 17,212  |              | 16.74  |   |        |   | 5,153        |  | 6.29   |  
|4.00% - 4.99%                     |  |                 | 18,077  |              | 17.58  |   |        |   | 1,674        |  | 2.04   |  
|5.00% - 5.99%                     |  |                 | 2,123   |              | 2.07   |   |        |   | 235          |  | 0.28   |  
|6.00% - 6.99%                     |  |                 |        |              |       |   |        |   | 16           |  | 0.02   |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Total certificates of deposit (1) |  |                 | 44,364  |              | 43.15  |   |        |   | 31,090       |  | 37.94  |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Total deposits                    |  | $               | 102,809 |              | 100.00 | % |        | $ | 81,936       |  | 100.00 | %
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  

---

|(1) | Included individual retirement accounts (IRAs) totaling $2,632,000 and $1,924,000
at December 31, 2005 and 2004, all of which are in the form of certificates of deposit.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents by
various interest rate categories the amounts of certificates of deposit at December 31, 2005, which mature during the periods indicated (in thousands):



|                              |  |                          |        |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       
|----------------------------- |  | ------------------------ | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | ----- |  | - | ------
|                              |  | Year Ending December 31,
|                              |  | 2006                     |        | 2007 |   | 2008  |  | 2009 |       | 2010 |   | Total
|0% - 0.99%                    |  | $                        | 52     |      | $ |      |  | $    |      |      | $ |      |  | $ |      |  | $ | 52    
|1.00% - 1.99%                 |  |                          | 187    |      |   |      |  |      |      |      |   |      |  |   |      |  |   | 187   
|2.00% - 2.99%                 |  |                          | 5,788  |      |   | 775   |  |      | 150   |      |   |      |  |   |      |  |   | 6,713 
|3.00% - 3.99%                 |  |                          | 14,694 |      |   | 1,107 |  |      | 884   |      |   | 441   |  |   | 86    |  |   | 17,212
|4.00% - 4.99%                 |  |                          | 12,078 |      |   | 2,384 |  |      | 1,254 |      |   | 600   |  |   | 1,761 |  |   | 18,077
|5.00% - 5.99%                 |  |                          |       |      |   | 1,123 |  |      |      |      |   |      |  |   | 1,000 |  |   | 2,123 
|                              |  |                          |        |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       
|Total certificates of deposit |  | $                        | 32,799 |      | $ | 5,389 |  | $    | 2,288 |      | $ | 1,041 |  | $ | 2,847 |  | $ | 44,364
|                              |  |                          |        |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       



16



---

Jumbo certificates ($100,000 and over) mature as follows (in thousands):



|                                    |  |              |        |      |   |       
|----------------------------------- |  | ------------ | ------ | ---- | - | ------
|                                    |  | December 31,
|                                    |  | 2005         |        | 2004
|Due three months or less            |  | $            | 3,072  |      | $ | 3,010 
|Due over three months to six months |  |              | 3,413  |      |   | 435   
|Due over six months to one year     |  |              | 7,863  |      |   | 4,781 
|Due over one year to five years     |  |              | 7,843  |      |   | 5,234 
|                                    |  |              |        |      |   |       
|                                    |  | $            | 22,191 |      | $ | 13,460
|                                    |  |              |        |      |   |       

Interest Rate Sensitivity

Our operating results depend primarily on our net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities, consisting primarily
of deposits. Net interest income is determined by the difference between yields earned on interest-earning assets and rates paid on interest-bearing liabilities (interest-rate spread) and the relative amounts of interest-earning assets
and interest-bearing liabilities. Our interest-rate spread is affected by regulatory, economic, and competitive factors that influence interest rates, loan demand, and deposit flows. In addition, our net earnings are also affected by the level of
nonperforming loans and foreclosed real estate, as well as the level of our non-interest income, and our non-interest expenses, such as salaries and employee benefits, occupancy and equipment costs and income taxes.



17



---

The following table sets forth, for the years indicated, information regarding: (i) the total dollar
amount of interest and dividend income from interest-earning assets and the resultant average yield; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average costs; (iii) net
interest/dividend income; (iv) interest rate spread; (v) net interest margin. Average balances are based on average daily balances (dollars in thousands).



|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ----------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------ | ----------------- | - | ----- |  | ---- | -
|                                                                                 |  | Year Ended December 31, |        
|                                                                                 |  | 2005                    |         |                      | 2004 |                  
|                                                                                 |  | AverageBalance          |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |        | AverageYield/Rate |  
|Interest-earning assets:                                                         |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Loans                                                                            |  | $                       | 91,215  |                      |      | 6,523             |  | 7.15 | %              |  | $                    | 59,036 |                   |   | 3,938 |  | 6.67 | %
|Securities                                                                       |  |                         | 10,144  |                      |      | 341               |  | 3.36 |                |  |                      | 9,724  |                   |   | 303   |  | 3.12 |  
|Other interest-earning assets (1)                                                |  |                         | 12,127  |                      |      | 379               |  | 3.13 |                |  |                      | 6,295  |                   |   | 104   |  | 1.65 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                         | 113,486 |                      |      | 7,243             |  | 6.38 |                |  |                      | 75,055 |                   |   | 4,345 |  | 5.79 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                         | 5,656   |                      |      |                   |  |      |                |  |                      | 6,339  |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Total assets                                                                     |  | $                       | 119,142 |                      |      |                   |  |      |                |  | $                    | 81,394 |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Savings, NOW and money-market deposits                                           |  |                         | 36,345  |                      |      | 709               |  | 1.95 |                |  |                      | 27,297 |                   |   | 340   |  | 1.25 |  
|Certificates of deposit                                                          |  |                         | 36,039  |                      |      | 1,148             |  | 3.19 |                |  |                      | 27,445 |                   |   | 712   |  | 2.59 |  
|Other borrowings                                                                 |  |                         | 2,552   |                      |      | 82                |  | 3.21 |                |  |                      | 1,151  |                   |   | 22    |  | 1.91 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                         | 74,936  |                      |      | 1,939             |  | 2.59 |                |  |                      | 55,893 |                   |   | 1,074 |  | 1.92 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Demand deposits                                                                  |  |                         | 28,715  |                      |      |                   |  |      |                |  |                      | 17,238 |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                         | 1,375   |                      |      |                   |  |      |                |  |                      | 918    |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                         | 14,116  |                      |      |                   |  |      |                |  |                      | 7,345  |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                       | 119,142 |                      |      |                   |  |      |                |  | $                    | 81,394 |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Net interest income                                                              |  |                         |         |                      | $    | 5,304             |  |      |                |  |                      |        |                   | $ | 3,271 |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Interest-rate spread                                                             |  |                         |         |                      |      |                   |  | 3.79 | %              |  |                      |        |                   |   |       |  | 3.87 | %
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Net interest margin (2)                                                          |  |                         |         |                      |      |                   |  | 4.67 | %              |  |                      |        |                   |   |       |  | 4.36 | %
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                         | 1.51    |                      |      |                   |  |      |                |  |                      | 1.34   |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |        |                   |   |       |  |      |  

---

|(1) | Other interest-earning assets included federal funds sold, Federal Home Loan Bank stock and
time deposits.
|--- | ----------------------------------------------------------------------------------------------------------

|(2) | Net interest margin is net interest income divided by total average interest-earning assets.
|--- | --------------------------------------------------------------------------------------------



18



---

Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest income and interest expense for the years indicated. For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change in rate multiplied by prior volume), (2) changes in volume (change in volume multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).

Year Ended December 31, 2005 vs. 2004:



|                                       |  |                            |     |        |   |             |  |       |     |  |   |      
|-------------------------------------- |  | -------------------------- | --- | ------ | - | ----------- |  | ----- | --- |  | - | -----
|                                       |  | Increase (Decrease) Due to
|                                       |  | Rate                       |     | Volume |   | Rate/Volume |  | Total
|                                       |  | (In thousands)            
|Interest-earning assets:               |  |                            |     |        |   |             |  |       |     |  |   |      
|Loans                                  |  | $                          | 283 |        | $ | 2,147       |  | $     | 155 |  | $ | 2,585
|Securities                             |  |                            | 24  |        |   | 13          |  |       | 1   |  |   | 38   
|Other interest-earning assets          |  |                            | 93  |        |   | 96          |  |       | 86  |  |   | 275  
|                                       |  |                            |     |        |   |             |  |       |     |  |   |      
|Total                                  |  |                            | 400 |        |   | 2,256       |  |       | 242 |  |   | 2,898
|                                       |  |                            |     |        |   |             |  |       |     |  |   |      
|Interest-bearing liabilities:          |  |                            |     |        |   |             |  |       |     |  |   |      
|Deposits:                              |  |                            |     |        |   |             |  |       |     |  |   |      
|Savings, money-market and NOW deposits |  |                            | 192 |        |   | 113         |  |       | 64  |  |   | 369  
|Certificates of deposit                |  |                            | 164 |        |   | 221         |  |       | 51  |  |   | 436  
|Other borrowings                       |  |                            | 15  |        |   | 27          |  |       | 18  |  |   | 60   
|                                       |  |                            |     |        |   |             |  |       |     |  |   |      
|Total                                  |  |                            | 371 |        |   | 361         |  |       | 133 |  |   | 865  
|                                       |  |                            |     |        |   |             |  |       |     |  |   |      
|Net change in net interest income      |  | $                          | 29  |        | $ | 1,895       |  | $     | 109 |  | $ | 2,033
|                                       |  |                            |     |        |   |             |  |       |     |  |   |      

Comparison of Years Ended December 31, 2005 and 2004

General. Net earnings for the year ended December 31, 2005, were $765,000 or $.55 per basic and $.52 per diluted share compared to net
earnings of $123,000 or $.15 per basic and diluted share for the year ended December 31, 2004. This increase in net operating results was primarily due to an increase in interest income and noninterest income, partially offset by an increase in
interest expense and noninterest expense, all as a result of our growth.

Interest Income. Interest income increased to $7.2
million for the year ended December 31, 2005, from $4.3 million for the year ended December 31, 2004. Interest income on loans increased to $6.5 million from $3.9 million due to an increase in the average loan portfolio balance for the
year ended December 31, 2005, and an increase in the weighted-average yield earned on the portfolio. Interest on securities increased to $341,000 in 2005, from $303,000 in 2004, due to an increase in the average yield in 2005, and an increase
in the average portfolio balance. Interest on other interest-earning assets increased to $379,000 primarily due to an increase in the weighted-average portfolio balance.

Interest Expense. Interest expense increased to $1.9 million in 2005 from $1.1 million in 2004. Interest expense increased due to growth in average interest-bearing deposits in 2005, as well as an
increase in the weighted-average rate paid on deposits.



19



---

Provision for Loan Losses. The provision for loan losses was charged to operations to bring
the total allowance to a level we deem appropriate and is based upon historical experience, the volume and the type of lending we conduct. In addition, industry standards, the amounts of nonperforming loans, general economic conditions, particularly
as they relate to our market area, and other factors related to the collectibility of our loan portfolio were considered. The provision for loan losses decreased to $352,000 in 2005 from $380,000 in 2004. The allowance for loan losses increased to
$1.4 million at December 31, 2005 from $1.1 million at December 31, 2004. The increase in the allowance was due to the increase in the loan portfolio during the year. Management believes that the allowance for loan losses of $1.4 million
is adequate at December 31, 2005.

Noninterest Income. Noninterest income increased to $930,000 in 2005 from $759,000 in
2004. This was primarily a result of increased gains from the sales of loans and loan brokerage fees in 2005 compared to 2004.

Noninterest Expense. Total noninterest expense increased to $4.6 million for the year ended December 31, 2005, compared to $3.4 million in 2004. This was primarily due to increases in employee compensation and benefits,
occupancy and equipment and other expenses, all a result of our overall growth.

Income Taxes.The income tax provision was
$478,000 (an effective rate of 38.5%) for 2005 compared to $87,000 (an effective rate of 41.4%) for 2004.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting
principles, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial
companies, substantially all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.

Selected Quarterly Results

Selected quarterly results of operations for the four quarters ended
December 31 are as follows (in thousands, except per share amounts):



|                                         |  |               |       |              |       |               |       |              |       |               |       |              |       |               |     |              |      |  
|---------------------------------------- |  | ------------- | ----- | ------------ | ----- | ------------- | ----- | ------------ | ----- | ------------- | ----- | ------------ | ----- | ------------- | --- | ------------ | ---- | -
|                                         |  | 2005          |       | 2004         |      
|                                         |  | FourthQuarter |       | ThirdQuarter |       | SecondQuarter |       | FirstQuarter |       | FourthQuarter |       | ThirdQuarter |       | SecondQuarter |     | FirstQuarter |     
|Interest income                          |  | $             | 2,167 |              | 1,923 |               | 1,681 |              | 1,472 |               | 1,341 |              | 1,107 |               | 967 |              | 930  |  
|Interest expense                         |  |               | 663   |              | 479   |               | 424   |              | 373   |               | 335   |              | 272   |               | 231 |              | 236  |  
|Net interest income                      |  |               | 1,504 |              | 1,444 |               | 1,257 |              | 1,099 |               | 1,006 |              | 835   |               | 736 |              | 694  |  
|Provision for loan losses                |  |               | 95    |              | 95    |               | 92    |              | 70    |               | 55    |              | 85    |               | 115 |              | 125  |  
|Earnings before income taxes             |  |               | 182   |              | 425   |               | 409   |              | 227   |               | 171   |              | 99    |               | 39  |              | (99  | )
|Net earnings                             |  |               | 109   |              | 263   |               | 253   |              | 140   |               | 104   |              | 58    |               | 25  |              | (64  | )
|Basic earnings per common share          |  |               | .04   |              | .15   |               | .19   |              | .17   |               | .13   |              | .07   |               | .03 |              | (.08 | )
|Diluted earnings per common share        |  |               | .03   |              | .14   |               | .18   |              | .17   |               | .13   |              | .07   |               | .03 |              | (.08 | )
|Cash dividends declared per common share |  |               |      |              |      |               |      |              |      |               | .07   |              |      |               |    |              |     |  



20



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

($ in thousands, except share amounts)



|                                                                                                               |  |                 |         |   |      |        |  
|-------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ---- | ------ | -
|                                                                                                               |  | At December 31, |        
|                                                                                                               |  | 2005            |         |   | 2004 |       
|Assets                                                                                                         |  |                 |         |   |      |        |  
|Cash and due from banks                                                                                        |  | $               | 2,869   |   |      | 2,048  |  
|Federal funds sold                                                                                             |  |                 | 9,268   |   |      | 7,656  |  
|Interest-bearing deposits with banks                                                                           |  |                 | 229     |   |      | 55     |  
|                                                                                                               |  |                 |         |   |      |        |  
|Total cash and cash equivalents                                                                                |  |                 | 12,366  |   |      | 9,759  |  
|                                                                                                               |  |                
|Securities available for sale                                                                                  |  |                 | 9,229   |   |      | 8,337  |  
|Securities held to maturity (market value of $2,950 and $3,002)                                                |  |                 | 3,015   |   |      | 3,034  |  
|Loans, net of allowance for loan losses of $1,383 and $1,097                                                   |  |                 | 95,666  |   |      | 68,794 |  
|Premises and equipment, net                                                                                    |  |                 | 3,699   |   |      | 3,668  |  
|Federal Home Loan Bank stock, at cost                                                                          |  |                 | 306     |   |      | 253    |  
|Accrued interest receivable                                                                                    |  |                 | 558     |   |      | 306    |  
|Deferred income taxes                                                                                          |  |                 | 197     |   |      | 214    |  
|Bank owned life insurance                                                                                      |  |                 | 1,950   |   |      |       |  
|Other assets                                                                                                   |  |                 | 323     |   |      | 232    |  
|                                                                                                               |  |                 |         |   |      |        |  
|Total assets                                                                                                   |  | $               | 127,309 |   |      | 94,597 |  
|                                                                                                               |  |                 |         |   |      |        |  
|Liabilities and Stockholders Equity                                                                           |  |                 |         |   |      |        |  
|                                                                                                               |  |                
|Liabilities:                                                                                                   |  |                 |         |   |      |        |  
|Noninterest-bearing demand deposits                                                                            |  |                 | 20,374  |   |      | 20,568 |  
|Savings, NOW and money-market deposits                                                                         |  |                 | 38,071  |   |      | 30,278 |  
|Time deposits                                                                                                  |  |                 | 44,364  |   |      | 31,090 |  
|                                                                                                               |  |                 |         |   |      |        |  
|Total deposits                                                                                                 |  |                 | 102,809 |   |      | 81,936 |  
|                                                                                                               |  |                
|Official checks                                                                                                |  |                 | 938     |   |      | 2,455  |  
|Federal Home Loan Bank advances                                                                                |  |                 | 2,600   |   |      | 2,500  |  
|Other liabilities                                                                                              |  |                 | 621     |   |      | 286    |  
|                                                                                                               |  |                 |         |   |      |        |  
|Total liabilities                                                                                              |  |                 | 106,968 |   |      | 87,177 |  
|                                                                                                               |  |                 |         |   |      |        |  
|Commitments and contingencies (Notes 4 and 7)                                                                  |  |                 |         |   |      |        |  
|                                                                                                               |  |                
|Stockholders equity:                                                                                          |  |                 |         |   |      |        |  
|Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued or outstanding                  |  |                 |        |   |      |       |  
|Common stock, $.01 par value; 5,000,000 shares authorized, 1,810,588 and 819,120 shares issued and outstanding |  |                 | 18      |   |      | 8      |  
|Additional paid-in capital                                                                                     |  |                 | 20,136  |   |      | 7,927  |  
|Retained earnings (accumulated deficit)                                                                        |  |                 | 262     |   |      | (503   | )
|Accumulated other comprehensive income (loss)                                                                  |  |                 | (75     | ) |      | (12    | )
|                                                                                                               |  |                 |         |   |      |        |  
|Total stockholders equity                                                                                     |  |                 | 20,341  |   |      | 7,420  |  
|                                                                                                               |  |                 |         |   |      |        |  
|Total liabilities and stockholders equity                                                                     |  | $               | 127,309 |   |      | 94,597 |  
|                                                                                                               |  |                 |         |   |      |        |  

See Accompanying Notes to Consolidated Financial Statements.



21



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Earnings

($ in thousands, except per share
amounts)



|                                                    |  |                         |           |      |        
|--------------------------------------------------- |  | ----------------------- | --------- | ---- | -------
|                                                    |  | Year Ended December 31,
|                                                    |  | 2005                    |           | 2004
|Interest income:                                    |  |                         |           |      |        
|Loans                                               |  | $                       | 6,523     |      | 3,938  
|Securities                                          |  |                         | 341       |      | 303    
|Other                                               |  |                         | 379       |      | 104    
|                                                    |  |                         |           |      |        
|Total interest income                               |  |                         | 7,243     |      | 4,345  
|                                                    |  |                         |           |      |        
|Interest expense:                                   |  |                         |           |      |        
|Deposits                                            |  |                         | 1,857     |      | 1,052  
|Federal Home Loan Bank advances                     |  |                         | 82        |      | 22     
|                                                    |  |                         |           |      |        
|Total interest expense                              |  |                         | 1,939     |      | 1,074  
|                                                    |  |                         |           |      |        
|Net interest income                                 |  |                         | 5,304     |      | 3,271  
|Provision for loan losses                           |  |                         | 352       |      | 380    
|                                                    |  |                         |           |      |        
|Net interest income after provision for loan losses |  |                         | 4,952     |      | 2,891  
|                                                    |  |                         |           |      |        
|Noninterest income:                                 |  |                         |           |      |        
|Service charges and fees on deposit accounts        |  |                         | 292       |      | 284    
|Loan brokerage fees                                 |  |                         | 205       |      | 88     
|Gain on sale of loans held for sale                 |  |                         | 421       |      | 363    
|Gain on sale of securities available for sale       |  |                         |          |      | 20     
|Other fees                                          |  |                         | 12        |      | 4      
|                                                    |  |                         |           |      |        
|Total noninterest income                            |  |                         | 930       |      | 759    
|                                                    |  |                         |           |      |        
|Noninterest expenses:                               |  |                         |           |      |        
|Salaries and employee benefits                      |  |                         | 2,438     |      | 1,720  
|Occupancy and equipment                             |  |                         | 608       |      | 466    
|Advertising                                         |  |                         | 364       |      | 263    
|Professional fees                                   |  |                         | 141       |      | 93     
|Data processing                                     |  |                         | 308       |      | 274    
|Supplies                                            |  |                         | 130       |      | 133    
|Other                                               |  |                         | 650       |      | 491    
|                                                    |  |                         |           |      |        
|Total noninterest expenses                          |  |                         | 4,639     |      | 3,440  
|                                                    |  |                         |           |      |        
|Earnings before income taxes                        |  |                         | 1,243     |      | 210    
|Income taxes                                        |  |                         | 478       |      | 87     
|                                                    |  |                         |           |      |        
|Net earnings                                        |  | $                       | 765       |      | 123    
|Earnings per share:                                 |  |                         |           |      |        
|                                                    |  |                         |           |      |        
|Basic                                               |  | $                       | .55       |      | .15    
|                                                    |  |                         |           |      |        
|Diluted                                             |  | $                       | .52       |      | .15    
|                                                    |  |                         |           |      |        
|Weighted-average number of shares, basic            |  |                         | 1,396,384 |      | 818,203
|                                                    |  |                         |           |      |        
|Weighted-average number of shares, diluted          |  |                         | 1,462,465 |      | 818,203
|                                                    |  |                         |           |      |        

See Accompanying Notes to Consolidated Financial Statements.



22



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders Equity

Years Ended
December 31, 2005 and 2004

($ in thousands)



|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|------------------------------------------------------------------------------- |  | ------------ | - | ------------------------ | ------ | -- | ------------------------------------ | ------ | - | ------------------------------- | ---- | - | ------------------------ | --- | - |  | ------ | -
|                                                                                |  | Accumulated  |  
|                                                                                |  | Common Stock |   | AdditionalPaid-InCapital |        |    | RetainedEarnings(AccumulatedDeficit) |        |   | OtherComprehensiveIncome (Loss) |      |   | TotalStockholdersEquity |    
|                                                                                |  | Shares       |   |                          | Amount |    |                                      |        |  
|Balance at December 31, 2003                                                    |  | 818,120      |   |                          | $      | 8  |                                      | 7,918  |   |                                 | (567 | ) |                          | 13  |   |  | 7,372  |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Comprehensive income:                                                           |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Net earnings                                                                    |  |             |   |                          |        |   |                                      |       |   |                                 | 123  |   |                          |    |   |  | 123    |  
|Net unrealized loss on securities available for sale, net of tax benefit of $16 |  |             |   |                          |        |   |                                      |       |   |                                 |     |   |                          | (25 | ) |  | (25    | )
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Comprehensive income                                                            |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  | 98     |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Issuance of common stock from exercise of warrants                              |  | 8,000        |   |                          |        |   |                                      | 80     |   |                                 |     |   |                          |    |   |  | 80     |  
|Repurchase and retirement of common stock                                       |  | (8,000       | ) |                          |        |   |                                      | (83    | ) |                                 |     |   |                          |    |   |  | (83    | )
|Common stock issued as compensation                                             |  | 1,000        |   |                          |        |   |                                      | 12     |   |                                 |     |   |                          |    |   |  | 12     |  
|Dividends                                                                       |  |             |   |                          |        |   |                                      |       |   |                                 | (59  | ) |                          |    |   |  | (59    | )
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Balance at December 31, 2004                                                    |  | 819,120      |   |                          |        | 8  |                                      | 7,927  |   |                                 | (503 | ) |                          | (12 | ) |  | 7,420  |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Proceeds from the sale of common stock (net of offering costs of $641)          |  | 960,000      |   |                          |        | 10 |                                      | 11,829 |   |                                 |     |   |                          |    |   |  | 11,839 |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Comprehensive income:                                                           |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Net earnings                                                                    |  |             |   |                          |        |   |                                      |       |   |                                 | 765  |   |                          |    |   |  | 765    |  
|Net unrealized loss on securities available for sale, net of tax benefit of $37 |  |             |   |                          |        |   |                                      |       |   |                                 |     |   |                          | (63 | ) |  | (63    | )
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Comprehensive income                                                            |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  | 702    |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Proceeds from exercise of common stock options and warrants                     |  | 31,468       |   |                          |        |   |                                      | 316    |   |                                 |     |   |                          |    |   |  | 316    |  
|Tax benefit from common stock options exercised                                 |  |             |   |                          |        |   |                                      | 64     |   |                                 |     |   |                          |    |   |  | 64     |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  
|Balance at December 31, 2005                                                    |  | 1,810,588    |   |                          | $      | 18 |                                      | 20,136 |   |                                 | 262  |   |                          | (75 | ) |  | 20,341 |  
|                                                                                |  |              |   |                          |        |    |                                      |        |   |                                 |      |   |                          |     |   |  |        |  

See Accompanying Notes to Consolidated Financial Statements.



23



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In thousands)



|                                                                                    |  |                         |         |   |      |         |  
|----------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | ------- | -
|                                                                                    |  | Year Ended December 31, |        
|                                                                                    |  | 2005                    |         |   | 2004 |        
|Cash flows from operating activities:                                               |  |                         |         |   |      |         |  
|Net earnings                                                                        |  | $                       | 765     |   |      | 123     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                         |         |   |      |         |  
|Depreciation and amortization                                                       |  |                         | 269     |   |      | 177     |  
|Provision for loan losses                                                           |  |                         | 352     |   |      | 380     |  
|Deferred income taxes                                                               |  |                         | 54      |   |      | 87      |  
|Stock based compensation                                                            |  |                         |        |   |      | 12      |  
|Amortization of loan costs (fees), net                                              |  |                         | 37      |   |      | (66     | )
|Net amortization of premiums and discounts on securities                            |  |                         | (5      | ) |      | 7       |  
|Gain on the sale of securities available for sale                                   |  |                         |        |   |      | (20     | )
|Gain on sale of loans held for sale                                                 |  |                         | (421    | ) |      | (363    | )
|Proceeds from sale of loans held for sale                                           |  |                         | 7,393   |   |      | 3,762   |  
|Originations of loans held for sale                                                 |  |                         | (6,972  | ) |      | (3,399  | )
|Increase in accrued interest receivable                                             |  |                         | (252    | ) |      | (57     | )
|Increase in other assets                                                            |  |                         | (91     | ) |      | (102    | )
|(Decrease) increase in official checks and other liabilities                        |  |                         | (1,059  | ) |      | 1,104   |  
|                                                                                    |  |                         |         |   |      |         |  
|Net cash provided by operating activities                                           |  |                         | 70      |   |      | 1,645   |  
|                                                                                    |  |                         |         |   |      |         |  
|Cash flows from investing activities:                                               |  |                         |         |   |      |         |  
|Maturities of securities available for sale                                         |  |                         | 3,500   |   |      |        |  
|Purchase of securities available for sale                                           |  |                         | (5,000  | ) |      | (3,500  | )
|Principal payments on securities available for sale                                 |  |                         | 510     |   |      | 1,418   |  
|Proceeds from the sale of securities available for sale                             |  |                         |        |   |      | 2,000   |  
|Principal payments on securities held to maturity                                   |  |                         | 22      |   |      | 58      |  
|Net increase in loans                                                               |  |                         | (27,261 | ) |      | (20,864 | )
|Purchase of Federal Home Loan Bank stock                                            |  |                         | (53     | ) |      | (131    | )
|Purchase of premises and equipment                                                  |  |                         | (300    | ) |      | (1,408  | )
|Purchase of bank owned life insurance                                               |  |                         | (1,950  | ) |      |        |  
|                                                                                    |  |                         |         |   |      |         |  
|Net cash used in investing activities                                               |  |                         | (30,532 | ) |      | (22,427 | )
|                                                                                    |  |                         |         |   |      |         |  
|Cash flows from financing activities:                                               |  |                         |         |   |      |         |  
|Net increase in deposits                                                            |  |                         | 20,873  |   |      | 20,872  |  
|Proceeds from Federal Home Loan Bank advances                                       |  |                         | 100     |   |      | 2,500   |  
|Net proceeds from the issuance of common stock                                      |  |                         | 12,155  |   |      | 80      |  
|Repurchase of common stock                                                          |  |                         |        |   |      | (88     | )
|Dividends paid                                                                      |  |                         | (59     | ) |      | (41     | )
|                                                                                    |  |                         |         |   |      |         |  
|Net cash provided by financing activities                                           |  |                         | 33,069  |   |      | 23,323  |  
|                                                                                    |  |                         |         |   |      |         |  
|Net increase in cash and cash equivalents                                           |  |                         | 2,607   |   |      | 2,541   |  
|                                                                                    |  |                        
|Cash and cash equivalents at beginning of the year                                  |  |                         | 9,759   |   |      | 7,218   |  
|                                                                                    |  |                         |         |   |      |         |  
|Cash and cash equivalents at end of the year                                        |  | $                       | 12,366  |   |      | 9,759   |  
|                                                                                    |  |                         |         |   |      |         |  

(continued)



24



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows, Continued

(In thousands)



|                                                                                                                   |  |                         |       |   |      |       |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ----- | - | ---- | ----- | -
|                                                                                                                   |  | Year Ended December 31, |      
|                                                                                                                   |  | 2005                    |       |   | 2004 |      
|Supplemental disclosure of cash flow information:                                                                  |  |                         |       |   |      |       |  
|Cash paid during the year for:                                                                                     |  |                         |       |   |      |       |  
|Interest, net of interest capitalized of $3 and $23                                                                |  | $                       | 1,897 |   |      | 1,053 |  
|                                                                                                                   |  |                         |       |   |      |       |  
|Income taxes                                                                                                       |  | $                       | 355   |   |      |      |  
|                                                                                                                   |  |                         |       |   |      |       |  
|Noncash transactions:                                                                                              |  |                         |       |   |      |       |  
|Accumulated other comprehensive income, net change in unrealized loss on securities available for sale, net of tax |  | $                       | (63   | ) |      | (25   | )
|                                                                                                                   |  |                         |       |   |      |       |  
|Tax benefit from exercise of common stock options and warrants                                                     |  | $                       | 64    |   |      | 5     |  
|                                                                                                                   |  |                         |       |   |      |       |  
|Dividends payable included in other liabilities                                                                    |  | $                       |      |   |      | 59    |  
|                                                                                                                   |  |                         |       |   |      |       |  

See Accompanying Notes to Consolidated Financial Statements.



25



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2005 and 2004
and the Years Then Ended

(1) Summary of Significant Accounting Policies

Organization. FPB Bancorp, Inc. (the Holding Company) owns 100% of the outstanding common stock of First Peoples Bank (the
Bank) (collectively referred to as the Company). The Holding Company operates as a one-bank holding company and its only business activity is the operation of the Bank. The Bank is a state (Florida)-chartered commercial bank
and its deposits are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Port St. Lucie, Fort Pierce, and
Stuart, Florida. A Loan Production Office (LPO) opened in Vero Beach, Florida, in preparation for the estimated April, 2006 opening of a fourth banking office. The Company also anticipates opening an operations center in 2006.

The following is a description of the significant accounting policies and practices followed by the Company, which conform with U.S. generally accepted
accounting principles and prevailing practices within the banking industry.

Basis of Presentation.The consolidated financial
statements include the accounts of the Holding Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates. In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting 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 loan losses.

Cash
and Cash Equivalents. For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks, interest-bearing deposits with banks and federal funds sold, all of which mature within
ninety days.

The Bank is required by law or regulation to maintain cash reserves in the form of vault cash or in
noninterest-earning accounts with the Federal Reserve Bank or other qualified banks. At December 31, 2005 and 2004, there was no required reserve balance.

Securities. Securities may be classified as either trading, held to maturity or available for sale. Trading securities are held principally for resale and recorded at their fair values. Unrealized gains
and losses on trading securities are included immediately in earnings. Held-to-maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities
consist of securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses, net of tax, on available-for-sale securities are reported as a net amount in accumulated other comprehensive income
(loss). Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method. Premiums and discounts on securities are recognized in interest income using the interest method over the period to
maturity.

(continued)



26



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting
Policies, Continued

Loans. Loans that management has the intent and ability to hold for the foreseeable future or until
maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs.

Commitment fees and loan origination fees are deferred and certain direct origination costs are capitalized. Both are recognized as an adjustment of the yield of the related loan.

The accrual of interest on loans is discontinued at the time the loan is ninety days delinquent unless the loan is well collateralized and in process of
collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery
method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans Held for Sale.The Company originates loans guaranteed by the U.S. Small Business Administration, the guaranteed portion of which may
be sold at a premium. These loans are carried at the lower of cost or estimated fair value in the aggregate. There were no loans held for sale at December 31, 2005 or 2004.

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for
loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon managements periodic review of the collectibility of
the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as either loss, doubtful, substandard or special mention. For such loans that are also classified as impaired, an
allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical
industry loss experience adjusted for qualitative factors.

(continued)



27



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting
Policies, Continued

Allowance for Loan Losses, Continued.A loan is considered impaired when, based on current
information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due. Factors considered by management in determining impairment include payment status, collateral value, and the
probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment record,
and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial, construction and commercial real estate loans by either the present value of expected future cash flows
discounted at the loans effective interest rate, the loans obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

Premises and Equipment. Land is stated at cost. Building and improvements, leasehold improvements, and furniture, fixtures
and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense are computed using the straight-line method over the estimated useful life of each type of asset or the length of time the Company
expects to lease the property.

Transfer of Financial Assets. Transfers of financial assets are accounted for as sales, when
control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it
from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Income Taxes. Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary
differences between revenues and expenses reported for financial statement and those reported for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be realized or settled. Valuation allowances are provided against assets which are not likely to be realized.

(continued)



28



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting
Policies, Continued

Stock Compensation Plans. Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, (as amended by SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure) (collectively SFAS No. 123) encourages all entities to adopt a fair value
based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it
also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB No. 25), whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. The Company has elected
to continue with the accounting methodology in APB No. 25.

No stock-based employee compensation cost is reflected in net earnings, as
all options granted under those plans had an exercise price which approximated the market value of the underlying common stock on the date of grant. For purposes of proforma disclosures, the estimated fair value is included in expense in the period
vesting occurs. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. ($ in thousands, except per
share amounts).



|                                                                                                                                       |  |                         |      |   |      |     |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | - | ---- | --- | -
|                                                                                                                                       |  | Year Ended December 31, |     
|                                                                                                                                       |  | 2005                    |      |   | 2004 |    
|Net earnings as reported                                                                                                               |  | $                       | 765  |   |      | 123 |  
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax
effect |  |                         | (315 | ) |      | (33 | )
|                                                                                                                                       |  |                         |      |   |      |     |  
|Proforma net earnings                                                                                                                  |  | $                       | 450  |   |      | 90  |  
|                                                                                                                                       |  |                         |      |   |      |     |  
|Basic earnings per share:                                                                                                              |  |                         |      |   |      |     |  
|As reported                                                                                                                            |  | $                       | .55  |   |      | .15 |  
|                                                                                                                                       |  |                         |      |   |      |     |  
|Proforma                                                                                                                               |  | $                       | .32  |   |      | .11 |  
|                                                                                                                                       |  |                         |      |   |      |     |  
|Diluted earnings per share:                                                                                                            |  |                         |      |   |      |     |  
|As reported                                                                                                                            |  | $                       | .52  |   |      | .15 |  
|                                                                                                                                       |  |                         |      |   |      |     |  
|Diluted                                                                                                                                |  | $                       | .31  |   |      | .11 |  
|                                                                                                                                       |  |                         |      |   |      |     |  

The fair value of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions:



|                                                                         |  |      |         |   |      |           |  
|------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | --------- | -
|                                                                         |  | 2005 |         |   | 2004 |          
|Dividend yield                                                           |  |      |        | % |      | .69       | %
|                                                                         |  |     
|Expected life                                                            |  |      | 5 years |   |      | 10 years  |  
|                                                                         |  |     
|Expected volatility                                                      |  |      | 6.35    | % |      |          | %
|                                                                         |  |     
|Risk-free interest rate                                                  |  |      | 4.34    | % |      | 4.13-4.80 | %
|Weighted-average grant-date fair value of options issued during the year |  | $    | 3.32    |   |      | 3.46      |  

(continued)



29



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting
Policies, Continued

Off-Balance-Sheet Instruments. In the ordinary course of business the Company has entered into
off-balance-sheet financial instruments consisting of commitments to extend credit, available lines of credit and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded.

Earnings Per Share. Basic earnings per share has been computed on the basis of the weighted-average number of shares
of common stock outstanding during the year. Diluted earnings per share were computed based on the weighted-average number of shares outstanding plus the effect of outstanding stock options, computed using the treasury stock method. Earnings per
common share have been computed based on the following:



|                                                                                                         |  |                         |  |        
|-------------------------------------------------------------------------------------------------------- |  | ----------------------- |  | -------
|                                                                                                         |  | Year Ended December 31,
|                                                                                                         |  | 2005                    |  | 2004   
|Weighted-average number of common shares outstanding used to calculate basic earnings per common share   |  | 1,396,384               |  | 818,203
|Effect of dilutive stock options                                                                         |  | 66,081                  |  |       
|                                                                                                         |  |                         |  |        
|Weighted-average number of common shares outstanding used to calculate diluted earnings per common share |  | 1,462,465               |  | 818,203
|                                                                                                         |  |                         |  |        

Fair Values of Financial Instruments. The fair value of a financial instrument is
the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the
Companys various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following methods and assumptions were used by
the Company in estimating fair values of financial instruments:



Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value.

Securities. Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

(continued)



30



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting
Policies, Continued

Fair Values of Financial Instruments, Continued.

Loans. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying
values. Fair values for certain fixed-rate mortgage (e.g. one-to-four family residential), commercial real estate and commercial loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.

Federal Home Loan Bank Stock. Fair value of the Companys
investment in Federal Home Loan Bank stock is based on its redemption value, which is its cost of $100 per share.

Deposit
Liabilities. The fair values disclosed for demand, NOW, money-market and savings deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for fixed-rate time
deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on time deposits to a schedule of aggregated expected monthly maturities of time deposits.

Accrued Interest. The carrying amounts of accrued interest approximate their fair values.

Federal Home Loan Bank Advances.The fair value of Federal Home Loan Bank advances is estimated using a discounted cash flow analysis based
on the Companys current incremental borrowing rate for similar types of borrowings.

Off-Balance-Sheet Instruments. Fair
values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing.

Comprehensive Income.Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net
earnings. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with
net earnings, are components of comprehensive income. The components of accumulated other comprehensive income and related tax effects are as follows (in thousands):



|                                                |  |                         |      |   |      |     |  
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- | --- | -
|                                                |  | Year Ended December 31, |     
|                                                |  | 2005                    |      |   | 2004 |    
|Holding losses on available-for-sale securities |  | $                       | (100 | ) |      | (21 | )
|Gain realized in earnings                       |  |                         |     |   |      | (20 | )
|                                                |  |                         |      |   |      |     |  
|Net unrealized loss                             |  |                         | (100 | ) |      | (41 | )
|Tax effect                                      |  |                         | 37   |   |      | 16  |  
|                                                |  |                         |      |   |      |     |  
|Net-of-tax amount                               |  | $                       | (63  | ) |      | (25 | )
|                                                |  |                         |      |   |      |     |  

(continued)



31



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting
Policies, Continued

Recent Pronouncements.In December 2003, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. This SOP requires acquired impaired loans for which it is probable that the investor will be
unable to collect all contractually required payments receivable to be recorded at the present value of amounts expected to be received. The SOP also prohibits carrying over or creation of valuation allowances in the initial accounting for these
loans. The SOP was effective for loans acquired in fiscal years beginning after December 15, 2004. The adoption of this SOP did not impact the Companys consolidated financial position or results of operations.

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 123 (Revised), Share-Based Payment (SFAS No. 123(R)). This Statement replaces SFAS No. 123 and supersedes APB No. 25. SFAS No. 123(R) clarifies and expands SFAS No. 123s guidance in several
areas, including measuring fair value, classifying an award as equity or as a liability, accounting for nonsubstantive vesting provisions, and attributing compensation cost to reporting periods. Under the provisions of SFAS No. 123(R), the
alternative to use APB No. 25s intrinsic value method of accounting that was provided in SFAS No. 123, as originally issued, is eliminated. Effective January 1, 2006, the Company will begin expensing the fair value of unvested
stock options and any future grants of stock options. Based on the number of unvested stock options as of December 31, 2005, the Company will record compensation expense of approximately $7,800 annually for the years 2006, 2007 and 2008.

In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, which replaces APB Opinion No. 20,
Accounting Changes,and SFAS 3, Reporting Accounting Changes in Interim Financial Statements An Amendment of APB Opinion No. 28. SFAS 154 changes the requirements for the accounting and reporting of a change in accounting
principle. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

(continued)



32



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(2) Securities

Securities have been classified according to managements intention. The carrying amount of securities and their fair values are as follows (in
thousands):



|                                    |  |               |       |                      |    |                       |      |   |           |      
|----------------------------------- |  | ------------- | ----- | -------------------- | -- | --------------------- | ---- | - | --------- | -----
|                                    |  | AmortizedCost |       | GrossUnrealizedGains |    | GrossUnrealizedLosses |      |   | FairValue
|At December 31, 2005:               |  |               |       |                      |    |                       |      |   |           |      
|Securities available for sale:      |  |               |       |                      |    |                       |      |   |           |      
|U.S. Government agency securities   |  | $             | 8,002 |                      |   |                       | (83  | ) |           | 7,919
|Mortgage-backed securities          |  |               | 1,347 |                      |   |                       | (37  | ) |           | 1,310
|                                    |  |               |       |                      |    |                       |      |   |           |      
|Total securities available for sale |  | $             | 9,349 |                      |   |                       | (120 | ) |           | 9,229
|                                    |  |               |       |                      |    |                       |      |   |           |      
|Securities held to maturity:        |  |               |       |                      |    |                       |      |   |           |      
|U.S. Government agency securities   |  |               | 2,997 |                      |   |                       | (65  | ) |           | 2,932
|Mortgage-backed securities          |  |               | 18    |                      |   |                       |     |   |           | 18   
|                                    |  |               |       |                      |    |                       |      |   |           |      
|Total securities held to maturity   |  | $             | 3,015 |                      |   |                       | (65  | ) |           | 2,950
|                                    |  |               |       |                      |    |                       |      |   |           |      
|At December 31, 2004:               |  |               |       |                      |    |                       |      |   |           |      
|Securities available for sale:      |  |               |       |                      |    |                       |      |   |           |      
|U.S. Government agency securities   |  |               | 6,482 |                      | 6  |                       | (21  | ) |           | 6,467
|Mortgage-backed securities          |  |               | 1,875 |                      | 5  |                       | (10  | ) |           | 1,870
|                                    |  |               |       |                      |    |                       |      |   |           |      
|Total securities available for sale |  | $             | 8,357 |                      | 11 |                       | (31  | ) |           | 8,337
|                                    |  |               |       |                      |    |                       |      |   |           |      
|Securities held to maturity:        |  |               |       |                      |    |                       |      |   |           |      
|U.S. Government agency securities   |  |               | 2,994 |                      |   |                       | (32  | ) |           | 2,962
|Mortgage-backed securities          |  |               | 40    |                      |   |                       |     |   |           | 40   
|                                    |  |               |       |                      |    |                       |      |   |           |      
|Total securities held to maturity   |  | $             | 3,034 |                      |   |                       | (32  | ) |           | 3,002
|                                    |  |               |       |                      |    |                       |      |   |           |      

(continued)



33



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(2) Securities, Continued

There were no sales of available for sale securities in 2005. For the year ended December 31, 2004, proceeds from the sale
of securities available for sale were $2,000,000. Gross realized gains were $20,000 in 2004.

The scheduled maturities of
securities at December 31, 2005 are as follows (in thousands):



|                           |  |                  |       |                    |       |               |       |           |      
|-------------------------- |  | ---------------- | ----- | ------------------ | ----- | ------------- | ----- | --------- | -----
|                           |  | Held to Maturity |       | Available for Sale
|                           |  | AmortizedCost    |       | FairValue          |       | AmortizedCost |       | FairValue
|Due in one year or less    |  | $                | 2,000 |                    | 1,972 |               | 499   |           | 494  
|Due from one to five years |  |                  | 5,002 |                    | 4,960 |               | 2,498 |           | 2,438
|Due from five to ten years |  |                  | 1,000 |                    | 987   |               |      |           |     
|Mortgage-backed securities |  |                  | 1,347 |                    | 1,310 |               | 18    |           | 18   
|                           |  |                  |       |                    |       |               |       |           |      
|                           |  | $                | 9,349 |                    | 9,229 |               | 3,015 |           | 2,950
|                           |  |                  |       |                    |       |               |       |           |      

At December 31, 2005 and 2004 securities with a carrying value of $3,999,000 and $2,882,000,
respectively, were pledged to the State of Florida as collateral for public funds.

Securities with gross unrealized losses at
December 31, 2005, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands):



|                                    |  |                         |     |                    |           |       |                       |     |   |           |      
|----------------------------------- |  | ----------------------- | --- | ------------------ | --------- | ----- | --------------------- | --- | - | --------- | -----
|                                    |  | Less Than Twelve Months |     | Over Twelve Months
|                                    |  | GrossUnrealizedLosses   |     |                    | FairValue |       | GrossUnrealizedLosses |     |   | FairValue
|Securities available for sale:      |  |                         |     |                    |           |       |                       |     |   |           |      
|U.S. Government agency securities   |  | $                       | (55 | )                  |           | 4,947 |                       | (28 | ) |           | 1,972
|Mortgage-backed securities          |  |                         | (17 | )                  |           | 760   |                       | (20 | ) |           | 550  
|                                    |  |                         |     |                    |           |       |                       |     |   |           |      
|Total securities available for sale |  | $                       | (72 | )                  |           | 5,707 |                       | (48 | ) |           | 2,522
|                                    |  |                         |     |                    |           |       |                       |     |   |           |      
|Securities held to maturity-        |  |                         |     |                    |           |       |                       |     |   |           |      
|U.S. Government agency securities   |  | $                       |    |                    |           |      |                       | (65 | ) |           | 2,932
|                                    |  |                         |     |                    |           |       |                       |     |   |           |      

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis,
and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The unrealized losses on investment securities available for sale and held to maturity were caused by interest rate changes. It is expected that the
securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold
these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

(continued)



34



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3) Loans

The components of loans are as follows (in thousands):



|                                  |  |                 |        |   |      |        |  
|--------------------------------- |  | --------------- | ------ | - | ---- | ------ | -
|                                  |  | At December 31, |       
|                                  |  | 2005            |        |   | 2004 |       
|Commercial                        |  | $               | 36,510 |   |      | 22,640 |  
|Commercial real estate            |  |                 | 39,794 |   |      | 30,803 |  
|Construction                      |  |                 | 4,365  |   |      | 1,731  |  
|Consumer                          |  |                 | 16,688 |   |      | 14,803 |  
|Residential real estate           |  |                 | 206    |   |      | 181    |  
|                                  |  |                 |        |   |      |        |  
|Total loans                       |  |                 | 97,563 |   |      | 70,158 |  
|                                  |  |                
|Deduct:                           |  |                 |        |   |      |        |  
|Deferred loan costs and fees, net |  |                 | (514   | ) |      | (267   | )
|Allowance for loan losses         |  |                 | (1,383 | ) |      | (1,097 | )
|                                  |  |                 |        |   |      |        |  
|Loans, net                        |  | $               | 95,666 |   |      | 68,794 |  
|                                  |  |                 |        |   |      |        |  

An analysis of the change in the allowance for loan losses follows (in thousands):



|                               |  |                         |       |   |      |       |  
|------------------------------ |  | ----------------------- | ----- | - | ---- | ----- | -
|                               |  | Year Ended December 31, |      
|                               |  | 2005                    |       |   | 2004 |      
|Beginning balance              |  | $                       | 1,097 |   |      | 852   |  
|Provision for loan losses      |  |                         | 352   |   |      | 380   |  
|Charge-offs, net of recoveries |  |                         | (66   | ) |      | (135  | )
|                               |  |                         |       |   |      |       |  
|Ending balance                 |  | $                       | 1,383 |   |      | 1,097 |  
|                               |  |                         |       |   |      |       |  

Information about impaired loans, all of which are collateral dependent, is as follows (in
thousands):



|                                                        |  |                 |   |      |     |  
|------------------------------------------------------- |  | --------------- | - | ---- | --- | -
|                                                        |  | At December 31, |  
|                                                        |  | 2005            |   | 2004 |    
|Loans identified as impaired:                           |  |                 |   |      |     |  
|Gross loans with no related allowances for loan losses  |  | $               |  |      |    |  
|                                                        |  |                 |   |      |     |  
|Gross loans with related allowances for losses recorded |  |                 |  |      | 465 |  
|Less allowance on these loans                           |  |                 |  |      | (70 | )
|                                                        |  |                 |   |      |     |  
|Net investment in impaired loans                        |  | $               |  |      | 395 |  
|                                                        |  |                 |   |      |     |  

(continued)



35



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3) Loans, Continued



|                                             |  |                         |    |      |      
|-------------------------------------------- |  | ----------------------- | -- | ---- | -----
|                                             |  | Year Ended December 31,
|                                             |  | 2005                    |    | 2004
|Average net investment in impaired loans     |  | $                       | 90 |      | 1,026
|                                             |  |                         |    |      |      
|Interest income recognized on impaired loans |  | $                       | 49 |      | 93   
|                                             |  |                         |    |      |      
|Interest income received on impaired loans   |  | $                       | 49 |      | 93   
|                                             |  |                         |    |      |      

Nonaccrual loans and loans past due ninety days or more but still accruing were as follows (in
thousands):



|                                                |  |                 |   |      |    
|----------------------------------------------- |  | --------------- | - | ---- | ---
|                                                |  | At December 31,
|                                                |  | 2005            |   | 2004
|Nonaccrual loans                                |  | $               |  |      | 496
|Past due ninety days or more but still accruing |  |                 |  |      |   
|                                                |  |                 |   |      |    
|                                                |  | $               |  |      | 496
|                                                |  |                 |   |      |    

(4) Premises and Equipment

A summary of premises and equipment follows (in thousands):



|                                               |  |                 |       |   |      |       |  
|---------------------------------------------- |  | --------------- | ----- | - | ---- | ----- | -
|                                               |  | At December 31, |      
|                                               |  | 2005            |       |   | 2004 |      
|Building and improvements                      |  | $               | 2,614 |   |      | 2,433 |  
|Land                                           |  |                 | 552   |   |      | 552   |  
|Furniture, fixtures and equipment              |  |                 | 884   |   |      | 820   |  
|Leasehold improvements                         |  |                 | 221   |   |      | 220   |  
|Construction in process                        |  |                 |      |   |      | 222   |  
|                                               |  |                 |       |   |      |       |  
|Total, at cost                                 |  |                 | 4,271 |   |      | 4,247 |  
|Less accumulated depreciation and amortization |  |                 | (572  | ) |      | (579  | )
|                                               |  |                 |       |   |      |       |  
|Premises and equipment, net                    |  | $               | 3,699 |   |      | 3,668 |  
|                                               |  |                 |       |   |      |       |  

Interest capitalized and included in construction in process during 2005 and 2004 was
approximately $3,000 and $23,000, respectively.

(continued)



36



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(4) Premises and Equipment, Continued

The Company leases its Stuart branch office facility under a noncancelable lease. The initial lease term is five years with two
five-year renewal options. The Company is required to pay an allowable share of common area maintenance and real estate taxes. In 2005, the Company opened an LPO under a short-term lease through June of 2006. In November 2005, the Company signed a
ten year lease with four five year renewals, on a branch building in Vero Beach. That branch is expected to open in April of 2006. At December 31, 2005, the Company has purchase commitments of approximately $109,000 relating to the opening of
the Vero Beach branch. Rent expense under the operating leases during the years ended December 31, 2005 and 2004 was approximately $127,000 and $104,000, respectively. In addition, in 2004, the Company began leasing space in its Fort Pierce
branch office facility to third parties. The leases have initial terms of five years and lease income was approximately $110,000 and $42,000 in 2005 and 2004, respectively. At December 31, 2005, future minimum rental commitments, including
renewal options, under these noncancelable leases were approximately as follows (in thousands):

Operating



|                         |  |              |       |             |    
|------------------------ |  | ------------ | ----- | ----------- | ---
|Year Ending December 31, |  | LeaseExpense |       | LeaseIncome
|2006                     |  | $            | 210   |             | 112
|2007                     |  |              | 215   |             | 115
|2008                     |  |              | 221   |             | 118
|2009                     |  |              | 226   |             | 88 
|2010                     |  |              | 232   |             |   
|Thereafter               |  |              | 2,300 |             |   
|                         |  |              |       |             |    
|Total                    |  | $            | 3,404 |             | 433
|                         |  |              |       |             |    

(5) Deposits

The aggregate amount of time deposits with a minimum denomination of $100,000, was approximately $22,191,000 and $13,460,000 at December 31, 2005 and 2004, respectively.

A schedule of maturities of time deposits follows (in thousands):



|                         |  |        |       
|------------------------ |  | ------ | ------
|Year Ending December 31, |  | Amount
|2006                     |  | $      | 32,799
|2007                     |  |        | 5,389 
|2008                     |  |        | 2,288 
|2009                     |  |        | 1,041 
|2010                     |  |        | 2,847 
|                         |  |        |       
|                         |  | $      | 44,364
|                         |  |        |       

(continued)



37



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(6) Federal Home Loan Bank Advances

Maturities and interest rates of advances from the Federal Home Loan Bank of Atlanta (FHLB) consisted of the following ($
in thousands):



|                                  |  |                      |     |  |          |  |               |   |  |                 |       |      |      
|--------------------------------- |  | -------------------- | --- |  | -------- |  | ------------- | - |  | --------------- | ----- | ---- | -----
|                                  |  |                      |     |  |          |  |               |   |  | At December 31,
|Maturity Year Ending December 31, |  | Fixed orVariableRate |     |  | CallDate |  | Interest Rate |   |  | 2005            |       | 2004
|2006                              |  | Variable             | (1) |  | N/A      |  | 4.15          | % |  | $               | 2,500 |      | 2,500
|2015                              |  | Fixed                | (2) |  | N/A      |  | .50           | % |  |                 | 100   |      |     
|                                  |  |                      |     |  |          |  |               |   |  |                 |       |      |      
|Total                             |  |                      |     |  |          |  |               |   |  | $               | 2,600 |      | 2,500
|                                  |  |                      |     |  |          |  |               |   |  |                 |       |      |      

---

|(1) | Interest rate of libor plus two basis points, adjusts quarterly.
|--- | ----------------------------------------------------------------

|(2) | Low interest rate due to being related to FHLB low-housing project lending.
|--- | ---------------------------------------------------------------------------

The advances are collateralized by securities available for sale with a carrying value of approximately $3,075,000 at December 31, 2005.

(7) Financial Instruments

The estimated fair
values of the Companys financial instruments were as follows (in thousands):



|                                |  |                      |         |                      |         |                |        |           |       
|------------------------------- |  | -------------------- | ------- | -------------------- | ------- | -------------- | ------ | --------- | ------
|                                |  | At December 31, 2005 |         | At December 31, 2004
|                                |  | CarryingAmount       |         | FairValue            |         | CarryingAmount |        | FairValue
|Financial assets:               |  |                      |         |                      |         |                |        |           |       
|Cash and cash equivalents       |  | $                    | 12,366  |                      | 12,366  |                | 9,759  |           | 9,759 
|Securities available for sale   |  |                      | 9,229   |                      | 9,229   |                | 8,337  |           | 8,337 
|Securities held to maturity     |  |                      | 3,015   |                      | 2,950   |                | 3,034  |           | 3,002 
|Loans, net                      |  |                      | 95,666  |                      | 97,469  |                | 68,794 |           | 68,934
|Federal Home Loan Bank stock    |  |                      | 306     |                      | 306     |                | 253    |           | 253   
|Accrued interest receivable     |  |                      | 558     |                      | 558     |                | 306    |           | 306   
|                                |  |                      |         |                     
|Financial liabilities:          |  |                      |         |                      |         |                |        |           |       
|Deposit liabilities             |  |                      | 102,809 |                      | 102,579 |                | 81,936 |           | 82,139
|Federal Home Loan Bank advances |  |                      | 2,600   |                      | 2,600   |                | 2,500  |           | 2,500 

The Company is a 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 are unfunded loan commitments, available lines of credit and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate
risk in excess of the amount recognized in the consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit
is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

(continued)



38



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(7) Financial Instruments, Continued

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed-expiration dates or other termination clauses and may require payment of a fee. Because some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit, is based on
managements credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that included in extending loans to customers. The Company generally holds collateral supporting these
commitments and management does not anticipate any potential losses if these letters of credit are funded.

Standby letters of credit,
available lines of credit and commitments to extend credit typically result in loans with a market interest rate when funded. A summary of Companys financial instruments with off balance sheet risk at December 31, 2005 follows (in
thousands):



|                             |  |                |        |                |   |                    |  
|---------------------------- |  | -------------- | ------ | -------------- | - | ------------------ | -
|                             |  | ContractAmount |        | CarryingAmount |   | EstimatedFairValue
|Standby letters of credit    |  | $              | 474    |                |  |                    | 
|                             |  |                |        |                |   |                    |  
|Commitments to extend credit |  | $              | 9,209  |                |  |                    | 
|                             |  |                |        |                |   |                    |  
|Available lines of credit    |  | $              | 13,437 |                |  |                    | 
|                             |  |                |        |                |   |                    |  

(8) Credit Risk

The Company grants the majority of its loans to borrowers throughout the Port St. Lucie, Stuart, Fort Pierce and Vero Beach, Florida area. Although the Company has a diversified loan portfolio, a significant portion
of its borrowers ability to honor their contracts is dependent upon the economy in St. Lucie County, Martin County and Indian River County, Florida.

(9) Income Taxes

Income taxes consisted of the following (in thousands):



|               |  |                         |     |      |   
|-------------- |  | ----------------------- | --- | ---- | --
|               |  | Year Ended December 31,
|               |  | 2005                    |     | 2004
|Current:       |  |                         |     |      |   
|Federal        |  | $                       | 365 |      |  
|State          |  |                         | 59  |      |  
|               |  |                         |     |      |   
|Total current  |  |                         | 424 |      |  
|               |  |                         |     |      |   
|Deferred:      |  |                         |     |      |   
|Federal        |  |                         | 44  |      | 74
|State          |  |                         | 10  |      | 13
|               |  |                         |     |      |   
|Total deferred |  |                         | 54  |      | 87
|               |  |                         |     |      |   
|Income taxes   |  | $                       | 478 |      | 87
|               |  |                         |     |      |   

(continued)



39



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(9) Income Taxes, Continued

The reasons for the differences between the statutory Federal income tax rate and the effective tax rate are summarized as follows
(dollars in thousands):



|                                        |  |                         |     |               |      |   |        |   |               |  |    |  
|--------------------------------------- |  | ----------------------- | --- | ------------- | ---- | - | ------ | - | ------------- |  | -- | -
|                                        |  | Year Ended December 31, |    
|                                        |  | 2005                    |     |               | 2004 |  
|                                        |  | Amount                  |     | % of Earnings |      |   | Amount |   | % of Earnings | 
|Income taxes at statutory rate          |  | $                       | 423 |               | 34   | % |        | $ | 71            |  | 34 | %
|Increase resulting from:                |  |                         |     |               |      |   |        |   |               |  |    |  
|State taxes, net of Federal tax benefit |  |                         | 46  |               | 4    |   |        |   | 9             |  | 4  |  
|Nondeductible expenses                  |  |                         | 9   |               |     |   |        |   | 7             |  | 3  |  
|                                        |  |                         |     |               |      |   |        |   |               |  |    |  
|Income taxes                            |  | $                       | 478 |               | 38   | % |        | $ | 87            |  | 41 | %
|                                        |  |                         |     |               |      |   |        |   |               |  |    |  

The tax effects of temporary differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities are presented below (in thousands).



|                                                 |  |                 |      |   |      |      |  
|------------------------------------------------ |  | --------------- | ---- | - | ---- | ---- | -
|                                                 |  | At December 31, |     
|                                                 |  | 2005            |      |   | 2004 |     
|Deferred tax assets:                             |  |                 |      |   |      |      |  
|Allowance for loan losses                        |  | $               | 474  |   |      | 353  |  
|Net operating loss carryforwards                 |  |                 |     |   |      | 125  |  
|Unrealized loss on securities available for sale |  |                 | 45   |   |      | 8    |  
|                                                 |  |                 |      |   |      |      |  
|Deferred tax assets                              |  |                 | 519  |   |      | 486  |  
|                                                 |  |                 |      |   |      |      |  
|Deferred tax liabilities:                        |  |                 |      |   |      |      |  
|Accrual to cash adjustment                       |  |                 | (93  | ) |      | (96  | )
|Accumulated depreciation                         |  |                 | (123 | ) |      | (117 | )
|Deferred loan costs                              |  |                 | (106 | ) |      | (57  | )
|Other                                            |  |                 |     |   |      | (2   | )
|                                                 |  |                 |      |   |      |      |  
|Deferred tax liabilities                         |  |                 | (322 | ) |      | (272 | )
|                                                 |  |                 |      |   |      |      |  
|Net deferred tax asset                           |  | $               | 197  |   |      | 214  |  
|                                                 |  |                 |      |   |      |      |  

(continued)



40



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(10) Related Party Transactions

In the ordinary course of business, the Company may make loans at terms and rates prevailing at the time to officers and directors of
the Company or their affiliates. The Company also accepts deposits from these same related parties. These are summarized as follows (in thousands):



|                             |  |      |       |   |      |       |  
|---------------------------- |  | ---- | ----- | - | ---- | ----- | -
|                             |  | 2005 |       |   | 2004 |      
|Loans:                       |  |      |       |   |      |       |  
|Balance at beginning of year |  | $    | 2,086 |   |      | 1,981 |  
|Borrowings                   |  |      | 2,169 |   |      | 490   |  
|Repayments                   |  |      | (924  | ) |      | (385  | )
|                             |  |      |       |   |      |       |  
|Balance at end of year       |  | $    | 3,331 |   |      | 2,086 |  
|                             |  |      |       |   |      |       |  
|Deposits                     |  | $    | 3,232 |   |      | 3,423 |  
|                             |  |      |       |   |      |       |  

(11) Stock Options

The Company established an Option Plan in 1998 for directors, officers and employees of the Company. The Plan was amended in April 2003 to increase the number of shares available for grant to 122,666. The exercise
price of the stock options is the greater of $10 or the fair market value of the common stock on the date of grant. The options expire ten years from the date of grant. At December 31, 2005, no shares remain available for grant and all options
are exercisable. A summary of stock option information follows ($ in thousands, except share amounts):



|                                 |  |                 |   |  |                                |              |   |                                |        |   |                      |       |  
|-------------------------------- |  | --------------- | - |  | ------------------------------ | ------------ | - | ------------------------------ | ------ | - | -------------------- | ----- | -
|                                 |  | Number ofShares |   |  | Range of Per ShareOption Price |              |   | Weighted-AveragePer SharePrice |        |   | AggregateOptionPrice |      
|Outstanding at December 31, 2003 |  | 107,552         |   |  | $                              | 10.00-10.75  |   |                                | 10.13  |   |                      | 1,090 |  
|Granted                          |  | 2,500           |   |  |                                | 10.50        |   |                                | 10.50  |   |                      | 26    |  
|Forfeited                        |  | (1,050          | ) |  |                                | (10.50       | ) |                                | (10.50 | ) |                      | (11   | )
|                                 |  |                 |   |  |                                |              |   |                                |        |   |                      |       |  
|Outstanding at December 31, 2004 |  | 109,002         |   |  |                                | 10.00-10.75  |   |                                | 10.14  |   |                      | 1,105 |  
|Exercised                        |  | (31,468         | ) |  |                                | (10.00-10.50 | ) |                                | (10.00 | ) |                      | (316  | )
|Granted                          |  | 13,664          |   |  |                                | 17.00        |   |                                | 17.00  |   |                      | 232   |  
|                                 |  |                 |   |  |                                |              |   |                                |        |   |                      |       |  
|Outstanding at December 31, 2005 |  | 91,198          |   |  | $                              | 10.00-17.50  |   |                                | 11.19  |   |                      | 1,021 |  
|                                 |  |                 |   |  |                                |              |   |                                |        |   |                      |       |  

(continued)



41



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(11) Stock Options, Continued

In 2005, the Company established a new option plan for directors, officers and employees of the Company. The Plan provides for 144,000
shares of common stock to be available for grant. The exercise price of the stock options is the fair market value of the common stock on the date of grant. The Plan allows for various vesting periods. All options granted in 2005 were vested
immediately except for 7,054 options which vest 33.3% in the second and third year, respectively, after grant and are fully exercisable during the fourth year after grant. The options expire ten years from the date of grant. At December 31,
2005, 63,053 shares remain available for grant. A summary of stock option information follows ($ in thousands, except share amounts):



|                                 |  |                 |  |                               |       |                                |       |                      |      
|-------------------------------- |  | --------------- |  | ----------------------------- | ----- | ------------------------------ | ----- | -------------------- | -----
|                                 |  | Number ofShares |  | Range ofPer ShareOption Price |       | Weighted-AveragePer SharePrice |       | AggregateOptionPrice
|Outstanding at December 31, 2004 |  |                |  | $                             |      |                                |      |                      |     
|Granted                          |  | 80,947          |  |                               | 17.00 |                                | 17.00 |                      | 1,376
|                                 |  |                 |  |                               |       |                                |       |                      |      
|Outstanding at December 31, 2005 |  | 80,947          |  | $                             | 17.00 |                                | 17.00 |                      | 1,376
|                                 |  |                 |  |                               |       |                                |       |                      |      

The weighted-average remaining contractual life of the outstanding stock options at
December 31, 2005 and 2004 was 7.6 years and 5.4 years, respectively.

In 2005, the Company accelerated the vesting of all unvested
options that existed as of December 31, 2004. All of these options are now currently exercisable, and were accelerated primarily to reduce noncash compensation expense that would have been recorded in its consolidated statements of earnings in
future years due to the adoption of SFAS No. 123(R) in January 2006.

Also in January 2004, 20,000 stock options were granted to a
third party as compensation for services provided to the Company. The options were issued at $11.00 per share and are fully vested. As of December 31, 2005, none of these options had been exercised.

(12) Stock Warrants

During 1999, the Company granted
stock warrants to certain shareholders to purchase 24,000 shares of the Companys common stock at $10 per share. Warrant holders exercised 8,000 and 16,000 warrants in 2004 and 2003, respectively.

(continued)



42



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(13) Profit Sharing Plan

The Company sponsors a section 401(k) profit sharing plan (The Plan) which is available to all employees electing to
participate. During 2005, the Company approved a 1.5% match to the Plan in an approximate amount of $20,000. A 1% match in the approximate amount of $8,000 was made in 2004.

(14) Restrictions on Dividends

The Companys ability to pay cash dividends on its common stock
is limited to the amount of dividends it could receive from the Bank plus its own cash and cash equivalents, which amounted to $10.3 million at December 31, 2005. The amount of dividends the Bank is permitted to pay to the Company is restricted
to 100% of its calendar year-to-date net earnings plus retained earnings for the preceding two years. In addition, no bank may pay a dividend at any time that net earnings in the current year when combined with retained earnings from the preceding
two years produce a loss. Under Florida law, a Florida chartered commercial bank may not pay cash dividends that would cause the Banks capital to fall below the minimum amount required by Federal or Florida law.

(15) Regulatory Matters

The Bank is subject to
various regulatory capital requirements administered by the regulatory banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Banks and the Companys consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgements by
the regulators about components, risk weightings, and other factors.

(continued)



43



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(15) Regulatory Matters, Continued

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and percentages
(set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2005,
the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2005, the most recent notification from
the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and
Tier 1 leverage percentages as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Banks category. The Banks actual capital amounts and percentages are
also presented in the table ($ in thousands).



|                                        |  |        |        |   |                              |   |        |                                                                       |       |  |      |        |  |   |       |  |       |  
|--------------------------------------- |  | ------ | ------ | - | ---------------------------- | - | ------ | --------------------------------------------------------------------- | ----- |  | ---- | ------ |  | - | ----- |  | ----- | -
|                                        |  | Actual |        |   | For Capital AdequacyPurposes |   |        | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |      
|                                        |  | Amount |        | % |                              |   | Amount |                                                                       | %     |  |      | Amount |  | % |      
|As of December 31, 2005:                |  |        |        |   |                              |   |        |                                                                       |       |  |      |        |  |   |       |  |       |  
|Total capital to Risk- Weighted assets  |  | $      | 11,078 |   | 12.55                        | % |        | $                                                                     | 7,059 |  | 8.00 | %      |  | $ | 8,824 |  | 10.00 | %
|Tier I Capital to Risk- Weighted Assets |  |        | 9,972  |   | 11.30                        |   |        |                                                                       | 3,530 |  | 4.00 |        |  |   | 5,294 |  | 6.00  |  
|Tier I Capital to Total Assets          |  |        | 9,972  |   | 7.75                         |   |        |                                                                       | 5,148 |  | 4.00 |        |  |   | 6,435 |  | 5.00  |  
|                                        |  |        |        |   |                              |  
|As of December 31, 2004:                |  |        |        |   |                              |   |        |                                                                       |       |  |      |        |  |   |       |  |       |  
|Total capital to Risk- Weighted assets  |  |        | 7,950  |   | 12.90                        |   |        |                                                                       | 4,930 |  | 8.00 |        |  |   | 6,131 |  | 10.00 |  
|Tier I Capital to Risk- Weighted Assets |  |        | 7,176  |   | 11.64                        |   |        |                                                                       | 2,465 |  | 4.00 |        |  |   | 3,698 |  | 6.00  |  
|Tier I Capital to Total Assets          |  |        | 7,176  |   | 7.65                         |   |        |                                                                       | 3,754 |  | 4.00 |        |  |   | 4,692 |  | 5.00  |  

(continued)



44



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(16) Holding Company Financial
Information

The Holding Companys unconsolidated financial information is as follows (in thousands):

Condensed Balance Sheets



|                                           |  |                        |        |   |      |       |  
|------------------------------------------ |  | ---------------------- | ------ | - | ---- | ----- | -
|                                           |  | At December 31,        |       
|                                           |  | 2005                   |        |   | 2004 |      
|Assets                                     |  |                        |        |   |      |       |  
|                                           |  |                       
|Cash and cash equivalents                  |  | $                      | 10,289 |   |      | 243   |  
|Investment in subsidiary                   |  |                        | 9,897  |   |      | 7,163 |  
|Other assets                               |  |                        | 155    |   |      | 73    |  
|                                           |  |                        |        |   |      |       |  
|Total assets                               |  | $                      | 20,341 |   |      | 7,479 |  
|                                           |  |                        |        |   |      |       |  
|Liabilities and Stockholders Equity       |  |                        |        |   |      |       |  
|                                           |  |                       
|Other liabilities                          |  |                        |       |   |      | 59    |  
|Stockholders equity                       |  |                        | 20,341 |   |      | 7,420 |  
|                                           |  |                        |        |   |      |       |  
|Total liabilities and stockholders equity |  | $                      | 20,341 |   |      | 7,479 |  
|                                           |  |                        |        |   |      |       |  
|                                          
|Condensed Statements of Earnings           | 
|                                           | 
|                                           |  | Year EndedDecember 31, |       
|                                           |  | 2005                   |        |   | 2004 |      
|Revenues                                   |  | $                      | 2      |   |      |      |  
|Expenses                                   |  |                        | (34    | ) |      | (21   | )
|                                           |  |                        |        |   |      |       |  
|Loss before earnings of subsidiary         |  |                        | (32    | ) |      | (21   | )
|Earnings of subsidiary                     |  |                        | 797    |   |      | 144   |  
|                                           |  |                        |        |   |      |       |  
|Net earnings                               |  | $                      | 765    |   |      | 123   |  
|                                           |  |                        |        |   |      |       |  

(continued)



45



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FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(16) Holding Company Financial
Information, Continued

Condensed Statements of Cash Flows



|                                                                                                                                 |  |                        |        |   |      |        |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | ------ | -
|                                                                                                                                 |  | Year EndedDecember 31, |       
|                                                                                                                                 |  | 2005                   |        |   | 2004 |       
|Cash flows from operating activities:                                                                                            |  |                        |        |   |      |        |  
|Net earnings                                                                                                                     |  | $                      | 765    |   |      | 123    |  
|Adjustments to reconcile net earnings to net cash used in operating activities:                                                  |  |                        |        |   |      |        |  
|Stock based compensation                                                                                                         |  |                        |       |   |      | 12     |  
|Undistributed earnings of subsidiary                                                                                             |  |                        | (797   | ) |      | (144   | )
|Increase in other assets                                                                                                         |  |                        | (18    | ) |      | (21    | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Net cash used in operating activities                                                                                            |  |                        | (50    | ) |      | (30    | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Cash flows from investing activity-                                                                                              |  |                        |        |   |      |        |  
|Investment in subsidiary                                                                                                         |  |                        | (2,000 | ) |      | (1,500 | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Cash flows from financing activities:                                                                                            |  |                        |        |   |      |        |  
|Net proceeds from the issuance of common stock                                                                                   |  |                        | 12,155 |   |      | 80     |  
|Repurchase of common stock                                                                                                       |  |                        |       |   |      | (88    | )
|Dividends paid                                                                                                                   |  |                        | (59    | ) |      | (41    | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Net cash provided by (used in) financing activities                                                                              |  |                        | 12,096 |   |      | (49    | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Net increase (decrease) in cash and cash equivalents                                                                             |  |                        | 10,046 |   |      | (1,579 | )
|                                                                                                                                 |  |                       
|Cash and cash equivalents at beginning of the year                                                                               |  |                        | 243    |   |      | 1,822  |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Cash and cash equivalents at end of year                                                                                         |  | $                      | 10,289 |   |      | 243    |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Noncash transactions:                                                                                                            |  |                        |        |   |      |        |  
|Tax benefit from exercise of stock options and warrants                                                                          |  | $                      | 64     |   |      | 5      |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Dividends payable included in other liabilities                                                                                  |  | $                      |       |   |      | 59     |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Accumulated other comprehensive income of subsidiary, net change in unrealized loss on securities available for sale, net of
tax |  | $                      | (63    | ) |      | (25    | )
|                                                                                                                                 |  |                        |        |   |      |        |  



46



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LOGO

Report of Independent Registered Public Accounting Firm

FPB Bancorp, Inc.

Port St. Lucie, Florida:

We have audited the accompanying consolidated balance sheets of FPB Bancorp, Inc. and Subsidiary (the
Company) as of December 31, 2005 and 2004, and the related consolidated statements of earnings, stockholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2005 and 2004, and the results of its
operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

LOGO

HACKER, JOHNSON & SMITH PA

Fort Lauderdale, Florida

March 2, 2006

500 North Westshore Boulevard, Post Office Box 20368, Tampa, Florida 33622-0368,
(813) 286-2424

A Registered Public Accounting Firm



47



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BOARD OF DIRECTORS

John R. Baker, Sr., age 56, is the Banks and FPBs Vice Chairman of the Board. He graduated from the University of Georgia with a Bachelor of Business Administration degree in Real Estate. He
moved to Stuart, Florida in 1981 and assumed the position of Vice President, General Manager of Bessemer Properties, Incorporated. Prior to moving to Stuart, Mr. Baker served as Director of Residential Sales for Bessemer in Atlanta, Georgia,
where he began his real estate career in 1975. Mr. Baker is a former director of Barnett Bank of Martin County and is past President of Treasure Coast Builders Association and Florida Home Builders Association. He also served as Chairman of
Housing and Finance Authority in Martin County and the Martin County Affordable Housing Task Force. Mr. Baker lives in Vero Beach and is in his 17thyear as a youth soccer coach. He is employed with the Laurel Corporation in Vero Beach and is involved in all aspects of real estate.

Gary A. Berger, age 56, is a director and Chairman of the Board for both FPB and the Bank. Mr. Berger is President of the accounting firm of Berger, Toombs, Elam, Gaines, and Frank, CPA. He is a
graduate of Michigan State University and has been a certified public accountant since 1975. Mr. Berger is a member of the Rotary Club of Ft. Pierce, the Florida Institute of Certified Public Accountants and the American Institute of Certified
Public Accountants. He is a past Treasurer of the United Way, past President of the St. Lucie County Economic Development Council and past President of the Rotary Club of Ft. Pierce, Florida.

Donald J. Cuozzo, age 52, is a director of FPB and the Bank. He received a Bachelor of Science degree in Environmental Technology from the Florida
Institute of Technology in 1979. He began his work career in the public sector with the Martin County Growth Management Department before leaving to work with regional and national developers. In that role, he was instrumental in obtaining approval
of the Martin Downs DRI amendment and in coordinating the acquisition and development of a number of large residential communities in Palm Beach and Martin Counties. Mr. Cuozzo also served as a principal with a large Palm Beach County based
engineering firm where he gained extensive experience in the area of project management and coordination. In 1993, he co-founded Houston Cuozzo Group to provide planning, design and government-oriented strategic planning service for private and
public sector clients in South Florida. Mr. Cuozzo has more than 30 years of experience planning and implementing numerous land developments throughout the region and has worked in nearly all facets of community and project development.
Mr. Cuozzo is a founding member of the Martin County Business Development Board, a graduate of the first class of Martin County Leadership 91/92, a recipient of the 1991 Industry Appreciation Award for Outstanding Contribution to the Community,
and a 2006 recipient of the Industry Appreciation Award for Martin County. He is a past Second Vice President of the Treasure Coast Builders Association. Mr. Cuozzo was appointed to the Treasure Coast Regional Planning Council by Governor Jeb
Bush and served for four years in that position.

Ann L. Decker, age 53, is a director and Secretary of FPB and the Bank. Ms. Decker
presently serves as District Manager for U.S. Congressman Mark Foley. Ms. Decker was formerly a co-owner of Intracoastal Printing, Inc., which was sold in 1990. Born in Chicago, Illinois, Ms. Decker has a Bachelor of Science degree in
Professional Business Management from Barry University in Miami, Florida. Ms. Decker currently serves on the FAU (Florida Atlantic University) Advisory Board.

Paul J. Miret, age 58, is a director of FPB and the Bank. Mr. Miret is presently a realtor with RE/MAX 100 Riverside. Prior to that, he was the owner and operator of Sunshine Carpet Cleaning from 1978 to 1998 and of
Ameri-Kleen Services from 1992 to 1998. He also owns and manages several residential rental units. From 1995 to 1997, Mr. Miret served on the Community Board of Riverside National Bank. Mr. Miret is also a past President of the Port St.
Lucie Little League and the Port St. Lucie Exchange Club and a past director of the Port St. Lucie Chamber of Commerce.

Robert L. Schweiger,
age 58, is a director of FPB and the Bank. He has been a resident of the Treasure Coast since 1974 and currently resides in Palm City. From 1994 to 1997, Mr. Schweiger served as an Advisory Board memberfirst with Port St. Lucie National
Bank and then with First National Bank. He serves as a board member and officer of the Exchange CASTLE and previously served as founder/President of the Treasure Coast Childrens Home Society and Treasurer of the St. Lucie Boys & Girls
Clubs. He studied for his BA degree at Colorado State University and American University of Beirut and for his MBA degree at Florida Atlantic University. Currently, Mr. Schweiger is a private financial investor and thoroughbred race horse owner
and breeder.



48



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Robert L. Seeley, age 81, is a director of FPB and the Bank. Mr. Seeley has been in private law
practice in Florida for more than 40 years. Mr. Seeley was co-founder of the Stuart law firm of Fox, Wackeen, Dungey, Beard, Sobel and McCluskey, LLP, for which he currently serves Of Counsel. From 1973 to 1996, Mr. Seeley
served as a director of Barnett Bank of the Treasure Coast. He also served as the founding director and Chairman of the Saint Lucie Medical Center and a former director of the St. Lucie and Martin County Economic Development Councils.
Mr. Seeley completed his undergraduate studies at the University of Illinois and received his Juris Doctorate degree from the University of Florida.

David W. Skiles, age 58, is (CEO) Chief Executive Officer, President, and a director of FPB and the Bank. Prior to joining First Peoples Bank, he was Vice President and Regional Manager with 1st United/Wachovia Bank in Stuart
and was Vice President and Senior Lender of Port St. Lucie National Bank. Mr. Skiles has a Bachelor of Science degree from Barry University, and an Associate Degree from Sinclair Community College in Dayton, Ohio. He currently serves on the FAU
(Florida Atlantic University) Advisory Board, is Vice President of the (SLC) St Lucie County (EDC) Economic Development Council and is Chairman of (BAP) Business Alliance for Prosperity in SLC. He is Past-President of the SLC Chamber of Commerce and
is a member of the Stuart/Martin County Chamber of Commerce. Mr. Skiles has served on the (FBA) Florida Bankers Association GRC Committee (Government Relations Committee) for three years & is active with the SLC Chambers Local
Affairs Committee & Treasure Coast Legislative Delegation. He previously served as Chairman of the SLC Chambers Port St. Lucie Area Council and is still a member of that committee and the Chambers Executive Committee. He is also
a Vice President and board member of the SLC Education Foundation. He was Past-President and District Governor of Sertoma Club of Martin County and has also served on numerous campaigns for the United Way of St. Lucie and Martin Counties, most
notably as a previous campaign chairman in Martin County and as Chairman of the Professional Division in St. Lucie County for the 2000 Campaign. Mr. Skiles served on the SLC Airport Steering Committee and is currently a member of the Budget and
Finance Boards for St. Martin de Porres Catholic Church in Jensen Beach, Florida.

Paul A. Zinter, age 51, is a director of FPB and the Bank.
He has been a resident of Port St. Lucie for 37 years, and was a member of the second graduating class from Fort Pierce Central High School. Mr. Zinter received a Bachelor of Arts degree in business administration from Eastern New Mexico
University in 1975, where he majored in real estate and marketing and was managing partner of a family-owned real estate company. Mr. Zinter was past president and honorary member of the Rotary Club of Port St. Lucie and has been a local
realtor/managing partner and business owner for the past 29 years.



49



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FPB BANCORP, INC.

NON-DIRECTOR

EXECUTIVE OFFICERS

Nancy E. Aumack, age 57, is FPBs and the Banks Senior Vice President and Chief Financial Officer. Prior to joining the Bank in 2001, she was Senior Vice President and Chief Financial Officer
of Independent Community Bank, Tequesta, Florida. In the period from 1997 to 1999, she served as Chief Financial Officer and Administrative Support Director for the engineering firm LBFH, Palm City, Florida. From 1995 to 1997, she served as Vice
President and Chief Financial Officer for Treasure Coast Bank, Stuart, Florida, and from 1983 to 1995, she served as Vice President and Financial Accounting Officer for American Bank of Martin County in Stuart, Florida. Ms. Aumack received her
A.S. degree in Banking and Financial Services from Indian River Community College in 1989. She is presently a member of the Port St. Lucie Women on Wall Street, a member of the Port St. Lucie Business Women, and a director and Vice Chairman of the
ARC of Martin County, Florida, as well as a community board member for the Treasure Coast Division of the American Heart Association.

P. Lee
Brown, age 46, is FPBs and the Banks Senior Vice President and Fort Pierce Area Executive. Prior to joining the Bank in 2003, he was Vice President and Commercial Lender for Riverside National Bank from 1988 to 2003. He is a 2005
graduate of the Graduate School of Banking at Louisiana State University and is a graduate of the National Commercial Lending School in Norman, Oklahoma. He received his A.A. degree from Indian River Community College in 1979 and B.S. degree in
Business Management from the University of Florida in 1981. He is a Certified General Contractor, licensed with the State of Florida, member of the Treasure Coast Builders, board member for the St. Lucie County Fair and an active member of the Fort
Pierce Rotary Club.

Thomas W. Eby, age 56, is FPBs and the Banks Senior Vice President of Residential Lending. Prior to joining
the Bank in 2005, he was the Wholesale Lending Manager for Indian River National Bank, Vero Beach, Florida. From 2002 to 2004 he was the Residential Lending Manager for Public Bank, Vero Beach, Florida. He also served as Vice President and Regional
Sales Manager for Community Savings, West Palm Beach, Florida from 1999 to 2002. Mr. Eby has 32 years of Residential Lending experience. He received his undergraduate degree in Finance from the University of Miami, Miami, Florida. He also
graduated from the Graduate School for Executive Development from the University of Georgia. He is an active member with our local Realtor Boards and the Treasure Coast Builders Association since 1982.

Melissa M. Favorite, age 36, is FPBs and the Banks Senior Vice President of Deposit Operations. She also serves as the Bank Secrecy Act
Officer. Prior to joining the bank in 1999, Ms. Favorite was Assistant Vice President and Branch Manager for First National Bank & Trust Company of the Treasure Coast from 1997 to 1999. Prior to that she also served as Assistant Vice
President  Lender for Port St. Lucie National Bank from 1988 to 1997. Ms. Favorite holds diplomas from the American Institute of Banking in General Banking, Consumer Lending and Commercial Lending. Ms. Favorite is a graduate of the
Florida Bankers Associations Florida School of Banking. She is an active member of the March of Dimes Walk America committee, which she has chaired for four years. She presently serves on the board of the Treasure Coast Division of the March
of Dimes.

Stephen J. Krumfolz, age 54, is FPBs and the Banks Senior Vice President and Port St. Lucie Area Executive. Prior to
joining the Bank in 1999, he was Vice President and SBA Lending Manager for Riverside National Bank from January 1998 through June 1999. He served as Vice President and Commercial Lending Officer for Port St. Lucie National Bank from 1994 through
1997, and completed all phases of Barnett Banks Management Training Program during his employment from 1989 through 1994. Mr. Krumfolz received an Associate Degree in Banking through the American Institute of Banking and Indian River
Community College in 1991, as well as a Core Credit School Certificate from Barnett Bank in 1992. He is an active member of the Port St. Lucie Breakfast Rotary Club and Treasure Coast Business on The Green.

Marge Riley, age 57, is FPBs and the Banks Executive Vice President and Chief Operating Officer. She also serves as the Banks Security
Officer, Compliance Officer and Information Systems Technology Officer. Prior to joining the Bank in 1998, Ms. Riley was the Assistant Vice President and Branch Manager for First National Bank & Trust Company of the Treasure Coast from
1997 to 1998. She also served as Assistant Vice President  Loan Administrator for Port St. Lucie National Bank from 1990 to 1997. Ms. Riley has A.S. Degrees in Accounting and Banking and Financial Services from Fox Valley Technical
College in Appleton, Wisconsin. She is presently President of the Port St. Lucie Business Women, a member of the Port St. Lucie Women on Wall Street, a Board Member and Allocations Chair for United Way of St. Lucie County, a graduate of the St.
Lucie County Chamber of Commerce Leadership program class of 2004, and serves as a Board member of its Leadership Alumni Council.



50



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Randy J. Riley, age 55, is FPBs and the Banks Senior Vice President and Area Executive for
Indian River County. Prior to joining FPB he was Senior Vice President and Area Executive for Indian River National Bank 2004-2005, Area President for Public Bank 2001-2004 and President and CEO of Citrus Financial Services, Inc. and Citrus Bank, NA
1989-2001. Riley has been in the banking business since 1970 and has worked for banks in Illinois, Wisconsin and Florida. Riley attended Elmhurst College, Elmhurst, IL, the Graduate School of Banking at the University of Wisconsin, and the School of
Bank Marketing at the University of Colorado. Riley has also served as an instructor for the American Institute of Banking. He is currently a member of the Indian River County Chamber of Commerce Board of Directors, Treasurer of Vero Beach Treasure
Coast Kiwanis and Treasurer of Elks Lodge 1774 in Vero Beach. He has been an active participant in both Indian River Economic Development Division and the Treasure Coast Legislative Delegation. He previously served as Chairman of the Junior
Achievement Board of Directors, United Way Finance Division, SunUp Board, Mental Health Organization Board and Academy of Entrepreneurship Board.

William V. West, age 39, is FPBs and the Banks Senior Vice President and Martin County Area Executive. Prior to joining the Bank in 2004, he was Vice President of Commercial Lending for Southern Community Bank of
Southwest Florida, Naples, Florida. From 1999 to 2001, he served as Assistant Vice President and Commercial Lender for SouthTrust Bank in Naples, Florida. In 2001, he completed his Master of Business Administration in Finance, Summa Cum Laude, with
International College. He also completed a Bachelor of Arts in Organizational Management with Warner Southern College in 1996, an Associate in Arts with an emphasis in Financial Institution Management with Brevard Community College in 1993, a
Supervisory Skills Certificate from the American Institute of Banking in 2000 and will graduate from the Graduate School of Banking at Colorado in 2006. Mr. West is President of the Jensen Beach Chamber of Commerce, President of the Christian
Business Fellowship, Treasurer of Entrepreneurship Foundation and Treasurer of the Treasure Coast Angel Investment Forum. In 2005, the Florida Economic Development Council awarded Bill the McLaughlin Award for his contributions to economic
development in Florida.



51



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FIRST PEOPLES BANK

OFFICERS

David W. Skiles, President and Chief Executive Officer

Marge Riley, Executive Vice President and Chief Operating Officer

Nancy E. Aumack, Senior Vice President and Chief Financial Officer

Stephen J. Krumfolz, Senior Vice
President and Area Executive  Port St. Lucie

Philip Lee Brown, Senior Vice President and Area Executive  Fort Pierce

Melissa M. Favorite, Senior Vice President, Deposit Operations

William V. West, Senior Vice President and Area Executive  Stuart

Randy J.
Riley, Senior Vice President and Area Executive  Vero Beach

Thomas W. Eby, Senior Vice President, Residential Lending

David P. Hoffman, Vice President, Senior Consumer Lender

Sandra Cotter, Vice President, Loan Operations

Irene P. Teresi, Vice President and Controller

Brenda K. Parmelee, Assistant Vice President, Branch Manager (Fort Pierce)

Jillian A. Lopez, Assistant Vice President, Branch Manager (Stuart)

Christina M.
Saltos, Assistant Vice President, Branch Manager (Port St. Lucie)

Ryan T. Kamphuis, Assistant Vice President, Branch Manager (Vero Beach)

Peter G. Ferlatte, Network Administration Officer



52



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COMMUNITY LIAISON BOARD

Fort Pierce

Barbara Allen, Medical Office and Property Management

Stefan Matthes, Sr. Vice President and Professional Engineer, Culpepper & Terpening, Inc.

Michele Miller, Owner of Miller Insurance

John Schwerer, DMD

David Wright, Owner of Butterfield Drugs and Butterfield Oxygen and Medical Equipment

Port St. Lucie

Meredith
Breault, Owner of Management Recruiters

Shirley Cherveny, Owner of Palm Realty

Gardner Foote, Retired

Jack Wilson, Owner of Florida Tire Recycling

Greg Wyatt, Owner of Port St. Lucie Broadcasters

Stuart

Linda Braswell, Owner of Braswell Bail Bonds and Braswell Surety Services

Mark Brechbill, Owner of Mark Brechbill CPA

Lee Carroll, Vice President of Deakins Carroll Insurance

Vicki Davis, Supervisor of Elections for Martin County, FL

Phil Faherty, Owner of Stuart Business Systems

Craig Melby, Owner of the Melby Group

Howard Shields, Organizing Board Chairman/Director of Emeritus

David Walker, Attorney with David Walker Attorney at Law



53



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GENERAL INFORMATION



|                             |  |                                                                                                                                                                                                                                                                                        
|---------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Annual Meeting               |  | The Annual Meeting of the Stockholders will be held at Holiday Inn, 10120 South Federal Highway, Port St. Lucie, Florida 34952 at 5:30 P.M., April 26, 2006. A social hour will begin at 4:30
p.m.                                                                                     
|                             | 
|Transfer Agent and Registrar |  | Registrar and Transfer Co. 10 Commerce Drive
Cranford, NJ 07016 (800) 368-5948                                                                                                                                                                                                         
|                             | 
|Corporate Counsel            |  | Igler & Dougherty, P.A. 2457 Care Drive
Tallahassee, Florida 32308                                                                                                                                                                                                                     
|                             | 
|Independent Auditors         |  | Hacker, Johnson & Smith PA Certified Public
Accountants 500 West Cypress Creek Road, Suite 450 Fort
Lauderdale, Florida 33309                                                                                                                                                          
|                             | 
|Form 10-KSB                  |  | A copy of the Form 10-KSB as filed with the Securities and Exchange Commission may be obtained by stockholders without charge upon written request to Nancy E. Aumack, Senior Vice President and
Chief Financial Officer, 1301 Port St. Lucie Boulevard, Port St. Lucie, Florida 34952.

COMMON STOCK PRICES AND DIVIDENDS

The common stock of FPB Bancorp, Inc. is listed with the NASDAQ, under the symbol FPBI. As of December 31, 2005 the Company had not declared a dividend.
Future dividends, if any, will be determined by the Board of Directors. As of December 31, 2005, FPB Bancorp, Inc. had approximately 1,172 holders of record of common stock.



54