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***LETTER      TO SHAREHOLDERS***

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***FIRST***
** **

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**CORPORATE      PROFILE**

**SPECIAL      NOTE REGARDING FORWARD-LOOKING STATEMENTS**

| **TABLE                OF 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                                                                    | 19-46    |
|                                                                                                                |     |
| Report                of Independent Registered Public Accounting                Firm                               | 47       |
|                                                                                                                |     |
| Board                of Directors                                                                                   | 48       |
|                                                                                                                |     |
| Non-Director                Executive Officers                                                                      | 48       |
|                                                                                                                |     |
| First                Peoples Bank Board of Directors and                Officers                                    | 49       |
|                                                                                                                |     |
| Community                Liaison Board                                                                              | 50       |
|                                                                                                                |     |
| General                Information                                                                                  | 51       |
|                                                                                                                |     |
| Common                Stock Prices and                Dividends                                                     | 51       |

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**FINANCIAL      HIGHLIGHTS**

**December      31, 2007 and 2006 or the Years Then Ended**

**(Dollars      in thousands, except per share figures)**

| **At                Year End:**                                     |   | **2007** |      |   | **2006** |   |
|---------------------------------------------------------------------|--------|----------|-----------|--------|----------|--------|
|                                                                |   |     |      |   |     |   |
| Assets                                                              |   | $        | 196,753   |   |     | $      | 153,439 |   |
| Loans,                net                                           |   | $        | 172,251   |   |     | $      | 130,133 |   |
| Securities                                                          |   | $        | 6,793     |   |     | $      | 8,953 |   |
| Deposits                                                            |   | $        | 172,677   |   |     | $      | 130,219 |   |
| Stockholders'                equity                                 |   | $        | 21,931    |   |     | $      | 21,063 |   |
| Book                value per share (1)                             |   | $        | 10.66     |   |     | $      | 10.52 |   |
| Shares                outstanding (1)                               |   |     | 2,058,047 |   |     |   | 2,001,513 |   |
| Equity                as a percentage of assets                     |   |     | 11.15     | %      |     |   | 13.73 | % |
| Nonperforming                assets as a percentage of total assets |   |     | .89       | %      |     |   | .22 | % |
|                                                                |   |     |      |   |     |   |   |   |
| **For                The Year:**                                    |   |     |      |   |     |   |   |   |
|                                                                |   |     |      |   |     |   |   |   |
| Interest                income                                      |   | $        | 13,588    |   |     | $      | 10,626 |   |
| Net                earnings                                         |   | $        | 177       |   |     | $      | 631 |   |
| Earnings                per share, basic (1)                        |   | $        | .09       |   |     | $      | .32 |   |
| Earnings                per share, diluted (1)                      |   | $        | .09       |   |     | $      | .31 |   |
| Return                on average assets                             |   |     | .10       | %      |     |   | .43 | % |
| Return                on average equity                             |   |     | .83       | %      |     |   | 3.04 | % |
| Average                equity as a percentage of average assets     |   |     | 12.11     | %      |     |   | 14.08 | % |
| Non-interest                expenses to average assets              |   |     | 4.18      | %      |     |   | 4.12 | % |
|                                                                |   |     |      |   |     |   |   |   |
|                                                                |   |     |      |   |     |   |   |   |
| **Yields                and Rates:**                                |   |     |      |   |     |   |   |   |
|                                                                |   |     |      |   |     |   |   |   |
| Loan                portfolio                                       |   |     | 8.49      | %      |     |   | 8.33 | % |
| Securities                                                          |   |     | 4.87      | %      |     |   | 3.97 | % |
| Other                interest-earning assets                        |   |     | 4.98      | %      |     |   | 4.56 | % |
| All                interest-earning assets                          |   |     | 8.18      | %      |     |   | 7.65 | % |
| Deposits                                                            |   |     | 4.85      | %      |     |   | 3.82 | % |
| Borrowings                                                          |   |     | 4.00      | %      |     |   | 4.74 | % |
| All                interest-bearing liabilities                     |   |     | 4.85      | %      |     |   | 3.83 | % |
| Interest-rate                spread (2)                             |   |     | 3.33      | %      |     |   | 3.82 | % |
| Net                yield on average interest earning assets (3)     |   |     | 4.53      | %      |     |   | 4.79 | % |

| (1) | All                per share amounts reflect the 5% stock dividends declared on May                16, 2007                and April 26, 2006 and paid on June 15, 2007 and 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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*Table          of Contents*

|   | **SELECTED                FINANCIAL                DATA** |
|--------|-----------------------------------------------------------|

**December      31, 2007, 2006, 2005, 2004 and 2003 and the**

**Years      Ended December 31, 2007, 2006, 2005, 2004 and 2003**

**(Dollars      in thousands, except per share figures)**

| **At                Year End:**                                                                                                        |   | **2007** |      |   | **2006** |   |      | **2005** |   |   | **2004**  |   |   | **2003** |    |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|--------|----------|--------|-----------|----------|--------|--------|-----------|--------|--------|----------|---------|
| Cash                and cash equivalents                                                                                               |   | $        | 6,795     |   |     |   | 5,422     |     |   |   | 12,366    |   |   |     | 9,759   |   |   |   | 7,218 |   |
| Securities                                                                                                                             |   |     | 6,793     |   |     |   | 8,953     |     |   |   | 12,244    |   |   |     | 11,371  |   |   |   | 11,375 |   |
| Loans,                net                                                                                                              |   |     | 172,251   |   |     |   | 130,133   |     |   |   | 95,666    |   |   |     | 68,794  |   |   |   | 48,244 |   |
| All                other assets                                                                                                        |   |     | 10,914    |   |     |   | 8,931     |     |   |   | 7,033     |   |   |     | 4,673   |   |   |   | 3,218 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Total                assets                                                                                                            |   | $        | 196,753   |   |     |   | 153,439   |     |   |   | 127,309   |   |   |     | 94,597  |   |   |   | 70,055 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Deposit                accounts                                                                                                        |   |     | 172,677   |   |     |   | 130,219   |     |   |   | 102,809   |   |   |     | 81,936  |   |   |   | 61,064 |   |
| Federal                Home Loan Bank advances                                                                                         |   |     | 100       |   |     |   | 100       |     |   |   | 2,600     |   |   |     | 2,500   |   |   |   | - |   |
| All                other liabilities                                                                                                   |   |     | 2,045     |   |     |   | 2,057     |     |   |   | 1,559     |   |   |     | 2,741   |   |   |   | 1,619 |   |
| Stockholders'                equity                                                                                                    |   |     | 21,931    |   |     |   | 21,063    |     |   |   | 20,341    |   |   |     | 7,420   |   |   |   | 7,372 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Total                liabilities and stockholders' equity                                                                              |   | $        | 196,753   |   |     |   | 153,439   |     |   |   | 127,309   |   |   |     | 94,597  |   |   |   | 70,055 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| **For                the Period:**                                                                                                     |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Total                interest income                                                                                                   |   | $        | 13,588    |   |     |   | 10,626    |     |   |   | 7,243     |   |   |     | 4,345   |   |   |   | 3,393 |   |
| Total                interest expense                                                                                                  |   |     | 6,060     |   |     |   | 3,976     |     |   |   | 1,939     |   |   |     | 1,074   |   |   |   | 993 |   |
| Net                interest income                                                                                                     |   |     | 7,528     |   |     |   | 6,650     |     |   |   | 5,304     |   |   |     | 3,271   |   |   |   | 2,400 |   |
| Provision                for loan losses                                                                                               |   |     | 885       |   |     |   | 429       |     |   |   | 352       |   |   |     | 380     |   |   |   | 383 |   |
| Net                interest income after provision for loan losses                                                                     |   |     | 6,643     |   |     |   | 6,221     |     |   |   | 4,952     |   |   |     | 2,891   |   |   |   | 2,017 |   |
| Non-interest                income                                                                                                     |   |     | 996       |   |     |   | 824       |     |   |   | 930       |   |   |     | 759     |   |   |   | 620 |   |
| Non-interest                expenses                                                                                                   |   |     | 7,385     |   |     |   | 6,082     |     |   |   | 4,639     |   |   |     | 3,440   |   |   |   | 2,372 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Earnings                before income taxes                                                                                            |   |     | 254       |   |     |   | 963       |     |   |   | 1,243     |   |   |     | 210     |   |   |   | 265 |   |
| Income                taxes                                                                                                            |   |     | 77        |   |     |   | 332       |     |   |   | 478       |   |   |     | 87      |   |   |   | 104 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Net                earnings                                                                                                            |   | $        | 177       |   |     |   | 631       |     |   |   | 765       |   |   |     | 123     |   |   |   | 161 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Net                earnings per basic share (1)                                                                                        |   | $        | .09       |   |     |   | .32       |     |   |   | .50       |   |   |     | .14     |   |   |   | .18 |   |
| Net                earnings per diluted share (1)                                                                                      |   | $        | .09       |   |     |   | .31       |     |   |   | .49       |   |   |     | .14     |   |   |   | .18 |   |
| Weighted-average                number of shares outstanding  for basic (1)                                                  |   |     | 2,017,553 |   |     |   | 1,998,871 |     |   |   | 1,539,513 |   |   |     | 902,068 |   |   |   | 901,607 |   |
| Weighted-average                number of shares outstanding for diluted (1)                                                           |   |     | 2,034,070 |   |     |   | 2,030,344 |     |   |   | 1,553,623 |   |   |     | 902,068 |   |   |   | 901,607 |   |
|                                                                                                                                   |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| **Ratios                and Other Data:**                                                                                              |   |     |      |   |     |   |      |     |   |   |      |   |   |     |    |   |   |   |   |   |
| Return                on average assets                                                                                                |   |     | .10       | %      |     |   | .43       | %        |   |   | .64       | %      |   |     | .15     | % |   |   | .25 | % |
| Return                on average equity                                                                                                |   |     | .83       | %      |     |   | 3.04      | %        |   |   | 5.42      | %      |   |     | 1.67    | % |   |   | 2.19 | % |
| Average                equity as a percentage of average assets                                                                        |   |     | 12.11     | %      |     |   | 14.08     | %        |   |   | 11.85     | %      |   |     | 9.02    | % |   |   | 11.34 | % |
| Interest-rate                spread during the period                                                                                  |   |     | 3.33      | %      |     |   | 3.82      | %        |   |   | 3.79      | %      |   |     | 3.87    | % |   |   | 3.81 | % |
| Net                yield on average interest-earning assets                                                                            |   |     | 4.53      | %      |     |   | 4.79      | %        |   |   | 4.67      | %      |   |     | 4.36    | % |   |   | 4.22 | % |
| Non-interest                expenses to average assets                                                                                 |   |     | 4.18      | %      |     |   | 4.12      | %        |   |   | 3.89      | %      |   |     | 4.23    | % |   |   | 3.66 | % |
| Ratio                of average interest-earning assets to average interest-bearing                liabilities                         |   |     | 1.33      |   |     |   | 1.34      |     |   |   | 1.51      |   |   |     | 1.34    |   |   |   | 1.24 |   |
| Nonperforming                loans and foreclosed real estate as a  percentage of total                assets at end of year |   |     | .89       | %      |     |   | .22       | %        |   |   | -         | %      |   |     | .52     | % |   |   | 2.07 | % |
| Allowance                for loan losses as a percentage of total loans at end of                year                                  |   |     | 1.36      | %      |     |   | 1.36      | %        |   |   | 1.42      | %      |   |     | 1.56    | % |   |   | 1.73 | % |
| Total                number of banking offices                                                                                         |   |     | 4         |   |     |   | 4         |     |   |   | 3         |   |   |     | 3       |   |   |   | 2 |   |
| Total                shares outstanding at end of year (1)                                                                             |   |     | 2,058,047 |   |     |   | 2,001,513 |     |   |   | 1,996,172 |   |   |     | 903,079 |   |   |   | 901,977 |   |
| Book                value per share at end of year (1)                                                                                 |   | $        | 10.66     |   |     | $      | 10.52     |     |   | $      | 10.19     |   |   | $        | 8.22    |   |   | $ | 8.17 |   |

|   |  (1)   All                per share amounts reflect the 5% stock dividends declared on May                16, 2007                and April 26, 2006 and paid on June 15, 2007 and May 17,                2006. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**MANAGEMENT’S      DISCUSSION AND ANALYSIS OF**

|   | **FINANCIAL                CONDITION AND RESULTS OF                OPERATIONS** |
|--------|---------------------------------------------------------------------------------|

**General**

**Management’s      Strategy**

----

*Table          of Contents*

**Critical      Accounting Policies**

**Regulation      and Legislation**

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*Table          of Contents*

**Credit      Risk**

**Allowance      for Loan Losses**

|                                                                                                       |   | **2007**   |   |   | **2006**                         |   |   | **2005**   |   |
|------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|----------------------------------|--------|--------|------------|--------|
|                                                                                                       |   |       |   |   | **Loans                  to**    |   |   |       |   |   | **Loans                  to** |   |   |   |   |   | **Loans                  to** |   |
|                                                                                                       |   | **Amount** |   |   | **Total                  Loans** |   |   | **Amount** |   |   | **Total                  Loans** |   |   | **Amount** |   |   | **Total                  Loans** |   |
|                                                                                                       |   |       |   |   |                             |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Commercial                                                                                                 |   | $          | 1,156  |   |                             |   | 34.15  | %          |   | $ | 811 |   |   |   | 38.13 | % |   | $ | 576 |   |   |   | 37.42 | % |
| Commercial                  real estate                                                                    |   |       | 857    |   |                             |   | 47.31  |       |   |   | 631 |   |   |   | 42.24 |   |   |   | 478 |   |   |   | 40.79 |   |
| Construction                                                                                               |   |       | 145    |   |                             |   | 6.38   |       |   |   | 65 |   |   |   | 4.59 |   |   |   | 53 |   |   |   | 4.47 |   |
| Consumer                                                                                                   |   |       | 234    |   |                             |   | 12.13  |       |   |   | 293 |   |   |   | 14.80 |   |   |   | 274 |   |   |   | 17.11 |   |
| Residential                  real estate                                                                   |   |       | 1      |   |                             |   | .03    |       |   |   | 1 |   |   |   | .24 |   |   |   | 2 |   |   |   | .21 |   |
|                                                                                                       |   |       |   |   |                             |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  allowance for loan losses                                                           |   | $          | 2,393  |   |                             |   | 100.00 | %          |   | $ | 1,801 |   |   |   | 100.00 | % |   | $ | 1,383 |   |   |   | 100.00 | % |
|                                                                                                       |   |       |   |   |                             |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                  allowance for loan losses as a percentage of total loans                  outstanding |   |       |   |   |                             |   | 1.36   | %          |   |   |   |   |   |   | 1.36 | % |   |   |   |   |   |   | 1.42 | % |

**Loan      Portfolio**

|                                             |   | **2007**   |    |   | **2006**                |   |   | **2005**   |   |
|--------------------------------------------------|--------|------------|---------|--------|-------------------------|--------|--------|------------|--------|
|                                             |   |       |    |   | **%                of** |   |   |       |   |   | **%                of** |   |   |   |   |   | **%                of** |   |
|                                             |   | **Amount** |    |   | **Total**               |   |   | **Amount** |   |   | **Total** |   |   | **Amount** |   |   | **Total** |   |
|                                             |   |       |    |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Commercial                                       |   | $          | 59,878  |   |                    |   | 34.15  | %          |   | $ | 50,521 |   |   |   | 38.13 | % |   | $ | 36,510 |   |   |   | 37.42 | % |
| Commercial                real estate            |   |       | 82,951  |   |                    |   | 47.31  |       |   |   | 55,967 |   |   |   | 42.24 |   |   |   | 39,794 |   |   |   | 40.79 |   |
| Construction                                     |   |       | 11,186  |   |                    |   | 6.38   |       |   |   | 6,089 |   |   |   | 4.59 |   |   |   | 4,365 |   |   |   | 4.47 |   |
| Consumer                                         |   |       | 21,279  |   |                    |   | 12.13  |       |   |   | 19,618 |   |   |   | 14.80 |   |   |   | 16,688 |   |   |   | 17.11 |   |
| Residential                real estate           |   |       | 48      |   |                    |   | .03    |       |   |   | 315 |   |   |   | .24 |   |   |   | 206 |   |   |   | .21 |   |
|                                             |   |       |    |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |       | 175,342 |   |                    |   | 100.00 | %          |   |   | 132,510 |   |   |   | 100.00 | % |   |   | 97,563 |   |   |   | 100.00 | % |
|                                             |   |       |    |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                            |   |       |    |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred                loan costs and fees, net |   |       | (698    | )      |                    |   |   |       |   |   | (576 | ) |   |   |   |   |   |   | (514 | ) |   |   |   |   |
| Allowance                for loan losses         |   |       | (2,393  | )      |                    |   |   |       |   |   | (1,801 | ) |   |   |   |   |   |   | (1,383 | ) |   |   |   |   |
|                                             |   |       |    |   |                    |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans,                net                        |   | $          | 172,251 |   |                    |   |   |       |   | $ | 130,133 |   |   |   |   |   |   | $ | 95,666 |   |   |   |   |   |

----

*Table          of Contents*

|                                                                                                          |   | **At                December 31,** |   |
|---------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                                          |   | **2007**                           |   |   | **2006** |   |   | **2005** |   |
| Non-accrual                loans:                                                                             |   |                               |   |   |   |   |   |   |   |
| Real                estate loans                                                                              |   | $                                  | 1,077  |   |   | $ | 172 |   |   | $ | - |   |
| Consumer                loans                                                                                 |   |                               | 27     |   |   |   | 18 |   |   |   | - |   |
| Commercial                and all other loans                                                                 |   |                               | 297    |   |   |   | 154 |   |   |   | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                non-accrual loans                                    |   |                               | 1,401  |   |   |   | 344 |   |   |   | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
| Accruing                loans over 90 days delinquent:                                                        |   |                               |   |   |   |   |   |   |   |   |   |   |
| Real                estate loans                                                                              |   |                               | 243    |   |   |   | - |   |   |   | - |   |
| Consumer                loans                                                                                 |   |                               | -      |   |   |   | - |   |   |   | - |   |
| Commercial                and all other loans                                                                 |   |                               | 106    |   |   |   | - |   |   |   | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                accrual loans over 90 days delinquent                |   |                               | 349    |   |   |   | - |   |   |   | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                nonperforming loans                                  |   |                               | 1,750  |   |   |   | 344 |   |   |   | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
| Foreclosed                assets                                                                              |   |                               | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                non-performing loans and foreclosed assets           |   | $                                  | 1,750  |   |   | $ | 344 |   |   | $ | - |   |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                non-performing loans as a percentage of total loans  |   |                               | 1.00   | % |   |   | .26 | % |   |   | - | % |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                non-performing loans as a percentage of total assets |   |                               | .89    | % |   |   | .22 | % |   |   | - | % |
|                                                                                                          |   |                               |   |   |   |   |   |   |   |   |   |   |
|       Total                non-performing loans and real estate owned           |   |                               |   |   |   |   |   |   |   |   |   |   |
|       as                a percentage of total assets                            |   |                               | .89    | % |   |   | .22 | % |   |   | - | % |

**Allowance      for Credit Losses**

----

*Table          of Contents*

|                                                                                                                               |   | **Year                Ended December 31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                               |   | **2007**                                   |   |   | **2006** |   |   | **2005** |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |
| Allowance                at beginning of year                                                                                      |   | $                                          | 1,801  |   |   | $ | 1,383 |   |   | $ | 1,097 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Charge-offs:                                                                                                                       |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Real                estate loans                                                                                                   |   |                                       | 123    |   |   |   | - |   |   |   | - |   |
| Consumer                loans                                                                                                      |   |                                       | 49     |   |   |   | 19 |   |   |   | 17 |   |
| Commercial                and all other loans                                                                                      |   |                                       | 128    |   |   |   | 14 |   |   |   | 55 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Total                charge-offs                                                                                                   |   |                                       | 300    |   |   |   | 33 |   |   |   | 72 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Recoveries:                                                                                                                        |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Real                estate loans                                                                                                   |   |                                       | -      |   |   |   | - |   |   |   | - |   |
| Consumer                loans                                                                                                      |   |                                       | 6      |   |   |   | 10 |   |   |   | 1 |   |
| Commercial                and all other loans                                                                                      |   |                                       | 1      |   |   |   | 12 |   |   |   | 5 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Total                recoveries                                                                                                    |   |                                       | 7      |   |   |   | 22 |   |   |   | 6 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Provision                for loan losses charged to operations                                                                     |   |                                       | 885    |   |   |   | 429 |   |   |   | 352 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Allowance                at end of year                                                                                            |   | $                                          | 2,393  |   |   | $ | 1,801 |   |   | $ | 1,383 |   |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Ratio                of net charge-offs during the year to average loans outstanding during                the                year |   |                                       | .19    | % |   |   | .01 | % |   |   | .08 | % |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Allowance                for loan losses as a percentage of total at end of year                loans                              |   |                                       | 1.36   | % |   |   | 1.36 | % |   |   | 1.42 | % |
|                                                                                                                               |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Allowance                for loan losses as a percentage of nonperforming loans                                                    |   |                                       | 136.74 | % |   |   | 523.55 | % |   |   | - | % |

----

*Table          of Contents*

**Capital      Resources and Liquidity**

*See*

|                                                  |   | **Actual** |   |   | **Minimum****For                Capital Adequacy**** Purposes** |   |   | **Minimum**** To                Be Well****Capitalized                Under****Prompt                Corrective****Action                Provisions** |   |
|-------------------------------------------------------|--------|------------|--------|--------|----------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| ***As                of December 31, 2007:***         |   | **Amount** |   |   | **%**                                                                |   |   | **Amount**                                                                                                                                                 |   |   | **%** |   |   | **Amount** |   |   | **%** |   |
|                                                  |   |       |   |   |                                                                 |   |   |                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| Total                Capital to Risk-Weighted Assets  |   | $          | 20,202 |   |                                                                 |   | 11.09  | %                                                                                                                                                          |   | $ | 14,579 |   |   |   | 8.00 | % |   | $ | 18,224 |   |   |   | 10.00 | % |
| Tier                I Capital to Risk-Weighted Assets |   |       | 17,923 |   |                                                                 |   | 9.83   |                                                                                                                                                       |   |   | 7,290 |   |   |   | 4.00 |   |   |   | 10,934 |   |   |   | 6.00 |   |
| Tier                I Capital to Total Assets         |   |       | 17,923 |   |                                                                 |   | 9.09   |                                                                                                                                                       |   |   | 7,884 |   |   |   | 4.00 |   |   |   | 9,855 |   |   |   | 5.00 |   |

----

*Table          of Contents*

**Investment      Activities**

**Securities**

|                                                                    |   | **2007** |   |   | **2006** |   |
|-------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
| ***Securities                available for sale:***                     |   |     |   |   |     |   |
| U.S.                Government agency securities                        |   | $        | 6,061  |   |     | $      | 5,445 |   |
| Mortgage-backed                securities                               |   |     | 728    |   |     |   | 999 |   |
|                                                                    |   |     | 6,789  |   |     |   | 6,444 |   |
|                                                                    |   |     |   |   |     |   |   |   |
| ***Securities                held to maturity:***                       |   |     |   |   |     |   |   |   |
| U.S.                Government agency securities                        |   |     | -      |   |     |   | 2,500 |   |
| Mortgage-backed                securities                               |   |     | 4      |   |     |   | 9 |   |
|                                                                    |   |     | 4      |   |     |   | 2,509 |   |
|            Total |   | $        | 6,793  |   |     | $      | 8,953 |   |

----

*Table          of Contents*

|                                             |   | **Due                in**           |   |   | **From                One Year** |   |   | **From                Five Years** |   |   |        |   |   |         |   |
|--------------------------------------------------|--------|-------------------------------------|--------|--------|----------------------------------|--------|--------|------------------------------------|--------|--------|-------------|--------|--------|--------------|--------|
|                                             |   | **One                Year or Less** |   |   | **to                Five Years** |   |   | **to                Ten Years**    |   |   | **Total**   |   |
|                                             |   | **Carrying**                        |   |   | **Average**                      |   |   | **Carrying**                       |   |   | **Average** |   |   | **Carrying** |   |   | **Average** |   |   | **Carrying** |   |   | **Average** |   |
|                                             |   | **Value**                           |   |   | **Yield**                        |   |   | **Value**                          |   |   | **Yield**   |   |   | **Value**    |   |   | **Yield** |   |   | **Value** |   |   | **Yield** |   |
| **December                31, 2007:**            |   |                                |   |   |                             |   |   |                               |   |   |        |   |   |         |   |   |   |   |   |   |   |   |   |   |
| U.S.                Government agency securities |   | $                                   | 1,499  |   |                             |   | 4.26   | %                                  |   | $      | 1,003       |   |   |         | 500    | % |   | $ | 3,559 |   |   |   | 5.71 | % |   | $ | 6,061 |   |   |   | 5.24 | % |
| Mortgage-backed                securities        |   |                                |   |   |                             |   |   |                               |   |   |        |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   | 732 |   |   |   | 4.03 |   |
|                                             |   |                                |   |   |                             |   |   |                               |   |   |        |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total**                                        |   |                                |   |   |                             |   |   |                               |   |   |        |   |   |         |   |   |   |   |   |   |   |   |   |   |   | $ | 6,793 |   |   |   | 5.11 | % |
|                                             |   |                                |   |   |                             |   |   |                               |   |   |        |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **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 | % |

**Regulatory      Capital Requirements**

**Market      Risk**

----

*Table          of Contents*

**Asset      and Liability Structure**

----

*Table          of Contents*

|                                                |   |                        |    |   | **More**                      |   |    | **More**                         |   |   |        |   |   |      |   |
|-----------------------------------------------------|--------|-----------------------------|---------|--------|-------------------------------|--------|---------|----------------------------------|--------|--------|-------------|--------|--------|-----------|--------|
|                                                |   |                        |    |   | **than                One**   |   |    | **than                Five**     |   |   |        |   |   |      |   |
|                                                |   |                        |    |   | **Year                and**   |   |    | **Years                and**     |   |   | **Over**    |   |   |      |   |
|                                                |   | **One                Year** |    |   | **Less                than**  |   |    | **Less                than**     |   |   | **Fifteen** |   |   |      |   |
|                                                |   | **or                Less**  |    |   | **Five                Years** |   |    | **Fifteen                Years** |   |   | **Years**   |   |   | **Total** |   |
| Mortgage                and commercial loans (1):   |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |
| Commercial                                          |   | $                           | 25,029  |   |                          | $      | 30,811  |                             |   | $      | 4,038       |   |   | $         | -      |   |   | $ | 59,878 |   |
| Commercial                real estate               |   |                        | 15,450  |   |                          |   | 53,896  |                             |   |   | 13,262      |   |   |      | 343    |   |   |   | 82,951 |   |
| Construction                                        |   |                        | 2,088   |   |                          |   | 7,097   |                             |   |   | 2,001       |   |   |      | -      |   |   |   | 11,186 |   |
| Consumer                                            |   |                        | 6,001   |   |                          |   | 14,261  |                             |   |   | 852         |   |   |      | 165    |   |   |   | 21,279 |   |
| Residential                mortgage                 |   |                        | 48      |   |                          |   | -       |                             |   |   | -           |   |   |      | -      |   |   |   | 48 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Total                loans                          |   |                        | 48,616  |   |                          |   | 106,065 |                             |   |   | 20,153      |   |   |      | 508    |   |   |   | 175,342 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Interest-bearing                deposits with banks |   |                        | 250     |   |                          |   | -       |                             |   |   | -           |   |   |      | -      |   |   |   | 250 |   |
| Federal                funds sold                   |   |                        | 2,466   |   |                          |   | -       |                             |   |   | -           |   |   |      | -      |   |   |   | 2,466 |   |
| Federal                Home Loan Bank stock         |   |                        | -       |   |                          |   | -       |                             |   |   | -           |   |   |      | 280    |   |   |   | 280 |   |
| Securities                (2)                       |   |                        | 4,499   |   |                          |   | 1,807   |                             |   |   | 428         |   |   |      | 59     |   |   |   | 6,793 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Total                rate-sensitive assets          |   |                        | 55,831  |   |                          |   | 107,872 |                             |   |   | 20,581      |   |   |      | 847    |   |   |   | 185,131 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Deposit                accounts (3):                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Money                market deposits                |   | $                           | 26,121  |   |                          | $      | -       |                             |   | $      | -           |   |   | $         | -      |   |   | $ | 26,121 |   |
| NOW                deposits                         |   |                        | 3,175   |   |                          |   | -       |                             |   |   | -           |   |   |      | -      |   |   |   | 3,175 |   |
| Savings                deposits                     |   |                        | 4,061   |   |                          |   | -       |                             |   |   | -           |   |   |      | -      |   |   |   | 4,061 |   |
| Certificates                of deposit              |   |                        | 82,562  |   |                          |   | 33,617  |                             |   |   | -           |   |   |      | -      |   |   |   | 116,179 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Total                deposit accounts               |   |                        | 115,919 |   |                          |   | 33,617  |                             |   |   | -           |   |   |      | -      |   |   |   | 149,536 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Federal                Home Loan Bank advance       |   |                        | -       |   |                          |   | -       |                             |   |   | 100         |   |   |      | -      |   |   |   | 100 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Total                rate-sensitive liabilities     |   |                        | 115,919 |   |                          |   | 33,617  |                             |   |   | 100         |   |   |      | -      |   |   |   | 149,636 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| GAP                (repricing differences)          |   | $                           | (60,088 | )      |                          | $      | 74,255  |                             |   | $      | 20,481      |   |   | $         | 847    |   |   | $ | 35,495 |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Cumulative                GAP                       |   | $                           | (60,088 | )      |                          | $      | 14,167  |                             |   | $      | 34,648      |   |   | $         | 35,495 |   |   |   |   |   |
|                                                |   |                        |    |   |                          |   |    |                             |   |   |        |   |   |      |   |   |   |   |   |   |
| Cumulative                GAP/total assets          |   |                        | (30.54  | )%     |                          |   | 7.20    | %                                |   |   | 17.61       | %      |   |      | 18.04  | % |   |   |   |   |

| (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 or call                dates. |
|-----|--------------------------------------------------------------------------------------------|

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

----

*Table          of Contents*

|                             |      |           |   | **Commercial** |   |            |   |         |   |             |
|----------------------------------|-----------|----------------|--------|----------------|--------|-----------------|--------|--------------|--------|------------------|
|                             |      |           |   | **Real**       |   | **Residential** |   |         |   |             |
| **Years                Ending**  |      | **Commercial** |   | **Estate**     |   | **Mortgage**    |   | **Consumer** |   | **Construction** |
| **December                31,**  |      | **Loans**      |   | **Loans**      |   | **Loans**       |   | **Loans**    |   | **Loans**        |
|                             |      |           |   |           |   |            |   |         |   |             |
| 2008                             |      | $              | 18,340 |           | $      | 19,453          |   | $            | 27     |             | $ | 8,025 |   | $ | 2,884 |
| 2009                             |      |           | 9,772  |           |   | 6,725           |   |         | 4      |             |   | 4,907 |   |   | 983 |
| 2010                             |      |           | 6,202  |           |   | 4,541           |   |         | 4      |             |   | 3,854 |   |   | 981 |
|                             | 2011-2012 |           |   | 7,715          |   |            | 7,832  |         |   | 9                |   |   | 3,404 |   |   | 921 |
|                             | 2013-2014 |           |   | 4,840          |   |            | 7,285  |         |   | 4                |   |   | 566 |   |   | 874 |
| 2015                & beyond |      |           | 13,009 |           |   | 37,115          |   |         | -      |             |   | 523 |   |   | 4,543 |
|                             |      |           |   |           |   |            |   |         |   |             |   |   |   |   |   |   |
| **Total**                        |      | $              | 59,878 |           | $      | 82,951          |   | $            | 48     |             | $ | 21,279 |   | $ | 11,186 |

| ***Originations:***                                         |   | **2007** |    |   | **2006** |
|-------------------------------------------------------------|--------|----------|---------|--------|----------|
|                                                        |   |     |    |   |     |
| Commercial                loans                             |   | $        | 29,299  |   |     | $ | 28,540 |
| Commercial                real estate loans                 |   |     | 38,323  |   |     |   | 23,983 |
| Consumer                loans                               |   |     | 10,197  |   |     |   | 12,891 |
| Construction                loans                           |   |     | 13,637  |   |     |   | 5,868 |
|                                                        |   |     |    |   |     |   |   |
| Total                loans originated                       |   |     | 91,456  |   |     |   | 71,282 |
|                                                        |   |     |    |   |     |   |   |
| Principal                reductions and participations sold |   |     | (48,624 | )      |     |   | (36,335 |
|                                                        |   |     |    |   |     |   |   |
| Increase                in total loans                      |   | $        | 42,832  |   |     | $ | 34,947 |

**Deposit      Activities and Other Sources of Funds**

----

*Table          of Contents*

|                                             |       |   | **At                December 31,** |
|--------------------------------------------------|------------|--------|------------------------------------|
|                                             |       |   | **2007**                           |   |   | **2006** |
|                                             |       |   |                               |   |   | **%                of** |   |   |   |   |   | **%                of** |
|                                             |       |   | **Amount**                         |   |   | **Deposits** |   |   | **Amount** |   |   | **Deposits** |
| Demand                deposits                   |       |   | $                                  | 23,141 |   |   |   | 13.40 | % |   | $ | 20,125 |   |   |   | 15.45 |
| Money-market                deposits             |       |   |                               | 26,121 |   |   |   | 15.13 |   |   |   | 26,541 |   |   |   | 20.38 |
| NOW                deposits                      |       |   |                               | 3,175 |   |   |   | 1.84 |   |   |   | 3,834 |   |   |   | 2.94 |
| Savings                deposits                  |       |   |                               | 4,061 |   |   |   | 2.35 |   |   |   | 5,111 |   |   |   | 3.92 |
|                                             |       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subtotal                                         |       |   |                               | 56,498 |   |   |   | 32.72 |   |   |   | 55,611 |   |   |   | 42.69 |
|                                             |       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificate                of deposits:          |       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | 0%-0.99    | %      |                               |   | 391 |   |   |   | .23 |   |   |   | 274 |   |   |   | .21 |
|                                             | 1.00%-1.99 | %      |                               |   | 170 |   |   |   | .10 |   |   |   | - |   |   |   | - |
|                                             | 2.00%-2.99 | %      |                               |   | - |   |   |   | - |   |   |   | 932 |   |   |   | .72 |
|                                             | 3.00%-3.99 | %      |                               |   | 1,497 |   |   |   | .87 |   |   |   | 2,364 |   |   |   | 1.82 |
|                                             | 4.00%-4.99 | %      |                               |   | 41,742 |   |   |   | 24.17 |   |   |   | 21,272 |   |   |   | 16.34 |
|                                             | 5.00%-5.99 | %      |                               |   | 72,379 |   |   |   | 41.91 |   |   |   | 49,766 |   |   |   | 38.22 |
|                                             |       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                certificates of deposit (1) |       |   |                               | 116,179 |   |   |   | 67.28 |   |   |   | 74,608 |   |   |   | 57.31 |
|                                             |       |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                deposits                    |       |   | $                                  | 172,677 |   |   |   | 100.00 | % |   | $ | 130,219 |   |   |   | 100.00 |

|   |  (1) | Included                individual retirement accounts (“IRAs”) totaling $4.5 million and $4.0                million at December 31, 2007 and 2006, all of which are in the form                of                certificates of deposit. |
|--------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      | **Year                  Ending December 31,** |
|-----------------------------------------------------------|-----------------------------------------------|
|                                                      | **2008**                                      | **2009** | **2010** | **2011** | **2012** | **Total** |
|                                                      |                                          |   |   |   |   |   |
|      0%                  - 0.99% | $      391      | $           - | $         - | $         - | $         - | $        391 |
| 1.00%                  - 1.99%                            | 170                                           | - | - | - | - | 170 |
| 2.00%                  - 2.99%                            | -                                             | - | - | - | - | - |
| 3.00%                  - 3.99%                            | 1,197                                         | 207 | 93 | - | - | 1,497 |
| 4.00%                  - 4.99%                            | 29,426                                        | 7,782 | 2,848 | 312 | 1,374 | 41,742 |
| 5.00%                  - 5.99%                            | 51,378                                        |  8,014 | 5,488 | 3,466 | 4,033 |   72,379 |
|                                                      |                                          |   |   |   |   |   |
| Total                  certificates of deposit            | $                  82,562                     | $                  16,003 | $                  8,429 | $                  3,778 | $                  5,407 | $                  116,179 |

----

*Table          of Contents*

|                                               |   | **December                31,** |
|----------------------------------------------------|--------|---------------------------------|
|                                               |   | **2007**                        |   |   | **2006** |
|                                               |   |                            |   |   |   |
| Due                three months or less            |   | $                               | 10,535 |   |   | $ | 6,512 |
| Due                over three months to six months |   |                            | 14,286 |   |   |   | 5,273 |
| Due                over six months to one year     |   |                            | 16,464 |   |   |   | 19,118 |
| Due                over one year to five years     |   |                            | 27,249 |   |   |   | 8,325 |
|                                               |   |                            |   |   |   |   |   |
|                                               |   | $                               | 68,534 |   |   | $ | 39,228 |

**Interest      Rate Sensitivity**

----

*Table          of Contents*

|                                                                                                           |   | **Year                Ended December 31,** |    |
|----------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                                                           |   | **2007**                                   |    |   | **2006** |   |
|                                                                                                           |   |                                       |    |   | **Interest** |   |   | **Average** |   |   |   |   |   | **Interest** |   |   | **Average** |   |
|                                                                                                           |   | **Average**                                |    |   | **and** |   |   | **Yield/** |   |   | **Average** |   |   | **and** |   |   | **Yield/** |   |
|                                                                                                           |   | **Balance**                                |    |   | **Dividends** |   |   | **Rate** |   |   | **Balance** |   |   | **Dividends** |   |   | **Rate** |   |
| Interest-earning                assets:                                                                        |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                                          |   | $                                          | 151,760 |   |   |   | 12,878 |   |   |   | 8.49 | % |   | $ | 115,533 |   |   |   | 9,626 |   |   |   | 8.33 | % |
| Securities                                                                                                     |   |                                       | 7,704   |   |   |   | 375 |   |   |   | 4.87 |   |   |   | 10,741 |   |   |   | 426 |   |   |   | 3.97 |   |
| Other                interest-earning assets (1)                                                               |   |                                       | 6,732   |   |   |   | 335 |   |   |   | 4.98 |   |   |   | 12,587 |   |   |   | 574 |   |   |   | 4.56 |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest-earning assets                                                                   |   |                                       | 166,196 |   |   |   | 13,588 |   |   |   | 8.18 |   |   |   | 138,861 |   |   |   | 10,626 |   |   |   | 7.65 |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non                interest-earning assets                                                                     |   |                                       | 10,528  |   |   |   |   |   |   |   |   |   |   |   | 8,700 |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                                    |   | $                                          | 176,724 |   |   |   |   |   |   |   |   |   |   | $ | 147,561 |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                                   |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings,                NOW and money-market deposits                                                          |   |                                       | 34,200  |   |   |   | 1,156 |   |   |   | 3.38 |   |   |   | 37,710 |   |   |   | 1,121 |   |   |   | 2.97 |   |
| Certificates                of deposit                                                                         |   |                                       | 90,727  |   |   |   | 4,900 |   |   |   | 5.40 |   |   |   | 64,718 |   |   |   | 2,791 |   |   |   | 4.31 |   |
| Other                borrowings                                                                                |   |                                       | 100     |   |   |   | 4 |   |   |   | 4.00 |   |   |   | 1,350 |   |   |   | 64 |   |   |   | 4.74 |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest-bearing liabilities                                                              |   |                                       | 125,027 |   |   |   | 6,060 |   |   |   | 4.85 |   |   |   | 103,778 |   |   |   | 3,976 |   |   |   | 3.83 |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                                 |   |                                       | 23,004  |   |   |   |   |   |   |   |   |   |   |   | 20,978 |   |   |   |   |   |   |   |   |   |
| Non-interest                bearing liabilities                                                                |   |                                       | 7,299   |   |   |   |   |   |   |   |   |   |   |   | 2,034 |   |   |   |   |   |   |   |   |   |
| Stockholders'                equity                                                                            |   |                                       | 21,394  |   |   |   |   |   |   |   |   |   |   |   | 20,771 |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                liabilities and stockholders' equity                                                      |   | $                                          | 176,724 |   |   |   |   |   |   |   |   |   |   | $ | 147,561 |   |   |   |   |   |   |   |   |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                             |   |                                       |    |   |   | $ | 7,528 |   |   |   |   |   |   |   |   |   |   | $ | 6,650 |   |   |   |   |   |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-rate                spread (2)                                                                        |   |                                       |    |   |   |   |   |   |   |   | 3.33 | % |   |   |   |   |   |   |   |   |   |   | 3.82 | % |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest margin (3)                                                                         |   |                                       |    |   |   |   |   |   |   |   | 4.53 | % |   |   |   |   |   |   |   |   |   |   | 4.79 | % |
|                                                                                                           |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio                of average interest-earning assets to average interest-bearing                liabilities |   |                                       | 1.33    |   |   |   |   |   |   |   |   |   |   |   | 1.34 |   |   |   |   |   |   |   |   |   |

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

| (2) | Interest-rate                spread represents the difference between the average yield on                interest-earning assets and the average rate of interest-bearing                liabilities. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Net                interest margin is net interest income divided by total average                interest-earning assets. |
|-----|----------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Rate/Volume      Analysis**

***Year      Ended December 31, 2007 vs. 2006:***

|                                                  |   | **Increase                (Decrease)** |   |
|-------------------------------------------------------|--------|----------------------------------------|--------|
|                                                  |   |                                   |   |   |   |   |   | **Rate/** |   |   |   |   |
|                                                  |   | **Rate**                               |   |   | **Volume** |   |   | **Volume** |   |   | **Total** |   |
|                                                  |   | **(In                thousands)**      |   |
| Interest-earning                assets:               |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                 |   | $                                      | 174    |   |   | $ | 3,019 |   |   | $ | 59 |   |   | $ | 3,252 |   |
| Securities                                            |   |                                   | 97     |   |   |   | (121 | ) |   |   | (27 | ) |   |   | (51 | ) |
| Other                interest-earning assets          |   |                                   | 53     |   |   |   | (267 | ) |   |   | (25 | ) |   |   | (239 | ) |
|                                                  |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                 |   |                                   | 324    |   |   |   | 2,631 |   |   |   | 7 |   |   |   | 2,962 |   |
|                                                  |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:          |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                             |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings,                money-market and NOW deposits |   |                                   | 154    |   |   |   | (105 | ) |   |   | (14 | ) |   |   | 35 |   |
| Certificates                of deposit                |   |                                   | 705    |   |   |   | 1,121 |   |   |   | 283 |   |   |   | 2,109 |   |
| Other                borrowings                       |   |                                   | (10    | ) |   |   | (59 | ) |   |   | 9 |   |   |   | (60 | ) |
|                                                  |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                 |   |                                   | 849    |   |   |   | 957 |   |   |   | 278 |   |   |   | 2,084 |   |
|                                                  |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                change in net interest income      |   | $                                      | (525   | ) |   | $ | 1,674 |   |   | $ | (271 | ) |   | $ | 878 |   |

**Comparison      of Years Ended December 31, 2007 and 2006**

***General.***

***Interest      Income.***

***Interest      Expense.***

----

*Table          of Contents*

***Provision      for Loan Losses.***

***Non-interest      Income.***

***Non-interest      Expense.***

***Income      Taxes.  ***

**Impact      of Inflation and Changing Prices**

**Selected      Quarterly Results**

|                                                    |   | **2007**    |   |   | **2006**    |   |
|---------------------------------------------------------|--------|-------------|--------|--------|-------------|--------|
|                                                    |   | **Fourth**  |   |   | **Third**   |   |   | **Second** |   |   | **First** |   |   | **Fourth** |   |   | **Third** |   |   | **Second** |   |   | **First** |   |
|                                                    |   | **Quarter** |   |   | **Quarter** |   |   | **Quarter** |   |   | **Quarter** |   |   | **Quarter** |   |   | **Quarter** |   |   | **Quarter** |   |   | **Quarter** |   |
|                                                    |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                          |   | $           | 3,694  |   |        |   | 3,640 |   |   |   | 3,286 |   |   |   | 2,968 |   |   | $ | 3,009 |   |   |   | 2,763 |   |   |   | 2,546 |   |   |   | 2,308 |   |
| Interest                expense                         |   |        | 1,737  |   |        |   | 1,636 |   |   |   | 1,417 |   |   |   | 1,270 |   |   |   | 1,255 |   |   |   | 1,023 |   |   |   | 936 |   |   |   | 762 |   |
| Net                interest income                      |   |        | 1,957  |   |        |   | 2,004 |   |   |   | 1,869 |   |   |   | 1,698 |   |   |   | 1,754 |   |   |   | 1,740 |   |   |   | 1,610 |   |   |   | 1,546 |   |
| Provision                for loan  losses     |   |        | 317    |   |        |   | 252 |   |   |   | 221 |   |   |   | 95 |   |   |   | 107 |   |   |   | 145 |   |   |   | 70 |   |   |   | 107 |   |
| Earnings                before income taxes             |   |        | 26     |   |        |   | 43 |   |   |   | 53 |   |   |   | 132 |   |   |   | 205 |   |   |   | 303 |   |   |   | 220 |   |   |   | 235 |   |
| Net                earnings                             |   |        | 22     |   |        |   | 32 |   |   |   | 37 |   |   |   | 86 |   |   |   | 135 |   |   |   | 198 |   |   |   | 142 |   |   |   | 156 |   |
| Basic                earnings per common share          |   |        | .01    |   |        |   | .02 |   |   |   | .02 |   |   |   | .04 |   |   |   | .07 |   |   |   | .09 |   |   |   | .07 |   |   |   | .09 |   |
| Diluted                earnings per common share        |   |        | .01    |   |        |   | .02 |   |   |   | .02 |   |   |   | .04 |   |   |   | .07 |   |   |   | .09 |   |   |   | .07 |   |   |   | .08 |   |
| Cash                dividends declared per common share |   |        | -      |   |        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Consolidated      Balance Sheets**

**(Dollars      in thousands, except per share amounts)**

|                                                                                                                                           |   | **                  December 31,** |    |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                                                                           |   | **2007**                                     |    |   | **2006** |   |
| **Assets**                                                                                                                                     |   |                                         |    |
|                                                                                                                                           |   |                                         |    |   |   |   |
| Cash                and due from banks                                                                                                         |   | $                                            | 4,079   |   |   |   | 1,734 |   |
| Federal                funds sold                                                                                                              |   |                                         | 2,466   |   |   |   | 3,499 |   |
| Interest-bearing                deposits with banks.                                                                                           |   |                                         | 250     |   |   |   | 189 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Total                cash and cash equivalents                                                                                                 |   |                                         | 6,795   |   |   |   | 5,422 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Securities                available for sale                                                                                                   |   |                                         | 6,789   |   |   |   | 6,444 |   |
| Securities                held to maturity (market value of $4 and $2,499)                                                                     |   |                                         | 4       |   |   |   | 2,509 |   |
| Loans,                net of allowance for loan losses of $2,393 and $1,801                                                                    |   |                                         | 172,251 |   |   |   | 130,133 |   |
| Premises                and equipment, net                                                                                                     |   |                                         | 5,466   |   |   |   | 4,278 |   |
| Federal                Home Loan Bank stock, at cost                                                                                           |   |                                         | 280     |   |   |   | 259 |   |
| Accrued                interest receivable                                                                                                     |   |                                         | 983     |   |   |   | 828 |   |
| Deferred                income taxes                                                                                                           |   |                                         | 628     |   |   |   | 368 |   |
| Bank-owned                life insurance                                                                                                       |   |                                         | 2,681   |   |   |   | 2,573 |   |
| Other                assets                                                                                                                    |   |                                         | 876     |   |   |   | 625 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Total                assets                                                                                                                    |   | $                                            | 196,753 |   |   |   | 153,439 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| **Liabilities                and Stockholders' Equity**                                                                                        |   |                                         |    |   |   |   |   |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Liabilities:                                                                                                                                   |   |                                         |    |   |   |   |   |   |
| Non-interest                bearing demand deposits                                                                                            |   |                                         | 23,141  |   |   |   | 20,125 |   |
| Savings,                NOW and money-market deposits                                                                                          |   |                                         | 33,357  |   |   |   | 35,486 |   |
| Time                deposits                                                                                                                   |   |                                         | 116,179 |   |   |   | 74,608 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Total                deposits                                                                                                                  |   |                                         | 172,677 |   |   |   | 130,219 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Official                checks                                                                                                                 |   |                                         | 1,214   |   |   |   | 1,241 |   |
| Federal                Home Loan Bank advance                                                                                                  |   |                                         | 100     |   |   |   | 100 |   |
| Other                liabilities                                                                                                               |   |                                         | 831     |   |   |   | 816 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Total                liabilities                                                                                                               |   |                                         | 174,822 |   |   |   | 132,376 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
|    Commitments                (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, 2,058,047 and                1,906,203 shares issued and outstanding |   |                                         | 20      |   |   |   | 19 |   |
| Additional                paid-in capital                                                                                                      |   |                                         | 23,813  |   |   |   | 21,729 |   |
| Accumulated                deficit                                                                                                             |   |                                         | (1,936  | ) |   |   | (634 | ) |
| Accumulated                other comprehensive income (loss)                                                                                   |   |                                         | 34      |   |   |   | (51 | ) |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Total                stockholders' equity                                                                                                      |   |                                         | 21,931  |   |   |   | 21,063 |   |
|                                                                                                                                           |   |                                         |    |   |   |   |   |   |
| Total                liabilities and stockholders' equity                                                                                      |   | $                                            | 196,753 |   |   |   | 153,439 |   |

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Consolidated      Statements of Earnings**

**(Dollars      in thousands, except per share amounts)**

|                                                               |   | **                     Year Ended December 31,** |      |
|--------------------------------------------------------------------|--------|---------------------------------------------------------------------------|-----------|
| Interest                income:                                    |   | **2007**                                                                  |      |   | **2006** |   |
| Loans                                                              |   | $                                                                         | 12,878    |   |   |   | 9,626 |   |
| Securities                                                         |   |                                                                      | 375       |   |   |   | 426 |   |
| Other                                                              |   |                                                                      | 335       |   |   |   | 574 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Total                interest income                               |   |                                                                      | 13,588    |   |   |   | 10,626 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Interest                expense:                                   |   |                                                                      |      |   |   |   |   |   |
| Deposits                                                           |   |                                                                      | 6,056     |   |   |   | 3,912 |   |
| Federal                Home Loan Bank advances                     |   |                                                                      | 1         |   |   |   | 64 |   |
|    Other                                            |   |                                                                      | 3         |   |   |   | - |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Total                interest expense                              |   |                                                                      | 6,060     |   |   |   | 3,976 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Net                interest income                                 |   |                                                                      | 7,528     |   |   |   | 6,650 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Provision                for loan losses                           |   |                                                                      | 885       |   |   |   | 429 |   |
| Net                interest income after provision for loan losses |   |                                                                      | 6,643     |   |   |   | 6,221 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Non-interest                income:                                |   |                                                                      |      |   |   |   |   |   |
| Service                charges and fees on deposit accounts        |   |                                                                      | 473       |   |   |   | 439 |   |
| Loan                brokerage fees                                 |   |                                                                      | 205       |   |   |   | 260 |   |
| Gain                on sale of loans held for sale                 |   |                                                                      | 175       |   |   |   | - |   |
| Income                from bank-owned life insurance               |   |                                                                      | 108       |   |   |   | 98 |   |
| Other                fees                                          |   |                                                                      | 35        |   |   |   | 27 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Total                non-interest income                           |   |                                                                      | 996       |   |   |   | 824 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Non-interest                expenses:                              |   |                                                                      |      |   |   |   |   |   |
| Salaries                and employee benefits                      |   |                                                                      | 3,681     |   |   |   | 3,163 |   |
| Occupancy                and equipment                             |   |                                                                      | 1,246     |   |   |   | 878 |   |
| Advertising                                                        |   |                                                                      | 566       |   |   |   | 498 |   |
| Data                processing                                     |   |                                                                      | 482       |   |   |   | 394 |   |
| Supplies                                                           |   |                                                                      | 151       |   |   |   | 162 |   |
| Professional                fees                                   |   |                                                                      | 185       |   |   |   | 183 |   |
| Other                                                              |   |                                                                      | 1,074     |   |   |   | 804 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Total                non-interest expenses                         |   |                                                                      | 7,385     |   |   |   | 6,082 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Earnings                before income taxes                        |   |                                                                      | 254       |   |   |   | 963 |   |
| Income                taxes                                        |   |                                                                      | 77        |   |   |   | 332 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Net                earnings                                        |   | $                                                                         | 177       |   |   |   | 631 |   |
| Net                earnings per share:                             |   |                                                                      |      |   |   |   |   |   |
| Basic                                                              |   | $                                                                         | .09       |   |   |   | .32 |   |
| Diluted                                                            |   | $                                                                         | .09       |   |   |   | .31 |   |
|                                                               |   |                                                                      |      |   |   |   |   |   |
| Weighted-average                number of shares, basic            |   |                                                                      | 2,017,553 |   |   |   | 1,998,871 |   |
| Weighted-average                number of shares, diluted          |   |                                                                      | 2,034,070 |   |   |   | 2,030,344 |   |

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Consolidated      Statements of Stockholders' Equity**

**Years      Ended December 31, 2007 and 2006**

**(Dollars      in thousands)**

|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   | **Accumulated**                  |   |   |       |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|--------|-------------|--------|--------|----------------|--------|--------|------------------|--------|--------|----------------------------------|--------|--------|------------|--------|
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   | **(Accumulated** |   |   | **Other**                        |   |   |       |   |
|                                                                                                                           |   |                            |      |   |        |   |   | **Additional** |   |   | **Deficit)**     |   |   | **Compre-**                      |   |   | **Total**  |   |
|                                                                                                                           |   | **Common                Stock** |      |   | **Paid-In** |   |   | **Retained**   |   |   | **hensive**      |   |   | **Stockholders’**          |   |
|                                                                                                                           |   | **Shares**                      |      |   | **Amount**  |   |   | **Capital**    |   |   | **Earnings**     |   |   | **Income                (Loss)** |   |   | **Equity** |   |
| 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 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 associated with exercise of common stock options                                                    |   |                            | -         |   |        |   | -      |           |   |   | 11               |   |   |                             | -      |   |       |   | - |   |   |   | 11 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                                    |   |                            | 1,906,203 |   |        |   | 19     |           |   |   | 21,729           |   |   |                             | (634   | )      |       |   | (51 | ) |   |   | 21,063 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Comprehensive                income:                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Net                earnings                                                                                                    |   |                            | -         |   |        |   | -      |           |   |   | -                |   |   |                             | 177    |   |       |   | - |   |   |   | 177 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Net                change in unrealized loss on securities available for sale, net of                tax of                $51 |   |                            | -         |   |        |   | -      |           |   |   | -                |   |   |                             | -      |   |       |   | 85 |   |   |   | 85 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Comprehensive                income                                                                                            |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   | 262 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| 5%                stock dividend, fractional shares paid in cash of $6                                                         |   |                            | 94,915    |   |        |   | 1      |           |   |   | 1,472            |   |   |                             | (1,479 | )      |       |   | - |   |   |   | (6 | ) |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Share-based                compensation                                                                                        |   |                            | -         |   |        |   | -      |           |   |   | 32               |   |   |                             | -      |   |       |   | - |   |   |   | 32 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Proceeds                from exercise of common stock options                                                                  |   |                            | 56,929    |   |        |   | -      |           |   |   | 520              |   |   |                             | -      |   |       |   | - |   |   |   | 520 |   |
|                                                                                                                           |   |                            |      |   |        |   |   |           |   |   |             |   |   |                             |   |   |       |   |   |   |   |   |   |   |
| Tax                benefit associated with exercise of  common stock                options                          |   |                            | -         |   |        |   | -      |           |   |   | 60               |   |   |                             | -      |   |       |   | - |   |   |   | 60 |   |
|  Balance                at December 31, 2007                                                                              |   |                            | 2,058,047 |   |        | $      | 20     |           |   |   | 23,813           |   |   |                             | (1,936 | )      |       |   | 34 |   |   |   | 21,931 |   |

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*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Consolidated      Statements of Cash Flows**

**(In      thousands)**

|                                                                                                              |   | **Year                Ended December 31,** |    |
|-------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                                                                              |   | **2007**                                   |    |   | **2006** |   |
| Cash                flows from operating activities:                                                              |   |                                       |    |   |   |   |
| Net                earnings                                                                                       |   | $                                          | 177     |   |   |   | 631 |   |
| Adjustments                to reconcile net earnings to net cash provided by operating                activities: |   |                                       |    |   |   |   |   |   |
| Depreciation                and amortization                                                                      |   |                                       | 376     |   |   |   | 285 |   |
| Provision                for loan losses                                                                          |   |                                       | 885     |   |   |   | 429 |   |
| Amortization                of loan (fees) costs, net                                                             |   |                                       | (111    | ) |   |   | (26 | ) |
| Deferred                income taxes                                                                              |   |                                       | (311    | ) |   |   | (185 | ) |
| Net                amortization of premiums and discounts on securities                                           |   |                                       | 8       |   |   |   | 8 |   |
| Gain                on sale of loans held for sale                                                                |   |                                       | (175    | ) |   |   | - |   |
| Proceeds                from sale of loans held for sale                                                          |   |                                       | 4,562   |   |   |   | - |   |
| Originations                of loans held for sale                                                                |   |                                       | (4,387  | ) |   |   | - |   |
| Increase                in accrued interest receivable                                                            |   |                                       | (155    | ) |   |   | (270 | ) |
| Increase                in other assets                                                                           |   |                                       | (251    | ) |   |   | (302 | ) |
| (Decrease)                increase in official checks and other liabilities                                       |   |                                       | (12     | ) |   |   | 498 |   |
| Income                from bank-owned life insurance                                                              |   |                                       | (108    | ) |   |   | (98 | ) |
| Share-based                compensation                                                                           |   |                                       | 32      |   |   |   | 8 |   |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Net                cash provided by operating activities                                                          |   |                                       | 530     |   |   |   | 978 |   |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Cash                flows from investing activities:                                                              |   |                                       |    |   |   |   |   |   |
| Maturities                and calls of securities available for sale                                              |   |                                       | 2,500   |   |   |   | 4,000 |   |
| Maturities                of securities held to maturity                                                          |   |                                       | 2,500   |   |   |   | 500 |   |
| Purchase                of securities available for sale                                                          |   |                                       | (3,000  | ) |   |   | (1,500 | ) |
| Principal                payments on securities available for sale                                                |   |                                       | 283     |   |   |   | 312 |   |
| Principal                payments on securities held to maturity                                                  |   |                                       | 5       |   |   |   | 9 |   |
| Net                increase in loans                                                                              |   |                                       | (42,892 | ) |   |   | (34,870 | ) |
| Purchase                of premises and equipment                                                                 |   |                                       | (1,564  | ) |   |   | (864 | ) |
| Purchase                of bank-owned life insurance                                                              |   |                                       | -       |   |   |   | (525 | ) |
| (Purchase)                sale of Federal Home Loan Bank stock                                                    |   |                                       | (21     | ) |   |   | 47 |   |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Net                cash used in investing activities                                                              |   |                                       | (42,189 | ) |   |   | (32,891 | ) |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Cash                flows from financing activities:                                                              |   |                                       |    |   |   |   |   |   |
| Net                increase in deposits                                                                           |   |                                       | 42,458  |   |   |   | 27,410 |   |
| Decrease                of Federal Home Loan Bank advances                                                        |   |                                       | -       |   |   |   | (2,500 | ) |
| Proceeds                from the exercise of common stock options                                                 |   |                                       | 520     |   |   |   | 50 |   |
| Tax                benefit associated with exercise of common stock options                                       |   |                                       | 60      |   |   |   | 11 |   |
| Fractional                shares of stock dividends paid in cash                                                  |   |                                       | (6      | ) |   |   | (2 | ) |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Net                cash provided by financing activities                                                          |   |                                       | 43,032  |   |   |   | 24,969 |   |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                                               |   |                                       | 1,373   |   |   |   | (6,944 | ) |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Cash                and cash equivalents at beginning of year                                                     |   |                                       | 5,422   |   |   |   | 12,366 |   |
|                                                                                                              |   |                                       |    |   |   |   |   |   |
| Cash                and cash equivalents at end of year                                                           |   | $                                          | 6,795   |   |   |   | 5,422 |   |

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*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Consolidated      Statements of Cash Flows, Continued**

**(In      thousands)**

|                                                                                                                                                                   |   | **Year                Ended December 31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                                                                   |   | **2007**                                   |   |   | **2006** |   |
| Supplemental                disclosure of cash flow information:                                                                                                       |   |                                       |   |   |   |   |
| Cash                paid during the year for:                                                                                                                          |   |                                       |   |   |   |   |
| Interest,                net of interest capitalized of $7 in 2007                                                                                                     |   | $                                          | 6,026  |   |   |   | 3,955 |   |
|                                                                                                                                                                   |   |                                       |   |   |   |   |   |   |
| Income                taxes                                                                                                                                            |   | $                                          | 448    |   |   |   | 379 |   |
|                                                                                                                                                                   |   |                                       |   |   |   |   |   |   |
| Non-cash                transactions:                                                                                                                                  |   |                                       |   |   |   |   |   |   |
| Accumulated                other comprehensive income (loss), net change in unrealized loss                on                securities available for sale, net of tax |   | $                                          | 85     |   |   |   | 24 |   |
|                                                                                                                                                                   |   |                                       |   |   |   |   |   |   |
| Common                stock dividend                                                                                                                                   |   | $                                          | 1,473  |   |   |   | 1,525 |   |

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*Table          of Contents*

|   | **FPB                BANCORP, INC. AND                SUBSIDIARY** |
|--------|--------------------------------------------------------------------|

**Notes      to Consolidated Financial Statements**

**     December      31, 2007 and 2006 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                it’s 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, Stuart, Fort Pierce and Vero Beach,                Florida.  A fifth office opened on January 18, 2008 in Palm                City, Florida and a sixth office is anticipated to open in the second                quarter of 2008, on Gatlin Boulevard in Port St. Lucie,                Florida.  In addition, an 11,000 square foot Operations Center                in Jensen Beach, Florida, opened in March 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 and deferred tax                assets. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

**                   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 income (loss). Gains and                losses                on the sale of available-for-sale securities are determined using                the                specific-identification method. Premiums and discounts on securities                are                recognized in interest income using the interest method over the                period to                maturity. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***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                non-accrual 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                non-accrual 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 2007, 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, 2007 or                2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

|   |   |
|--------|--------|

|   | **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 impaired.                For                such loans, 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 all other loans and is based on historical 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) |
|--------|-------------|

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*Table          of Contents*

**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.*** 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 beginning 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,                *Accounting for Stock-Based Compensation* (as amended by SFAS No.                148, *Accounting for Stock-Based Compensation Transition and                Disclosure*) (collectively 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). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (continued) |
|--------|-------------|

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*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(1)    Summary      of Significant Accounting Policies, Continued**

|   | ***Earnings                Per Share.*** Basic earnings per share have 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 dividends                paid on June 15, 2007 and May 17, 2006. Earnings per common share                have                been computed based on the                following: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                  | **Year                Ended December 31,** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|
|                                                                                                                                                  | **2007**                                   | **2006** |
| Weighted-average                number of common shares outstanding used to calculate basic earnings                per                common share   | 2,017,553                                  | 1,998,871 |
|                                                                                                                                                  |                                       |   |
| Effect                of dilutive stock options                                                                                                       |      16,517       |     31,473 |
|                                                                                                                                                  |                                       |   |
| Weighted-average                number of common shares outstanding used to calculate diluted earnings                per                common share | 2,034,070                                  | 2,030,344 |

|                                                      | **Number                Outstanding**                                           | **Exercise                Price**  | **Expires**     |
|-----------------------------------------------------------|---------------------------------------------------------------------------------|------------------------------------|-----------------|
|  For                the year ended December 31, 2007 |             115,798 |  $                15.42-16.67 |  2015-2017 |

|   | ***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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

|   | **FPB                BANCORP, INC. AND                SUBSIDIARY** |
|--------|--------------------------------------------------------------------|

**           Notes      to Consolidated Financial Statements, Continued**

**(1)  Summary      of Significant Accounting Policies, Continued**

|   | ***Fair                Values of Financial Instruments,                Continued.*** |
|--------|--------------------------------------------------------------------------------------|

|   | ***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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***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 Advance.  ***The fair value of the                Federal Home Loan Bank advance 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 gains (losses) on securities                available for sale. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***Recent                Accounting Pronouncements.  ***In September 2006,                Financial Accounting Standards Board (“FASB”) issued SFAS No. 157,                *Fair Value Measurements* (“SFAS 157”). SFAS 157 defines fair                value, establishes a framework for measuring fair value in accordance                with                generally accepted accounting principles, and expands disclosures                about                fair value measurements. This statement is effective for the Company's                financial statements as of January 1, 2008. Management is in the                process of evaluating the impact of SFAS 157 and does not anticipate                it                will have any effect on the Company’s consolidated financial condition or                results of operations. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(1)  Summary      of Significant Accounting Policies, Continued**

***Recent      Accounting Pronouncements, Continued.***

*The Fair Value Option for      Financial Assets*
*and Financial Liabilities*

*Business Combinations*

*Accounting for Deferred Compensation and Postretirement      Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements*
*Accounting for Deferred Compensation and      Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life      Insurance Arrangements*

|   | (continued) |
|--------|-------------|

----

*Table          of Contents*

**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): |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                    |   | **Amortized****Cost** |   |   | **Gross****Unrealized****Gains** |   |   | **Gross****Unrealized****Losses** |   |   | **Fair****Value** |   |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|-------------------|--------|
| **At                December 31, 2007:****  *Securities                available for sale:*** |   |                  |   |   |                             |   |   |                              |   |   |              |   |
|      U.S.                Government agency securities                          |   | $                     | 6,000  |   |                             |   | 62     |                              |   |   | (1                | )      |   |   | 6,061 |   |
|      Mortgage-backed                securities                                 |   |                  | 735    |   |                             |   | -      |                              |   |   | (7                | )      |   |   | 728 |   |
|                                                                                                    |   |                  |   |   |                             |   |   |                              |   |   |              |   |   |   |   |   |
|         Total                securities available for sale      |   | $                     | 6,735  |   |                             |   | 62     |                              |   |   | (8                | )      |   |   | 6,789 |   |
|                                                                                                    |   |                  |   |   |                             |   |   |                              |   |   |              |   |   |   |   |   |
|   ***Security                held to                maturity -***                             |   |                  |   |   |                             |   |   |                              |   |   |              |   |   |   |   |   |
|      Mortgage-backed                security                                   |   | $                     | 4      |   |                             |   | -      |                              |   |   | -                 |   |   |   | 4 |   |
|                                                                                                    |   |                  |   |   |                             |   |   |                              |   |   |              |   |   |   |   |   |
| **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                security                                   |   |                  | 9      |   |                             |   | -      |                              |   |   | -                 |   |   |   | 9 |   |
|                                                                                                    |   |                  |   |   |                             |   |   |                              |   |   |              |   |   |   |   |   |
|         Total                securities held to maturity        |   | $                     | 2,509  |   |                             |   | -      |                              |   |   | (10               | )      |   |   | 2,499 |   |
|                                                                                                    |   |                  |   |   |                             |   |   |                              |   |   |              |   |   |   |   |   |

|   | There                were no sales of available for sale securities in 2007 or                2006. |
|--------|-----------------------------------------------------------------------------------------------------|

|   | (continued) |
|--------|-------------|

----

*Table          of Contents*

**FPB        BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(2)  Securities,      Continued**

|   | The                scheduled maturities of securities at December 31, 2007 are as follows                (in                thousands): |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | **Available                for Sale** |   |   | **Held                to Maturity** |   |
|-------------------------------------------|--------|---------------------------------------|--------|--------|-------------------------------------|--------|
|                                      |   | **Amortized****Cost**                 |   |   | **Fair****Value**                   |   |   | **Amortized**** Cost** |   |   | **Fair****Value** |   |
|                                      |   |                                  |   |   |                                |   |   |   |   |   |   |   |
| Due                in one year or less    |   | $                                     | 1,500  |   |                                |   | 1,499 |   |   |   | - |   |   |   | - |   |
| Due                from one to five years |   |                                  | 1,000  |   |                                |   | 1,003 |   |   |   | - |   |   |   | - |   |
| Due                from five to ten years |   |                                  | 3,500  |   |                                |   | 3,559 |   |   |   | - |   |   |   | - |   |
| Mortgage-backed                securities |   |                                  | 735    |   |                                |   | 728 |   |   |   | 4 |   |   |   | 4 |   |
|                                      |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|                                      |   | $                                     | 6,735  |   |                                |   | 6,789 |   |   |   | 4 |   |   |   | 4 |   |

|   | At                December 31, 2007 and 2006 securities with a carrying value of $6,724,000                and $5,594,000, respectively, were pledged for Federal Home Loan                Bank                advances and to the Federal Reserve Bank for Treasury Tax and Loan                (TT&L) transactions and the State of Florida as collateral for public                funds. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Securities                with gross unrealized losses at December 31, 2007, aggregated by                investment category and length of time that individual securities                have                been in a continuous loss position, is as follows                (in   thousands): |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                             |   | **Over                Twelve Months** |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                             |   | **Gross****Unrealized****Losses**     |   |   | **Fair****Value** |   |
| ***Securities                available for sale:***                              |   |                                  |   |   |   |   |
|      U.S.                Government agency securities   |   | $                                     | (1     | ) |   |   | 1,499 |   |
|      Mortgage-backed                securities          |   |                                  | (7     | ) |   |   | 663 |   |
|                                                                             |   |                                  |   |   |   |   |   |   |
|      Total                securities available for sale |   | $                                     | (8     | ) |   |   | 2,162 |   |

|   | 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) |
|--------|-------------|

**        **

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(2)  Securities,      Continued**

|   | The                unrealized losses on six investment securities available for sale                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**

|                                                                                                                                   |   | **At                December 31,** |    |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                                                   |   | **2007**                           |    |   | **2006** |   |
|                                                                                                                                   |   |                               |    |   |   |   |
| Commercial                                                                                                                             |   | $                                  | 59,878  |   |   |   | 50,521 |   |
| Commercial                real estate                                                                                                  |   |                               | 82,951  |   |   |   | 55,967 |   |
| Construction                                                                                                                           |   |                               | 11,186  |   |   |   | 6,089 |   |
| Consumer                                                                                                                               |   |                               | 21,279  |   |   |   | 19,618 |   |
| Residential                real estate                                                                                                 |   |                               | 48      |   |   |   | 315 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
|                   Total                loans |   |                               | 175,342 |   |   |   | 132,510 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
| Deduct:                                                                                                                                |   |                               |    |   |   |   |   |   |
|        Deferred                loan costs and fees, net                                             |   |                               | (698    | ) |   |   | (576 | ) |
|        Allowance                for loan losses                                                     |   |                               | (2,393  | ) |   |   | (1,801 | ) |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
| Loans,                net                                                                                                              |   | $                                  | 172,251 |   |   |   | 130,133 |   |

|                                          |   | **Year                ended December 31,** |   |
|-----------------------------------------------|--------|--------------------------------------------|--------|
|                                          |   | **2007**                                   |   |   | **2006** |   |
|                                          |   |                                       |   |   |   |   |
| Beginning                balance              |   | $                                          | 1,801  |   |   |   | 1,383 |   |
| Provision                for loan losses      |   |                                       | 885    |   |   |   | 429 |   |
| Charge-offs,                net of recoveries |   |                                       | (293   | ) |   |   | (11 | ) |
|                                          |   |                                       |   |   |   |   |   |   |
| Ending                balance                 |   | $                                          | 2,393  |   |   |   | 1,801 |   |

|   | (continued) |
|--------|-------------|

----

*Table          of Contents*

**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,**         |   |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                   |   | **2007**                                   |   |   | **2006** |   |
| Loans                identified as impaired:                                           |   |                                       |   |   |   |   |
|  Gross                loans with no related allowance for losses                  |   | $                                          | 1,410  |   |   |   | - |   |
|   Gross                loans with related allowance for loan losses recorded |   |                                       | 1,280  |   |   |   | 344 |   |
|    Less:                Allowance on these loans                        |   |                                       | 355    |   |   |   | 87 |   |
|                                                                                   |   |                                       |   |   |   |   |   |   |
| Net                investment in impaired loans                                        |   | $                                          | 2,335  |   |   |   | 257 |   |
|                                                                                   |   |                                       |   |   |   |   |   |   |
|                                                                                   |   | **Year                Ended December 31,** |   |
|                                                                                   |   | **2007**                                   |   |   | **2006** |   |
|  Average                investment in impaired loans                              |   | $                                          | 1,331  |   |   |   | 69 |   |
|                                                                                   |   |                                       |   |   |   |   |   |   |
| Interest                income recognized on impaired loans                            |   | $                                          | 31     |   |   |   | 14 |   |
|                                                                                   |   |                                       |   |   |   |   |   |   |
| Interest                income received on impaired loans                              |   | $                                          | 31     |   |   |   | 14 |   |
|                                                                                   |   |
|                                                                                   |   | **At                December 31,**         |   |
|                                                                                   |   | **2007**                                   |   |   | **2006** |   |
|                                                                                   |   |                                       |   |   |   |   |   |   |
| Non-accrual                loans                                                       |   | $                                          | 1,401  |   |   |   | 344 |   |
| Past                due ninety days or more but still accruing                         |   |                                       | 349    |   |   |   | - |   |
|                                                                                   |   |                                       |   |   |   |   |   |   |
|                                                                                   |   | $                                          | 1,750  |   |   |   | 344 |   |

|                                                           |   | **At                December 31,** |   |
|----------------------------------------------------------------|--------|------------------------------------|--------|
|                                                           |   | **2007**                           |   |   | **2006** |   |
|                                                           |   |                               |   |   |   |   |
| Non-accrual                loans                               |   | $                                  | 1,401  |   |   |   | 344 |   |
| Past                due ninety days or more but still accruing |   |                               | 349    |   |   |   | - |   |
|                                                           |   |                               |   |   |   |   |   |   |
|                                                           |   | $                                  | 1,750  |   |   |   | 344 |   |

----

*Table          of Contents*

**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,** |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                                    |   | **2007**                           |   |   | **2006** |   |
| Building                and improvements                                                                |   | $                                  | 2,779  |   |   |   | 2,614 |   |
| Land                                                                                                    |   |                               | 552    |   |   |   | 552 |   |
| Furniture,                fixtures and equipment                                                        |   |                               | 1,651  |   |   |   | 1,259 |   |
| Leasehold                improvements                                                                   |   |                               | 811    |   |   |   | 327 |   |
| Construction                in process                                                                  |   |                               | 834    |   |   |   | 379 |   |
|                                                                                                    |   |                               |   |   |   |   |   |   |
|        Total,                at cost                                 |   |                               | 6,627  |   |   |   | 5,131 |   |
|                                                                                                    |   |                               |   |   |   |   |   |   |
|        Less                accumulated depreciation and amortization |   |                               | (1,161 | ) |   |   | (853 | ) |
|                                                                                                    |   |                               |   |   |   |   |   |   |
|        Premises                and equipment, net                    |   | $                                  | 5,466  |   |   |   | 4,278 |   |

|   | Interest                capitalized and included in construction in process during 2007 was                approximately $7,000. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company leases its Stuart, Florida branch office facility under a                non-cancelable 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                the first quarter of 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 opened in March of 2007. In                May of                2007, the Company signed a 10 year lease with two five-year renewal                options for a branch office in Palm City, Florida, which opened in                January, 2008.  At December 31, 2007, the Company had                approximately $466,000 in outstanding purchase commitments related                to the                Gatlin Boulevard and Palm City, Florida branch locations. 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, 2007 and 2006                was                approximately $488,000 and $298,000, 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 $87,000 and $89,000 in 2007 and 2006,                respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(4)  Premises      and Equipment, Continued**

|   | At                December 31, 2007, future minimum rental commitments, including certain                renewal options, under these non-cancelable leases were approximately                as                follows (in thousands): |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  ** Year                Ending**** December                31,** |   | **Operating****Lease****Expense** |   |   | **Operating****Lease****Income** |
|---------------------------------------------------------------------------------|--------|-----------------------------------|--------|--------|----------------------------------|
| 2008                                                                            |   | $                                 | 465    |   |                             |   | 84 |
| 2009                                                                            |   |                              | 479    |   |                             |   | 57 |
| 2010                                                                            |   |                              | 490    |   |                             |   | - |
| 2011                                                                            |   |                              | 501    |   |                             |   | - |
| 2012                                                                            |   |                              | 517    |   |                             |   | - |
| Thereafter                                                                      |   |                              | 16,195 |   |                             |   | - |
|                                                                            |   |                              |   |   |                             |   |   |
| Total                                                                           |   | $                                 | 18,647 |   |                             |   | 141 |

**(5)  Deposits**

|   | The                aggregate amount of time deposits with a minimum denomination of                $100,000                was approximately $68,534,000 and $39,228,000 at December 31, 2007                and                2006, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Year                Ending****December                31,** |   | **Amount** |
|---------------------------------------------------------------|--------|------------|
| 2008                                                          |   | $          | 82,562 |
| 2009                                                          |   |       | 16,003 |
| 2010                                                          |   |       | 8,429 |
| 2011                                                          |   |       | 3,778 |
| 2012                                                          |   |       | 5,407 |
|                                                          |   |       |   |
|                                                          |   | $          | 116,179 |

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(6)  Federal      Home Loan Bank Advance**

|   | Maturity                and interest rate of the advance from the Federal Home Loan Bank                of                Atlanta ("FHLB") consisted of the following ($ in                thousands): |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  **Maturity**                    | ** Fixed                or** | ** **     | ** **                             | ** **                               | ** **     |
|---------------------------------------|-----------------------------------|----------------|----------------------------------------|------------------------------------------|----------------|
| ** Year                Ending**  | ** Variable**                | ** Call** | ** **                             | **At                December 31, ** |
| ** December                31,** | ** Rate**                    | ** Date** | ** Interest                Rate** | ** 2007**                           | ** 2006** |
|                                  |                              |           |                                   |                                     |           |
|  2015                            |   Fixed(1)    |  N/A      |  50%                              |  $                100               |  100      |

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

|   | The                advance is collateralized by securities available for sale with a                carrying                value of approximately $250,000 and $336,000 at December 31, 2007                and                2006, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(7)  Financial      Instruments**

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

|                                                                        |   | **At                December 31, 2007** |    |   | **At                December 31, 2006** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------|---------|--------|-----------------------------------------|--------|
|                                                                        |   | **Carrying****Amount**                  |    |   | **Fair****Value**                       |   |   | **Carrying****Amount** |   |   | **Fair****Value** |   |
|                                                                        |   |                                    |    |   |                                    |   |   |   |   |   |   |   |
| Financial                assets:                                            |   |                                    |    |   |                                    |   |   |   |   |   |   |   |
|      Cash                and cash equivalents      |   | $                                       | 6,795   |   |                                    |   | 6,795 |   |   |   | 5,422 |   |   |   | 5,422 |   |
|      Securities                available for sale  |   |                                    | 6,789   |   |                                    |   | 6,789 |   |   |   | 6,444 |   |   |   | 6,444 |   |
|      Securities                held to maturity    |   |                                    | 4       |   |                                    |   | 4 |   |   |   | 2,509 |   |   |   | 2,499 |   |
|      Loans,                net                     |   |                                    | 172,251 |   |                                    |   | 173,071 |   |   |   | 130,133 |   |   |   | 126,597 |   |
|      Federal                Home Loan Bank stock   |   |                                    | 280     |   |                                    |   | 280 |   |   |   | 259 |   |   |   | 259 |   |
|      Accrued                interest receivable    |   |                                    | 983     |   |                                    |   | 983 |   |   |   | 828 |   |   |   | 828 |   |
|                                                                        |   |                                    |    |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Financial                liabilities:                                       |   |                                    |    |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
|      Deposit                liabilities            |   |                                    | 172,677 |   |                                    |   | 173,078 |   |   |   | 130,219 |   |   |   | 129,948 |   |
|      Federal                Home Loan Bank advance |   |                                    | 100     |   |                                    |   | 100 |   |   |   | 100 |   |   |   | 100 |   |
|                                                                        |   |                                    |    |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**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 creditworthiness 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, 2007 follows (in                thousands): |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                        |   | **Contract****Amount** |   |
|---------------------------------------------|--------|------------------------|--------|
|                                        |   |                   |   |
| Standby                letters of credit    |   | $                      | 287    |   |
|                                        |   |                   |   |   |
| Commitments                to extend credit |   | $                      | 3,436  |   |
|                                        |   |                   |   |   |
| Available                lines of credit    |   | $                      | 22,729 |   |
|                                        |   |                   |   |   |

**(8)  Credit      Risk**

|   | The                Company grants the majority of its loans to borrowers throughout                the Port                St. Lucie, Stuart, Palm City, 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. The Company does not have significant concentrations                to                any one industry or customer. The Company does have eighteen loans,                generally with original terms of 5 years or less, aggregating $16.9                million at December 31, 2007, where the primary source of repayment                is the                sale of the related collateral or the conversion of the existing                debt into                debt at another financial institution. The majority of these loans                are                located in Martin and St. Lucie County,                Florida. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                                                  ** **(continued) |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

**(8)  Credit      Risk, Continued**

|   | With                the uncertain real estate market in Martin, St. Lucie and Indian                River                Counties, Florida, obtaining refinancing or sale of the collateral                may be                difficult or impossible. It is most likely many of these loans will                be                extended and may be modified to provide additional interest reserves.                Management is closely monitoring these loans and believes the loan                loss                allowance at December 31, 2007 is                adequate. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(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 $86,000 in 2007 and $80,000 in 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** |
|--------------------------------------|

|                                                                                                                                |   | **Year                Ended December 31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                                |   | **2007**                                   |   |   | **2006** |   |
| Current:                                                                                                                            |   |                                       |   |   |   |   |
|      Federal                                                                                               |   | $                                          | 332    |   |   |   | 439 |   |
|      State                                                                                                 |   |                                       | 56     |   |   |   | 78 |   |
|                                                                                                                                |   |                                       |   |   |   |   |   |   |
|                  Total                current  |   |                                       | 388    |   |   |   | 517 |   |
|                                                                                                                                |   |                                       |   |   |   |   |   |   |
| Deferred:                                                                                                                           |   |                                       |   |   |   |   |   |   |
|      Federal                                                                                               |   |                                       | (265   | ) |   |   | (158 | ) |
|      State                                                                                                 |   |                                       | (46    | ) |   |   | (27 | ) |
|                                                                                                                                |   |                                       |   |   |   |   |   |   |
|                  Total                deferred |   |                                       | (311   | ) |   |   | (185 | ) |
|                                                                                                                                |   |                                       |   |   |   |   |   |   |
|                  Income                taxes   |   | $                                          | 77     |   |   |   | 332 |   |

----

*Table          of Contents*

**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,** |   |
|-----------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                          |   | **2007**                                         |   |   | **2006** |   |
|                                                                                          |   | **Amount**                                       |   |   | **%                of****Pretax****Earnings** |   |   | **Amount** |   |   | **%                of****Pretax****Earnings** |   |
|                                                                                          |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Income                taxes at statutory rate                                                 |   | $                                                | 86     |   |   |   | 34 | % |   | $ | 327 |   |   |   | 34 | % |
| Increase                (decrease) resulting from:                                            |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      State                taxes, net of Federal tax benefit          |   |                                             | 7      |   |   |   | 3 |   |   |   | 34 |   |   |   | 4 |   |
|      Income                from bank-owned life insurance            |   |                                             | (40    | ) |   |   | (16 | ) |   |   | (37 | ) |   |   | (4 | ) |
|      Nondeductible                expenses                           |   |                                             | 13     |   |   |   | 5 |   |   |   | 5 |   |   |   | - |   |
|      Share-based                compensation                         |   |                                             | 11     |   |   |   | 4 |   |   |   | 3 |   |   |   | - |   |
|            Income                taxes |   | $                                                | 77     |   |   |   | 30 | % |   | $ | 332 |   |   |   | 34 | % |
|                                                                                          |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|   | 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,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                                                                      |   | **2007**                                      |   |   | **2006** |   |
| Deferred                tax assets:                                                                                                                       |   |                                          |   |   |   |   |
|       Allowance                for loan losses                                                                              |   | $                                             | 830    |   |   |   | 635 |   |
|       Unrealized                loss on securities available for sale                                                       |   |                                          | -      |   |   |   | 31 |   |
|       Deferred                compensation                                                                                  |   |                                          | 64     |   |   |   | 21 |   |
|       Other                                                                                                                 |   |                                          | 19     |   |   |   | 6 |   |
|                                                                                                                                                      |   |                                          |   |   |   |   |   |   |
|                    Deferred                tax assets      |   |                                          | 913    |   |   |   | 693 |   |
|                                                                                                                                                      |   |                                          |   |   |   |   |   |   |
| Deferred                tax liabilities:                                                                                                                  |   |                                          |   |   |   |   |   |   |
|        Accrual                to cash adjustment                                                                       |   |                                          | (60    | ) |   |   | (85 | ) |
|        Accumulated                depreciation                                                                         |   |                                          | (87    | ) |   |   | (134 | ) |
|        Deferred                loan costs                                                                              |   |                                          | (118   | ) |   |   | (106 | ) |
|        Unrealized                gain on securities available for sale                                                 |   |                                          | (20    | ) |   |   | - |   |
|                                                                                                                                                      |   |                                          |   |   |   |   |   |   |
|                    Deferred                tax Liabilities |   |                                          | (285   | ) |   |   | (325 | ) |
|                                                                                                                                                      |   |                                          |   |   |   |   |   |   |
|                    Net                deferred tax asset   |   | $                                             | 628    |   |   |   | 368 |   |

----

*Table          of Contents*

**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): |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                        |   | **2007** |   |   | **2006** |   |
|---------------------------------------------------------------------------------------------|--------|----------|--------|--------|----------|--------|
| Loans:                                                                                      |   |     |   |   |     |   |
|         Balance                at beginning of year |   | $        | 2,824  |   |     |   | 3,331 |   |
|         Borrowings                                  |   |     | 1,892  |   |     |   | 559 |   |
|         Repayments                                  |   |     | (370   | )      |     |   | (1,066 | ) |
|                                                                                        |   |     |   |   |     |   |   |   |
|         Balance                at end of year       |   | $        | 4,346  |   |     |   | 2,824 |   |
|                                                                                        |   |     |   |   |     |   |   |   |
| Deposits                                                                                    |   | $        | 2,867  |   |     |   | 3,460 |   |

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

|   | The                Company established a Stock Option Plan in 1998 (“1998 Plan”) for                directors, officers and employees of the Company.  The 1998 Plan                as amended provides for 131,553 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 options expire ten years from the date of grant. At                December 31, 2007, 1,160 shares (adjusted) remain available for grant.                As                of December 31, 2005, all issued options were exercisable and no                stock                options were granted in 2006 or 2007, therefore, no share based                compensation was recognized in 2006 or 2007 from the 1998 plan. All                per                share amounts reflect the 5% stock dividends paid on June 15, 2007                and May                17, 2006.  A summary of stock option information follows ($ in                thousands, except per share amounts):  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                 |    **Number                of****Options** |  **Weighted-****Average****Exercise****Price** | **Weighted-****Average****Remaining****Contractual****         Term** |   **Aggregate****Intrinsic****    Value** |
|----------------------------------------------------------------------|-----------------------------------------------------------|-----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|
|                                                                 |                                                      |                                                |                                                                                                               |                                                                    |
| Outstanding                at December 31, 2005                      | 100,305                                                   | $                10.15                              |                                                                                                               |                                                                    |
| Options                exercised                                     | (5,263)                                                   | (9.50)                                              |                                                                                                               |                                                                    |
| Options                forfeited                                     | (110)                                                     | (9.07)                                              |                                                                                                               |                                                                    |
|                                                                 |                                                      |                                                |                                                                                                               |                                                                    |
| Outstanding                at December 31, 2006                      | 94,932                                                    | 10.19                                               |                                                                                                               |                                                                    |
| Options                exercised                                     | (56,929)                                                  | (9.12)                                              |                                                                                                               |                                                                    |
| Options                forfeited                                     | (1,050)                                                   | (15.42)                                             |                                                                                                               |                                                                    |
|                                                                 |                                                      |                                                |                                                                                                               |                                                                    |
| Outstanding                and exercisable at                        |                                                      |                                                |                                                                                                               |                                                                    |
|       December                31, 2007 | 36,953                                                    | $                11.68                              | 3.30                years                                                                                          | $                9                                                      |

----

*Table          of Contents*

**FPB        BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

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

|   | In                2005, the Company established a new option plan (“2005 Plan”) for                directors, officers and employees of the Company.  The 2005 Plan                provides for 158,743 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 2005                Plan allows for various vesting periods.  All options granted in                2005 were vested immediately except for 7,776 (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, 2007, 56,960                shares (adjusted) remain available for grant.  All per share                amounts reflect the 5% stock dividends paid on June 15, 2007 and                May 17,                2006.  A summary of stock option information                follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                    |   | **Number                of****Options** |    |   | **Weighted-****Average****Exercise****Price** |   | **Weighted-****Average****Remaining****Contractual****Term** |   | **Aggregate****Intrinsic****Value** |
|---------------------------------------------------------|--------|-----------------------------------------|---------|--------|-----------------------------------------------|--------|--------------------------------------------------------------|--------|-------------------------------------|
|                                                    |   |                                    |    |   |                                          |   |                                                         |   |                                |
| Options                outstanding at December 31, 2005 |   |                                    | 89,226  |   |                                          | $      | 15.42                                                        |   |                                |   |   |
| Options                forfeited                        |   |                                    | (1,653  | )      |                                          |   | (15.42                                                       | )      |                                |   |   |
|                                                    |   |                                    |    |   |                                          |   |                                                         |   |                                |   |   |
| Options                outstanding at December 31, 2006 |   |                                    | 87,573  |   |                                          |   | 15.42                                                        |   |                                |   |   |
| Options                forfeited                        |   |                                    | (2,756  | )      |                                          |   | (15.42                                                       | )      |                                |   |   |
| Options                granted                          |   |                                    | 16,966  |   |                                          |   | 16.67                                                        |   |                                |   |   |
|                                                    |   |                                    |    |   |                                          |   |                                                         |   |                                |   |   |
| Options                outstanding at December 31, 2007 |   |                                    | 101,783 |   |                                          | $      | 15.63                                                        |   | 8.09                years           |   | $ | - |
|                                                    |   |                                    |    |   |                                          |   |                                                         |   |                                |   |   |   |
| Options                exercisable at December 31, 2007 |   |                                    | 82,225  |   |                                          | $      | 15.42                                                        |   | 7.92                years           |   | $ | - |

|   | The                fair value of each option granted in 2007 was estimated on the date                of                grant using the Black-Scholes option-pricing model with the following                weighted-average assumptions: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Dividend                yield                                       |  -%               |
|---------------------------------------------------------------------|------------------------|
| Expected                life                                        | 6                years |
| Expected                volatility                                  | 18.62%                 |
| Risk-free                interest rate                              | 3.88%                  |
| Weighted-average                grant-date fair value of options    |                   |
|      issued                during the year | $                4.96  |

----

*Table          of Contents*

**FPB        BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

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

|   | The                Company has examined its historical pattern of option exercises by                its                directors and employees in an effort to determine if there was any                pattern                based on these 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.  The dividend yield assumptions are based on the                Company’s history and expectation of dividend                payments. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                total intrinsic value of options exercised during 2007 and 2006 was                $186,000 and $ 38,000, respectively and the related tax benefit recognized                was $60,000 and $11,000 respectively. The total fair value of shares                vested and recognized as compensation expense was $32,000 and $8,000                for                2007 and 2006 respectively. As of December 31, 2007, the Company                had                19,558 (adjusted) stock options not fully vested and there was $61,000                of                total unrecognized compensation cost related to these non-vested                options.                This cost is expected to be recognized monthly over a weighted-average                period of 1.9 years on a straight-line                basis. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Also                in January 2004, 22,050 (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, 2007, 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                2007 and 2006, the Company approved a 2% match to the Plan in an                approximate amount of $43,000 and $29,000                respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(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 $3.7 million at December                31, 2007.                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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table            of Contents*

|   | ** FPB                BANCORP, INC. AND                SUBSIDIARY** |
|--------|--------------------------------------------------------------------------|

**      Notes      to      Consolidated Financial Statements, Continued**

| **(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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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, 2007, the Bank met all capital adequacy                requirements to which they are                subject. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As                of December 31, 2007, the most recent notification from the regulatory                authorities categorized the Bank as well capitalized under the regulatory                framework for prompt corrective action.  To be categorized as                well capitalized, an institution must maintain minimum total risk-based,                Tier 1 risk-based, and Tier 1 leverage percentages as set forth in                the                following tables. There are no conditions or events since that                notification that management believes have changed the Bank's                category.  The Bank's actual capital amounts and percentages are                also presented in the table ($ in                thousands). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                              |   | **Actual** |   |   | **Minimum                for****Capital                Adequacy****Purposes** |   |   | **Minimum****To                Be Well****Capitalized                Under****Prompt                Corrective****Action                Provisions** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|-------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                              |   | **Amount** |   |   | **%**                                                                         |   |   | **Amount**                                                                                                                                           |   |   | **%** |   |   | **Amount** |   |   | **%** |   |
| ***As                of December 31, 2007:***                                                                     |   |       |   |   |                                                                          |   |   |                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
|   Total                Capital to Risk-    Weighted                Assets           |   | $          | 20,202 |   |                                                                          |   | 11.09  | %                                                                                                                                                    |   | $ | 14,579 |   |   |   | 8.00 | % |   | $ | 18,224 |   |   |   | 10.00 | % |
|   Tier                1 Capital to Risk-    Weighted                Assets          |   |       | 17,923 |   |                                                                          |   | 9.83   |                                                                                                                                                 |   |   | 7,290 |   |   |   | 4.00 |   |   |   | 10,934 |   |   |   | 6.00 |   |
|    Tier                1 Capital     To                Total Assets       |   |       | 17,923 |   |                                                                          |   | 9.09   |                                                                                                                                                 |   |   | 7,884 |   |   |   | 4.00 |   |   |   | 9,855 |   |   |   | 5.00 |   |
|                                                                                                              |   |       |   |   |                                                                          |   |   |                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***As                of December 31, 2006:***                                                                     |   |       |   |   |                                                                          |   |   |                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Total                Capital to Risk-     Weighted                Assets     |   |       | 14,232 |   |                                                                          |   | 10.45  |                                                                                                                                                 |   |   | 10,899 |   |   |   | 8.00 |   |   |   | 13,624 |   |   |   | 10.00 |   |
|   Tier                1 Capital to Risk-     Weighted                Assets    |   |       | 12,650 |   |                                                                          |   | 9.29   |                                                                                                                                                 |   |   | 5,449 |   |   |   | 4.00 |   |   |   | 8,174 |   |   |   | 6.00 |   |
|    Tier                1 Capital      To                Total Assets |   |       | 12,650 |   |                                                                          |   | 8.08   |                                                                                                                                                 |   |   | 6,259 |   |   |   | 4.00 |   |   |   | 7,824 |   |   |   | 5.00 |   |

----

*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

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

**Condensed      Balance Sheets**

|                                                                              |   | **At                December 31,** |   |
|-----------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                              |   | **2007**                           |   |   | **2006** |   |
| **      Assets**                                    |   |                               |   |   |   |   |
|                                                                              |   |                               |   |   |   |   |
| Cash                and cash equivalents                                          |   | $                                  | 3,687  |   |   |   | 8,285 |   |
| Investment                in subsidiary                                           |   |                               | 17,957 |   |   |   | 12,599 |   |
| Other                assets                                                       |   |                               | 287    |   |   |   | 179 |   |
|                                                                              |   |                               |   |   |   |   |   |   |
|       Total                assets                   |   | $                                  | 21,931 |   |   |   | 21,063 |   |
|                                                                              |   |                               |   |   |   |   |   |   |
| **      Stockholders’                Equity** |   |                               |   |   |   |   |   |   |
|                                                                              |   |                               |   |   |   |   |   |   |
| **      **Stockholders’                Equity |   | $                                  | 21,931 |   |   |   | 21,063 |   |

**Condensed      Statements of Earnings**

|                                                                            |   | **Year                Ended**** December                31,** |   |
|---------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                                            |   | **2007**                                                           |   |   | **2006** |   |
|                                                                            |   |                                                               |   |   |   |   |
| Revenues                                                                        |   | $                                                                  | -      |   |   |   | - |   |
| Expenses                                                                        |   |                                                               | (96    | ) |   |   | (47 | ) |
|                                                                            |   |                                                               |   |   |   |   |   |   |
|      Loss                before earnings of subsidiary |   |                                                               | (96    | ) |   |   | (47 | ) |
|      Earnings                of subsidiary             |   |                                                               | 273    |   |   |   | 678 |   |
|                                                                            |   |                                                               |   |   |   |   |   |   |
|      Net                earnings                       |   | $                                                                  | 177    |   |   |   | 631 |   |

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*Table          of Contents*

**FPB      BANCORP, INC. AND SUBSIDIARY**

**Notes      to Consolidated Financial Statements, Continued**

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

**Condensed      Statements of Cash Flows**

|                                                                                                                                                                                                                                                       |   | **Year                Ended**   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                                                                                                                                                                                                       |   | **December                31,** |   |
|                                                                                                                                                                                                                                                       |   | **2007**                        |   |   | **2006** |   |
| Cash                flows from operating activities:                                                                                                                                                                                                       |   |                            |   |   |   |   |
| Net                earnings                                                                                                                                                                                                                                |   | $                               | 177    |   |   |   | 631 |   |
| Adjustments                to reconcile net earnings to net cash used in operating activities:                                                                                                                                                        |   |                            |   |   |   |   |   |   |
| Share-based                compensation                                                                                                                                                                                                                    |   |                            | 32     |   |   |   | 8 |   |
| Undistributed                earnings of subsidiary                                                                                                                                                                                                        |   |                            | (273   | ) |   |   | (678 | ) |
| Increase                in other assets                                                                                                                                                                                                                    |   |                            | (108   | ) |   |   | (24 | ) |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Net                cash used in operating activities                                                                                                                                                                                                       |   |                            | (172   | ) |   |   | (63 | ) |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Cash                flows from investing activities-                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Investment                in subsidiary                                                                                                                                                                                                                    |   |                            | (5,000 | ) |   |   | (2,000 | ) |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Proceeds                from the exercise of common stock options                                                                                                                                                                                          |   |                            | 520    |   |   |   | 50 |   |
| Tax                benefit associated with exercise of common stock options                                                                                                                                                                                |   |                            | 60     |   |   |   | 11 |   |
| Fractional                shares of stock dividends, paid in cash                                                                                                                                                                                          |   |                            | (6     | ) |   |   | (2 | ) |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Net                cash provided by financing activities                                                                                                                                                                                                   |   |                            | 574    |   |   |   | 59 |   |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Net                decrease in cash and cash equivalents                                                                                                                                                                                                   |   |                            | (4,598 | ) |   |   | (2,004 | ) |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Cash                and cash equivalents at beginning of year                                                                                                                                                                                              |   |                            | 8,285  |   |   |   | 10,289 |   |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Cash                and cash equivalents at end of year                                                                                                                                                                                                    |   | $                               | 3,687  |   |   |   | 8,285 |   |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Non-cash                transactions:                                                                                                                                                                                                                      |   |                            |   |   |   |   |   |   |
| Common                stock dividend                                                                                                                                                                                                                       |   | $                               | 1,473  |   |   |   | 1,525 |   |
|                                                                                                                                                                                                                                                       |   |                            |   |   |   |   |   |   |
| Accumulated                other comprehensive income (loss) of subsidiary,      net                change in unrealized loss on securities available      for                sale, net of tax |   | $                               | 85     |   |   |   | 24 |   |

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*Table          of Contents*

**Report      of Independent Registered Public Accounting      Firm**

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*Table          of Contents*

***FPB      BANCORP, INC.***

**BOARD      OF DIRECTORS**

*Gary      A. Berger, Chairman*

*Donald      J. Cuozzo*

*Ann      L. Decker, Secretary*

*Paul      J. Miret*

*Robert      L. Schweiger*

*Robert      L. Seeley*

*David      W. Skiles, President & Chief Executive Officer*

*Paul      A. Zinter, Vice Chairman*

**NON-DIRECTOR      EXECUTIVE OFFICERS**

*Marge      Riley, Executive Vice President and Chief Operating Officer*

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

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*Table          of Contents*

***FIRST      PEOPLES BANK***

**BOARD      OF DIRECTORS**

*Gary      A. Berger, Chairman*

*Donald      J. Cuozzo*

*Ann      L. Decker, Secretary*

*Paul      J. Miret*

*Robert      L. Schweiger*

*Robert      L. Seeley*

*David      W. Skiles, President & Chief Executive Officer*

*Paul      A. Zinter, Vice Chairman*

**OFFICERS**

*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, SBA Commercial Lender*

*Philip      Lee Brown, Senior Vice President and Area Executive – St. Lucie      County*

*Melissa      M. Favorite, Senior Vice President, BSA/Compliance Officer*

*William      V. West, Senior Vice President and Area Executive – Martin      County*

*Randy      J. Riley, Senior Vice President and Area Executive – Indian River      County*

*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*

*Amy      M. Sowerby, Vice President, Deposit Operations*

*Jill      E. Knapp, Vice President, Commercial Lender*

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

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

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

*Peter      G. Ferlatte, Assistant Vice President, Network Administration      Officer*

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

*Ryan      C. Coughlin, Assistant Vice President, Commercial Lender*

*Rebekah      A. Witt, Assistant Vice President, Loan Operations*

*Rosalind      M. Green, Assistant Vice President, Branch Manager (Palm City)*

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*Table          of Contents*

**FIRST      PEOPLES BANK**

**COMMUNITY      LIAISON BOARDS**

**Fort      Pierce**

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

*Judy      Culpepper, Retired*

*Robert      Hargis, Accent Landscape*

*Dr.      Kenneth Langley, St. Lucie Eye Associates*

*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*

*John      S. Leighton, Real Estate Broker*

*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.*

*James      Kretsch, James Kretsch & Associates, LLC*

*Catherine      McKenzie, BellSouth*

*John      Michael Matthews, John Michael Matthews Fine Jewelry*

*Mahendra      Patel, Patel & Associates*

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*Table          of Contents*

**GENERAL      INFORMATION**

| **Annual                Meeting**     |   | The                Annual Meeting of the Stockholders will be held at Josef’s Steakhouse,                2601 SE Morningside Boulevard, Port St. Lucie, Florida 34952 at 5:30                P.M.,                Wednesday, April 30th,                2008.  A social hour will begin at 4:30 p.m.                                                     |
|---------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                     |
| **Transfer                Agent and** |   | Registrar                and Transfer Co.                                                                                                                                                                                                                                                                                                                                |
| **Registrar**                         |   | 10                Commerce Drive                                                                                                                                                                                                                                                                                                                                         |
|                                  |   | Cranford,                NJ  07016                                                                                                                                                                                                                                                                                                                             |
|                                  |   |  (800)                368-5948                                                                                                                                                                                                                                                                                                                                      |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                     |
| **Corporate                Counsel**  |   | Igler                & Dougherty, P.A.                                                                                                                                                                                                                                                                                                                               |
|                                  |   | 2457                Care Drive                                                                                                                                                                                                                                                                                                                                           |
|                                  |   | Tallahassee,  Florida  32308                                                                                                                                                                                                                                                                                                                         |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                     |
| **Independent**                       |   | Hacker,                Johnson & Smith PA                                                                                                                                                                                                                                                                                                                            |
| **Auditors**                          |   | 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, 1792 NE Jensen Beach Blvd., Jensen Beach,                Florida  34957. |

**COMMON      STOCK PRICES AND DIVIDENDS**

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*Table          of Contents*