FPB Bancorp (FPBI) 10-Q 2009 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2009

or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 000-33351

(Exact Name of Registrant as Specified in Its Charter)

Florida	65-1147861
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1301 SE Port St. Lucie Boulevard

Port St. Lucie, Florida 34952

(Address of Principal Executive Offices)

(772) 225-5930

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed

Since Last Report)

Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES  þNO  o

  Indicate by checkmark whether the registrantis a large accelerated filer, an accelerated filer, a non-      accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: (Check one):

    Large accelerated filer   o        Accelerated filer o

    Non-accelerated filer   p          Smaller reporting company x

    (Do not check if a smaller reporting company)

            Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  oNO  þ

    Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as  of the latest practicable date:

Common stock, par value $.01 per share	2,058,047 shares
(class)	Outstanding at April 30, 2009

Transitional Small Business Disclosure Format (check one): YES o NO þ

FPB BANCORP, INC. AND SUBSIDIARY

INDEX

PART I. FINANCIAL INFORMATION	Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2009 (unaudited) and December 31, 2008	2
Condensed Consolidated Statements of Operations -
Three Months ended March 31, 2009 and 2008 (unaudited)	3-4
Condensed Consolidated Statements of Stockholders' Equity -
Three Months ended March 31, 2009 and 2008 (unaudited)	5
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 2009 and 2008 (unaudited)	6-7
Notes to Condensed Consolidated Financial Statements (unaudited)	8-13
Review By Independent Registered Public Accounting Firm	14
Report of Independent Registered Public Accounting Firm	15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	16-19
Item 4. Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1.  Legal Proceedings	21
Item 6.  Exhibits	21
SIGNATURES	22

1

FPB BANCORP, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

	March 31,			December 31,
Assets	2009			2008
	(unaudited)
Cash and due from banks	$	9,532			2,826
Federal funds sold		3,000			2,384
Interest-bearing deposits with banks		381			247
Total cash and cash equivalents		12,913			5,457
Securities available for sale		33,935			33,238
Securities held to maturity (market value of $1)		-			1
Loans, net of allowance for loan losses of $2,634 and $2,552		185,031			184,182
Premises and equipment, net		5,764			5,881
Federal Home Loan Bank stock, at cost		930			853
Foreclosed assets		3,936			1,714
Accrued interest receivable		1,349			1,355
Deferred income taxes		1,945			1,654
Bank-owned life insurance		2,924			2,789
Other assets		2,101			2,049
Total assets	$	250,828			239,173
Liabilities and Stockholders' Equity
Liabilities:
Non-interest bearing demand deposits		21,651			19,492
Savings, NOW and money-market deposits		49,410			39,458
Time deposits		142,519			141,733
Total deposits		213,580			200,683
Official checks		1,053			1,217
Federal Home Loan Bank advances		10,600			11,100
Other liabilities		1,252			1,277
Total liabilities		226,485			214,277
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized, 5,800 shares of Series A  issued and outstanding		-			-
Additional paid-in capital, preferred		5,800			5,800
Preferred stock discount		(498	)		(521	)
Common stock, $.01 par value; 5,000,000 shares authorized, 2,058,047 shares issued and outstanding		20			20
Additional paid-in capital, common		24,406			24,393
Accumulated deficit		(5,839	)		(4,982	)
Accumulated other comprehensive income		454			186
Total stockholders' equity		24,343			24,896
Total liabilities and stockholders' equity	$	250,828			239,173

See Accompanying Notes to Condensed Consolidated Financial Statements.

2

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended
	March 31,
	2009		2008
Interest income:
Loans	$	2,814	$	3,432
Securities		403		105
Other		2		40
Total interest income		3,219		3,577
Interest expense:
Deposits		1,606		1,770
Interest on borrowings		58		6
Total interest expense		1,664		1,776
Net interest income		1,555		1,801
Provision for loan losses		1,069		559
Net interest income after provision for loan losses		486		1,242
Non-interest income:
Service charges and fees on deposit accounts		162		124
Loan brokerage fees		30		30
(Loss) gain on sale of loans held for sale		(23)		15
Gain on sale of securities available for sale		87		20
Income from bank-owned life insurance		27		27
Other fees		13		8
Total non-interest income		296		224
Non-interest expenses:
Salaries and employee benefits		896		985
Occupancy and equipment		393		372
Advertising		80		113
Data processing		141		159
Supplies		31		56
Professional fees		153		112
Other		322		287
Total non-interest expenses		2,016		2,084
Loss before income taxes		(1,234)		(618)
Income tax benefit		(472)		(237)
Net loss	$	(762)	$	(381)
Preferred stock dividend requirements and amortization of preferred stock discount		95		-
Net loss available to common shareholders	$	(857)	$	(381)

3

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations (Unaudited), continued

(Dollars in thousands, except per share amounts)

Net loss per common share:
Basic	$	(.42	)	(.19	)
Diluted	$	(.42	)	(.19	)
Weighted-average number of common shares, basic	$	2,058,047		2,058,047
Weighted-average number of common shares, diluted	$	2,058,047		2,058,047

See Accompanying Notes to Condensed Consolidated Financial Statements.

4

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders' Equity

Three Months Ended March 31, 2009 and 2008

(Dollars in thousands)

																			Accumulated
	­­­­­­­­­­­­­­­­­­­­ Preferred Stock									Common Stock									Other
					Additional									Additional					Compre-		Total
					Paid-In									Paid-In		Accumulated			hensive		Stockholders’
	Shares		Amount		Capital		Discount			Shares		Amount		Capital		Deficit			Income		Equity
Balance at December 31, 2007		-	$	-		-		-			2,058,047	$	20		23,813		(1,936	)		34		21,931
Comprehensive loss:
Net loss for the three months ended March 31, 2008 (unaudited)		-		-		-		-			-		-		-		(381	)		-		(381	)
Net change in unrealized gain on securities available for sale, net of tax of $6 (unaudited)		-		-		-		-			-		-		-		-			10		10
Comprehensive Loss (unaudited)																						(371	)
Share-based compensation (unaudited)		-		-		-		-			-		-		8		-			-		8
Cumulative effect adjustment related to deferred compensation plans, net of tax benefit of $25 (unaudited) (see note 8)		-		-		-		-			-		-		-		(42	)		-		(42	)
Balance at March 31, 2008 (unaudited)		-	$	-		-		-			2,058,047	$	20		23,821		(2,359	)		44		21,526
Balance at December 31, 2008		5,800	$	-		5,800		(521	)		2,058,047	$	20		24,393		(4,982	)		186		24,896
Comprehensive loss:
Net loss for the three months ended March 31, 2009 (unaudited)		-		-		-		-			-		-		-		(762	)		-		(762	)
Net change in unrealized gain on securities available for sale, net of tax of $162 (unaudited)		-		-		-		-			-		-		-		-			268		268
Comprehensive Loss (unaudited)																						(494	)
Preferred stock dividend requirements and amortization of preferred stock discount (unaudited)		-		-		-		23			-		-		-		(95	)		-		(72	)
Share-based compensation (unaudited)		-		-		-		-			-		-		13		-			-		13
Balance at March 31, 2009 (unaudited)		5,800	$	-		5,800		(498	)		2,058,047	$	20		24,406		(5,839	)		454		24,343

See Accompanying Notes to Consolidated Financial Statements.

5

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Three months ended March 31
	2009			2008
Cash flows from operating activities:
Net loss	$	(762	)	$	(381	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		122			102
Provision for loan losses		1,069			559
Amortization of loan fees, net		(28	)		(50	)
Deferred income taxes		(453	)		(220	)
Net amortization of premiums and discounts on securities		30			4
Loss (gain) on sale of loans held for sale		23			(15	)
Gain on sale of securities available for sale		(87	)		(20	)
(Disbursements) proceeds from sale of loans held for sale		(23	)		400
Originations of loans held for sale		-			(385	)
Decrease in accrued interest receivable		6			33
Increase in other assets		(52	)		(348	)
Decrease in official checks and other liabilities		(205	)		(570	)
Income from bank-owned life insurance		(27	)		(27	)
Share-based compensation		13			8
Net cash used in operating activities		(374	)		(910	)
Cash flows from investing activities:
Maturities and calls of securities available for sale		4,500			-
Purchase of securities available for sale		(8,276	)		(7,329	)
Principal payments on securities available for sale		659			85
Proceeds from sale of securities available for sale		2,907			4,794
Principal payments on securities held to maturity		1			-
Net increase in loans		(4,112	)		(6,647	)
Purchase of premises and equipment		(5	)		(536	)
Purchase of Federal Home Loan Bank stock		(77	)		(78	)
Purchase of bank-owned life insurance		(108	)		-
Net cash used in investing activities		(4,511	)		(9,711	)
Cash flows from financing activities:
Net increase in deposits		12,897			19,704
Cash paid to preferred stockholder		(56	)		-
Repayment of Federal Home Loan Bank Advances		(500	)		-
Net cash provided by financing activities		12,341			19,704
Net  increase in cash and cash equivalents		7,456			9,083
Cash and cash equivalents at beginning of period		5,457			6,795
Cash and cash equivalents at end of period	$	12,913		$	15,878

6

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (unaudited), Continued

(In thousands)

	Three months ended March 31
	2009		2008
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest, net of interest capitalized $10 in 2008	$	1,689		1,759
Income taxes	$	-		-
Non-cash transactions:
Accumulated other comprehensive income, net change in unrealized gain on securities available for sale, net of tax	$	268		10
Cumulative effect adjustment related to deferred compensation plans, net of tax benefit of $25	$	-		(42	)
Transfer of loans to foreclosed assets	$	2,222		-
Accrual of preferred stock dividend	$	72		-

See Accompanying Notes to Consolidated Financial Statements.

7

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(1) General. FPB Bancorp, Inc. (the "Holding Company") owns 100% of the outstanding common stock of First Peoples Bank (the "Bank") and the Bank owns 100% of the outstanding common stock of Treasure Coast Holdings, Inc., (collectively referred to as the "Company"). The Holding Company operates as a one-bank holding company and its only business activity is the operation of the Bank.  The Bank is a state (Florida)-chartered commercial bank and its deposits are insured up to the maximum amounts by the Federal Deposit Insurance Corporation, which are currently $250,000 for all qualified accounts, and unlimited for non-interest bearing transaction accounts, both through  December 31, 2009. The Bank offers a variety of community banking services to individual and corporate customers through its six banking offices located in Port St. Lucie, Stuart, Fort Pierce, Vero Beach and Palm City, Florida.  The newest office opened in May, 2008 on Gatlin Boulevard in Port St. Lucie, Florida.  In addition, the Palm City, Florida office opened in January of 2008.  The new subsidiary, Treasure Coast Holdings, Inc., was incorporated in June 2008 for the sole purpose of managing foreclosed assets.

In the opinion of management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position at March 31, 2009, and the results of operations and cash flows for the three-month periods ended March 31, 2009 and 2008.  The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the results to be expected for the full year.

(2) Loan Impairment and Credit Losses. Information about impaired loans, the majority of which are collateral dependent, for the three months ended March 31, 2009 and 2008, is as follows (in thousands):

	At March 31,
	2009		2008
Loans identified as impaired:
Gross loans with no related allowance for losses	$	18,305	$	1,537
Gross loans with related allowance for loan losses recorded		5,019		3,215
Less: Allowance on these loans		477		336
Net investment in impaired loans	$	22,847	$	4,416
	Three Months Ended March 31,
	2009		2008
Average investment in impaired loans	$	23,663	$	2,984
Interest income recognized on impaired loans	$	226	$	7
Interest income received on impaired loans	$	124	$	7

During the quarter ending March 31, 2009, nine additional loans totaling $4.2 million were identified as impaired, with a net change for the quarter of $649,000.  Loans totaling $2.2 million were transferred to foreclosed assets during the quarter ending March 31, 2009.  Management believes that due to the collateral value associated with these loans, no material losses will be incurred.

(continued)

8

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(2) Loan Impairment and Credit Losses, Continued. The activity in the allowance for loan losses was as follows (in thousands):

	Three Months Ended
	March 31,
	2009			2008
Balance at beginning of period	$	2,552		$	2,393
Provision for loan losses		1,069			559
(Charge-offs), net of recoveries		(987	)		(502	)
Balance at end of period	$	2,634		$	2,450

Non-accrual and past due loans were as follows (in thousands):

	At March 31,		At December 31,
	2009		2008
Non-accrual loans	$	11,211	$	10,105
Past due ninety days or more, but still accruing		1,278		250
	$	12,489	$	10,355

(3) Regulatory Capital.The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at March 31, 2009 of the regulatory capital requirements and the Bank's capital on a percentage basis:

	Percentage
	of		Regulatory
	the Bank		Requirement
Tier I capital to total average assets	8.11	%	4.00	%
Tier I capital to risk-weighted assets	9.87	%	4.00	%
Total capital to risk-weighted assets	11.12	%	8.00	%

(continued)

9

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(4) Loss Per Common Share. Basic loss per common share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. For the three months ended March 31, 2009 and 2008, outstanding stock options and warrants are not considered dilutive due to the loss incurred by the Company.

(5)   Share-Based Compensation.  The Company follows the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment (“SFAS 123(R)”), and expenses the fair value of any stock options granted after December 31, 2005.  SFAS 123(R) requires the measurement and recognition of compensation for all stock-based awards made to employees and directors including stock options based on estimated fair values.  Under the fair value recognition provisions of SFAS 123(R), the Company recognizes share-based compensation in compensation and benefits for officers and employees, and in other expense for directors in the consolidated statements of operations.  The expense is recognized on a straight-line basis over the vesting period.

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 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 March 31, 2009, no shares remain available for grant, as the Plan Agreement terminated on December 8, 2008.  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, 2007	36,953			$	11.68
Options granted	579				8.50
Options forfeited		(771	)		(9.52	)
Outstanding at December 31, 2008
and March 31, 2009		36,761		$	11.68			2.16 years	$	-
Options exercisable at March 31, 2009		36,182		$	11.73			2.05 years	$	-

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 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 expire ten years from the date of grant.  At March 31, 2009, 35,694 shares remain available for grant.

(continued)

10

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 (5)  Share-based Compensation, continued.

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, 2007	101,783			$	15.63
Options forfeited	(6,442		)		(14.47	)
Options granted		27,708			9.34
Options outstanding at December 31, 2008
and March 31, 2009		123,049		$	14.27			7.49 years	$	-
Options exercisable at March 31, 2009		85,030		$	15.49			7.05 years	$	-

The fair value of each option granted in the first quarter of 2008 was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended March 31,
	2008
Dividend yield		-		%
Expected life in years		6 – 6.5 years
Expected stock volatility		23.44% - 28.20		%
Risk-free interest rate		4.88% - 4.98		%
Per share grant-date fair value of options
issued during the period		$	3.11 - $3.40

No stock options were granted during the three months ended March 31, 2009

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.

                       (continued)

11

      FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

  (5)  Share-Based Compensation, continued

The total fair value of shares vested and recognized as compensation expense was $13,000 and $8,000 for 2009 and 2008 respectively, and the related tax benefit recognized  was $1,000 in 2009 and none in 2008. As of December 31, 2008, the Company had 38,598 stock options not fully vested and there was $76,000 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 1.3 years on a straight-line basis.

In addition, as discussed in more detail in Note 6, the Company sold on December 5, 2008 to the U.S. Treasury a ten year warrant to purchase at any time up to 183,158 shares of the Company’s common stock for $4.75 per share.

 (6)   Stockholders’ Equity.On December 5, 2008, the Company issued and sold to the United States Department of the Treasury (the “Treasury”) 5,800 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Preferred Shares”), along with a ten year warrant (the “Warrant”) to purchase at any time up to 183,158 shares of the Company’s common stock for $4.75 per share, for a total cash investment of $5.8 million from the Treasury (the “Transaction”).

The Transaction proceeds of $5.8 million were allocated between the Preferred Shares and Warrant based on the ratio of the estimated fair value of the Warrant to the aggregate estimated fair value of both the Preferred Shares and the Warrant. The value of the Warrant was computed to be $394,000 using the Black Scholes model with the following inputs: expected stock volatility of 61.89%, risk-free interest rate of 4.11%, expected life of 5 years and no dividend yield. The value of the Preferred Shares was computed to be $3.9 million based on the net present value of the expected cash flows over five years using a discount rate of 14%, which represents what the Company believes to be its incremental borrowing rate for a similar transaction in the private sector. The allocation of proceeds to the Warrant was recorded as a “preferred stock discount” against the Preferred Shares, with a corresponding and equal entry to additional paid in common equity in the amount of $526,000. This discount is being amortized over five years on a straight-line basis and increases the loss available to common shareholders.

 (7) Fair Value Measurements. Financial assets subject to fair value measurements on a recurring basis are as follows (in thousands): 

			Fair Value Measurements at Reporting Date Using
			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2009 - Available-for-sale securities	$	33,935		-	$	33,935		-

          (continued)

12

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

 (7) Fair Value Measurements, continued.

Impaired collateral-dependent loans and foreclosed assets are carried at fair value when the current collateral value is lower than the carrying value of the loan or foreclosed asset.  Those impaired collateral-dependent loans and foreclosed assets which are measured at fair value on a non-recurring basis are as follows (in thousands):

													Losses Recorded in
													Operations For the
										Total			Three Months Ended
	Total			Level 1		Level 2		Level 3		Losses			March 31, 2009
As of March 31, 2009:
Impaired Loans	$	6,972	(1)		-		-	$	6,972	$	(2,481	)	$	(266	)
Foreclosed assets	$	3,936			-		-	$	3,936		-			-

(1) In addition, loans with a carrying value of $15.9 million were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

(8)   Cumulative Effect Adjustment Related to Deferred Compensation Plans.During 2007, the Financial Accounting Standards Board issued EITF No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsed Split-Dollar Life Insurance Arrangements” (“EITF 06-4”), which requires an employer to recognize a liability for postretirement death benefits provided under endorsement split-dollar agreements. An endorsement split-dollar agreement is an arrangement whereby  an employer owns a life insurance policy that covers the life of an employee and, pursuant to a separate agreement, endorses a portion of the policy’s death benefits to the insured employee’s beneficiary. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The Company has entered into Supplemental Death Benefit Agreements with certain of its directors and executive officers pursuant to which the Company has agreed to pay a portion of the death benefit payable under certain life insurance policies owned by the Company to the directors’ or executives’ beneficiaries upon their death. As a result of the adoption of EITF 06-4, the Company recognized a cumulative effect adjustment (decrease) to retained earnings of $(42,000) representing an additional liability of $67,000 required to be provided under EITF 06-4 on January 1, 2008 relating to the agreements, net of deferred income taxes of $25,000.

(9)   Recent Development.  On May 1, 2009, the Office of the Comptroller of Currency closed Silverton Bank, N.A., the Company’s primary correspondent bank.  The FDIC was appointed as the Receiver and the correspondent bank is now operating as Silverton Bridge Bank, National Association.  The Company had previously purchased a total of 200 shares of the common stock of Silverton Bank, N.A., for a total investment of $548,000, which is being charged-off during the second quarter of 2009.

13

FPB BANCORP, INC. AND SUBSIDIARY

Review by Independent Registered Public Accounting Firm

Hacker, Johnson & Smith PA, the Company's independent registered public accounting firm, has made a limited review of the financial data as of March 31, 2009, and for the three-month periods ended March 31, 2009 and 2008 presented in this document, in accordance with the standards established by the Public Company Accounting Oversight Board.

Their report furnished pursuant to Article 10 of Regulation S-X is included herein. 

14

Report of Independent Registered Public Accounting Firm

FPB Bancorp, Inc.

Port St. Lucie, Florida:

We have reviewed the accompanying condensed consolidated balance sheet of FPB Bancorp, Inc. and Subsidiary (the "Company") as of March 31, 2009, and the related condensed consolidated statements of operations, stockholders’ equity and cash flows for the three-month periods ended March 31, 2009 and 2008. These interim financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of the Company as of December 31, 2008, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated March 3, 2009, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Hacker, Johnson & Smith PA

HACKER, JOHNSON & SMITH PA

Fort Lauderdale, Florida

May 11, 2009

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FPB BANCORP, INC. AND SUBSIDIARY

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations

General

FPB Bancorp, Inc. (the "Holding Company") owns 100% of the outstanding common stock of First Peoples Bank (the "Bank") and the Bank owns 100% of the outstanding common stock of Treasure Coast Holdings, Inc., (collectively referred to as the "Company"). The Holding Company operates as a one-bank holding company and its only business activity is the operation of the Bank.  The Bank is a state (Florida)-chartered commercial bank and its deposits are insured up to the maximum amounts by the Federal Deposit Insurance Corporation, which are currently $250,000 for all qualified accounts, and unlimited for non-interest bearing transaction accounts, both through  December 31, 2009. The Bank offers a variety of community banking services to individual and corporate customers through its six banking offices located in Port St. Lucie, Stuart, Fort Pierce, Vero Beach and Palm City, Florida.  The newest office opened in May, 2008 on Gatlin Boulevard in Port St. Lucie, Florida.  In addition, the Palm City, Florida office opened in January of 2008.  The new subsidiary, Treasure Coast Holdings, Inc., was incorporated in June 2008 for the sole purpose of managing foreclosed assets.

Liquidity and Capital Resources

The Company's primary source of cash during the three months ended March 31, 2009 was from net deposit inflows of approximately $12.9 million and the sale, call or maturity of securities available for sale of approximately $7.4 million. Cash was used primarily for net loan originations of approximately $4.1 million and the purchase of securities available for sale of approximately $8.3 million. At March 31, 2009, the Company had time deposits of $102.1 million that mature in one year or less. Management believes that, if so desired, it can adjust the rates on time deposits to retain or attract deposits in a changing interest-rate environment.

The following table shows selected information for the periods ended or at the dates indicated:

	Three Months				Three Months
	Ended		Year Ended		Ended
	March 31,		December 31,		March 31,
	2009		2008		2008
Average equity as a percentage of average assets	10.09	%	9.79	%	10.47	%
Equity to total assets at end of period	9.71	%	10.41	%	9.99	%
Return on average assets (1)	(1.40	%)	(1.38	%)	(.74	%)
Return on average equity (1)	(13.87	%)	(14.10	%)	(7.03	%)
Noninterest expenses to average assets (1)	3.31	%	3.89	%	4.03	%
Nonperforming loans to total assets at end of period	4.98	%	4.33	%	2.66	%

(1) Annualized for the three months ended March 31, 2009 and 2008.

 (continued)

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FPB BANCORP, INC. AND SUBSIDIARY

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Off-Balance Sheet Arrangements

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. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet.  The contract amounts of those instruments reflect the extent of the Company's involvement in particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, available lines of credit and standby letters of 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.  Since many of the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's credit worthiness on a case-by-case basis.  The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counter party.

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 involved 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.

A summary of the amounts of the Company's financial instruments, with off-balance sheet risk at March 31, 2009, follows (in thousands):

	Contract
	Amount
Commitments to extend credit	$	2,249
Available lines of credit	$	16,084
Standby letters of credit	$	177

Management believes that the Company has adequate resources to fund all of its commitments.

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FPB BANCORP, INC. AND SUBSIDIARY

Results of Operations

The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest and dividend income of the Company from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest-rate spread; (v) net interest margin; and (vi) ratio of average interest-earning assets to average interest-bearing liabilities.

	Three Months Ended March 31,
	2009							2008
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Rate			Balance		Dividends		Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	186,478		2,814	6.04		%	$	180,992		3,432	7.58		%
Securities		33,618		403	4.80				8,578		105	4.90
Other (1)		4,303		2	.19				6,015		40	2.66
Total interest-earning assets		224,399		3,219	5.74				195,585		3,577	7.32
Noninterest-earning assets		20,510							11,346
Total assets	$	244,909						$	206,931
Interest-bearing liabilities:
Savings, NOW and money-market deposit accounts		43,174		221	2.05				32,691		237	2.90
Time deposits		143,969		1,385	3.85				128,753		1,533	4.76
Borrowings		10,822		58	2.14				100		6	2.40
Total interest-bearing liabilities		197,965		1,664	3.36				161,544		1,776	4.40
Demand deposits		20,532							20,743
Noninterest-bearing liabilities		1,702							2,971
Stockholders' equity		24,710							21,673
Total liabilities and stockholders' equity	$	244,909						$	206,931
Net interest income			$	1,555						$	1,801
Interest-rate spread (2)						2.38	%						2.92	%
Net interest margin (3)						2.77	%						3.68	%
Ratio of average interest-earning assets to average interest-bearing liabilities		1.13							1.21

(1) Includes federal funds sold, dividends from Federal Home Loan Bank stock and interest-earning deposits with banks.

(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 average interest-earning assets.

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FPB BANCORP, INC. AND SUBSIDIARY

Comparison of the Three-Month Periods Ended March 31, 2009 and 2008

General.  Net loss available to common shareholders for the three months ended March 31, 2009, was $(857,000) or $(.42) per basic and diluted common share compared to net losses of $(381,000) or $(.19) per basic and diluted common share for the three month period ended March 31, 2008. This increase in the Company's net losses was primarily due to a decrease in interest income and an increase in the provision for loan loss, partially offset by a decrease in interest expense and non-interest expense, and an increase in non-interest income.

Interest Income.  Interest income decreased to $3.2 million for the three months ended March 31, 2009 from $3.6 million for the three months ended March 31, 2008.  Interest income on loans decreased to $2.8 million due to a decrease in the average yield earned, partially offset by an increase in the average loan portfolio balance for the three months ended March 31, 2009.

Interest Expense.  Interest expense decreased to $1.7 million for the three months ended March 31, 2009, from $1.8 million for the three months ended March 31, 2008.  Interest expense decreased due to a decrease in the average yield paid on deposits, partially offset by an increase in the average balance of deposits for the three months ended March 31, 2009.

Provision for Loan Losses.  The provision for loan losses is charged to operations to bring the total allowance to a level deemed appropriate by management and is based upon historical experience, the volume and type of lending conducted by the Company, industry standards, the amount of impaired loans, general economic conditions, particularly as they relate to the Company's market areas, and other factors related to the estimated collectibility of the Company's loan portfolio. The provision for the three months ended March 31, 2009, was $1.1 million compared to $559,000 for the same period in 2008.  Management believes the balance in the allowance for loan losses of $2.6 million at March 31, 2009, is adequate.

Non-interest Income.  Total non-interest income increased to $296,000 for the three months ended March 31, 2009, from $224,000 for the three months ended March 31, 2008 primarily as a result of an increase in service charges on deposit accounts and gain on sale of securities available for sale, partially offset by a decrease in gain on sale of loans held for sale.

Non-interest Expenses.  Total non-interest expenses decreased to $2.0 million for the three months ended March 31, 2009 from $2.1 million for the three months ended March 31, 2008, primarily due to a decrease in employee compensation and benefits of $89,000, and decreases in advertising, data processing and supplies totaling $76,000, partially offset by increases in occupancy, professional fees and other expenses totaling $110,000.

Income Taxes.  The income tax benefit for the three months ended March 31, 2009, was $472,000 compared to an income tax benefit of $237,000 for the three months ended March 31, 2008.

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  FPB BANCORP, INC. AND SUBSIDIARY

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Principal Executive Officer and Principal Financial Officer concluded that, subject to the limitations noted below, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.

(b) Changes in Internal Controls

We have made no significant changes in its internal controls over financial reporting during the quarter ended March 31, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

(c) Limitations on the Effectiveness of Controls

Our Management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the   likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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FPB BANCORP, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which the Company is a party or to which any of its property is subject.

Item 6. Exhibits

Exhibits. The following exhibits are filed with or incorporated by reference into this report. The exhibits marked with an (a) were previously filed as a part of the Company’s Registration Statement on Form SB-1, filed with the Federal Deposit Insurance Corporation on April 30, 2000; those marked with a (b) were filed with the Company’s 2003 Proxy Statement filed with the Security and Exchange Commission (“SEC”) on March 28, 2003; those marked with a (c) were filed with the Company’s Definitive Schedule 14A filed with the SEC on October 26, 2005; those marked with a (d) were filed with the Company’s Form 8-A with the SEC on November 16, 2001; those marked with an (e) were filed with the Company’s Form 10-QSB with the SEC on August 2, 2008; those marked with an (f) were filed with the Company’s Form 10-QSB with the SEC on November 6, 2008; and those marked with an (h) were filed with the Company’s Form 8-K on December 5, 2008.

Exhibit No.	Description of Exhibit
(d)3.1	Articles of Incorporation
(d)3.2	Bylaws
(e)3.3	Amendment to the Bylaws, Adopted August 15, 2008
(a)4.1	Specimen copy of certificate evidencing shares of the Company’s common capital stock, $0.01 par value
(a)4.2	First Peoples Bank Stock Option Plan dated January 14, 1999
(b)4.5	Amendment to First Peoples Bank Stock Option Plan
(c)4.6	2005 Stock Compensation Plan
(a)10.1	First Peoples Bank Qualified 401(k) Profit Sharing Plan, dated May 1, 1999
(f)10.2	Amended and Restated Employment Agreement for David W. Skiles
(h)10.6	Letter Agreement, dated December 5, 2008 between the Company and the United States Department of the Treasury
(h)10.7	Form of Waiver, executed by each of David W. Skiles, Nancy E. Aumack and Marge Riley
(h)10.8	Form of Compliance Agreement, executed by each of David W. Skiles, Nancy E. Aumack and Marge Riley
(h)10.9	Securities Purchase Agreement – Standard Terms between the Company and the United States Department of the Treasury
(e)10.3	Amended and Restated Change in Control Agreement for Nancy E. Aumack
(e)10.4	Amended and Restated Change in Control Agreement for Stephen J. Krumfolz
(e)10.5	Amended and Restated Change in Control Agreement for Marge Riley
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

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FPB BANCORP, INC. AND SUBSIDIARY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			FPB BANCORP, INC.
			(Registrant)
Date:	May 11, 2009	By:	/s/David W. Skiles
			David W. Skiles, Principal Executive Officer, President and Chief Executive Officer
Date:	May 11, 2009	By:	/s/Nancy E. Aumack
			Nancy E. Aumack, Principal Financial Officer, Senior Vice President and Chief Financial Officer

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