Exhibit 13

FPB BANCORP, INC.

2006 ANNUAL REPORT



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CORPORATE PROFILE

FPB Bancorp, Inc. is a one-bank holding company incorporated in the State of Florida. FPB Bancorp, Inc. owns 100% of First Peoples Banks common stock. First Peoples Bank is a Florida state-chartered commercial bank. Our deposits are
insured by the Federal Deposit Insurance Corporation. We provide a variety of banking services to small businesses and individuals in St. Lucie, Martin, and Indian River County, Florida. We currently have four retail banking offices located in Port
St. Lucie, Fort Pierce, Stuart and Vero Beach, Florida. A fifth office is anticipated to open in early 2008 on Gatlin Boulevard in Port St. Lucie, Florida. In addition, an 11,000 square foot Operations Center in Jensen Beach, Florida will be open by
the end of the first quarter of 2007. At December 31, 2006, we had total consolidated assets of $153.4 million and total consolidated stockholders equity of $21.1 million. For the year ended December 31, 2006, we had net earnings of
$631,000.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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



|                                                                                      |  |      
|------------------------------------------------------------------------------------- |  | -----
|CONTENTS                                                                              |  | Page 
|Financial Highlights                                                                  |  | 1    
|                                                                                      | 
|Selected Financial Data                                                               |  | 2    
|                                                                                      | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 3-18 
|                                                                                      | 
|Consolidated Financial Statements                                                     |  | 19-47
|                                                                                      | 
|Report of Independent Registered Public Accounting Firm                               |  | 48   
|                                                                                      | 
|Board of Directors                                                                    |  | 49-50
|                                                                                      | 
|Non-Director Executive Officers                                                       |  | 51-52
|                                                                                      | 
|First Peoples Bank Officers                                                           |  | 53   
|                                                                                      | 
|Community Liaison Board                                                               |  | 54   
|                                                                                      | 
|General Information                                                                   |  | 55   
|                                                                                      | 
|Common Stock Prices and Dividends                                                     |  | 55   



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FINANCIAL HIGHLIGHTS

December 31, 2006 and 2005 or the Years Then Ended

(Dollars in thousands, except per share
figures)



|                                                     |  |      |           |   |      |   |           |  
|---------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                     |  | 2006 |           |   | 2005 |  
|At Year End:                                         |  |      |           |   |      |   |           |  
|                                                     |  |     
|Assets                                               |  | $    | 153,439   |   |      | $ | 127,309   |  
|Loans, net                                           |  | $    | 130,133   |   |      | $ | 95,666    |  
|Securities                                           |  | $    | 8,953     |   |      | $ | 12,244    |  
|Deposits                                             |  | $    | 130,219   |   |      | $ | 102,809   |  
|Stockholders equity                                 |  | $    | 21,063    |   |      | $ | 20,341    |  
|Book value per share (1)                             |  | $    | 11.05     |   |      | $ | 10.70     |  
|Shares outstanding (1)                               |  |      | 1,906,203 |   |      |   | 1,901,117 |  
|Equity as a percentage of assets                     |  |      | 13.73     | % |      |   | 15.98     | %
|Nonperforming assets as a percentage of total assets |  |      | .22       | % |      |   |          | %
|                                                     |  |     
|For The Year:                                        |  |      |           |   |      |   |           |  
|                                                     |  |     
|Interest income                                      |  | $    | 10,626    |   |      | $ | 7,243     |  
|Net earnings                                         |  | $    | 631       |   |      | $ | 765       |  
|Earnings per share, basic (1)                        |  | $    | .33       |   |      | $ | .52       |  
|Earnings per share, diluted (1)                      |  | $    | .33       |   |      | $ | .52       |  
|Return on average assets                             |  |      | .43       | % |      |   | .64       | %
|Return on average equity                             |  |      | 3.04      | % |      |   | 5.42      | %
|Average equity as a percentage of average assets     |  |      | 14.08     | % |      |   | 11.85     | %
|Noninterest expenses to average assets               |  |      | 4.12      | % |      |   | 3.89      | %
|                                                     |  |     
|Yields and Rates:                                    |  |      |           |   |      |   |           |  
|                                                     |  |     
|Loan portfolio                                       |  |      | 8.33      | % |      |   | 7.15      | %
|Securities                                           |  |      | 3.97      | % |      |   | 3.36      | %
|Other interest-earning assets                        |  |      | 4.56      | % |      |   | 3.13      | %
|All interest-earning assets                          |  |      | 7.65      | % |      |   | 6.38      | %
|Deposits                                             |  |      | 3.82      | % |      |   | 2.57      | %
|Borrowings                                           |  |      | 4.74      | % |      |   | 3.21      | %
|All interest-bearing liabilities                     |  |      | 3.83      | % |      |   | 2.59      | %
|Interest-rate spread (2)                             |  |      | 3.82      | % |      |   | 3.79      | %
|Net yield on average interest earning assets (3)     |  |      | 4.79      | % |      |   | 4.67      | %

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|(1) | All per share amounts reflect the 5% stock dividend declared on April 26, 2006 and paid on May 17, 2006.
|--- | --------------------------------------------------------------------------------------------------------

|(2) | Average yield on all interest-earning assets less average rate paid on all interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------

|(3) | Net interest income divided by average interest-earning assets.
|--- | ---------------------------------------------------------------



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SELECTED FINANCIAL DATA

December 31, 2006, 2005, 2004, 2003 and 2002 and the

Years Ended
December 31, 2006, 2005, 2004, 2003 and 2002

(Dollars in thousands, except per share figures)



|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                                              |  | 2006 |           |   | 2005 |   |           | 2004 |  |   | 2003    |   |  | 2002 |        
|At Year End:                                                                                  |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                                              |  |      |           |   |     
|Cash and cash equivalents                                                                     |  | $    | 5,422     |   |      |   | 12,366    |      |  |   | 9,759   |   |  |      | 7,218   |   |  |   | 7,825   |  
|Securities                                                                                    |  |      | 8,953     |   |      |   | 12,244    |      |  |   | 11,371  |   |  |      | 11,375  |   |  |   | 6,697   |  
|Loans, net                                                                                    |  |      | 130,133   |   |      |   | 95,666    |      |  |   | 68,794  |   |  |      | 48,244  |   |  |   | 41,662  |  
|All other assets                                                                              |  |      | 8,931     |   |      |   | 7,033     |      |  |   | 4,673   |   |  |      | 3,218   |   |  |   | 2,583   |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total assets                                                                                  |  | $    | 153,439   |   |      |   | 127,309   |      |  |   | 94,597  |   |  |      | 70,055  |   |  |   | 58,767  |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Deposit accounts                                                                              |  |      | 130,219   |   |      |   | 102,809   |      |  |   | 81,936  |   |  |      | 61,064  |   |  |   | 50,265  |  
|Federal Home Loan Bank advances                                                               |  |      | 100       |   |      |   | 2,600     |      |  |   | 2,500   |   |  |      |        |   |  |   |        |  
|All other liabilities                                                                         |  |      | 2,057     |   |      |   | 1,559     |      |  |   | 2,741   |   |  |      | 1,619   |   |  |   | 1,189   |  
|Stockholders equity                                                                          |  |      | 21,063    |   |      |   | 20,341    |      |  |   | 7,420   |   |  |      | 7,372   |   |  |   | 7,313   |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total liabilities and stockholders equity                                                    |  | $    | 153,439   |   |      |   | 127,309   |      |  |   | 94,597  |   |  |      | 70,055  |   |  |   | 58,767  |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|For the Period:                                                                               |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                                              |  |      |           |   |     
|Total interest income                                                                         |  | $    | 10,626    |   |      |   | 7,243     |      |  |   | 4,345   |   |  |      | 3,393   |   |  |   | 3,203   |  
|Total interest expense                                                                        |  |      | 3,976     |   |      |   | 1,939     |      |  |   | 1,074   |   |  |      | 993     |   |  |   | 1,135   |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income                                                                           |  |      | 6,650     |   |      |   | 5,304     |      |  |   | 3,271   |   |  |      | 2,400   |   |  |   | 2,068   |  
|                                                                                              |  |      |           |   |     
|Provision for loan losses                                                                     |  |      | 429       |   |      |   | 352       |      |  |   | 380     |   |  |      | 383     |   |  |   | 381     |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income after provision for loan losses                                           |  |      | 6,221     |   |      |   | 4,952     |      |  |   | 2,891   |   |  |      | 2,017   |   |  |   | 1,687   |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Noninterest income                                                                            |  |      | 824       |   |      |   | 930       |      |  |   | 759     |   |  |      | 620     |   |  |   | 264     |  
|Noninterest expenses                                                                          |  |      | 6,082     |   |      |   | 4,639     |      |  |   | 3,440   |   |  |      | 2,372   |   |  |   | 1,825   |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Earnings before income taxes                                                                  |  |      | 963       |   |      |   | 1,243     |      |  |   | 210     |   |  |      | 265     |   |  |   | 126     |  
|Income taxes                                                                                  |  |      | 332       |   |      |   | 478       |      |  |   | 87      |   |  |      | 104     |   |  |   | 52      |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net earnings                                                                                  |  | $    | 631       |   |      |   | 765       |      |  |   | 123     |   |  |      | 161     |   |  |   | 74      |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net earnings per basic share(1)                                                               |  | $    | .33       |   |      |   | .52       |      |  |   | .14     |   |  |      | .19     |   |  |   | .10     |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net earnings per diluted share(1)                                                             |  | $    | .33       |   |      |   | .52       |      |  |   | .14     |   |  |      | .19     |   |  |   | .10     |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Weighted-average number of shares outstanding for basic(1)                                    |  |      | 1,903,687 |   |      |   | 1,466,203 |      |  |   | 859,113 |   |  |      | 858,674 |   |  |   | 693,370 |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Weighted-average number of shares outstanding for diluted(1)                                  |  |      | 1,933,661 |   |      |   | 1,479,641 |      |  |   | 859,113 |   |  |      | 858,674 |   |  |   | 693,370 |  
|                                                                                              |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Ratios and Other Data:                                                                        |  |      |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                                              |  |      |           |   |     
|Return on average assets                                                                      |  |      | .43       | % |      |   | .64       | %    |  |   | .15     | % |  |      | .25     | % |  |   | .14     | %
|Return on average equity                                                                      |  |      | 3.04      | % |      |   | 5.42      | %    |  |   | 1.67    | % |  |      | 2.19    | % |  |   | 1.29    | %
|Average equity as a percentage of average assets                                              |  |      | 14.08     | % |      |   | 11.85     | %    |  |   | 9.02    | % |  |      | 11.34   | % |  |   | 11.11   | %
|Interest-rate spread during the period                                                        |  |      | 3.82      | % |      |   | 3.79      | %    |  |   | 3.87    | % |  |      | 3.81    | % |  |   | 3.42    | %
|Net yield on average interest-earning assets                                                  |  |      | 4.79      | % |      |   | 4.67      | %    |  |   | 4.36    | % |  |      | 4.22    | % |  |   | 4.21    | %
|Noninterest expenses to average assets                                                        |  |      | 4.12      | % |      |   | 3.89      | %    |  |   | 4.23    | % |  |      | 3.66    | % |  |   | 3.53    | %
|Ratio of average interest-earning assets to average interest-bearing liabilities              |  |      | 1.34      |   |      |   | 1.51      |      |  |   | 1.34    |   |  |      | 1.24    |   |  |   | 1.34    |  
|Nonperforming loans and foreclosed real estate as a percentage of total assets at end of year |  |      | .22       | % |      |   |          | %    |  |   | .52     | % |  |      | 2.07    | % |  |   | .29     | %
|Allowance for loan losses as a percentage of total loans at end of year                       |  |      | 1.36      | % |      |   | 1.42      | %    |  |   | 1.56    | % |  |      | 1.73    | % |  |   | 1.31    | %
|Total number of banking offices                                                               |  |      | 4         |   |      |   | 3         |      |  |   | 3       |   |  |      | 2       |   |  |   | 1       |  
|Total shares outstanding at end of year(1)                                                    |  |      | 1,906,203 |   |      |   | 1,901,117 |      |  |   | 860,076 |   |  |      | 859,026 |   |  |   | 858,664 |  
|Book value per share at end of year(1)                                                        |  | $    | 11.05     |   |      | $ | 10.70     |      |  | $ | 8.63    |   |  | $    | 8.58    |   |  | $ | 8.51    |  

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|(1) | All per share amounts reflect the 5% stock dividend declared on April 26, 2006 and paid on
May 17, 2006.
|--- | --------------------------------------------------------------------------------------------------------



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MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and our results of operations should be read in conjunction with the consolidated financial statements and the related notes, as of December 31, 2006 and 2005, included
elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.

General

FPB is a one-bank holding company
incorporated in the State of Florida. Our sole subsidiary, First Peoples Bank, is a Florida state-chartered commercial bank whose deposits are insured by the Federal Deposit Insurance Corporation. We opened for business on April 26, 1999 and
provide a variety of banking services to small businesses and individuals in St. Lucie, Martin and Indian River County, Florida. We currently have four retail banking offices located in Port St. Lucie, Fort Pierce, Stuart and Vero Beach, Florida. At
December 31, 2006, we had total consolidated assets of $153.4 million and total consolidated stockholders equity of $21.1 million. For the year ended December 31, 2006, we had net earnings of $631,000.

Managements Strategy

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

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

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

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

Our customers are primarily individuals, professionals, small
and medium-size businesses, and seasonal retirees located predominantly in St. Lucie, Martin and Indian River County, Florida. Our offices are currently located in Stuart, Port St. Lucie, Fort Pierce and Vero Beach, Florida. A fifth office in Port
St. Lucie, Florida is estimated to open in early 2008 on Gatlin Boulevard in Port St. Lucie, Florida. In addition, the 11,000 square foot Operations Center in Jensen Beach, Florida will open by the end of the first quarter 2007.



---

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

Critical Accounting Policies

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

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

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

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

Regulation and Legislation

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



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Credit Risk

Our primary business is making business and consumer loans. That activity entails potential loan losses, the magnitude of which depend on a variety of economic factors affecting borrowers which are beyond our control. While underwriting
guidelines have been instituted and credit review procedures have been put in place to protect us from avoidable credit losses, some losses will inevitably occur. At December 31, 2006, we had nonperforming assets of $344,000.

Allowance for Loan Losses

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



|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |       |  |        |  
|------------------------------------------------------------------------ |  | ------ | ----- | ------------------ | ------ | - | ------ | ---- | ------------------ |  | ------ | ------ |  | ------------------ | ----- |  | ------ | -
|                                                                         |  | 2006   |       |                    | 2005   |   |        | 2004 |                   
|                                                                         |  | Amount |       | Loans toTotalLoans |        |   | Amount |      | Loans toTotalLoans |  |        | Amount |  | Loans toTotalLoans |      
|Commercial                                                               |  | $      | 811   |                    | 38.13  | % |        | $    | 576                |  | 37.42  | %      |  | $                  | 468   |  | 32.27  | %
|Commercial real estate                                                   |  |        | 631   |                    | 42.24  |   |        |      | 478                |  | 40.79  |        |  |                    | 312   |  | 43.90  |  
|Construction                                                             |  |        | 65    |                    | 4.59   |   |        |      | 53                 |  | 4.47   |        |  |                    | 36    |  | 2.47   |  
|Consumer                                                                 |  |        | 293   |                    | 14.80  |   |        |      | 274                |  | 17.11  |        |  |                    | 255   |  | 21.10  |  
|Residential real estate                                                  |  |        | 1     |                    | .24    |   |        |      | 2                  |  | .21    |        |  |                    | 26    |  | .26    |  
|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |       |  |        |  
|Total allowance for loan losses                                          |  | $      | 1,801 |                    | 100.00 | % |        | $    | 1,383              |  | 100.00 | %      |  | $                  | 1,097 |  | 100.00 | %
|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |       |  |        |  
|The allowance for loan losses as a percentage of total loans outstanding |  |        |       |                    | 1.36   | % |        |      |                    |  | 1.42   | %      |  |                    |       |  | 1.56   | %
|                                                                         |  |        |       |                    |        |   |        |      |                    |  |        |        |  |                    |       |  |        |  

Loan Portfolio

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



|                                  |  |        |         |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|--------------------------------- |  | ------ | ------- | - | --------- | ------ | - | ------ | - | ------ | --------- |  | ------ | ------ |  | - | --------- | - |  | ------ | -
|                                  |  | 2006   |         |   | 2005      |        |   | 2004   |  
|                                  |  | Amount |         |   | % ofTotal |        |   | Amount |   |        | % ofTotal |  |        | Amount |  |   | % ofTotal |  
|Commercial                        |  | $      | 50,521  |   |           | 38.13  | % |        | $ | 36,510 |           |  | 37.42  | %      |  | $ | 22,640    |   |  | 32.27  | %
|Commercial real estate            |  |        | 55,967  |   |           | 42.24  |   |        |   | 39,794 |           |  | 40.79  |        |  |   | 30,803    |   |  | 43.90  |  
|Construction                      |  |        | 6,089   |   |           | 4.59   |   |        |   | 4,365  |           |  | 4.47   |        |  |   | 1,731     |   |  | 2.47   |  
|Consumer                          |  |        | 19,618  |   |           | 14.80  |   |        |   | 16,688 |           |  | 17.11  |        |  |   | 14,803    |   |  | 21.10  |  
|Residential real estate           |  |        | 315     |   |           | .24    |   |        |   | 206    |           |  | .21    |        |  |   | 181       |   |  | .26    |  
|                                  |  |        |         |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|                                  |  |        | 132,510 |   |           | 100.00 | % |        |   | 97,563 |           |  | 100.00 | %      |  |   | 70,158    |   |  | 100.00 | %
|                                  |  |        |         |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|Less:                             |  |        |         |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|Deferred loan costs and fees, net |  |        | (576    | ) |           |        |   |        |   | (514   | )         |  |        |        |  |   | (267      | ) |  |        |  
|Allowance for loan losses         |  |        | (1,801  | ) |           |        |   |        |   | (1,383 | )         |  |        |        |  |   | (1,097    | ) |  |        |  
|                                  |  |        |         |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  
|Loans, net                        |  | $      | 130,133 |   |           |        |   |        | $ | 95,666 |           |  |        |        |  | $ | 68,794    |   |  |        |  
|                                  |  |        |         |   |           |        |   |        |   |        |           |  |        |        |  |   |           |   |  |        |  



---

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



|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|------------------------------------------------------------------------------- |  | --------------- | --- | - | ---- | - | - | ---- |  | - | --- | -
|                                                                                |  | At December 31, |    
|                                                                                |  | 2006            |     |   | 2005 |   |   | 2004 | 
|Nonaccrual loans:                                                               |  |                 |     |   |      |   |   |      |  |   |     |  
|Real estate loans                                                               |  | $               | 172 |   |      | $ |  |      |  | $ | 465 |  
|Consumer loans                                                                  |  |                 | 18  |   |      |   |  |      |  |   | 1   |  
|Commercial and all other loans                                                  |  |                 | 154 |   |      |   |  |      |  |   | 30  |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total nonaccrual loans                                                          |  |                 | 344 |   |      |   |  |      |  |   | 496 |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Accruing loans over 90 days delinquent:                                         |  |                 |     |   |      |   |   |      |  |   |     |  
|Real estate loans                                                               |  |                 |    |   |      |   |  |      |  |   |    |  
|Consumer loans                                                                  |  |                 |    |   |      |   |  |      |  |   |    |  
|Commercial and all other loans                                                  |  |                 |    |   |      |   |  |      |  |   |    |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total accrual loans over 90 days delinquent                                     |  |                 |    |   |      |   |  |      |  |   |    |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total nonperforming loans                                                       |  |                 | 344 |   |      |   |  |      |  |   | 496 |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Foreclosed assets                                                               |  |                 |    |   |      |   |  |      |  |   |    |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total nonperforming loans and foreclosed assets                                 |  | $               | 344 |   |      | $ |  |      |  | $ | 496 |  
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total nonperforming loans as a percentage of total loans                        |  |                 | .26 | % |      |   |  | %    |  |   | .71 | %
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total nonperforming loans as a percentage of total assets                       |  |                 | .22 | % |      |   |  | %    |  |   | .52 | %
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  
|Total nonperforming loans and real estate owned as a percentage of total assets |  |                 | .22 | % |      |   |  | %    |  |   | .52 | %
|                                                                                |  |                 |     |   |      |   |   |      |  |   |     |  

Allowance for Credit Losses

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

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



---

We actively monitor our asset quality to charged-off loans against the allowance for loan losses when
appropriate or to provide specific loss allowances when necessary. Although we believe we use the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the economic conditions in the assumptions used in making the initial determinations. We consider several factors in determining the allowances, including charge-off history, the relatively low level of nonperforming assets,
and the value of the underlying collateral. Nonperforming loans at December 31, 2006, increased to .26% of total loans, compared to 0% at December 31, 2005. During 2006, our allowance increased by $418,000, or 30%, and totaled $1.8 million
at December 31, 2006. Additional allowance was made to cover the loan growth of approximately 36% in 2006. We believe that the allowance for loan losses was adequate at December 31, 2006.

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



|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                                      |  | Year Ended December 31, |       
|                                                                                      |  | 2006                    |        |   | 2005 |   |       | 2004 | 
|Allowance at beginning of year                                                        |  | $                       | 1,383  |   |      | $ | 1,097 |      |  | $ | 852    |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Charge-offs:                                                                          |  |                         |        |   |      |   |       |      |  |   |        |  
|Real estate loans                                                                     |  |                         |       |   |      |   |      |      |  |   |       |  
|Consumer loans                                                                        |  |                         | 19     |   |      |   | 17    |      |  |   | 36     |  
|Commercial and all other loans                                                        |  |                         | 14     |   |      |   | 55    |      |  |   | 111    |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Total charge-offs                                                                     |  |                         | 33     |   |      |   | 72    |      |  |   | 147    |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Recoveries:                                                                           |  |                         |        |   |      |   |       |      |  |   |        |  
|Real estate loans                                                                     |  |                         |       |   |      |   |      |      |  |   |       |  
|Consumer loans                                                                        |  |                         | 10     |   |      |   | 1     |      |  |   | 3      |  
|Commercial and all other loans                                                        |  |                         | 12     |   |      |   | 5     |      |  |   | 9      |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Total recoveries                                                                      |  |                         | 22     |   |      |   | 6     |      |  |   | 12     |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Provision for loan losses charged to operations                                       |  |                         | 429    |   |      |   | 352   |      |  |   | 380    |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Allowance at end of year                                                              |  | $                       | 1,801  |   |      | $ | 1,383 |      |  | $ | 1,097  |  
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Ratio of net charge-offs during the year to average loans outstanding during the year |  |                         | .01    | % |      |   | .08   | %    |  |   | .25    | %
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Allowance for loan losses as a percentage of total at end of year loans               |  |                         | 1.36   | % |      |   | 1.42  | %    |  |   | 1.56   | %
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  
|Allowance for loan losses as a percentage of nonperforming loans                      |  |                         | 523.55 | % |      |   |      | %    |  |   | 221.17 | %
|                                                                                      |  |                         |        |   |      |   |       |      |  |   |        |  



---

Capital Resources and Liquidity

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

Our management team monitors our liquidity position on an on-going basis and reports regularly to our Board of Directors the level of liquidity compared
to minimum levels established by Board policy. As of December 31, 2006, our level of liquidity was within the established guidelines of Board policy.

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

Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table
below) of Total and Tier 1 capital to risk weighted assets and Tier 1 capital to average assets. As of December 31, 2006, we exceeded all applicable capital adequacy requirements. See Regulation and SupervisionCapital
Requirements.

As of December 31, 2006, our actual and required minimum capital ratios were as follows (dollars in thousands):



|                                        |  |        |        |   |                              |   |        |                                                                       |        |  |      |        |  |   |        |  |       |  
|--------------------------------------- |  | ------ | ------ | - | ---------------------------- | - | ------ | --------------------------------------------------------------------- | ------ |  | ---- | ------ |  | - | ------ |  | ----- | -
|                                        |  | Actual |        |   | For Capital AdequacyPurposes |   |        | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |       
|                                        |  | Amount |        | % |                              |   | Amount |                                                                       | %      |  |      | Amount |  | % |       
|As of December 31, 2006:                |  |        |        |   |                              |   |        |                                                                       |        |  |      |        |  |   |        |  |       |  
|Total Capital to Risk- Weighted Assets  |  | $      | 14,232 |   | 10.45                        | % |        | $                                                                     | 10,899 |  | 8.00 | %      |  | $ | 13,624 |  | 10.00 | %
|Tier I Capital to Risk- Weighted Assets |  |        | 12,650 |   | 9.29                         |   |        |                                                                       | 5,449  |  | 4.00 |        |  |   | 8,174  |  | 6.00  |  
|Tier I Capital to Total Assets          |  |        | 12,650 |   | 8.08                         |   |        |                                                                       | 6,259  |  | 4.00 |        |  |   | 7,824  |  | 5.00  |  

Our primary source of cash during the year ended December 31, 2006, was from the proceeds
from net deposit inflows of $27.4 million and net proceeds from the maturity and repayment of securities totaling $4.8 million. Cash was used primarily to purchase securities, originate loans and repay FHLB advances. At December 31, 2006, we
had outstanding commitments to originate loans totaling $16.2 million, available lines of credit of $23.2 million, and standby letters of credit of $146,000.



---

Investment Activities

Our securities portfolio is managed by our Funds Management Committee in accordance with a written investment policy of the Board of Directors that addresses strategies, types and levels of permitted investments. At
December 31, 2006, our securities portfolio equaled $9.0 million, or 5.83% of total assets. Our investment portfolio is comprised of agency securities and mortgage-backed securities.

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

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

Securities

The following table sets forth the carrying value of our securities portfolio at
December 31, 2006 (in thousands):



|                                  |  |      |       |      |       
|--------------------------------- |  | ---- | ----- | ---- | ------
|                                  |  | 2006 |       | 2005
|Securities available for sale:    |  |      |       |      |       
|U.S. Government agency securities |  | $    | 5,445 |      | 7,919 
|Mortgage-backed securities        |  |      | 999   |      | 1,310 
|                                  |  |      |       |      |       
|                                  |  |      | 6,444 |      | 9,229 
|                                  |  |      |       |      |       
|Securities held to maturity:      |  |      |       |      |       
|U.S. Government agency securities |  |      | 2,500 |      | 2,997 
|Mortgage-backed securities        |  |      | 9     |      | 18    
|                                  |  |      |       |      |       
|                                  |  |      | 2,509 |      | 3,015 
|                                  |  |      |       |      |       
|Total                             |  | $    | 8,953 |      | 12,244
|                                  |  |      |       |      |       



---

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



|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|--------------------------------- |  | ----------------------- | ----- | ------------ | --------------------------- | - | ------------- | ---------------------------- | ------------ |  | ----- | ------------- |  | ------------ | --- |  | ------------- | - | ------------ | - | ------ |  | ---- | -
|                                  |  | Due in One Year or Less |       |              | From One Year to Five Years |   |               | From Five Years to Ten Years |              |  | Total |              
|                                  |  | CarryingValue           |       | AverageYield |                             |   | CarryingValue |                              | AverageYield |  |       | CarryingValue |  | AverageYield |     |  | CarryingValue |   | AverageYield |  
|December 31, 2006:                |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|U.S. Government agency securities |  | $                       | 3,986 |              | 3.20                        | % |               | $                            | 2,964        |  | 4.69  | %             |  | $            | 995 |  | 5.62          | % |              | $ | 7,945  |  | 4.06 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|Mortgage-backed securities        |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   | 1,008  |  | 3.96 |  
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|Total                             |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              | $ | 8,953  |  | 4.05 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|December 31, 2005:                |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|U.S. Government agency securities |  | $                       | 2,471 |              | 2.78                        | % |               | $                            | 7,458        |  | 3.85  | %             |  | $            | 987 |  | 5.00          | % |              | $ | 10,916 |  | 3.71 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|Mortgage-backed securities        |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   | 1,328  |  | 3.76 |  
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  
|Total                             |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              | $ | 12,244 |  | 3.72 | %
|                                  |  |                         |       |              |                             |   |               |                              |              |  |       |               |  |              |     |  |               |   |              |   |        |  |      |  

Regulatory Capital Requirements

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

Quantitative measures established by
regulation to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios of total and Tier I capital, as defined in the regulations, to risk-weighted assets, also as defined in the regulations, and of Tier I
capital to average assets. We believe, as of December 31, 2006, that we met all capital adequacy requirements to which we are subject. See Note 15 to our consolidated financial statements for the actual capital amounts and ratios.

Market Risk

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

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



---

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.



---

The following table sets forth certain information relating to interest-earning assets and interest-bearing liabilities
at December 31, 2006, that are estimated to mature or are scheduled to reprice within the period shown (dollars in thousands):



|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|------------------------------------ |  | --------------- | ------- | -- | ---------------------------------------- | - | ------ | -------------------------------------------- |  | - | ---------------- | - |  | ----- | ------ | - |  | - | -------
|                                     |  | One Yearor Less |         |    | More than OneYear andLess thanFive Years |   |        | More thanFiveYears andLess thanFifteen Years |  |   | OverFifteenYears |   |  | Total
|Mortgage and commercial loans (1):   |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Commercial                           |  | $               | 25,236  |    |                                          | $ | 23,415 |                                              |  | $ | 1,864            |   |  | $     | 6      |   |  | $ | 50,521 
|Commercial real estate               |  |                 | 12,917  |    |                                          |   | 39,334 |                                              |  |   | 3,327            |   |  |       | 389    |   |  |   | 55,967 
|Construction                         |  |                 | 18      |    |                                          |   | 1,527  |                                              |  |   |                 |   |  |       | 4,544  |   |  |   | 6,089  
|Consumer                             |  |                 | 4,534   |    |                                          |   | 13,735 |                                              |  |   | 1,272            |   |  |       | 77     |   |  |   | 19,618 
|Residential mortgage                 |  |                 | 315     |    |                                          |   |       |                                              |  |   |                 |   |  |       |       |   |  |   | 315    
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Total loans                          |  |                 | 43,020  |    |                                          |   | 78,011 |                                              |  |   | 6,463            |   |  |       | 5,016  |   |  |   | 132,510
|                                     |  |                 |         |    |                                         
|Interest-bearing deposits with banks |  |                 | 189     |    |                                          |   |       |                                              |  |   |                 |   |  |       |       |   |  |   | 189    
|Federal funds sold                   |  |                 | 3,499   |    |                                          |   |       |                                              |  |   |                 |   |  |       |       |   |  |   | 3,499  
|Securities (2)                       |  |                 | 4,047   |    |                                          |   | 3,349  |                                              |  |   | 1,548            |   |  |       | 268    |   |  |   | 9,212  
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Total rate-sensitive assets          |  |                 | 50,755  |    |                                          |   | 81,360 |                                              |  |   | 8,011            |   |  |       | 5,284  |   |  |   | 145,410
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|                                     |  |                 |         |    |                                         
|Deposit accounts (3):                |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Money market deposits                |  | $               | 26,541  |    |                                          | $ |       |                                              |  | $ |                 |   |  | $     |       |   |  | $ | 26,541 
|NOW deposits                         |  |                 | 3,834   |    |                                          |   |       |                                              |  |   |                 |   |  |       |       |   |  |   | 3,834  
|Savings deposits                     |  |                 | 5,111   |    |                                          |   |       |                                              |  |   |                 |   |  |       |       |   |  |   | 5,111  
|Certificates of deposit              |  |                 | 63,649  |    |                                          |   | 10,959 |                                              |  |   |                 |   |  |       |       |   |  |   | 74,608 
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|                                     |  |                 |         |    |                                         
|Total deposit accounts               |  |                 | 99,135  |    |                                          |   | 10,959 |                                              |  |   |                 |   |  |       |       |   |  |   | 110,094
|                                     |  |                 |         |    |                                         
|Federal Home Loan Bank advance       |  |                 |        |    |                                          |   |       |                                              |  |   | 100              |   |  |       |       |   |  |   | 100    
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Total rate-sensitive liabilities     |  |                 | 99,135  |    |                                          |   | 10,959 |                                              |  |   | 100              |   |  |       |       |   |  |   | 110,194
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|GAP (repricing differences)          |  | $               | (48,380 | )  |                                          | $ | 70,401 |                                              |  | $ | 7,911            |   |  | $     | 5,284  |   |  | $ | 35,216 
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Cumulative GAP                       |  | $               | (48,380 | )  |                                          | $ | 22,021 |                                              |  | $ | 29,932           |   |  | $     | 35,216 |   |  |   |        
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        
|Cumulative GAP/total assets          |  |                 | (31.53  | )% |                                          |   | 14.35  | %                                            |  |   | 19.51            | % |  |       | 22.95  | % |  |   |        
|                                     |  |                 |         |    |                                          |   |        |                                              |  |   |                  |   |  |       |        |   |  |   |        

---

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

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

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



---

The following table reflects the contractual principal repayments by period of the loan portfolio at
December 31, 2006 (in thousands):



|                          |  |                 |        |                            |   |                          |  |               |     |                   |   |        |  |   |      
|------------------------- |  | --------------- | ------ | -------------------------- | - | ------------------------ |  | ------------- | --- | ----------------- | - | ------ |  | - | -----
|Years Ending December 31, |  | CommercialLoans |        | CommercialReal EstateLoans |   | ResidentialMortgageLoans |  | ConsumerLoans |     | ConstructionLoans
|2007                      |  | $               | 19,234 |                            | $ | 16,865                   |  | $             | 72  |                   | $ | 7,111  |  | $ | 4,720
|2008                      |  |                 | 5,555  |                            |   | 5,455                    |  |               | 68  |                   |   | 4,718  |  |   | 176  
|2009                      |  |                 | 4,839  |                            |   | 3,619                    |  |               | 57  |                   |   | 3,404  |  |   | 176  
|2010-2011                 |  |                 | 5,571  |                            |   | 4,941                    |  |               | 110 |                   |   | 3,542  |  |   | 141  
|2012-2013                 |  |                 | 3,643  |                            |   | 4,229                    |  |               | 8   |                   |   | 456    |  |   | 141  
|2014 & beyond             |  |                 | 11,679 |                            |   | 20,858                   |  |               |    |                   |   | 387    |  |   | 735  
|                          |  |                 |        |                            |   |                          |  |               |     |                   |   |        |  |   |      
|Total                     |  | $               | 50,521 |                            | $ | 55,967                   |  | $             | 315 |                   | $ | 19,618 |  | $ | 6,089
|                          |  |                 |        |                            |   |                          |  |               |     |                   |   |        |  |   |      

Of the $84.5 million of loans due after 2007, 31.22% of such loans have fixed interest rates and
68.78% have adjustable interest rates.

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



|                                             |  |      |         |   |      |   |         |  
|-------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                             |  | 2006 |         |   | 2005 |  
|Originations:                                |  |      |         |   |      |   |         |  
|Commercial loans                             |  | $    | 28,540  |   |      | $ | 30,314  |  
|Commercial real estate loans                 |  |      | 23,983  |   |      |   | 20,582  |  
|Residential mortgage loans                   |  |      |        |   |      |   |        |  
|Consumer loans                               |  |      | 12,891  |   |      |   | 15,168  |  
|Construction loans                           |  |      | 5,868   |   |      |   | 6,445   |  
|                                             |  |      |         |   |      |   |         |  
|Total loans originated                       |  |      | 71,282  |   |      |   | 72,509  |  
|Principal reductions and participations sold |  |      | (36,335 | ) |      |   | (45,104 | )
|                                             |  |      |         |   |      |   |         |  
|Increase in total loans                      |  | $    | 34,947  |   |      | $ | 27,405  |  
|                                             |  |      |         |   |      |   |         |  

Deposit Activities and Other Sources of Funds

Deposits are the major source of funds for our lending and investment activities. In addition, we also generate funds from loan principal
repayments and prepayments, and from the maturities and cash flow of investment securities. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by
general interest rates and money-market conditions. Borrowings from the Federal Home Loan Bank of Atlanta (the FHLB) may be used on a short-term basis to compensate for reductions in the availability of funds from other sources, or for
long-term funding purposes. We have Fed Funds lines of credit extended by our correspondent banks to utilize for overnight cash flow needs. Longer-term funding is available through a Brokered CD Program and a Repurchase Agreement, both
of which are set-up with our primary correspondent bank. Neither of these two funding sources were utilized in 2006.

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



---

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

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

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



|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|--------------------------------- |  | --------------- | ------- | ------------ | ------ | - | ------ | - | ------------ |  | ------ | -
|                                  |  | At December 31, |        
|                                  |  | 2006            |         |              | 2005   |  
|                                  |  | Amount          |         | % ofDeposits |        |   | Amount |   | % ofDeposits | 
|Demand deposits                   |  | $               | 20,125  |              | 15.45  | % |        | $ | 20,374       |  | 19.82  | %
|Money-market deposits             |  |                 | 26,541  |              | 20.38  |   |        |   | 26,267       |  | 25.55  |  
|NOW deposits                      |  |                 | 3,834   |              | 2.94   |   |        |   | 4,808        |  | 4.68   |  
|Savings deposits                  |  |                 | 5,111   |              | 3.92   |   |        |   | 6,996        |  | 6.80   |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Subtotal                          |  |                 | 55,611  |              | 42.69  |   |        |   | 58,445       |  | 56.85  |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Certificate of deposits:          |  |                 |         |              |        |   |        |   |              |  |        |  
|0% - 0.99%                        |  |                 | 274     |              | .21    |   |        |   | 52           |  | .05    |  
|1.00% - 1.99%                     |  |                 |        |              |       |   |        |   | 187          |  | .18    |  
|2.00% - 2.99%                     |  |                 | 932     |              | .72    |   |        |   | 6,713        |  | 6.53   |  
|3.00% - 3.99%                     |  |                 | 2,364   |              | 1.82   |   |        |   | 17,212       |  | 16.74  |  
|4.00% - 4.99%                     |  |                 | 21,272  |              | 16.34  |   |        |   | 18,077       |  | 17.58  |  
|5.00% - 5.99%                     |  |                 | 49,766  |              | 38.22  |   |        |   | 2,123        |  | 2.07   |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Total certificates of deposit (1) |  |                 | 74,608  |              | 57.31  |   |        |   | 44,364       |  | 43.15  |  
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  
|Total deposits                    |  | $               | 130,219 |              | 100.00 | % |        | $ | 102,809      |  | 100.00 | %
|                                  |  |                 |         |              |        |   |        |   |              |  |        |  

---

|(1) | Included individual retirement accounts (IRAs) totaling $3,998,000 and $2,632,000 at
December 31, 2006 and 2005, 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, 2006, which mature during the periods indicated (in thousands):



|                              |  |                          |        |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       
|----------------------------- |  | ------------------------ | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | ----- |  | - | ------
|                              |  | Year Ending December 31,
|                              |  | 2007                     |        | 2008 |   | 2009  |  | 2010 |       | 2011 |   | Total
|0% - 0.99%                    |  | $                        | 274    |      | $ |      |  | $    |      |      | $ |      |  | $ |      |  | $ | 274   
|1.00% - 1.99%                 |  |                          |       |      |   |      |  |      |      |      |   |      |  |   |      |  |   |      
|2.00% - 2.99%                 |  |                          | 778    |      |   | 154   |  |      |      |      |   |      |  |   |      |  |   | 932   
|3.00% - 3.99%                 |  |                          | 1,365  |      |   | 707   |  |      | 201   |      |   | 91    |  |   |      |  |   | 2,364 
|4.00% - 4.99%                 |  |                          | 16,631 |      |   | 1,817 |  |      | 934   |      |   | 1,710 |  |   | 180   |  |   | 21,272
|5.00% - 5.99%                 |  |                          | 44,601 |      |   | 317   |  |      | 1,000 |      |   | 1,245 |  |   | 2,603 |  |   | 49,766
|                              |  |                          |        |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       
|Total certificates of deposit |  | $                        | 63,649 |      | $ | 2,995 |  | $    | 2,135 |      | $ | 3,046 |  | $ | 2,783 |  | $ | 74,608
|                              |  |                          |        |      |   |       |  |      |       |      |   |       |  |   |       |  |   |       



---

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



|                                    |  |              |        |      |   |       
|----------------------------------- |  | ------------ | ------ | ---- | - | ------
|                                    |  | December 31,
|                                    |  | 2006         |        | 2005
|Due three months or less            |  | $            | 6,512  |      | $ | 3,072 
|Due over three months to six months |  |              | 5,273  |      |   | 3,413 
|Due over six months to one year     |  |              | 19,118 |      |   | 7,863 
|Due over one year to five years     |  |              | 8,325  |      |   | 7,843 
|                                    |  |              |        |      |   |       
|                                    |  | $            | 39,228 |      | $ | 22,191
|                                    |  |              |        |      |   |       

Interest Rate Sensitivity

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



---

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



|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|-------------------------------------------------------------------------------- |  | ----------------------- | ------- | -------------------- | ---- | ----------------- |  | ---- | -------------- |  | -------------------- | ------- | ----------------- | - | ----- |  | ---- | -
|                                                                                 |  | Year Ended December 31, |        
|                                                                                 |  | 2006                    |         |                      | 2005 |                  
|                                                                                 |  | AverageBalance          |         | InterestandDividends |      | AverageYield/Rate |  |      | AverageBalance |  | InterestandDividends |         | AverageYield/Rate |  
|Interest-earning assets:                                                         |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Loans                                                                            |  | $                       | 115,533 |                      |      | 9,626             |  | 8.33 | %              |  | $                    | 91,215  |                   |   | 6,523 |  | 7.15 | %
|Securities                                                                       |  |                         | 10,741  |                      |      | 426               |  | 3.97 |                |  |                      | 10,144  |                   |   | 341   |  | 3.36 |  
|Other interest-earning assets (1)                                                |  |                         | 12,587  |                      |      | 574               |  | 4.56 |                |  |                      | 12,127  |                   |   | 379   |  | 3.13 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-earning assets                                                    |  |                         | 138,861 |                      |      | 10,626            |  | 7.65 |                |  |                      | 113,486 |                   |   | 7,243 |  | 6.38 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                         | 8,700   |                      |      |                   |  |      |                |  |                      | 5,656   |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total assets                                                                     |  | $                       | 147,561 |                      |      |                   |  |      |                |  | $                    | 119,142 |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Savings, NOW and money-market deposits                                           |  |                         | 37,710  |                      |      | 1,121             |  | 2.97 |                |  |                      | 36,345  |                   |   | 709   |  | 1.95 |  
|Certificates of deposit                                                          |  |                         | 64,718  |                      |      | 2,791             |  | 4.31 |                |  |                      | 36,039  |                   |   | 1,148 |  | 3.19 |  
|Other borrowings                                                                 |  |                         | 1,350   |                      |      | 64                |  | 4.74 |                |  |                      | 2,552   |                   |   | 82    |  | 3.21 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                         | 103,778 |                      |      | 3,976             |  | 3.83 |                |  |                      | 74,936  |                   |   | 1,939 |  | 2.59 |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Demand deposits                                                                  |  |                         | 20,978  |                      |      |                   |  |      |                |  |                      | 28,715  |                   |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                         | 2,034   |                      |      |                   |  |      |                |  |                      | 1,375   |                   |   |       |  |      |  
|Stockholders equity                                                             |  |                         | 20,771  |                      |      |                   |  |      |                |  |                      | 14,116  |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                       | 147,561 |                      |      |                   |  |      |                |  | $                    | 119,142 |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest income                                                              |  |                         |         |                      | $    | 6,650             |  |      |                |  |                      |         |                   | $ | 5,304 |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Interest-rate spread                                                             |  |                         |         |                      |      |                   |  | 3.82 | %              |  |                      |         |                   |   |       |  | 3.79 | %
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Net interest margin (2)                                                          |  |                         |         |                      |      |                   |  | 4.79 | %              |  |                      |         |                   |   |       |  | 4.67 | %
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                         | 1.34    |                      |      |                   |  |      |                |  |                      | 1.51    |                   |   |       |  |      |  
|                                                                                 |  |                         |         |                      |      |                   |  |      |                |  |                      |         |                   |   |       |  |      |  

---

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

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



---

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, 2006 vs. 2005:



|                                       |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|-------------------------------------- |  | -------------------------- | ----- | ------ | - | ----- | ----------- |  | - | ----- | - |  | - | ----- | -
|                                       |  | Increase (Decrease) Due to |      
|                                       |  | Rate                       |       | Volume |   |       | Rate/Volume |  |   | Total |  
|                                       |  | (In thousands)             |      
|Interest-earning assets:               |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Loans                                  |  | $                          | 1,076 |        | $ | 1,739 |             |  | $ | 288   |   |  | $ | 3,103 |  
|Securities                             |  |                            | 61    |        |   | 20    |             |  |   | 4     |   |  |   | 85    |  
|Other interest-earning assets          |  |                            | 174   |        |   | 14    |             |  |   | 7     |   |  |   | 195   |  
|                                       |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Total                                  |  |                            | 1,311 |        |   | 1,773 |             |  |   | 299   |   |  |   | 3,383 |  
|                                       |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Interest-bearing liabilities:          |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Deposits:                              |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Savings, money-market and NOW deposits |  |                            | 371   |        |   | 27    |             |  |   | 14    |   |  |   | 412   |  
|Certificates of deposit                |  |                            | 405   |        |   | 916   |             |  |   | 322   |   |  |   | 1,643 |  
|Other borrowings                       |  |                            | 39    |        |   | (39   | )           |  |   | (18   | ) |  |   | (18   | )
|                                       |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Total                                  |  |                            | 815   |        |   | 904   |             |  |   | 318   |   |  |   | 2,037 |  
|                                       |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  
|Net change in net interest income      |  | $                          | 496   |        | $ | 869   |             |  | $ | (19   | ) |  | $ | 1,346 |  
|                                       |  |                            |       |        |   |       |             |  |   |       |   |  |   |       |  

Comparison of Years Ended December 31, 2006 and 2005

General. Net earnings for the year ended December 31, 2006, were $631,000 or $.33 per basic and diluted share compared to net earnings
of $765,000 or $.52 per basic and diluted share for the year ended December 31, 2005. This decrease in net operating results was primarily due to an increase in interest expense and noninterest expense, partially offset by an increase in
interest income, all as a result of our growth and expansion.

Interest Income. Interest income increased to $10.6 million
for the year ended December 31, 2006, from $7.2 million for the year ended December 31, 2005. Interest income on loans increased to $9.6 million from $6.5 million due to an increase in the average loan portfolio balance for the year ended
December 31, 2006, and an increase in the weighted-average yield earned on the portfolio. Interest on securities increased to $426,000 in 2006, from $341,000 in 2005, due to an increase in the average yield in 2006, and an increase in the
average portfolio balance. Interest on other interest-earning assets increased to $574,000 for the year ended December 31, 2006, from $379,000 for the year ended December 31, 2005, primarily due to an increase in the weighted-average rate
paid in 2006.

Interest Expense. Interest expense increased to $4.0 million in 2006 from $1.9 million in 2005. Interest
expense increased due to growth in average interest-bearing deposits in 2006, as well as an increase 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 to $429,000 in 2006 from $352,000 in 2005. The allowance for loan losses increased to
$1.8 million at December 31, 2006 from $1.4 million at December 31, 2005. The increase in the allowance was due to the increase in the loan portfolio during the year. Management believes that the allowance for loan losses of $1.8 million
is adequate at December 31, 2006.

Noninterest Income. Noninterest income decreased to $824,000 in 2006 from $930,000 in
2005. This was primarily a result of decreased gains from the sales of loans in 2006 compared to 2005, partially offset by an increase in loan brokerage fees, service charges on deposit accounts and income from bank-owned life insurance in 2006.

Noninterest Expense. Total noninterest expense increased to $6.1 million for the year ended December 31,
2006, compared to $4.6 million in 2005. This was primarily due to increases in employee compensation and benefits, occupancy and equipment and other expenses, all a result of our overall growth and expansion.

Income Taxes.The income tax provision was $332,000 (an effective rate of 34.5%) for 2006 compared to $478,000 (an effective rate of 38.5%)
for 2005.

Impact of Inflation and Changing Prices

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

Selected Quarterly Results

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



|                                         |  |               |       |              |       |               |       |              |       |               |   |              |  |               |  |              |  |      
|---------------------------------------- |  | ------------- | ----- | ------------ | ----- | ------------- | ----- | ------------ | ----- | ------------- | - | ------------ |  | ------------- |  | ------------ |  | -----
|                                         |  | 2006          |       | 2005        
|                                         |  | FourthQuarter |       | ThirdQuarter |       | SecondQuarter |       | FirstQuarter |       | FourthQuarter |   | ThirdQuarter |  | SecondQuarter |  | FirstQuarter
|Interest income                          |  | $             | 3,009 |              | 2,763 |               | 2,546 |              | 2,308 |               | $ | 2,167        |  | 1,923         |  | 1,681        |  | 1,472
|Interest expense                         |  |               | 1,255 |              | 1,023 |               | 936   |              | 762   |               |   | 663          |  | 479           |  | 424          |  | 373  
|Net interest income                      |  |               | 1,754 |              | 1,740 |               | 1,610 |              | 1,546 |               |   | 1,504        |  | 1,444         |  | 1,257        |  | 1,099
|Provision for loan losses                |  |               | 107   |              | 145   |               | 70    |              | 107   |               |   | 95           |  | 95            |  | 92           |  | 70   
|Earnings before income taxes             |  |               | 205   |              | 303   |               | 220   |              | 235   |               |   | 182          |  | 425           |  | 409          |  | 227  
|Net earnings                             |  |               | 135   |              | 198   |               | 142   |              | 156   |               |   | 109          |  | 263           |  | 253          |  | 140  
|Basic earnings per common share          |  |               | .07   |              | .10   |               | .07   |              | .09   |               |   | .04          |  | .14           |  | .18          |  | .16  
|Diluted earnings per common share        |  |               | .07   |              | .10   |               | .07   |              | .08   |               |   | .03          |  | .14           |  | .17          |  | .16  
|Cash dividends declared per common share |  |               |      |              |      |               |      |              |      |               |   |             |  |              |  |             |  |     



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

($ in thousands, except per share amounts)



|                                                                                                                 |  |                 |         |   |      |         |  
|---------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ---- | ------- | -
|                                                                                                                 |  | At December 31, |        
|                                                                                                                 |  | 2006            |         |   | 2005 |        
|Assets                                                                                                           |  |                 |         |   |      |         |  
|Cash and due from banks                                                                                          |  | $               | 1,734   |   |      | 2,869   |  
|Federal funds sold                                                                                               |  |                 | 3,499   |   |      | 9,268   |  
|Interest-bearing deposits with banks                                                                             |  |                 | 189     |   |      | 229     |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Total cash and cash equivalents                                                                                  |  |                 | 5,422   |   |      | 12,366  |  
|                                                                                                                 |  |                
|Securities available for sale                                                                                    |  |                 | 6,444   |   |      | 9,229   |  
|Securities held to maturity (market value of $2,499 and $2,950)                                                  |  |                 | 2,509   |   |      | 3,015   |  
|Loans, net of allowance for loan losses of $1,801 and $1,383                                                     |  |                 | 130,133 |   |      | 95,666  |  
|Premises and equipment, net                                                                                      |  |                 | 4,278   |   |      | 3,699   |  
|Federal Home Loan Bank stock, at cost                                                                            |  |                 | 259     |   |      | 306     |  
|Accrued interest receivable                                                                                      |  |                 | 828     |   |      | 558     |  
|Deferred income taxes                                                                                            |  |                 | 368     |   |      | 197     |  
|Bank-owned life insurance                                                                                        |  |                 | 2,573   |   |      | 1,950   |  
|Other assets                                                                                                     |  |                 | 625     |   |      | 323     |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Total assets                                                                                                     |  | $               | 153,439 |   |      | 127,309 |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Liabilities and Stockholders Equity                                                                             |  |                 |         |   |      |         |  
|                                                                                                                 |  |                
|Liabilities:                                                                                                     |  |                 |         |   |      |         |  
|Noninterest-bearing demand deposits                                                                              |  |                 | 20,125  |   |      | 20,374  |  
|Savings, NOW and money-market deposits                                                                           |  |                 | 35,486  |   |      | 38,071  |  
|Time deposits                                                                                                    |  |                 | 74,608  |   |      | 44,364  |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Total deposits                                                                                                   |  |                 | 130,219 |   |      | 102,809 |  
|                                                                                                                 |  |                
|Official checks                                                                                                  |  |                 | 1,241   |   |      | 938     |  
|Federal Home Loan Bank advances                                                                                  |  |                 | 100     |   |      | 2,600   |  
|Other liabilities                                                                                                |  |                 | 816     |   |      | 621     |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Total liabilities                                                                                                |  |                 | 132,376 |   |      | 106,968 |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Commitments and contingencies (Notes 4 and 7)                                                                    |  |                 |         |   |      |         |  
|                                                                                                                 |  |                
|Stockholders equity:                                                                                            |  |                 |         |   |      |         |  
|Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued or outstanding                    |  |                 |        |   |      |        |  
|Common stock, $.01 par value; 5,000,000 shares authorized, 1,906,203 and 1,810,588 shares issued and outstanding |  |                 | 19      |   |      | 18      |  
|Additional paid-in capital                                                                                       |  |                 | 21,729  |   |      | 20,136  |  
|(Accumulated deficit) retained earnings                                                                          |  |                 | (634    | ) |      | 262     |  
|Accumulated other comprehensive loss                                                                             |  |                 | (51     | ) |      | (75     | )
|                                                                                                                 |  |                 |         |   |      |         |  
|Total stockholders equity                                                                                       |  |                 | 21,063  |   |      | 20,341  |  
|                                                                                                                 |  |                 |         |   |      |         |  
|Total liabilities and stockholders equity                                                                       |  | $               | 153,439 |   |      | 127,309 |  
|                                                                                                                 |  |                 |         |   |      |         |  

See Accompanying Notes to Consolidated Financial Statements.



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Earnings

($ in thousands, except per share
amounts)



|                                                    |  |                         |           |      |          
|--------------------------------------------------- |  | ----------------------- | --------- | ---- | ---------
|                                                    |  | Year Ended December 31,
|                                                    |  | 2006                    |           | 2005
|Interest income:                                    |  |                         |           |      |          
|Loans                                               |  | $                       | 9,626     |      | 6,523    
|Securities                                          |  |                         | 426       |      | 341      
|Other                                               |  |                         | 574       |      | 379      
|                                                    |  |                         |           |      |          
|Total interest income                               |  |                         | 10,626    |      | 7,243    
|                                                    |  |                         |           |      |          
|Interest expense:                                   |  |                         |           |      |          
|Deposits                                            |  |                         | 3,912     |      | 1,857    
|Federal Home Loan Bank advances                     |  |                         | 64        |      | 82       
|                                                    |  |                         |           |      |          
|Total interest expense                              |  |                         | 3,976     |      | 1,939    
|                                                    |  |                         |           |      |          
|Net interest income                                 |  |                         | 6,650     |      | 5,304    
|                                                    |  |                        
|Provision for loan losses                           |  |                         | 429       |      | 352      
|                                                    |  |                         |           |      |          
|Net interest income after provision for loan losses |  |                         | 6,221     |      | 4,952    
|                                                    |  |                         |           |      |          
|Noninterest income:                                 |  |                         |           |      |          
|Service charges and fees on deposit accounts        |  |                         | 439       |      | 292      
|Loan brokerage fees                                 |  |                         | 260       |      | 205      
|Income from bank-owned life insurance               |  |                         | 98        |      |         
|Gain on sale of loans held for sale                 |  |                         |          |      | 421      
|Other fees                                          |  |                         | 27        |      | 12       
|                                                    |  |                         |           |      |          
|Total noninterest income                            |  |                         | 824       |      | 930      
|                                                    |  |                         |           |      |          
|Noninterest expenses:                               |  |                         |           |      |          
|Salaries and employee benefits                      |  |                         | 3,163     |      | 2,438    
|Occupancy and equipment                             |  |                         | 878       |      | 608      
|Advertising                                         |  |                         | 498       |      | 364      
|Professional fees                                   |  |                         | 183       |      | 141      
|Data processing                                     |  |                         | 394       |      | 308      
|Supplies                                            |  |                         | 162       |      | 130      
|Other                                               |  |                         | 804       |      | 650      
|                                                    |  |                         |           |      |          
|Total noninterest expenses                          |  |                         | 6,082     |      | 4,639    
|                                                    |  |                         |           |      |          
|Earnings before income taxes                        |  |                         | 963       |      | 1,243    
|                                                    |  |                        
|Income taxes                                        |  |                         | 332       |      | 478      
|                                                    |  |                         |           |      |          
|Net earnings                                        |  | $                       | 631       |      | 765      
|                                                    |  |                         |           |      |          
|Earnings per share:                                 |  |                         |           |      |          
|                                                    |  |                         |           |      |          
|Basic                                               |  | $                       | .33       |      | .52      
|                                                    |  |                         |           |      |          
|Diluted                                             |  | $                       | .33       |      | .52      
|                                                    |  |                         |           |      |          
|Weighted-average number of shares, basic            |  |                         | 1,903,687 |      | 1,466,203
|                                                    |  |                         |           |      |          
|Weighted-average number of shares, diluted          |  |                         | 1,933,661 |      | 1,479,641
|                                                    |  |                         |           |      |          

See Accompanying Notes to Consolidated Financial Statements.



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders Equity

Years Ended
December 31, 2006 and 2005

($ in thousands)



|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|----------------------------------------------------------------------------------------- |  | ------------ |  | ------------------------ | -- | ------------------------------------ | ------ |  | --------------------------------- | - |  | ------------------------ | - |  | ------ | -
|                                                                                          |  | Common Stock |  | AdditionalPaid-InCapital |    | (AccumulatedDeficit)RetainedEarnings |        |  | AccumulatedOtherComprehensiveLoss |   |  | TotalStockholdersEquity |  
|                                                                                          |  | Shares       |  | Amount                   |    |                                      |        | 
|Balance at December 31, 2004                                                              |  | 819,120      |  | $                        | 8  |                                      | 7,927  |  | (503                              | ) |  | (12                      | ) |  | 7,420  |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Proceeds from the sale of common stock (net of offering costs of $641)                    |  | 960,000      |  |                          | 10 |                                      | 11,829 |  |                                  |   |  |                         |   |  | 11,839 |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Comprehensive income:                                                                     |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|                                                                                          |  |              |  |                          |    |                                     
|Net earnings                                                                              |  |             |  |                          |   |                                      |       |  | 765                               |   |  |                         |   |  | 765    |  
|                                                                                          |  |              |  |                          |    |                                     
|Net change in unrealized loss on securities available for sale, net of tax benefit of $37 |  |             |  |                          |   |                                      |       |  |                                  |   |  | (63                      | ) |  | (63    | )
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Comprehensive income                                                                      |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  | 702    |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Proceeds from exercise of common stock options                                            |  | 31,468       |  |                          |   |                                      | 316    |  |                                  |   |  |                         |   |  | 316    |  
|                                                                                          |  |              |  |                          |    |                                     
|Tax benefit from common stock options exercised                                           |  |             |  |                          |   |                                      | 64     |  |                                  |   |  |                         |   |  | 64     |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Balance at December 31, 2005                                                              |  | 1,810,588    |  |                          | 18 |                                      | 20,136 |  | 262                               |   |  | (75                      | ) |  | 20,341 |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Comprehensive income:                                                                     |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|                                                                                          |  |              |  |                          |    |                                     
|Net earnings                                                                              |  |             |  |                          |   |                                      |       |  | 631                               |   |  |                         |   |  | 631    |  
|                                                                                          |  |              |  |                          |    |                                     
|Net change in unrealized loss on securities available for sale, net of tax benefit of $14 |  |             |  |                          |   |                                      |       |  |                                  |   |  | 24                       |   |  | 24     |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Comprehensive income                                                                      |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  | 655    |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|5% stock dividend, fractional shares paid-in cash of $2                                   |  | 90,602       |  |                          | 1  |                                      | 1,524  |  | (1,527                            | ) |  |                         |   |  | (2     | )
|                                                                                          |  |              |  |                          |    |                                     
|Share-based compensation                                                                  |  |             |  |                          |   |                                      | 8      |  |                                  |   |  |                         |   |  | 8      |  
|                                                                                          |  |              |  |                          |    |                                     
|Proceeds from exercise of common stock options                                            |  | 5,013        |  |                          |   |                                      | 50     |  |                                  |   |  |                         |   |  | 50     |  
|                                                                                          |  |              |  |                          |    |                                     
|Tax benefit from common stock options exercised                                           |  |             |  |                          |    |                                      | 11     |  |                                  |   |  |                         |   |  | 11     |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  
|Balance at December 31, 2006                                                              |  | 1,906,203    |  | $                        | 19 |                                      | 21,729 |  | (634                              | ) |  | (51                      | ) |  | 21,063 |  
|                                                                                          |  |              |  |                          |    |                                      |        |  |                                   |   |  |                          |   |  |        |  

See Accompanying Notes to Consolidated Financial Statements.



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In thousands)



|                                                                                    |  |                         |         |   |      |         |  
|----------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | ------- | -
|                                                                                    |  | Year Ended December 31, |        
|                                                                                    |  | 2006                    |         |   | 2005 |        
|Cash flows from operating activities:                                               |  |                         |         |   |      |         |  
|Net earnings                                                                        |  | $                       | 631     |   |      | 765     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                         |         |   |      |         |  
|Depreciation and amortization                                                       |  |                         | 285     |   |      | 269     |  
|Provision for loan losses                                                           |  |                         | 429     |   |      | 352     |  
|Amortization of loan (fees) costs, net                                              |  |                         | (26     | ) |      | 37      |  
|Deferred income taxes                                                               |  |                         | (185    | ) |      | 54      |  
|Net amortization of premiums and discounts on securities                            |  |                         | 8       |   |      | (5      | )
|Gain on sale of loans held for sale                                                 |  |                         |        |   |      | (421    | )
|Proceeds from sale of loans held for sale                                           |  |                         |        |   |      | 7,393   |  
|Origination of loans held for sale                                                  |  |                         |        |   |      | (6,972  | )
|Increase in accrued interest receivable                                             |  |                         | (270    | ) |      | (252    | )
|Increase in other assets                                                            |  |                         | (302    | ) |      | (91     | )
|Increase (decrease) in official checks and other liabilities                        |  |                         | 498     |   |      | (1,123  | )
|Income from bank-owned life insurance                                               |  |                         | (98     | ) |      |        |  
|Tax benefit associated with exercise of common stock options                        |  |                         |        |   |      | 64      |  
|Share-based compensation                                                            |  |                         | 8       |   |      |        |  
|                                                                                    |  |                         |         |   |      |         |  
|Net cash provided by operating activities                                           |  |                         | 978     |   |      | 70      |  
|                                                                                    |  |                         |         |   |      |         |  
|Cash flows from investing activities:                                               |  |                         |         |   |      |         |  
|Maturities of securities available for sale                                         |  |                         | 4,000   |   |      | 3,500   |  
|Maturity of security held to maturity                                               |  |                         | 500     |   |      |        |  
|Purchase of securities available for sale                                           |  |                         | (1,500  | ) |      | (5,000  | )
|Principal payments on securities available for sale                                 |  |                         | 312     |   |      | 510     |  
|Principal payments on securities held to maturity                                   |  |                         | 9       |   |      | 22      |  
|Net increase in loans                                                               |  |                         | (34,870 | ) |      | (27,261 | )
|Sale (purchase) of Federal Home Loan Bank stock                                     |  |                         | 47      |   |      | (53     | )
|Purchase of premises and equipment                                                  |  |                         | (864    | ) |      | (300    | )
|Purchase of bank-owned life insurance                                               |  |                         | (525    | ) |      | (1,950  | )
|                                                                                    |  |                         |         |   |      |         |  
|Net cash used in investing activities                                               |  |                         | (32,891 | ) |      | (30,532 | )
|                                                                                    |  |                         |         |   |      |         |  
|Cash flows from financing activities:                                               |  |                         |         |   |      |         |  
|Net increase in deposits                                                            |  |                         | 27,410  |   |      | 20,873  |  
|(Decrease) increase of Federal Home Loan Bank advances                              |  |                         | (2,500  | ) |      | 100     |  
|Net proceeds from the issuance of common stock                                      |  |                         |        |   |      | 11,839  |  
|Proceeds from the exercise of common stock options                                  |  |                         | 50      |   |      | 316     |  
|Tax benefit associated with exercise of common stock options                        |  |                         | 11      |   |      |        |  
|Fractional shares of stock dividends paid-in cash                                   |  |                         | (2      | ) |      |        |  
|Dividends paid                                                                      |  |                         |        |   |      | (59     | )
|                                                                                    |  |                         |         |   |      |         |  
|Net cash provided by financing activities                                           |  |                         | 24,969  |   |      | 33,069  |  
|                                                                                    |  |                         |         |   |      |         |  
|Net (decrease) increase in cash and cash equivalents                                |  |                         | (6,944  | ) |      | 2,607   |  
|                                                                                    |  |                        
|Cash and cash equivalents at beginning of the year                                  |  |                         | 12,366  |   |      | 9,759   |  
|                                                                                    |  |                         |         |   |      |         |  
|Cash and cash equivalents at end of the year                                        |  | $                       | 5,422   |   |      | 12,366  |  
|                                                                                    |  |                         |         |   |      |         |  

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows, Continued

(In thousands)



|                                                                                                                   |  |                         |       |      |       |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ----- | ---- | ----- | -
|                                                                                                                   |  | Year Ended December 31, |      
|                                                                                                                   |  | 2006                    |       | 2005 |      
|Supplemental disclosure of cash flow information:                                                                  |  |                         |       |      |       |  
|Cash paid during the year for:                                                                                     |  |                         |       |      |       |  
|Interest, net of interest capitalized of $3 in 2005                                                                |  | $                       | 3,955 |      | 1,897 |  
|                                                                                                                   |  |                         |       |      |       |  
|Income taxes                                                                                                       |  | $                       | 379   |      | 355   |  
|                                                                                                                   |  |                         |       |      |       |  
|Noncash transactions:                                                                                              |  |                         |       |      |       |  
|Accumulated other comprehensive income, net change in unrealized loss on securities available for sale, net of tax |  | $                       | 24    |      | (63   | )
|                                                                                                                   |  |                         |       |      |       |  
|Common stock dividend                                                                                              |  | $                       | 1,525 |      |      |  
|                                                                                                                   |  |                         |       |      |       |  

See Accompanying Notes to Consolidated Financial Statements.



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements



December 31, 2006 and 2005 and the Years Then Ended



|(1) | Summary of Significant Accounting Policies
|--- | ------------------------------------------

Organization. FPB Bancorp, Inc. (the Holding Company) owns 100% of the outstanding common stock of First Peoples Bank (the Bank) (collectively referred to as the Company). The Holding
Company operates as a one-bank holding company and its only business activity is the operation of the Bank. The Bank is a state (Florida)-chartered commercial bank and its deposits are insured up to the applicable amounts by the Federal Deposit
Insurance Corporation. The Bank offers a variety of community banking services to individual and corporate customers through its four banking offices located in Port St. Lucie, Fort Pierce, Vero Beach and Stuart, Florida. A fifth office is
anticipated to open in early 2008, on Gatlin Boulevard in Port St. Lucie, Florida. In addition, an 11,000 square foot Operations Center in Jensen Beach, Florida, will open by the end of the first quarter of 2007.

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

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

Use of Estimates. In preparing consolidated financial statements in conformity with U.S. generally accepted accounting
principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses.

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

The
Bank is required by law or regulation to maintain cash reserves in the form of vault cash or in noninterest-earning accounts with the Federal Reserve Bank or other qualified banks. At December 31, 2006 and 2005, there was no required reserve
balance.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(1) | Summary of Significant Accounting Policies, Continued
|--- | -----------------------------------------------------

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

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

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

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

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

Loans Held for Sale.In 2005, the Company originated loans guaranteed by the U.S. Small Business Administration, the
guaranteed portion of which may be sold at a premium. These loans were carried at the lower of cost or estimated fair value in the aggregate. There were no loans held for sale at December 31, 2006 or 2005.

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

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(1) | Summary of Significant Accounting Policies, Continued
|--- | -----------------------------------------------------

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

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

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

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

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

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(1) | Summary of Significant Accounting Policies, Continued
|--- | -----------------------------------------------------

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

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

Share-Based Compensation. Prior to
January 1, 2006, the Companys stock option plans were accounted for under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25 (Opinion 25), Accounting for Stock Issued to Employees,
and related Interpretations, as permitted by Financial Accounting Standards Board (FASB) Statement No. 123, Accounting for Stock-Based Compensation (as amended by Statement of Financial Accounting Standards (SFAS) No. 148,
Accounting for Stock-Based Compensation Transition and Disclosure) (collectively SFAS 123). No stock-based employee compensation cost was recognized in the Companys consolidated statements of earnings through December 31, 2005, as
all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement
No. 123(R), Share-Based Payment(SFAS 123(R)), using the modified-prospective-transition method. Under that transition method, compensation cost recognized in 2006 includes: (a) compensation cost for all share-based payments
granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value calculated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to
December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). As of December 31, 2006 and 2005, respectively, only 4,938 (adjusted) and 7,406 (adjusted) stock options were not fully
vested and no stock options were granted in 2006. The effect of adopting SFAS 123(R) in 2006 was not material.

In addition, prior to the
adoption of SFAS 123(R), the tax benefits of stock options exercised were classified as operating cash flows. Since the adoption of SFAS 123(R), tax benefits resulting from tax deductions in excess of the compensation cost recognized for options are
classified as financing cash flows. As the Company adopted the modified-prospective- transition method, the prior period consolidated cash flow statement was not adjusted to reflect current period presentation.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(1) | Summary of Significant Accounting Policies, Continued
|--- | -----------------------------------------------------

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

Earnings Per Share. Basic earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share were
computed based on the weighted-average number of shares outstanding plus the effect of outstanding stock options, computed using the treasury stock method. All per share amounts reflect the 5% stock dividend declared on April 26, 2006 and paid
on May 17, 2006. Earnings per common share have been computed based on the following:



|                                                                                                         |  |                         |  |          
|-------------------------------------------------------------------------------------------------------- |  | ----------------------- |  | ---------
|                                                                                                         |  | Year Ended December 31,
|                                                                                                         |  | 2006                    |  | 2005     
|Weighted-average number of common shares outstanding used to calculate basic earnings per common share   |  | 1,903,687               |  | 1,466,203
|Effect of dilutive stock options                                                                         |  | 29,974                  |  | 13,438   
|                                                                                                         |  |                         |  |          
|Weighted-average number of common shares outstanding used to calculate diluted earnings per common share |  | 1,933,661               |  | 1,479,641
|                                                                                                         |  |                         |  |          

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

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

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

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(1) | Summary of Significant Accounting Policies, Continued
|--- | -----------------------------------------------------

Fair Values of Financial Instruments, Continued.

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

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

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

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

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

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

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

Recent Accounting Pronouncements. In September 2006, the FASB issued SFAS No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R), (SFAS 158) which requires the recognition of a plans over-funded or under-funded status as an asset or liability
with an offsetting adjustment to Accumulated Other Comprehensive Income (Loss). This statement was effective as of December 31, 2006. The adoption of SFAS 158 had no effect on the Companys results of operations or financial condition.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(1) | Summary of Significant Accounting Policies, Continued
|--- | -----------------------------------------------------

Recent Accounting Pronouncements, Continued.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. SFAS 157 retains the exchange price notion and clarifies that the exchange price is the price that would be received for an
asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. SFAS 157 is effective for the Companys financial statements for the year beginning on January 1, 2008,
with earlier adoption permitted. The adoption of SFAS 157 is not expected to have a material impact on the Company.

In September 2006,
the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 expresses the SEC Staffs views regarding the process of quantifying financial statement misstatements. SAB 108 states that in
evaluating the materiality of financial statement misstatements a corporation must quantify the impact of correcting misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial
statements. SAB 108 was effective for the fiscal years ended after November 15, 2006. The adoption of SAB 108 had no effect on the Companys results of operations or financial condition.

In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the tax law may be uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. The Company adopted FIN 48 on January 1, 2007. The adoption of FIN 48 had no effect on the Company.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement
No. 133 and 140 (SFAS 156), which permits, but does not require, an entity to account for one or more classes of servicing rights (i.e., mortgage servicing rights) at fair value, with the changes in fair value recorded in the consolidated
statement of earnings. This Statement was effective as of January 1, 2007. The adoption of SFAS 156 had no effect on the Company.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments (SFAS 155), which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded
derivative that would otherwise require bifurcation in accordance with SFAS 133. The statement also subjects beneficial interests issued by securitization vehicles to the requirements of SFAS 133. The statement was effective as of
January 1, 2007. The adoption of SFAS 155 had no effect on the Company.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(2) | Securities
|--- | ----------

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



|                                    |  |               |       |                       |   |                        |      |   |           |      
|----------------------------------- |  | ------------- | ----- | --------------------- | - | ---------------------- | ---- | - | --------- | -----
|                                    |  | AmortizedCost |       | Gross UnrealizedGains |   | Gross UnrealizedLosses |      |   | FairValue
|At December 31, 2006:               |  |               |       |                       |   |                        |      |   |           |      
|Securities available for sale:      |  |               |       |                       |   |                        |      |   |           |      
|U.S. Government agency securities   |  | $             | 5,500 |                       |  |                        | (55  | ) |           | 5,445
|Mortgage-backed securities          |  |               | 1,026 |                       |  |                        | (27  | ) |           | 999  
|                                    |  |               |       |                       |   |                        |      |   |           |      
|Total securities available for sale |  | $             | 6,526 |                       |  |                        | (82  | ) |           | 6,444
|                                    |  |               |       |                       |   |                        |      |   |           |      
|Securities held to maturity:        |  |               |       |                       |   |                        |      |   |           |      
|U.S. Government agency securities   |  |               | 2,500 |                       |  |                        | (10  | ) |           | 2,490
|Mortgage-backed securities          |  |               | 9     |                       |  |                        |     |   |           | 9    
|                                    |  |               |       |                       |   |                        |      |   |           |      
|Total securities held to maturity   |  | $             | 2,509 |                       |  |                        | (10  | ) |           | 2,499
|                                    |  |               |       |                       |   |                        |      |   |           |      
|At December 31, 2005:               |  |               |       |                       |   |                        |      |   |           |      
|Securities available for sale:      |  |               |       |                       |   |                        |      |   |           |      
|U.S. Government agency securities   |  |               | 8,002 |                       |  |                        | (83  | ) |           | 7,919
|Mortgage-backed securities          |  |               | 1,347 |                       |  |                        | (37  | ) |           | 1,310
|                                    |  |               |       |                       |   |                        |      |   |           |      
|Total securities available for sale |  | $             | 9,349 |                       |  |                        | (120 | ) |           | 9,229
|                                    |  |               |       |                       |   |                        |      |   |           |      
|Securities held to maturity:        |  |               |       |                       |   |                        |      |   |           |      
|U.S. Government agency securities   |  |               | 2,997 |                       |  |                        | (65  | ) |           | 2,932
|Mortgage-backed securities          |  |               | 18    |                       |  |                        |     |   |           | 18   
|                                    |  |               |       |                       |   |                        |      |   |           |      
|Total securities held to maturity   |  | $             | 3,015 |                       |  |                        | (65  | ) |           | 2,950
|                                    |  |               |       |                       |   |                        |      |   |           |      

There were no sales of available for sale securities in 2006 or 2005.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(2) | Securities, Continued
|--- | ---------------------

The scheduled maturities of
securities at December 31, 2006 are as follows (in thousands):



|                           |  |                    |       |                  |       |               |       |           |      
|-------------------------- |  | ------------------ | ----- | ---------------- | ----- | ------------- | ----- | --------- | -----
|                           |  | Available for Sale |       | Held to Maturity
|                           |  | AmortizedCost      |       | FairValue        |       | AmortizedCost |       | FairValue
|Due in one year or less    |  | $                  | 1,500 |                  | 1,486 |               | 2,500 |           | 2,490
|Due from one to five years |  |                    | 3,000 |                  | 2,964 |               |      |           |     
|Due from five to ten years |  |                    | 1,000 |                  | 995   |               |      |           |     
|Mortgage-backed securities |  |                    | 1,026 |                  | 999   |               | 9     |           | 9    
|                           |  |                    |       |                  |       |               |       |           |      
|                           |  | $                  | 6,526 |                  | 6,444 |               | 2,509 |           | 2,499
|                           |  |                    |       |                  |       |               |       |           |      

At December 31, 2006 and 2005 securities with a carrying value of $5,594,000
and $7,074,000, respectively, were pledged for Federal Home Loan Bank advances and to the State of Florida as collateral for public funds.

Securities with gross unrealized losses at December 31, 2006, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows (in thousands):



|                                    |  |                         |    |                    |           |       |                        |     |   |           |      
|----------------------------------- |  | ----------------------- | -- | ------------------ | --------- | ----- | ---------------------- | --- | - | --------- | -----
|                                    |  | Less Than Twelve Months |    | Over Twelve Months
|                                    |  | Gross Unrealized Losses |    |                    | FairValue |       | Gross UnrealizedLosses |     |   | FairValue
|Securities available for sale:      |  |                         |    |                    |           |       |                        |     |   |           |      
|U.S. Government agency securities   |  | $                       | (7 | )                  |           | 1,494 |                        | (48 | ) |           | 3,951
|Mortgage-backed securities          |  |                         |   |                    |           |      |                        | (27 | ) |           | 999  
|                                    |  |                         |    |                    |           |       |                        |     |   |           |      
|Total securities available for sale |  | $                       | (7 | )                  |           | 1,494 |                        | (75 | ) |           | 4,950
|                                    |  |                         |    |                    |           |       |                        |     |   |           |      
|Securities held to maturity-        |  |                         |    |                    |           |       |                        |     |   |           |      
|U.S. Government agency securities   |  | $                       |   |                    |           |      |                        | (10 | ) |           | 2,490
|                                    |  |                         |    |                    |           |       |                        |     |   |           |      

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

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(2) | Securities, Continued
|--- | ---------------------

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



|(3) | Loans
|--- | -----

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



|                                  |  |                 |         |   |      |        |  
|--------------------------------- |  | --------------- | ------- | - | ---- | ------ | -
|                                  |  | At December 31, |        
|                                  |  | 2006            |         |   | 2005 |       
|Commercial                        |  | $               | 50,521  |   |      | 36,510 |  
|Commercial real estate            |  |                 | 55,967  |   |      | 39,794 |  
|Construction                      |  |                 | 6,089   |   |      | 4,365  |  
|Consumer                          |  |                 | 19,618  |   |      | 16,688 |  
|Residential real estate           |  |                 | 315     |   |      | 206    |  
|                                  |  |                 |         |   |      |        |  
|Total loans                       |  |                 | 132,510 |   |      | 97,563 |  
|                                  |  |                
|Deduct:                           |  |                 |         |   |      |        |  
|Deferred loan costs and fees, net |  |                 | (576    | ) |      | (514   | )
|Allowance for loan losses         |  |                 | (1,801  | ) |      | (1,383 | )
|                                  |  |                 |         |   |      |        |  
|Loans, net                        |  | $               | 130,133 |   |      | 95,666 |  
|                                  |  |                 |         |   |      |        |  

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



|                               |  |                         |       |   |      |       |  
|------------------------------ |  | ----------------------- | ----- | - | ---- | ----- | -
|                               |  | Year Ended December 31, |      
|                               |  | 2006                    |       |   | 2005 |      
|Beginning balance              |  | $                       | 1,383 |   |      | 1,097 |  
|Provision for loan losses      |  |                         | 429   |   |      | 352   |  
|Charge-offs, net of recoveries |  |                         | (11   | ) |      | (66   | )
|                               |  |                         |       |   |      |       |  
|Ending balance                 |  | $                       | 1,801 |   |      | 1,383 |  
|                               |  |                         |       |   |      |       |  

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(3) | Loans, Continued
|--- | ----------------



|                                                                                                           |  |                         |     |      |   
|---------------------------------------------------------------------------------------------------------- |  | ----------------------- | --- | ---- | --
|Information about impaired loans, all of which are collateral dependent, is as follows (in thousands):    
|                                                                                                           | 
|                                                                                                           |  | At December 31,        
|                                                                                                           |  | 2006                    |     | 2005
|Loans identified as impaired:                                                                              |  |                         |     |      |   
|Gross loans with no related allowances for loan losses                                                     |  | $                       |    |      |  
|                                                                                                           |  |                         |     |      |   
|Gross loans with related allowances for losses recorded                                                    |  |                         | 344 |      |  
|Less allowance on these loans                                                                              |  |                         | 87  |      |  
|                                                                                                           |  |                         |     |      |   
|Net investment in impaired loans                                                                           |  | $                       | 257 |      |  
|                                                                                                           |  |                         |     |      |   
|                                                                                                           | 
|                                                                                                           |  | Year Ended December 31,
|                                                                                                           |  | 2006                    |     | 2005
|Average net investment in impaired loans                                                                   |  | $                       | 69  |      | 90
|                                                                                                           |  |                         |     |      |   
|Interest income recognized on impaired loans                                                               |  | $                       | 14  |      | 49
|                                                                                                           |  |                         |     |      |   
|Interest income received on impaired loans                                                                 |  | $                       | 14  |      | 49
|                                                                                                           |  |                         |     |      |   
|                                                                                                          
|Nonaccrual loans and loans past due ninety days or more but still accruing were as follows (in thousands):
|                                                                                                           | 
|                                                                                                           |  | At December 31,        
|                                                                                                           |  | 2006                    |     | 2005
|Nonaccrual loans                                                                                           |  | $                       | 344 |      |  
|Past due ninety days or more but still accruing                                                            |  |                         |    |      |  
|                                                                                                           |  |                         |     |      |   
|                                                                                                           |  | $                       | 344 |      |  
|                                                                                                           |  |                         |     |      |   

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(4) | Premises and Equipment
|--- | ----------------------

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



|                                               |  |                 |       |   |      |       |  
|---------------------------------------------- |  | --------------- | ----- | - | ---- | ----- | -
|                                               |  | At December 31, |      
|                                               |  | 2006            |       |   | 2005 |      
|Building and improvements                      |  | $               | 2,614 |   |      | 2,614 |  
|Land                                           |  |                 | 552   |   |      | 552   |  
|Furniture, fixtures and equipment              |  |                 | 1,259 |   |      | 884   |  
|Leasehold improvements                         |  |                 | 327   |   |      | 221   |  
|Construction in process                        |  |                 | 379   |   |      |      |  
|                                               |  |                 |       |   |      |       |  
|Total, at cost                                 |  |                 | 5,131 |   |      | 4,271 |  
|                                               |  |                
|Less accumulated depreciation and amortization |  |                 | (853  | ) |      | (572  | )
|                                               |  |                 |       |   |      |       |  
|Premises and equipment, net                    |  | $               | 4,278 |   |      | 3,699 |  
|                                               |  |                 |       |   |      |       |  

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

The Company leases its Stuart, Florida branch office facility under a noncancelable lease. The initial lease term is five
years with two five-year renewal options. In November 2005, the Company signed a ten year lease with four five-year renewals, on a branch building in Vero Beach, Florida which opened in March, 2006. In February of 2006, the Company signed a fifty
year lease, with four ten-year renewal options on a ground lease for the Gatlin Boulevard, Port St. Lucie, Florida future branch site. That branch is expected to open in early 2008. In April of 2006, the Company signed a seven year lease, with two
five-year renewal options, on the Operations Center in Jensen Beach, Florida which is expected to open in early 2007. The Company has approximately $371,000 in outstanding purchase commitments related to the Operations Center. The Company is
required to pay an allowable share of common area maintenance, insurance and real estate taxes on these leases. Rent expense under the operating leases during the years ended December 31, 2006 and 2005 was approximately $298,000 and $127,000,
respectively. In addition, the Company leases space in its Fort Pierce branch office facility to third parties. The leases have initial terms of five years and lease income was approximately $89,000 and $110,000 in 2006 and 2005, respectively.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(4) | Premises and Equipment, Continued
|--- | ---------------------------------

At December 31, 2006, future minimum rental commitments, including certain renewal options, under these noncancelable leases were approximately as follows (in thousands):



|                         |  |                       |        |                      |    
|------------------------ |  | --------------------- | ------ | -------------------- | ---
|Year Ending December 31, |  | OperatingLeaseExpense |        | OperatingLeaseIncome
|2007                     |  | $                     | 317    |                      | 83 
|2008                     |  |                       | 393    |                      | 84 
|2009                     |  |                       | 406    |                      | 13 
|2010                     |  |                       | 414    |                      |   
|2011                     |  |                       | 423    |                      |   
|Thereafter               |  |                       | 14,504 |                      |   
|                         |  |                       |        |                      |    
|Total                    |  | $                     | 16,457 |                      | 180
|                         |  |                       |        |                      |    



|(5) | Deposits
|--- | --------

The aggregate amount of
time deposits with a minimum denomination of $100,000, was approximately $39,228,000 and $22,191,000 at December 31, 2006 and 2005, respectively.

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



|                         |  |        |       
|------------------------ |  | ------ | ------
|Year Ending December 31, |  | Amount
|2007                     |  | $      | 63,649
|2008                     |  |        | 2,995 
|2009                     |  |        | 2,135 
|2010                     |  |        | 3,046 
|2011                     |  |        | 2,783 
|                         |  |        |       
|                         |  | $      | 74,608
|                         |  |        |       

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(6) | Federal Home Loan Bank Advances
|--- | -------------------------------

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



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

---

|(1) | Low interest rate due to being related to FHLB low-housing project lending.
|--- | ---------------------------------------------------------------------------

The advances are collateralized by securities available for sale with a carrying value of approximately
$336,000 and $3,075,000 at December 31, 2006 and 2005, respectively.



|(7) | Financial Instruments
|--- | ---------------------

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



|                                        |  |                      |         |                      |         |                |         |           |        
|--------------------------------------- |  | -------------------- | ------- | -------------------- | ------- | -------------- | ------- | --------- | -------
|                                        |  | At December 31, 2006 |         | At December 31, 2005
|                                        |  | CarryingAmount       |         | FairValue            |         | CarryingAmount |         | FairValue
|                                        |  |                      |         |                      |         |                |         |           |        
|Financial assets:                       |  |                      |         |                      |         |                |         |           |        
|Cash and cash equivalents               |  | $                    | 5,422   |                      | 5,422   |                | 12,366  |           | 12,366 
|Securities available for sale           |  |                      | 6,444   |                      | 6,444   |                | 9,229   |           | 9,229  
|Securities held to maturity             |  |                      | 2,509   |                      | 2,499   |                | 3,015   |           | 2,950  
|Loans, net                              |  |                      | 130,133 |                      | 126,597 |                | 95,666  |           | 97,469 
|Federal Home Loan Bank stock            |  |                      | 259     |                      | 259     |                | 306     |           | 306    
|Accrued interest receivable             |  |                      | 828     |                      | 828     |                | 558     |           | 558    
|                                        |  |                      |         |                     
|Financial liabilities:                  |  |                      |         |                      |         |                |         |           |        
|Deposit liabilities                     |  |                      | 130,219 |                      | 129,948 |                | 102,809 |           | 102,579
|Federal Home Loan Bank advances         |  |                      | 100     |                      | 100     |                | 2,600   |           | 2,600  
|                                        |  |                      |         |                     
|Off-balance-sheet financial instruments |  |                      |        |                      |        |                |        |           |       

The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit, available lines of credit and standby letters of credit and may involve, to varying degrees, elements of credit
and interest-rate risk in excess of the amount recognized in the consolidated balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(7) | Financial Instruments, Continued
|--- | --------------------------------

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

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

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

Standby letters of credit, available lines of credit and commitments to extend credit typically result in loans with a market interest
rate when funded. A summary of Companys financial instruments with off balance sheet risk at December 31, 2006 follows (in thousands):



|                             |  |                |       
|---------------------------- |  | -------------- | ------
|                             |  | ContractAmount
|Standby letters of credit    |  | $              | 146   
|                             |  |                |       
|Commitments to extend credit |  | $              | 16,157
|                             |  |                |       
|Available lines of credit    |  | $              | 23,246
|                             |  |                |       



|(8) | Credit Risk
|--- | -----------

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

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(9) | Benefit Agreements
|--- | ------------------

In December
2005, the Company entered into Deferred Compensation Agreements (the Agreements) with certain officers and directors which require the Company to provide salary continuation benefits to them upon retirement. The Agreements require the
Company to pay annual benefits for five to fifteen years following their normal retirement ages. The Company has purchased life insurance policies on these officers and directors which although not formerly linked, have estimated future cash values
that exceed the estimated future benefits that will be due under these Agreements. The Company recognized income on the life insurance policies, net of benefit expense accrued on the Agreements, of $98,000 during the year ended December 31,
2006. The Company has also entered into split-dollar agreements with these individuals that would pay their beneficiaries a certain percentage of the death benefits in excess of the cash surrender amounts if these payments were triggered.



|(10) | Income Taxes
|---- | ------------

Income taxes consisted of the
following (in thousands):



|               |  |                         |      |   |      |    
|-------------- |  | ----------------------- | ---- | - | ---- | ---
|               |  | Year Ended December 31,
|               |  | 2006                    |      |   | 2005
|Current:       |  |                         |      |   |      |    
|Federal        |  | $                       | 439  |   |      | 365
|State          |  |                         | 78   |   |      | 59 
|               |  |                         |      |   |      |    
|Total current  |  |                         | 517  |   |      | 424
|               |  |                         |      |   |      |    
|Deferred:      |  |                         |      |   |      |    
|Federal        |  |                         | (158 | ) |      | 44 
|State          |  |                         | (27  | ) |      | 10 
|               |  |                         |      |   |      |    
|Total deferred |  |                         | (185 | ) |      | 54 
|               |  |                         |      |   |      |    
|Income taxes   |  | $                       | 332  |   |      | 478
|               |  |                         |      |   |      |    

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(10) | Income Taxes, Continued
|---- | -----------------------

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



|                                        |  |                         |     |   |                      |    |   |        |   |                      |  |    |  
|--------------------------------------- |  | ----------------------- | --- | - | -------------------- | -- | - | ------ | - | -------------------- |  | -- | -
|                                        |  | Year Ended December 31, |    
|                                        |  | 2006                    |     |   | 2005                 |   
|                                        |  | Amount                  |     |   | % of Pretax Earnings |    |   | Amount |   | % of Pretax Earnings | 
|Income taxes at statutory rate          |  | $                       | 327 |   |                      | 34 | % |        | $ | 423                  |  | 34 | %
|Increase (decrease) resulting from:     |  |                         |     |   |                      |    |   |        |   |                      |  |    |  
|State taxes, net of Federal tax benefit |  |                         | 34  |   |                      | 4  |   |        |   | 46                   |  | 4  |  
|Income from bank-owned life insurance   |  |                         | (37 | ) |                      | (4 | ) |        |   |                     |  |   |  
|Nondeductible expenses                  |  |                         | 8   |   |                      |   |   |        |   | 9                    |  |   |  
|                                        |  |                         |     |   |                      |    |   |        |   |                      |  |    |  
|Income taxes                            |  | $                       | 332 |   |                      | 34 | % |        | $ | 478                  |  | 38 | %
|                                        |  |                         |     |   |                      |    |   |        |   |                      |  |    |  

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



|                                                 |  |                 |      |   |      |      |  
|------------------------------------------------ |  | --------------- | ---- | - | ---- | ---- | -
|                                                 |  | At December 31, |     
|                                                 |  | 2006            |      |   | 2005 |     
|Deferred tax assets:                             |  |                 |      |   |      |      |  
|Allowance for loan losses                        |  | $               | 635  |   |      | 474  |  
|Unrealized loss on securities available for sale |  |                 | 31   |   |      | 45   |  
|Deferred compensation                            |  |                 | 21   |   |      |     |  
|Other                                            |  |                 | 6    |   |      |     |  
|                                                 |  |                 |      |   |      |      |  
|Deferred tax assets                              |  |                 | 693  |   |      | 519  |  
|                                                 |  |                 |      |   |      |      |  
|Deferred tax liabilities:                        |  |                 |      |   |      |      |  
|Accrual to cash adjustment                       |  |                 | (85  | ) |      | (93  | )
|Accumulated depreciation                         |  |                 | (134 | ) |      | (123 | )
|Deferred loan costs                              |  |                 | (106 | ) |      | (106 | )
|                                                 |  |                 |      |   |      |      |  
|Deferred tax liabilities                         |  |                 | (325 | ) |      | (322 | )
|                                                 |  |                 |      |   |      |      |  
|Net deferred tax asset                           |  | $               | 368  |   |      | 197  |  
|                                                 |  |                 |      |   |      |      |  

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(11) | Related Party Transactions
|---- | --------------------------

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



|                             |  |      |        |   |      |       |  
|---------------------------- |  | ---- | ------ | - | ---- | ----- | -
|                             |  | 2006 |        |   | 2005 |      
|Loans:                       |  |      |        |   |      |       |  
|Balance at beginning of year |  | $    | 3,331  |   |      | 2,086 |  
|Borrowings                   |  |      | 559    |   |      | 2,169 |  
|Repayments                   |  |      | (1,066 | ) |      | (924  | )
|                             |  |      |        |   |      |       |  
|Balance at end of year       |  | $    | 2,824  |   |      | 3,331 |  
|                             |  |      |        |   |      |       |  
|Deposits                     |  | $    | 3,460  |   |      | 3,232 |  
|                             |  |      |        |   |      |       |  



|(12) | Stock Options
|---- | -------------

The Company
established a Stock Option Plan in 1998 for directors, officers and employees of the Company. The Plan as amended provides for 127,027 shares (adjusted) of common stock to be available for grant. The exercise price of the stock options is the
greater of $10 or the fair market value of the common stock on the date of grant. The options expire ten years from the date of grant. At December 31, 2006, 105 shares (adjusted) remain available for grant and all issued options are
exercisable. All per share amounts reflect the 5% stock dividend declared on April 26, 2006 and paid on May 17, 2006. A summary of stock option information follows ($ in thousands, except share amounts):



|                                                 |  |                  |   |  |                                 |       |   |                                          |            |                           |   |    
|------------------------------------------------ |  | ---------------- | - |  | ------------------------------- | ----- | - | ---------------------------------------- | ---------- | ------------------------- | - | ---
|                                                 |  | Number ofOptions |   |  | Weighted-Average Exercise Price |       |   | Weighted-AverageRemainingContractualTerm |            | Aggregate Intrinsic Value
|Outstanding at December 31, 2004                 |  | 114,241          |   |  | $                               | 9.66  |   |                                          |            |                           |   |    
|Options exercised                                |  | (33,041          | ) |  |                                 | (9.52 | ) |                                          |            |                           |   |    
|Options granted                                  |  | 14,347           |   |  |                                 | 16.19 |   |                                          |            |                           |   |    
|                                                 |  |                  |   |  |                                 |       |   |                                          |            |                           |   |    
|Outstanding at December 31, 2005                 |  | 95,547           |   |  |                                 | 10.66 |   |                                          |            |                           |   |    
|Options exercised                                |  | (5,013           | ) |  |                                 | (9.97 | ) |                                          |            |                           |   |    
|Options forfeited                                |  | (105             | ) |  |                                 | (9.52 | ) |                                          |            |                           |   |    
|                                                 |  |                  |   |  |                                 |       |   |                                          |            |                           |   |    
|Outstanding and exercisable at December 31, 2006 |  | 90,429           |   |  | $                               | 10.70 |   |                                          | 4.30 years |                           | $ | 615
|                                                 |  |                  |   |  |                                 |       |   |                                          |            |                           |   |    

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(12) | Stock Options, Continued
|---- | ------------------------

In 2005,
the Companys Board of Directors approved the acceleration of vesting of all outstanding stock options that existed as of December 31, 2004 (the Acceleration). In accordance with SFAS 123, in 2005 the Company expensed the
remaining unrecognized compensation cost associated with the options with accelerated vesting in the pro forma disclosure. These actions were taken in order to avoid expense recognition in future financial statements upon adoption of SFAS 123(R).

In 2005, the Company established a new option plan for directors, officers and employees of the Company. The Plan provides
for 151,200 shares (adjusted) of common stock to be available for grant. The exercise price of the stock options is the fair market value of the common stock on the date of grant. The Plan allows for various vesting periods. All options granted in
2005 were vested immediately except for 7,406 (adjusted) options which vest 33.3% in the second and third year, respectively, after grant and are fully exercisable during the fourth year after grant. The options expire ten years from the date of
grant. At December 31, 2006, 67,781 shares (adjusted) remain available for grant. All per share amounts reflect the 5% stock dividend declared on April 26, 2006 and paid on May 17, 2006. A summary of stock option information follows
($ in thousands, except share amounts):



|                                         |  |                  |   |  |                                |       |                                             |            |                           |   |    
|---------------------------------------- |  | ---------------- | - |  | ------------------------------ | ----- | ------------------------------------------- | ---------- | ------------------------- | - | ---
|                                         |  | Number ofOptions |   |  | Weighted-Average ExercisePrice |       | Weighted- Average RemainingContractual Term |            | Aggregate Intrinsic Value
|Options outstanding at December 31, 2004 |  |                 |   |  | $                              |      |                                             |            |                           |   |    
|Options granted                          |  | 84,994           |   |  |                                | 16.19 |                                             |            |                           |   |    
|                                         |  |                  |   |  |                                |       |                                             |            |                           |   |    
|Options outstanding at December 31, 2005 |  | 84,994           |   |  |                                | 16.19 |                                             |            |                           |   |    
|                                         |  |                  |   |  |                                |       |                                             |            |                           |   |    
|                                         |  |                  |   | 
|Options forfeited                        |  | (1,575           | ) |  |                                | 16.19 |                                             |            |                           |   |    
|                                         |  |                  |   |  |                                |       |                                             |            |                           |   |    
|Options outstanding at December 31, 2006 |  | 83,419           |   |  | $                              | 16.19 |                                             | 8.67 years |                           | $ | 109
|                                         |  |                  |   |  |                                |       |                                             |            |                           |   |    
|Options exercisable at December 31, 2006 |  | 78,483           |   |  | $                              | 16.19 |                                             | 8.67 years |                           | $ | 103
|                                         |  |                  |   |  |                                |       |                                             |            |                           |   |    

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(12) | Stock Options, Continued
|---- | ------------------------

The
following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to options granted under the Companys stock option plan for 2005. For purposes of this
pro forma disclosure, the value of the options is estimated using the Black-Scholes option-pricing model and is being amortized to expense over the options vesting periods. All per share amounts reflect the 5% stock dividend declared on
April 26, 2006 and paid on May 17, 2006 (in thousands, except per share data).



|                                                                                                                                       |  |                            |      |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---- | -
|                                                                                                                                       |  | Year EndedDecember 31,2005 |     
|Net earnings as reported                                                                                                               |  | $                          | 765  |  
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax
effect |  |                            | (315 | )
|                                                                                                                                       |  |                            |      |  
|Proforma net earnings                                                                                                                  |  | $                          | 450  |  
|                                                                                                                                       |  |                            |      |  
|Basic earnings per share:                                                                                                              |  |                            |      |  
|As reported                                                                                                                            |  | $                          | .52  |  
|                                                                                                                                       |  |                            |      |  
|Proforma                                                                                                                               |  | $                          | .31  |  
|                                                                                                                                       |  |                            |      |  
|Diluted earnings per share:                                                                                                            |  |                            |      |  
|As reported                                                                                                                            |  | $                          | .52  |  
|                                                                                                                                       |  |                            |      |  
|Diluted                                                                                                                                |  | $                          | .30  |  
|                                                                                                                                       |  |                            |      |  

The fair value of each option granted in 2005 was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average assumptions:



|                                                                         |  |   |         |  
|------------------------------------------------------------------------ |  | - | ------- | -
|Dividend yield                                                           |  |   |        | %
|Expected life                                                            |  |   | 5 years |  
|Expected volatility                                                      |  |   | 6.35    | %
|Risk-free interest rate                                                  |  |   | 4.34    | %
|Weighted-average grant-date fair value of options issued during the year |  | $ | 3.32    |  

The Company examined its historical pattern of option exercises in an effort to
determine if there was any pattern based on certain employee populations. From this analysis, the Company could not identify any patterns in the exercise of options. As such, the Company used the guidance in Staff Accounting Bulletin No. 107
issued by the Securities and Exchange Commission to determine the estimated life of options. Expected volatility is based on historical volatility of the Companys common stock. The risk-free rate for periods within the contractual life of the
option is based on the U.S. treasury yield curve in effect at the time of grant.

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

|(12) | Stock Options, Continued
|---- | ------------------------

The
total intrinsic value of options exercised during 2006 was $38,000 and the related tax benefit recognized was $11,000. The total fair value of shares vested and recognized as compensation expense was $8,000 for 2006. As of December 31, 2006,
the Company had 4,938 (adjusted) stock options not fully vested and there was $16,000 of total unrecognized compensation cost related to these nonvested options. This cost is expected to be recognized monthly on a straight-line basis through
December 31, 2008.

Also in January 2004, 21,000 (adjusted) stock options were granted to a third party as
compensation for services provided to the Company. The options were issued at $11.00 per share and are fully vested. As of December 31, 2006, none of these options had been exercised.



|(13) | Profit Sharing Plan
|---- | -------------------

The Company
sponsors a section 401(k) profit sharing plan (the Plan) which is available to all employees electing to participate. During 2006, the Company approved a 2% match to the Plan in an approximate amount of $29,000. A 1.5% match in the
approximate amount of $20,000 was made in 2005.



|(14) | Restrictions on Dividends
|---- | -------------------------

The
Companys ability to pay cash dividends on its common stock is limited to the amount of dividends it could receive from the Bank plus its own cash and cash equivalents, which amounted to $8.3 million at December 31, 2006. The amount of
dividends the Bank is permitted to pay to the Company is restricted to 100% of its calendar year-to-date net earnings plus retained earnings for the preceding two years. In addition, no bank may pay a dividend at any time that net earnings in the
current year when combined with retained earnings from the preceding two years produce a loss. Under Florida law, a Florida chartered commercial bank may not pay cash dividends that would cause the Banks capital to fall below the minimum
amount required by Federal or Florida law.



|(15) | Regulatory Matters
|---- | ------------------

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

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(15) | Regulatory Matters, Continued
|---- | -----------------------------

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and percentages (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2006, the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2006, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage percentages as set forth in the following tables. There are
no conditions or events since that notification that management believes have changed the Banks category. The Banks actual capital amounts and percentages are also presented in the table ($ in thousands).



|                                        |  |        |        |   |          |   |                      |                   |        |                                                        |      |        |  |   |        |  |       |  
|--------------------------------------- |  | ------ | ------ | - | -------- | - | -------------------- | ----------------- | ------ | ------------------------------------------------------ | ---- | ------ |  | - | ------ |  | ----- | -
|                                        |  |        |        |   |          |   | For Capital Adequacy |                   |        | Minimum To Be Well Capitalized Under Prompt Corrective |     
|                                        |  | Actual |        |   | Purposes |   |                      | Action Provisions |       
|                                        |  | Amount |        | % |          |   | Amount               |                   | %      |                                                        |      | Amount |  | % |       
|As of December 31, 2006:                |  |        |        |   |          |   |                      |                   |        |                                                        |      |        |  |   |        |  |       |  
|Total Capital to Risk-Weighted Assets   |  | $      | 14,232 |   | 10.45    | % |                      | $                 | 10,899 |                                                        | 8.00 | %      |  | $ | 13,624 |  | 10.00 | %
|Tier I Capital to Risk-Weighted Assets  |  |        | 12,650 |   | 9.29     |   |                      |                   | 5,449  |                                                        | 4.00 |        |  |   | 8,174  |  | 6.00  |  
|Tier I Capital to Total Assets          |  |        | 12,650 |   | 8.08     |   |                      |                   | 6,259  |                                                        | 4.00 |        |  |   | 7,824  |  | 5.00  |  
|                                        |  |        |        |   |          |  
|As of December 31, 2005:                |  |        |        |   |          |   |                      |                   |        |                                                        |      |        |  |   |        |  |       |  
|Total Capital to Risk- Weighted Assets  |  |        | 11,078 |   | 12.55    |   |                      |                   | 7,059  |                                                        | 8.00 |        |  |   | 8,824  |  | 10.00 |  
|Tier I Capital to Risk- Weighted Assets |  |        | 9,972  |   | 11.30    |   |                      |                   | 3,530  |                                                        | 4.00 |        |  |   | 5,294  |  | 6.00  |  
|Tier I Capital to Total Assets          |  |        | 9,972  |   | 7.75     |   |                      |                   | 5,148  |                                                        | 4.00 |        |  |   | 6,435  |  | 5.00  |  

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(16) | Holding Company Financial Information
|---- | -------------------------------------

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

Condensed Balance Sheets



|                          |  |                 |        |      |       
|------------------------- |  | --------------- | ------ | ---- | ------
|                          |  | At December 31,
|                          |  | 2006            |        | 2005
|Assets                    |  |                 |        |      |       
|                          |  |                
|Cash and cash equivalents |  | $               | 8,285  |      | 10,289
|Investment in subsidiary  |  |                 | 12,599 |      | 9,897 
|Other assets              |  |                 | 179    |      | 155   
|                          |  |                 |        |      |       
|Total assets              |  | $               | 21,063 |      | 20,341
|                          |  |                 |        |      |       
|Stockholders Equity      |  |                 |        |      |       
|Stockholders equity      |  | $               | 21,063 |      | 20,341
|                          |  |                 |        |      |       

Condensed Statements of Earnings



|                                   |  |              |     |   |      |     |  
|---------------------------------- |  | ------------ | --- | - | ---- | --- | -
|                                   |  | Year Ended   |    
|                                   |  | December 31, |    
|                                   |  | 2006         |     |   | 2005 |    
|Revenues                           |  | $            |    |   |      | 2   |  
|Expenses                           |  |              | (47 | ) |      | (34 | )
|                                   |  |              |     |   |      |     |  
|Loss before earnings of subsidiary |  |              | (47 | ) |      | (32 | )
|Earnings of subsidiary             |  |              | 678 |   |      | 797 |  
|                                   |  |              |     |   |      |     |  
|Net earnings                       |  | $            | 631 |   |      | 765 |  
|                                   |  |              |     |   |      |     |  

(continued)



---

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued



|(16) | Holding Company Financial Information, Continued
|---- | ------------------------------------------------

Condensed Statements of Cash Flows



|                                                                                                                                 |  |                        |        |   |      |        |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | ------ | -
|                                                                                                                                 |  | Year EndedDecember 31, |       
|                                                                                                                                 |  | 2006                   |        |   | 2005 |       
|Cash flows from operating activities:                                                                                            |  |                        |        |   |      |        |  
|Net earnings                                                                                                                     |  | $                      | 631    |   |      | 765    |  
|Adjustments to reconcile net earnings to net cash used in operating activities:                                                  |  |                        |        |   |      |        |  
|Stock based compensation                                                                                                         |  |                        | 8      |   |      |       |  
|Undistributed earnings of subsidiary                                                                                             |  |                        | (678   | ) |      | (797   | )
|Increase in other assets                                                                                                         |  |                        | (24    | ) |      | (82    | )
|Tax benefit from exercise of stock options                                                                                       |  |                        |       |   |      | 64     |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Net cash used in operating activities                                                                                            |  |                        | (63    | ) |      | (50    | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Cash flows from investing activity-                                                                                              |  |                        |        |   |      |        |  
|Investment in subsidiary                                                                                                         |  |                        | (2,000 | ) |      | (2,000 | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Cash flows from financing activities:                                                                                            |  |                        |        |   |      |        |  
|Net proceeds from the issuance of common stock                                                                                   |  |                        | 50     |   |      | 12,155 |  
|Tax benefit associated with exercise of common stock options                                                                     |  |                        | 11     |   |      |       |  
|Dividends paid                                                                                                                   |  |                        | (2     | ) |      | (59    | )
|                                                                                                                                 |  |                        |        |   |      |        |  
|Net cash provided by financing activities                                                                                        |  |                        | 59     |   |      | 12,096 |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Net (decrease) increase in cash and cash equivalents                                                                             |  |                        | (2,004 | ) |      | 10,046 |  
|                                                                                                                                 |  |                       
|Cash and cash equivalents at beginning of the year                                                                               |  |                        | 10,289 |   |      | 243    |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Cash and cash equivalents at end of year                                                                                         |  | $                      | 8,285  |   |      | 10,289 |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Noncash transactions:                                                                                                            |  |                        |        |   |      |        |  
|Common stock dividend                                                                                                            |  | $                      | 1,525  |   |      |       |  
|                                                                                                                                 |  |                        |        |   |      |        |  
|Accumulated other comprehensive income of subsidiary, net change in unrealized loss on securities available for sale, net of
tax |  | $                      | 24     |   |      | (63    | )
|                                                                                                                                 |  |                        |        |   |      |        |  



---

Report of Independent Registered Public Accounting Firm

FPB Bancorp, Inc.

Port St. Lucie, Florida:

We have audited the accompanying consolidated balance sheets of FPB Bancorp, Inc. and Subsidiary (the Company) as of December 31, 2006
and 2005, and the related consolidated statements of earnings, stockholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.
generally accepted accounting principles.

HACKER, JOHNSON & SMITH PA

Fort Lauderdale, Florida

March 7, 2007



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BOARD OF DIRECTORS

Executive Officers and Directors of FPB

John R. Baker, Sr., age 57, is the Bank and FPBs Vice Chairman of the Board. He graduated from the University of Georgia with a Bachelor of Business Administration degree in Real Estate. He moved to Stuart, Florida in
1981 and assumed the position of Vice President, General Manager of Bessemer Properties, Incorporated. Prior to moving to Stuart, Mr. Baker served as Director of Residential Sales for Bessemer in Atlanta, Georgia, where he began his real estate
career in 1975. Mr. Baker is a former director of Barnett Bank of Martin County and is past President of Treasure Coast Builders Association and Florida Home Builders Association. He also served as Chairman of Housing and Finance Authority in
Martin County and the Martin County Affordable Housing Task Force. Mr. Baker lives in Vero Beach and is in his 17thyear as a youth soccer coach. He is employed with the Laurel Corporation in Vero Beach and is involved in all aspects of real estate.

Gary A. Berger, age 57, is a director and Chairman of the Board for both FPB and the Bank. Mr. Berger is President of the accounting firm of Berger, Toombs, Elam, Gaines, and Frank, CPA. He is a
graduate of Michigan State University and has been a certified public accountant since 1975. Mr. Berger is a member of the Rotary Club of Ft. Pierce, the Florida Institute of Certified Public Accountants and the American Institute of Certified
Public Accountants. He is a past Treasurer of the United Way, past President of the St. Lucie County Economic Development Council and past President of the Rotary Club of Ft. Pierce, Florida.

Donald J. Cuozzo, age 53, is a director of FPB and the Bank. He received a Bachelor of Science degree in Environmental Technology from the
Florida Institute of Technology in 1979. He began his work career in the public sector with the Martin County Growth Management Department before leaving to work with regional and national developers. In that role, he was instrumental in obtaining
approval of the Martin Downs DRI amendment and in coordinating the acquisition and development of a number of large residential communities in Palm Beach and Martin Counties. Mr. Cuozzo also served as a principal with a large Palm Beach County
based engineering firm where he gained extensive experience in the area of project management and coordination. In 1993, he co-founded Houston Cuozzo Group to provide planning, design and government-oriented strategic planning service for private
and public sector clients in South Florida. Mr. Cuozzo has more than 30 years of experience planning and implementing numerous land developments throughout the region and has worked in nearly all facets of community and project development.
Mr. Cuozzo is a founding member of the Martin County Business Development Board, a graduate of the first class of Martin County Leadership 91/92, a recipient of the 1991 Industry Appreciation Award for Outstanding Contribution to the Community,
and a 2006 recipient of the Industry Appreciation Award for Martin County. He is a past Second Vice President of the Treasure Coast Builders Association. Mr. Cuozzo was appointed to the Treasure Coast Regional Planning Council by Governor Jeb
Bush and served for four years in that position.

Ann L. Decker, age 55, is a director and Secretary of FPB and the Bank.
Ms. Decker serves as the Executive Director of the Indian River Community College Foundation, Inc., in Fort Pierce, Florida. For over thirty years, Ms. Decker served as the District Manager for three different U.S. Congressmen that
represented this area. Ms. Decker was formerly a co-owner of Intracoastal Printing, Inc., which was sold in 1990. Born in Chicago, Illinois, Ms. Decker has a Bachelor of Science degree in Professional Business Management from Barry
University in Miami, Florida.

Paul J. Miret, age 60, is a director of FPB and the Bank. Mr. Miret is presently a
realtor with RE/MAX 100 Riverside. Prior to that, he was the owner and operator of Sunshine Carpet Cleaning from 1978 to 1998 and of Ameri-Kleen Services from 1992 to 1998. He also owns and manages several residential rental units. From 1995 to
1997, Mr. Miret served on the Community Board of Riverside National Bank. Mr. Miret is also a past President of the Port St. Lucie Little League and the Port St. Lucie Exchange Club and a past director of the Port St. Lucie Chamber of
Commerce.

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



---

Robert L. Seeley, age 82, is a director of FPB and the Bank. Mr. Seeley has been in
private law practice in Florida for more than 40 years. Mr. Seeley was co-founder of the Stuart law firm of Fox, Wackeen, Dungey, Beard, Sobel and McCluskey, LLP, for which he currently serves Of Counsel. From 1973 to 1996,
Mr. Seeley served as a director of Barnett Bank of the Treasure Coast. He also served as the founding director and Chairman of the Saint Lucie Medical Center and a former director of the St. Lucie and Martin County Economic Development
Councils. Mr. Seeley completed his undergraduate studies at the University of Illinois and received his Juris Doctorate degree from the University of Florida.

David W. Skiles, age 59, is (CEO) Chief Executive Officer, President, and a director of FPB and the Bank. Prior to joining First Peoples Bank, he was a Vice President in charge of Martin County at 1st
United/Wachovia Bank in Stuart and was Vice President/Senior Lender of Port St. Lucie National Bank. Mr. Skiles has a Bachelor of Science degree from Barry University, and an Associate Degree from Sinclair Community College in Dayton, Ohio. He
currently serves on the (FAU) Florida Atlantic University Advisory Board, is Vice President of the Executive Committee and regular board member of the St. Lucie County (EDC) Economic Development Council. He is the current President of the St. Lucie
County Education Foundation, and currently serves on the Florida Bankers Association, Government Relations Committee and the FBA Bank Pac Board, as well as on the boards of the YMCA of the Treasure Coast, Workforce Development Board of the Treasure
Coast and the Arts Foundation of Martin County. He is past President of the St. Lucie County Chamber of Commerce and is a current member of the Stuart/Martin County and St. Lucie County Chambers. He served as Chairman of the St. Lucie County
Chambers Port St. Lucie Area Council and is a current member of that committee. He has served on numerous campaigns for the United Way of St. Lucie and Martin Counties, most notably as a past Campaign Chair in Martin County and as Chair of the
Professional Division in St. Lucie County. Mr. Skiles also serves on the Advisory Board for St. Martin de Porres Catholic Church in Jensen Beach, Florida and is past Chairman of (BAP) Business Alliance for Prosperity in St. Lucie County. He was
formerly District Governor and past President of Sertoma Club of Martin County.

Paul A. Zinter, age 52, is a director of FPB
and the Bank. He has been a resident of Port St. Lucie for 38 years, and was a member of the second graduating class from Fort Pierce Central High School. Mr. Zinter received a Bachelor of Arts degree in business administration from Eastern New
Mexico University in 1975, where he majored in real estate and marketing and was managing partner of a family-owned real estate company. Mr. Zinter was past president and honorary member of the Rotary Club of Port St. Lucie and has been a local
realtor/managing partner and business owner for the past 29 years.



---

FPB BANCORP, INC.

NON-DIRECTOR

EXECUTIVE OFFICERS

Nancy E. Aumack, age 58, is FPB and the Banks Senior Vice President and Chief Financial Officer. Prior to joining the Bank in 2001,
she was Senior Vice President and Chief Financial Officer of Independent Community Bank, Tequesta, Florida. In the period from 1997 to 1999, she served as Chief Financial Officer and Administrative Support Director for the engineering firm LBFH,
Palm City, Florida. From 1995 to 1997, she served as Vice President and Chief Financial Officer for Treasure Coast Bank, Stuart, Florida, and from 1983 to 1995, she served as Vice President and Financial Accounting Officer for American Bank of
Martin County in Stuart, Florida. Ms. Aumack received her A.S. degree in Banking and Financial Services from Indian River Community College in 1989. She is presently Chairman of the ARC of Martin County, Financial Partner for the Port St. Lucie
Women on Wall Street, and a member of the Port St. Lucie Business Women.

P. Lee Brown, age 47, is FPB and the Banks
Senior Vice President and Fort Pierce Area Executive. Prior to joining the Bank in 2003, he was Vice President and Commercial Lender for Riverside National Bank from 1988 to 2003. He is a 2005 graduate of the Graduate School of Banking at Louisiana
State University and is a graduate of the National Commercial Lending School in Norman, Oklahoma. He received his A.A. degree from Indian River Community College in 1979 and B.S. degree in Business Management from the University of Florida in 1981.
He is a Certified General Contractor, licensed with the State of Florida, member of the Treasure Coast Builders, board member for the St. Lucie County Fair and an active member of the Fort Pierce Rotary Club.

Thomas W. Eby, age 57, is FPB and the Banks Senior Vice President of Residential Lending. Prior to joining the Bank in 2005, he was
the Wholesale Lending Manager for Indian River National Bank, Vero Beach, Florida. From 2002 to 2004 he was the Residential Lending Manager for Public Bank, Vero Beach, Florida. He also served as Vice President and Regional Sales Manager for
Community Savings, West Palm Beach, Florida from 1999 to 2002. Mr. Eby has 32 years of Residential Lending experience. He received his undergraduate degree in Finance from the University of Miami, Miami, Florida, and graduated from the School
for Executive Development from the University of Georgia. He is an active member of the Fort Pierce Exchange Club, a board member of Exchange Club C.A.S.T.L.E., a member of the St. Lucie, Indian River and Martin County Realtor boards, and a member
of the Treasure Coast Builders Association.

Melissa M. Favorite, age 37, is FPB and the Banks Senior Vice President of
Deposit Operations. She also serves as the Bank Secrecy Act Officer. Prior to joining the bank in 1999, Ms. Favorite was Assistant Vice President and Branch Manager for First National Bank & Trust Company of the Treasure Coast from
1997 to 1999. Prior to that she also served as Assistant Vice President  Lender for Port St. Lucie National Bank from 1988 to 1997. Ms. Favorite holds diplomas from the American Institute of Banking in General Banking, Consumer Lending
and Commercial Lending. Ms. Favorite is a graduate of the Florida Bankers Associations Florida School of Banking. She is an active member of the March of Dimes Walk America walk committee in which she has chaired for four years. She
presently serves on the board of the Treasure Coast Division of the March of Dimes.

Stephen J. Krumfolz, age 55, is FPB and
the Banks Senior Vice President and Port St. Lucie Area Executive. Prior to joining the Bank in 1999, he was Vice President and SBA Lending Manager for Riverside National Bank from January 1998 through June 1999. He served as Vice President
and Commercial Lending Officer for Port St. Lucie National Bank from 1994 through 1997, and completed all phases of Barnett Banks Management Training Program during his employment from 1989 through 1994. Mr. Krumfolz received an Associate
Degree in Banking through the American Institute of Banking and Indian River Community College in 1991, as well as a Core Credit School Certificate from Barnett Bank in 1992. He is an active member of the Port St. Lucie Breakfast Rotary Club and
Treasure Coast Business on The Green.

Marge Riley, age 58, is FPB and the Banks Executive Vice President and Chief
Operating Officer. She also serves as the Banks Security Officer, Compliance Officer and Information Systems Technology Officer. Ms. Riley joined the Bank while it was In Organizationin 1998. Ms. Riley began her banking
career in 1985 at M & I Western State Bank in Oshkosh, Wisconsin. After moving to Florida in 1987, she worked as Loan Review Specialist for Barnett Bank, Assistant Vice President, Loan Administration at Port St. Lucie National Bank, and
Assistant Vice President, Branch Manager for First National Bank. She has A.S. Degrees in Accounting and Banking and Financial Services from Fox Valley Technical College in Appleton, Wisconsin. Ms. Riley is presently a board member and
Allocations Chair for United Way of St. Lucie County, a board member for St. Lucie County Chamber Leadership Council, a board member for Pace Center for Girls in Fort Pierce, Florida, a past president and board member of the Port St. Lucie Business
Women, a member of the Port St. Lucie Women on Wall Street, and a member of B.P.O.E. 1774 in Vero Beach, Florida.



---

Randy J. Riley, age 56, is FPB and the Banks Senior Vice President and Area Executive
for Indian River County. Prior to joining FPB he was Senior Vice President and Area Executive for Indian River National Bank 2004-2005, Area President for Public Bank 2001-2004 and President and CEO of Citrus Financial Services, Inc. and Citrus
Bank, NA 1989-2001. Mr. Riley has been in the banking business since 1970 and has worked for banks in Illinois, Wisconsin and Florida. Mr. Riley attended Elmhurst College, Elmhurst, IL, the Graduate School of Banking at the University of
Wisconsin, and the School of Bank Marketing at the University of Colorado. Riley has also served as an instructor for the American Institute of Banking. He is currently Treasurer of Vero Beach Treasure Coast Kiwanis and a past Lt. Governor of
Kiwanis Florida District. He has been an active participant in both Indian River Economic Development Division and the Treasure Coast Legislative Delegation. He previously served as Chairman of the Junior Achievement Board of Directors, United Way
Finance Division, and was on the boards of Indian River County Chamber of Commerce, SunUp, Mental Health Organization and Academy of Entrepreneurship.

William V. West, age 40, is FPB and the Banks Senior Vice President and Martin County Area Executive. Prior to joining the Bank in 2004, he was Vice President of Commercial Lending for Southern
Community Bank of Southwest Florida, Naples, Florida. From 1999 to 2001, he served as Assistant Vice President and Commercial Lender for SouthTrust Bank in Naples, Florida. In 2001, he completed his Master of Business Administration in Finance,
Summa Cum Laude, with International College. He completed his Bachelor of Arts in Organizational Management with Warner Southern College in 1996, and graduated from the Graduate School of Banking at Colorado in 2006. Mr. West also holds an
Associate in Arts with an emphasis in Financial Institution Management from Brevard Community College and a Supervisory Skills Certificate from the American Institute of Banking. Mr. West is the President of the Education Foundation of Martin
County, a director and immediate past President of the Jensen Beach Chamber of Commerce, the 2007 Chair of the Leukemia & Lymphoma Society Light the Night Walk, and Treasurer of the Entrepreneurship Foundation. In 2005, the Florida Economic
Development Council awarded Mr. West the McLaughlin Award for his contributions to economic development in Florida.



---

FIRST PEOPLES BANK

OFFICERS

David W. Skiles, President and Chief Executive Officer

Marge Riley, Executive Vice President and Chief Operating Officer

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

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

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

Melissa M. Favorite, Senior Vice President, Deposit Operations

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

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

Thomas W. Eby, Senior Vice President, Residential Lending

David P. Hoffman, Vice President, Senior Consumer Lender

Craig Dietz, Vice President, Credit Administration

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

Michelle A. Sias, Vice President, Commercial Lender

Jillian A. Lopez, Assistant Vice President, Human Resource Officer

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

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

Peter G. Ferlatte, Network Administration Officer

Sarah C. Baker, Assistant Vice President, Branch Manager (Stuart)

Ryan C. Coughlin, Assistant Vice President, Commercial Lender

Samuel L. Patterson, Business Development Officer

Larry J. Stevens, Commercial SBA Lending Officer



---

COMMUNITY LIAISON BOARDS

Fort Pierce

Barbara S. Allen, Associated Coastal Ear/Nose/Throat

Judy Culpepper, Retired

Stefan K. Matthes, Sr., Culpepper & Terpening, Inc.

Michelle R. Miller-Morris, Miller Insurance Agency

John A. Schwerer, DMD

Babu Thomas, IRCC
Regional Crime Lab

Port St. Lucie

Meredith C. Breault, Management Recruiters

Shirley Cherveny, Palm Realty

Gardner S. Foote, Retired

Al Soricelli, AXA
Advisors

Jack Wilson, Florida Tire Recycling

Ernesto Velasco, Velcon Group

Greg Wyatt, Port St. Lucie Broadcasters

Stuart

Linda B. Braswell,
Braswell Bail Bonds and Braswell Surety Services

Mark E. Brechbill, Mark Brechbill CPA

Lee Carroll, Deakins Carroll Insurance

Rick
Crary, Crary Buchanan

Vicki Davis, Supervisor of Elections for Martin County, FL

Philip T. Faherty, Stuart Business Systems

Craig Melby, the Melby Group

Howard Shields, Organizing Board Chairman & Director Emeritus

David Walker, Attorney

Vero Beach

Joe Coakley, Market Rite, Inc.

Lynn Hall, Northwestern Mutual

Steve Henderson, Collins, Brown & Caldwell (of counsel)

Claude Hessee, Echo Trading Co.

Catherine McKenzie, BellSouth

John Michael Matthews, John Michael Matthews Fine Jewelry

Mahendra Patel, Patel & Associates

John Jerry Swanson, P & S Properties



---

GENERAL INFORMATION



|                            |  |                                                                                                                                                                                                                                                                                        
|--------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Annual Meeting              |  | The Annual Meeting of the Stockholders will be held at Tradition Town Hall, 10799 Civic Lane, Port St. Lucie, Florida 34987 at 5:30 P.M., April 25, 2007. A social hour will begin at 4:30 p.m.                                                                                        
|                            | 
|Transfer Agent andRegistrar |  | Registrar and Transfer Co. 10 Commerce Drive
Cranford, NJ 07016 (800) 368-5948                                                                                                                                                                                                         
|                            | 
|Corporate Counsel           |  | Igler & Dougherty, P.A. 2457 Care Drive
Tallahassee, Florida 32308                                                                                                                                                                                                                     
|                            | 
|IndependentAuditors         |  | Hacker, Johnson & Smith PA Independent Registered
Public Accountants 500 West Cypress Creek Road, Suite 450 Fort
Lauderdale, Florida 33309                                                                                                                                             
|                            | 
|Form 10-KSB                 |  | A copy of the Form 10-KSB as filed with the Securities and Exchange Commission may be obtained by stockholders without charge upon written request to Nancy E. Aumack, Senior Vice President and Chief Financial
Officer, 1301 Port St. Lucie Boulevard, Port St. Lucie, Florida 34952.

COMMON STOCK PRICES AND DIVIDENDS

The common stock of FPB Bancorp, Inc. is listed with the NASDAQ, under the symbol FPBI. As of December 31, 2006 the Company had not declared a dividend.
Future dividends, if any, will be determined by the Board of Directors. As of December 31, 2006, FPB Bancorp, Inc. had approximately 1,500 holders of record of common stock. A 5% stock dividend was paid on May 17, 2006.