**EXHIBIT 99.2**

**2002 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. 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 County, Florida. We currently have one retail banking office located at 1301 SE Port St. Lucie Boulevard in Port St. Lucie, Florida and are in the process of building a branch office expected to open in late 2003 in Fort Pierce, Florida. In 2001, our stockholders approved a plan of corporate reorganization under which First Peoples Bank became a wholly-owned subsidiary of FPB Bancorp, Inc.  On December 3, 2001, the reorganization became effective and a majority of our stockholders exchanged their common shares for shares of FPB Bancorp, Inc. At December 31, 2002, we had total consolidated assets of $58.8 million and total consolidated stockholders' equity of $7.3 million. For the year ended December 31, 2002, we had net earnings of $74,000.****

**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. 

| **CONTENTS**                                                     | **Page** |
|------------------------------------------------------------------|----------|
|                                                             |     |
| Financial Highlights                                             | 1        |
|                                                             |     |
| Letter to Shareholders                                           | 2-3      |
|                                                             |     |
| Selected Financial Data                                          | 4        |
|                                                             |     |
| Management's Discussion and Analysis of Financial      Condition |     |
|    and Results of Operations                      | 5-15     |
|                                                             |     |
| Financial Statements                                             | 16-35    |
|                                                             |     |
| Independent Auditors' Report                                     | 36       |
|                                                             |     |
| Board of Directors                                               | 37-38    |
|                                                             |     |
| Non-Director Executive Officers                                  | 39       |
|                                                             |     |
| Community Liaison Board                                          | 40       |
|                                                             |     |
| General Information                                              | 41       |
|                                                             |     |
| Common Stock Prices and Dividends                                | 41       |

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**FINANCIAL  HIGHLIGHTS**

**December 31, 2002 and 2001 or the Years Then  Ended  (Dollars in thousands, except per share figures)**

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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. |

 

1

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**LETTER TO  SHAREHOLDERS**

March 15, 2003 

Dear Shareholders: 

We are very pleased to present to you the Annual Report for FPB Bancorp, Inc. for the year ended December 31, 2002. Despite unprecedented decreases in interest rates and declining sales and earnings of a large number of businesses in our area and nationwide, your bank has managed to grow and prosper. First Peoples Bank was profitable for the entire twelve months in 2002 and closed the year with net income of $106,000. On a consolidated basis, our 2002 net income was $74,000. 

We ended the year with assets of approximately $59 million or a 41% growth in total assets. We also closed the year with over $41 million in total loans, an increase of 30% and deposits increased by 52% and totaled $50 million. We now service over 4,200 deposit and loan customers.

We conducted a secondary offering of our stock beginning in May, 2002. The new offering afforded our established shareholders and depositors the opportunity to purchase additional stock in the bank for below the then established $10.75 market price for the first 60 days. The offering then extended until December 31, 2002 at $11.00 per share. I am pleased to report to you that we raised over $3.1 million in additional new capital. 

The new funds from the offering enabled us to exercise our lease purchase option on our present Port St. Lucie location and also to proceed with our established plans for expansion into the Fort Pierce marketplace. That plan calls for the construction of our first branch office. A lengthy review process was started to secure bids from several area contractors. We had purchased the corner lot at Virginia Ave. and 25th Street in Fort Pierce last year and much planning and detail concerning the location was put into motion. A number of meetings were held with six prospective contractors. We chose Paul Jacquin & Sons as the builder. The groundbreaking took place on January 15, 2003 and we anticipate a total of seven to nine months for the construction process. Building construction should start in early April and we hope to open the branch office prior to year end 2003.

The building design will be similar to our Port St. Lucie office Key West design and will be a two story, 9,600 square foot facility. First Peoples Bank will occupy the ground floor with an estimated 3,500 square feet and the 6,000 plus square feet upstairs will be leased. We have already started getting calls for the new location regarding leasing information from interested parties. Our Board of Directors is now discussing future expansion plans for other branch sites.

We expanded our courier program in 2002 to four persons and we now service over 800 accounts monthly. This program enables us to service commercial deposit and loan customers who are not in close proximity to the bank. This is a great convenience to our small business owners.

We continue to be a leader among area lenders in the Small Business Administration (SBA) loan program. Because of our success in this area, we were granted Preferred Lender Status by SBA. As many of you know, SBA loans provide loan assistance to new and start up companies that may lack the capital to qualify for initial funding. The SBA program allows banks the option of providing financial assistance to these customers and offers varying degrees of loan guarantees depending on which program is chosen. The guarantee of the loan comes directly from the US Government. We generated approximately $4 million in new SBA loans in 2002. 

Our staff remains very involved in the community and is very active in numerous charitable functions and civic groups. The bank also co-sponsored a local golf tournament for the United American Senior Tour in April, 2002. That event helped raise funds for the local YMCA Summer Youth Program and The United Way of St. Lucie County. Our staff is also very committed to The Exchange Club Castle Chili Cook-off, March of Dimes Walkathon and many other worthwhile area functions.

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As we stated in earlier correspondence, we formed our holding company, FPB Bancorp, Inc. in 2001. As a result of that action and in conjunction with our new stock offering in May 2002, we asked that our shareholders exchange their initial shares in First Peoples Bank for the new holding company stock. To date a number of you have still not responded to that request and we would ask that you check to make sure that you are now holding your shares in FPB Bancorp. If your current shares are still in the name of First Peoples Bank, please contact us at your earliest convenience and we will assist you in making the exchange.

We are very excited about the future of your bank in Port St. Lucie and in our prospective new market, Fort Pierce. We have approximately 40% of our shareholder base who either live or work in the Fort Pierce area. We are very optimistic about the prospect of a number of those people doing business at our new north location. Remember to call on us for any of your financial needs as we rely on the continued support from all of our shareholders to help build and grow this franchise. If you haven’t stopped by for a visit, please do so in the near future.

We continue to receive high marks in our examinations from our State of Florida and FDIC Regulators regarding the bank’s safety and soundness. Loan delinquencies continue to be very manageable and are at acceptable levels in relation to recent peer comparisons.

We look forward to 2003 as a banner year for this bank and we are very grateful for your continued support and faith in the bank. On behalf of the entire bank, our staff and directors, we again thank you for your commitment to community banking.

Sincerely, 

  

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            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| David W. Skiles        President & CEO
Gary A. Berger        Chairman of the Board 
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**SELECTED  FINANCIAL DATA**

**December 31, 2002, 2001, 2000 and 1999 and  the Years Ended December 31, 2002, 2001 and 2000   and the Period Ended December 31, 1999**(1)**(Dollars in thousands, except per share figures)**
  **2002****2001****2000****1999** **At Year End:**         Cash and cash equivalents$7,825 2,448 4,380 1,758 Securities 6,697 5,479 6,987 7,415 Loans, net 41,662 32,215 17,965 6,530 All other assets 2,583 1,564 1,200 973                              Total assets$58,767 41,706 30,532 16,676                 Deposit accounts 50,265 33,933 25,814 11,797 All other liabilities 1,189 3,683 574 555 Stockholders' equity 7,313 4,090 4,144 4,324                    Total liabilities and stockholders' equity$58,767 41,706 30,532 16,676                 **For the Period:**                   Total interest income$3,203 2,519 1,755 472 Total interest expense 1,135 1,046 815 172                 Net interest income 2,068 1,473 940 300           Provision for loan losses 381 202 162 60                 Net interest income after provision for loan losses 1,687 1,271 778 240                 Noninterest income 264 214 141 30 Noninterest expenses 1,825 1,557 1,282 780                 Earnings (loss) before income taxes (benefit) 126 (72)(363)(510)Income taxes (benefit) 52 (23)(136)(173)                Net earnings (loss)$74 (49)(227)(337)                Net earnings (loss) per basic and diluted share$.11 (.10)(.46)(.69)                Weighted-average number of shares outstanding for basic and      diluted 660,352 489,410 489,410 489,410                 **Ratios and Other Data:**         Return on average assets .14%(.14%)(.93%)(3.94%)Return on average equity 1.29%(1.17%)(5.40%)(10.50%)Average equity as a percentage of average assets 11.11%12.36%17.19%37.50%Interest-rate spread during the period 3.42%3.27%2.40%2.96%Net yield on average interest-earning assets 4.21%4.59%4.13%3.95%Noninterest expenses to average assets 3.53%4.60%5.24%9.12%Ratio of average interest-earning assets to average            interest-bearing liabilities 1.34 1.40 1.48 1.43 Nonperforming loans and foreclosed real estate as a percentage      of            total assets at end of year NIL NIL NIL NIL Allowance for loan losses as a percentage            of total loans at end of year 1.31%1.10%1.11%.91%Total number of banking offices 1 1 1 1 Total shares outstanding at end of year 817,775 489,410 489,410 489,410 Book value per share at end of year 8.94 8.36 8.47 8.83   (1)  Period from April 26, 1999 (commencement      of banking operations) to December 31, 1999. 
  

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      **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**December 31, 2002 and 2001 and for the Years Ended December 31, 2002 and 2001**

**General**

FPB Bancorp, Inc. is a one-bank holding company  incorporated in the State of Florida. FPB Bancorp, Inc. owns 100% of First Peoples  Bank. First Peoples Bank is a Florida state-chartered commercial bank. Our 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 County, Florida. We currently have one retail banking  office located at 1301 SE Port St. Lucie Boulevard in Port St. Lucie, Florida  and plan to open a branch office in late 2003 in Fort Pierce, Florida. In 2001,  our stockholders approved a plan of corporate reorganization under which First  Peoples Bank became a wholly-owned subsidiary of FPB Bancorp, Inc. On December  3, 2001, the reorganization became effective and a majority of the our stockholders  exchanged their common shares for shares of FPB Bancorp, Inc. At December 31,  2002, we had total consolidated assets of $58.8 million and total consolidated  stockholders' equity of $7.3 million. For the year ended December 31, 2002,  we had net earnings of $74,000. 

**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 committed to our economic growth and development.  With local ownership, management, and directors, we believe that we can be more responsive to the communities we serve. Local ownership will allow faster, more responsive and flexible decision-making which is not available at the majority of financial institutions in or near our market area which are 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 from 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) noninterest 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 County. We are expanding into our new location in Fort Pierce in the fall of 2003 to better serve the entire county. 

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. 

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**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 for 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 banking holding company, we are regulated by the Board of Governor's of the Federal Reserve System. As a state-chartered commercial bank, we are subject to extensive regulation by the Florida Department of Banking and Finance and the Federal Deposit Insurance Corporation. We file reports with the Florida Department of Banking and Finance 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 Florida Department of Banking and Finance and the FDIC to monitor our compliance with the various regulatory requirements.

**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, 2002, we had nonperforming assets of $168,000 and only minimal charge-off experience. 

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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): 
 **2002** **2001** **2000**      **Amount** **Loans to      Total       Loans** **Amount** **Loans to      Total       Loans** **Amount** **Loans to      Total       Loans**        Commercial loans$243 37.15%$116 35.82%$75 33.28%Commercial real estate loans 144 34.07  108 34.36  52 35.40 Residential real estate loans 5 26.38  6 26.01  10 29.73 Consumer loans 161 2.40  129 3.81  64 1.59           Total allowance for loan losses$553 100.00%$359 100.00%$201 100.00%                          The allowance for loan losses as a                  percentage of total loans                  outstanding   1.31%   1.10 %   1.11%             
The following table sets forth the composition of our loan portfolio at December 31, (dollars in thousands): 
 **2002** **2001** **2000**  **** **** ****  **Amount** **% of****Total** **Amount** **% of**Total**** **Amount** **% of**Total****        Commercial$15,698 37.15%$11,667 35.82% $6,037 33.28%Commercial real estate 14,398 34.07  11,192 34.36  6,420 35.40 Consumer 11,145 26.38  8,472 26.01  5,393 29.73 Residential real estate 1,013 2.40  1,241 3.81  289 1.59             42,254 100.00% 32,572 100.00%  18,139 100.00%             Less:                  Deferred loan costs and fees,                     net (39)   2    27      Allowance for loan losses (553)   (359)   (201)               Loans, net$41,662   $32,215    17,965                
**Liquidity and Capital Resources**

Our primary source of cash during the year ended December 31, 2002, was from the proceeds from net deposit inflows of $16.3 million. Cash was used primarily to purchase securities and to originate loans. At December 31, 2002, we had outstanding commitments to originate loans totalling $1.4 million, available lines of credit of $5.3 million, and standby letters of credit $251,000. At December 31, 2002, we exceeded our regulatory liquidity requirements. 

***Securities.***The following table sets forth the carrying value of our securities portfolio at December 31 (in thousands): 
 **2002** **2001**  Securities available for sale:        U.S. Government agency securities$1,512 $3,481   Mortgage-backed securities 4,760  1,015      6,272  4,496Securities held to maturity-        Mortgage-backed securities 425  983          Total$6,697  5,479    
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The following table sets forth, by maturity distribution,  certain information pertaining to the securities portfolio as follows (dollars  in thousands): ****
 **One Year or      Less****From One Year      to Five Years****From Five Years****to Ten Years****Over Ten Years****Total** ************************          **Carrying      Value** **Average      Yield****Carrying      Value** **Average      Yield****Carrying      Value** **Average      Yield****Carrying      Value** **Average      Yield****Carrying      Value** **Average      Yield**      **December 31, 2002:**                         U.S. Government                             agency securities$  - - %$- - %$1,512 4.56%$- - %$1,512 4.56%                Mortgage-backed                          securities                      5,185 5.40                        Total                     $6,697 5.21%                                                 **December 31, 2001:**                         U.S. Government                             agency securities$   - -%$3,481 5.03%$- - %$ - - %$3,481 5.03%                  Mortgage-backed                             securities                      1,998 5.77                           Total                     $5,479 5.30%                        
**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 (set forth in the table below) 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, 2002, that we met all capital adequacy requirements to which we are subject.
 ****  **** **Minimum       To Be Well       Capitalized Under****Prompt Corrective**  ****       **Action Provisions** **** **Actual** **For Capital Adequacy      Purposes**  **Amount** **%** **Amount** **%** **Amount** **%**      **(Dollars in thousands)*****As of December 31, 2002:***                  Total capital to Risk-                     Weighted assets$5,751 14.37%$3,202 8.00%$4,003 10.00%   Tier I Capital to Risk-                     Weighted Assets 5,250 13.12  1,601 4.00  2,402 6.00    Tier I Capital                     to Total Assets 5,250 9.23  2,274 4.00  2,843 5.00                 ***As of December 31, 2001:***                  Total capital to Risk-                     Weighted assets 4,277 13.03  2,623 8.00  3,284 10.00    Tier I Capital to Risk-                     Weighted Assets 3,919 11.94  1,313 4.00  1,970 6.00    Tier I Capital                     to Total Assets 3,919 10.30  1,522 4.00  1,903 5.00 
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**Market Risk**

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest-rate risk inherent in our loan and deposit-taking activities. We do not engage in securities trading or hedging activities and do not invest in interest-rate derivatives or enter into interest rate swaps. 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 8 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.

**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. 

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The following table sets forth certain information relating to interest-earning assets and interest-bearing liabilities at December 31, 2002, that are estimated to mature or are scheduled to reprice within the period shown (dollars in thousands): 
  **One****Year****or****Less** **More****than One****Year and****Less than****Five Years** **More****than Five****Years and****Less than****Fifteen Years** **Over****Fifteen****Years** **Total**          Mortgage and commercial loans (1):                 Commercial loans$12,480 $2,980 $238 $- $15,698   Commercial real estate loans 8,785  4,996  617  -  14,398   Residential mortgage loans -  1,013  -  -  1,013   Consumer loans 1,461  8,173  1,511  -  11,145                Total loans 22,726  17,162  2,366  -  42,254          Federal funds sold 2,410  -  -  -  2,410Securities (2) 80  -  6,272  425  6,777                Total rate-sensitive      assets$25,216 $17,162 $8,638 $425 $51,441                         Deposit accounts (3):                 Money market deposits$8,844 $ - $ - $- $8,844   NOW deposits 2,091  -  -  -  2,091   Savings deposits 4,950  -  -  -  4,950   Certificates of deposit 17,674  6,158  1,101  -  24,933                Total deposit accounts 33,559  6,158  1,101  -  40,818             Borrowings -  -  -  -  -                     Total rate-sensitive      liabilities$33,559 $6,158 $1,101 $- $40,818                         GAP (repricing differences) (8,343) 11,004  7,537 425  10,623                         Cumulative GAP (8,343) 2,661  10,198 10,623                             Cumulative GAP/total assets (14.20)% 4.53% 17.35%18.08%           (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 ready accessible withdrawable accounts. All other time deposits      are scheduled through the maturity dates.
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The following table reflects the contractual principal repayments by period of the loan portfolio at December 31, 2002 (in thousands): 
**Years Ending      December 31,****Commercial****Loans** **Real****Estate****Construction****Loans**     2003$4,790 $1,342   2004 1,949  157   2005 1,624  -   2006-2007 2,287  -   2008-2009 1,316  -   2010 & beyond 3,732  -       Total$15,698 $1,499    
Of the $11.1 million of loans due after 2003, 19.6% of such loans have fixed interest rates and 80.4% have adjustable interest rates. 

The following table sets forth total loans originated and repaid during the period ended December 31 (in thousands): 
  **2002**  **2001**  Originations:        Commercial loans$13,581 $12,826   Commercial real estate loans 4,906  2,138   Residential mortgage loans 2,464  687   Consumer loans 4,820  7,782                Total loans originated 25,771  23,433         Principal reductions 16,089  9,000             Increase in total loans$9,682 $14,433    
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The following table shows the distribution of,  and certain other information relating to deposit accounts by type (dollars  in thousands):****
 **At December 31,**    **2002** **2001**     **Amount** **% of****Deposits** **Amount** **% of      Deposits**      Demand deposits$9,447 18.79%$6,825 20.08%Money-market deposits 8,844 17.60  6,545 19.25 NOW deposits 2,091 4.16  1,292 3.80 Savings deposits 4,950 9.85  3,419 10.06           Subtotal 25,332 50.40  18,081 53.19        Certificate of deposits:             1.00% - 1.99% 2,625 5.22  154 .45    2.00% - 2.99% 3,928 7.81  1,540 4.53    3.00% - 3.99% 13,493 26.84  3,933 11.57    4.00% - 4.99% 1,883 3.75  4,688 13.79    5.00% - 5.99% 321 .64  2,334 6.87    6.00% - 6.99% 2,583 5.14  3,055 8.99    7.00% - 7.99% 100 .20  208 .61        Total certificates of deposit (1) 24,933 49.60  15,912 46.81        Total deposits$50,265 100.00%$33,993 100.00%       (1) Included individual retirement accounts ("IRAs")      totaling $1,305,000 and $1,058,000 at December 31, 2002 and 2001, 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, 2002, which mature during the periods indicated (in thousands): 

****
 **Year Ending December 31,**         **2003**  **2004**  **2005** **2006**  **2007**  **Total**      1.00% - 1.99%$1,570 $18 $1,037 $ - $ - $2,6252.00% - 2.99% 2,166 1,762  -  -  -  3,9283.00% - 3.99% 10,919 1,401  1,055  12  106  13,4934.00% - 4.99% 240  514  76  163  890  1,8835.00% - 5.99% 110  -  106  -  105  3216.00% - 6.99% 2,569  -  14  -  -  2,5837.00% - 7.99% 100  -  -  -  -  100            Total certificates of deposit$17,674 $3,695 $2,288 $175 $1,101 $24,933           
Jumbo certificates ($100,000 and over) mature  as follows (in thousands): 
 **December 31,**         **2002** **2001**  Due three months or less$4,878 $1,153Due over three months to six months 437  780Due over six months to one year 1,000  918Due over one year to five years 5,334  2,188     $11,649 $5,039    
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**Results of Operations**

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 noninterest income, and our noninterest expenses, such as salaries and employee benefits, occupancy and equipment costs and income taxes. 

The following table sets forth, for the period  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,**    **2002** **2001**  ******** ****   **Average      Balance** **Interest      and       Dividends** **Average      Yield/       Rate**  **Average      Balance**  **Interest      and       Dividends** **Average      Yield/       Rate**        Interest-earning assets:                   Loans$37,753  2,813 7.45%$24,379 $2,105 8.63%   Securities 6,124  306 5.00  4,822  293 6.08    Other interest-earning assets (1) 5,250  84 1.60  2,899  121 4.17                    Total interest-earning      assets 49,127  3,203 6.52  32,100  2,519 7.85 Noninterest-earning assets 2,544       1,729                           Total assets$51,671      $33,829                     Interest-bearing liabilities:                   Savings, NOW and money-market                      deposits 13,975  282 2.02  7,963  219 2.75    Certificates of deposit 22,387  851 3.80  14,622  818 5.59    Other borrowings 238  2 .84  264  9 3.44                    Total interest-bearing                         liabilities 36,600  1,135 3.10  22,849  1,046 4.58                Demand deposits 8,573       6,613      Noninterest-bearing liabilities 759       186      Stockholders' equity 5,739       4,181                           Total liabilities and                         stockholders'      equity$51,671      $33,829                     Net interest income   $2,068      $1,473                  Interest-rate spread      3.42%      3.27%               Net interest margin (2)      4.21%      4.59%               Ratio of average interest-earning                   assets to average interest-bearing                   liabilities 1.34       1.40                     (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 interest-earning assets.
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**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, 2002 vs. 2001:*******
 **Increase (Decrease) Due to**     **Rate** **Volume** **Rate/      Volume** **Total**              **(In thousands)** Interest-earning assets:               Loans$1,155 $(289)$(158)$708    Securities 79  (52) (14) 13    Other interest-earning assets 98  (74) (61) (37)               Total 1,332  (415) (233) 684          Interest-bearing liabilities:               Deposits:                  Savings, demand, money-market      and NOW deposits 165  (58) (44) 63       Time deposits 434  (262) (139) 33       Other borrowings -  (7) -  (7)               Total 599  (327) (183) 89          Net change in net interest income$733 $(88)$(50)$595          
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**Comparison of Years Ended December 31, 2002 and 2001**

***General.***  Net earnings for the year ended December 31, 2002, was $74,000 or $.11 per basic and diluted share compared to net loss of $49,000 or $(.10) per basic and diluted share for the year ended December 31, 2001. This improvement in net operating results was primarily due to an increase in net interest income and noninterest income, partially offset by an increase in noninterest expenses and the provision for loan losses, all as a result of our growth. 

***Interest Income.***Interest income increased to $3.2 million for the year ended December 31, 2002, from $2.5 million for the year ended December 31, 2001. Interest income on loans increased to $2.8 million from $2.1 million due to an increase in the average loan portfolio balance for the year ended December 31, 2002, partially offset by a decrease in the weighted-average yield earned on the portfolio to 7.45% for 2002 from 8.63% for 2001. Interest on securities increased to $306,000 due to an increase in the average securities balance in 2002, partially offset by a decrease in the average yield earned from 6.08% in 2001 to 5.00% in 2002. Interest on other interest-earning assets decreased to $84,000 primarily due to a decrease in the weighted-average yield earned on those assets, partially offset by an increase in the average balance. 

***Interest Expense.***Interest expense increased to $1.1 million in 2002 from $1.0 million in 2001. Interest expense increased due to the $13.8 million growth in average interest-bearing deposits in 2002, despite a decrease in the weighted-average rate paid on deposits.

***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 increased from $202,000 in 2001 to $381,000 in 2002. The increase  was due primarily to the $13.4 million increase in the average loan portfolio  during the year. Management believes that the allowance for loan losses of $553,000  is adequate at December 31, 2002. 

***Noninterest Income.***Noninterest income increased from $214,000 in 2001 to $264,000 in 2002. This was primarily a result of increased fees and service charges on deposit accounts in 2002, compared to 2001. ******

***Noninterest Expense.***Total noninterest expense increased to $1.8 million for the year ended December 31, 2002, compared to $1.6 million in 2001. This was primarily due to increases in employee compensation and benefits and other expenses, all a result of our overall growth. 

***Income Taxes.***The income tax benefit was $23,000 (an effective rate of 31.9%) for 2001 compared to an income tax expense of $52,000 (an effective rate of 41.3%) for 2002. We believe that it is more likely than not the benefit and deferred tax asset recognized will be realized in future periods. 

**Impact of Inflation and Changing Prices**

The financial statements and related data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, 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.

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**FPB  BANCORP, INC. AND SUBSIDIARY**

**Consolidated Balance Sheets****($ in thousands, except share amounts)**

 
 **At December 31,**         **Assets****2002** **2001**    Cash and due from banks$3,414 2,095 Interest-bearing deposits with banks 2,001 - Federal funds sold 2,410 353           Total cash and cash equivalents 7,825 2,448 Time deposit - 100 Securities available for sale 6,272 4,496 Securities held to maturity 425 983 Loans, net of allowance for loan losses of $553 and $359 41,662 32,215 Premises and equipment, net 1,778 616 Federal Home Loan Bank stock, at cost 80 80 Accrued interest receivable 197 211 Deferred income taxes 356 444 Other assets 172 113           Total assets$58,767 41,706     **Liabilities and Stockholders' Equity**     Liabilities:        Noninterest-bearing demand deposits 9,447 6,825    Savings, NOW and money-market deposits 15,885 11,256    Time deposits 24,933 15,912           Total deposits 50,265 33,993    Federal funds purchased - 1,500    Federal Home Loan Bank advance - 1,000    Notes payable - 342    Official checks 1,026 742    Other liabilities 163 39           Total liabilities 51,454 37,616     Commitments and contingencies (Note 8)     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,           817,775 and 489,410 shares issued      and outstanding 8 5    Additional paid-in capital 7,932 4,846    Accumulated deficit (687)(761)   Accumulated other comprehensive income 60 -           Total stockholders' equity 7,313 4,090           Total liabilities and stockholders'      equity$58,767 41,706     
 See Accompanying Notes to Consolidated Financial Statements.

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**FPB BANCORP, INC. AND SUBSIDIARY**
**Consolidated Statements of Operations****($ in thousands, except share amounts)** **Year Ended December 31,**    **2002** **2001**    Interest income:        Loans$2,813 2,105    Securities 306 293    Other 84 121           Total interest income 3,203 2,519     Interest expense:        Deposits 1,133 1,037    Other 2 9       Total interest expense 1,135 1,046     Net interest income 2,068 1,473       Provision for loan losses 381 202     Net interest income after provision for loan losses 1,687 1,271     Noninterest income:        Service charges and fees on deposit accounts 202 179    Gain on sale of a security available for sale 13 -    Broker fees 23 13    Other fees 26 22           Total noninterest income 264 214     Noninterest expenses:        Salaries and employee benefits 770 654    Occupancy and equipment 297 322    Advertising 84 68    Professional fees 131 114    Data processing 186 111    Supplies 45 45    Other 312 243           Total noninterest expenses 1,825 1,557     Earnings (loss) before income taxes 126 (72)   Income taxes (benefit) 52 (23)   Net earnings (loss)$74 (49)   Earnings (loss) per share basic and diluted$.11 (.10)   Weighted-average number of shares, basic and diluted 660,352 489,410     
 See Accompanying Notes to Consolidated Financial Statements.

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**FPB BANCORP, INC. AND SUBSIDIARY**

**Consolidated Statements of Stockholders' Equity**

**Years Ended December 31, 2002 and 2001****($ in thousands, except share amounts)**
 **Common****Stock** **Additional      Paid-In      Capital** **Accumulated      Deficit** **Accumulated      Other       Compre-       hensive       Income** **Total      Stockholders'       Equity** **Shares****Amount**                      Balance at December 31, 2000489,410 $5 4,846 (712)5 4,144                            Comprehensive loss:                              Net loss-  - - (49)- (49)              Net unrealized gain on             securities available for sale,                   net of tax of $3-  - - - (5)(5)                           Comprehensive loss           (54)                     Balance at December 31, 2001489,410  5 4,846 (761)- 4,090                            Comprehensive income:                              Net earnings-  - - 74 - 74               Net unrealized gain on             securities available for sale,                   net of tax of $36-  - - - 60 60                            Comprehensive income           134                            Proceeds from the issuance of             common stock, net of                offering costs of $85328,365  3 3,086 - - 3,089                       Balance at December 31, 2002817,775 $8 7,932 (687)60 7,313         
See Accompanying Notes to Consolidated Financial  Statements.

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**FPB BANCORP, INC. AND SUBSIDIARY**

**Consolidated Statements of Cash Flows****($ in thousands)**
 **Year Ended December 31,**  **2002** **2001**  Cash flows from operating activities:        Net earnings (loss)$74 (49)   Adjustments to reconcile net earnings (loss) to net      cash           provided by operating activities:              Depreciation 100 92          Provision for loan      losses 381 202          Deferred income      taxes (benefit) 52 (23)         Net amortization      of fees, premiums and discounts 63 (4)         Gain on the sale      of a securities available for sale (13)-          Decrease (increase)      in accrued interest receivable 14 (10)         Increase in other      assets (59)(27)         Increase in official      checks and other liabilities 408 207                       Net      cash provided by operating activities 1,020 388     Cash flows from investing activities:        Purchase of securities available for sale (9,159)(5,122)   Purchase of securities held to maturity - (1,004)   Maturities and calls of securities available for sale 5,500 7,500    Principal payments of securities available for sale 964 124    Principal payments of held to maturity securities 551 20    Proceeds from the sale of a security available for sale 1,013 -    Maturity of time deposit 100 -    Net increase in loans (9,869)(14,466)   Purchase of Federal Home Loan Bank stock - (51)   Purchase of premises and equipment (1,262)(342)                      Net      cash used in investing activities (12,162)(13,341)    Cash flows from financing activities:        Net increase in deposits 16,272 8,179    (Decrease) increase in other borrowings (1,500)1,500    (Decrease) increase in Federal Home Loan Bank advance (1,000)1,000    (Decrease) increase in notes payable (342)342    Proceeds from the issuance of common stock, net 3,089 -                       Net      cash provided by financing activities 16,519 11,021     Net increase (decrease) in cash and cash equivalents 5,377 (1,932)Cash and cash equivalents at beginning of the year 2,448 4,380     Cash and cash equivalents at end of the year$7,825 2,448     Supplemental disclosure of cash flow information:        Cash paid during the year for:     Interest, net of amount capitalized of $8 in 2002$1,543 1,033    |