FPB Bancorp (FPBI) 10-Q 2011 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, 2011

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 check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)  YES  o  NO o  *The registrant has not yet been phased into the interactive data requirements.

  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 May 13, 2011

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

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	Page
Condensed Consolidated Balance Sheets -
March 31, 2011 (unaudited) and December 31, 2010	2
Condensed Consolidated Statements of Operations -
Three months ended March 31, 2011 and 2010 (unaudited)	3-4
Condensed Consolidated Statements of Stockholders' Equity -
Three months ended March 31, 2011 and 2010 (unaudited)	5-6
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 2011 and 2010 (unaudited)	7-8
Notes to Condensed Consolidated Financial Statements (unaudited)	9-26
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	27-36
Item 4. Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.  Legal Proceedings	38
Item 3.  Defaults Upon Senior Securities	38
Item 6.  Exhibits	39
SIGNATURES	40

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

	March 31.			December 31.
	2011			2010
Assets
Cash and due from banks	$	2,061			2,094
Federal funds sold		154			104
Interest bearing deposits with banks		12,369			10,031
Total cash and cash equivalents		14,584			12,229
Securities available for sale		35,786			36,266
Security held to maturity (fair value of $1,437 and $1,482)		1,415			1,465
Loans, net of allowance for loan losses of $5,851 and $4,809		155,023			161,946
Premises and equipment, net		4,916			5,006
Federal Home Loan Bank stock, at cost		1,087			1,087
Foreclosed assets, net		8,917			9,190
Accrued interest receivable		861			884
Bank-owned life insurance		3,167			3,138
Other assets		2,304			1,234
Total assets	$	228,060			232,445
Liabilities and Stockholders' Equity
Liabilities:
Non-interest bearing demand deposits		21,446			18,336
Savings, NOW and money-market deposits		52,636			51,466
Time deposits		134,682			138,564
Total deposits		208,764			208,366
Official checks		875			1,218
Federal Home Loan Bank advances		14,600			14,600
Other liabilities		1,556			1,549
Total liabilities		225,795			225,733
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized, 5,800 shares of Series A issued and outstanding		-			-
Additional paid-in capital, preferred		5,800			5,800
Preferred stock discount		(314	)		(337	)
Common stock, $.01 par value; 25,000,000 shares authorized, 2,058,047 shares issued and outstanding		20			20
Additional paid-in capital, common		24,474			24,469
Accumulated deficit		(27,172	)		(22,625	)
Accumulated other comprehensive loss		(543	)		(615	)
Total stockholders' equity		2,265			6,712
Total liabilities and stockholders' equity	$	228,060			232,445

 See Accompanying Notes to Condensed Consolidated Financial Statements.

2

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended
	March 31,
	2011			2010
Interest income:
Loans	$	2,408		$	2,688
Securities		284			318
Other		9			6
Total interest income		2,701			3,012
Interest expense:
Deposits		783			1,074
Other borrowings		56			66
Total interest expense		839			1,140
Net interest income		1,862			1,872
Provision for loan losses		2,922			1,890
Net interest expense after provision for loan losses		(1,060	)		(18	)
Non-interest income:
Service charges and fees on deposit accounts		180			180
Loan brokerage fees		18			12
Income from bank-owned life insurance		29			30
Other fees		13			13
Total non-interest income		240			235
Non-interest expenses:
Salaries and employee benefits		890			930
Occupancy and equipment		361			377
Advertising		11			34
Data processing		170			155
Supplies		35			35
Professional fees		237			214
Expenses on foreclosed assets		1,086			446
FDIC insurance		250			218
Other		707			225
Total non-interest expenses		3,747			2,634
Loss before income taxes		(4,567	)		(2,417	)
Income tax benefit		43			-
Net loss	$	(4,524	)	$	(2,417	)
Preferred stock dividend requirements and amortization of preferred stock discount		96			96
Net loss available to common shareholders	$	(4,620	)	$	(2,513	)

 See Accompanying Notes to Condensed Consolidated Financial Statements.

3

Condensed Consolidated Statements of Operations (Unaudited), continued

(Dollars in thousands, except per share amounts)

	Three Months Ended
	March 31,
	2011			2010
Net loss per common share:
Basic	$	(2.24	)	$	(1.22	)
Diluted	$	(2.24	)	$	(1.22	)
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

Consolidated Statements of Stockholders' Equity

Three Months Ended March 31, 2011 and 2010

(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 (Loss)		Equity
Balance at December 31, 2009	5,800	$  -	5,800	(429)	2,058,047	$ 20	24,444	(14,572)	(624)		14,639
Comprehensive loss:
Net loss for the three months ended March 31, 2010 (unaudited)	-	-	-	-	-	-	-	(2,417)	-		(2,417)
Net change in unrealized loss on securities available for sale (unaudited)	-	-	-	-	-	-	-	-	432		432
Comprehensive Loss  (unaudited)											(1,985)
Preferred stock dividend requirements and amortization of preferred stock discount (unaudited)	-	-	-	23	-	-	-	(96)	-		(73)
Share-based compensation  (unaudited)	-	-	-	-	-	-	6	-	-		6
Balance at March 31, 2010 (unaudited)	5,800	$ -	5,800	(406)	2,058,047	$20	24,450	(17,085)	(192)		12,587

See Accompanying Notes to Consolidated Financial Statements.

5

Consolidated Statements of Stockholders' Equity

Three Months Ended March 31, 2011 and 2010, Continued

(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 (Loss)		Equity
Balance at December 31, 2010	5,800	$  -	5,800	(337)	2,058,047	$ 20	24,469	(22,625)	(615)		6,712
Comprehensive loss:
Net loss for the three months ended March 31, 2011 (unaudited)	-	-	-	-	-	-	-	(4,524)	-		(4,524)
Net change in unrealized loss on securities available for sale (unaudited)	-	-	-	-	-	-	-	-	72		72
Comprehensive Loss  (unaudited)											(4,452)
Preferred stock dividend requirements and amortization of preferred stock discount (unaudited)	-	-	-	23	-	-	-	(23)	-		-
Share-based compensation  (unaudited)	-	-	-	-	-	-	5	-	-		5
Balance at March 31, 2011 (unaudited)	5,800	$ -	5,800	(314)	2,058,047	$ 20	24,474	(27,172)	(543)		2,265

See Accompanying Notes to Consolidated Financial Statements.

6

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Three months ended March 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(4,524	)		(2,417	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		99			112
Provision for loan losses		2,922			1,890
Amortization of loan fees, net		(55	)		(61	)
Net amortization of premiums and discounts on securities		80			40
Write-down of foreclosed assets		840			291
Loss on sale of foreclosed assets		61			73
Credit for losses on foreclosed assets		(17	)		-
Decrease in accrued interest receivable		23			56
(Increase) decrease in other assets		(1,114	)		619
(Decrease) increase in official checks and other liabilities		(336	)		196
Income from bank-owned life insurance		(29	)		(30	)
Share-based compensation		5			6
Net cash (used in) provided by operating activities		(2,045	)		775
Cash flows from investing activities:
Maturities and calls of securities available for sale		-			2,250
Purchase of securities available for sale		-			(2,466	)
Principal payments on securities available for sale		518			421
Purchase of securities held to maturity		-			(2,553	)
Principal payments on securities held to maturity		48			6
Net decrease (increase) in loans		2,890			(584	)
Purchase of premises and equipment		(9	)		(3	)
Proceeds from the sale of foreclosed assets		555			324
Net cash provided by (used in) investing activities		4,002			(2,605	)
Cash flows from financing activities:
Net increase in deposits		398			8,472
Proceeds from other borrowings		-			1,990
Net cash provided by financing activities		398			10,462
Net  increase in cash and cash equivalents		2,355			8,632
Cash and cash equivalents at beginning of period		12,229			12,932
Cash and cash equivalents at end of period	$	14,584			21,564

7

Condensed Consolidated Statements of Cash Flows, Continued

(In thousands)

	Three months ended March 31,
	2011		2010
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	791		1,106
Non-cash transactions:
Accumulated other comprehensive loss, net change in unrealized loss on securities available for sale, net of tax	$	72		432
Transfer of loans to foreclosed assets	$	1,328		-
Transfer of foreclosed assets to loans	$	162		-
Preferred dividends payable at beginning of period	$	40		37
Preferred dividends payable at end of period	$	40		110
Amortization of preferred stock discount	$	23		23

See Accompanying Notes to Condensed Consolidated Financial Statements.

8

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 $250,000 for all qualified accounts, and unlimited for non-interest bearing transaction accounts through December 31, 2012. 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.  Treasure Coast Holdings, Inc. was incorporated in September 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, 2011, and the results of operations for the three-month periods ended March 31, 2011 and 2010 and cash flows for the three-month periods ended March 31, 2011 and 2010. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year.

Going Concern

The Company’s recent and continuing increases in nonperforming assets, continuing high levels of operating expenses related to credit problems and eroding regulatory capital raise substantial doubt about the Company’s ability to continue as a going concern. The Company has not complied with its regulatory capital requirements set forth in the Consent Order and Prompt Corrective Action, discussed in Item 2, page 27. The Company needs to raise substantial additional capital. If the Company fails to raise additional capital in the immediate term, it is likely that the Florida Office of Financial Regulation will close the Bank and place it into receivership. In such case, the Company will cease to have any business operations.

Management is evaluating all potential sources of capital to meet the Company’s capital requirements, to include offering stock to outside parties and seeking a strategic merger partner. To date, the Company has been unsuccessful in these efforts, and there can be no assurance that additional financing or recapitalization plans will be available or forthcoming and, if available, can be obtained or undertaken on terms favorable to the Company or its existing shareholders.

During the three months ended March 31, 2011, the Company’s level of impaired loans and reserves for potential loan losses have increased. At March 31, 2011, the Company is considered critically undercapitalized under FDIC regulations and imminently insolvent under Florida law.

(continued)

9

Notes to Condensed Consolidated Financial Statements (unaudited)

(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 March 31, 2011:
Securities available for sale:
Municipal bonds-taxable	$	2,059		-		(139	)	$	1,920
SBA securities		2,037		-		(77	)		1,960
Mortgage-backed securities		12,604		2		(148	)		12,458
Collateralized mortgage obligations (“CMO”) securities		19,957		-		(509	)		19,448
Total securities available for sale	$	36,657		2		(873	)	$	35,786
Securities held to maturity -
Mortgage-backed securities	$	1,415		22		-		$	1,437
At December 31, 2010:
Securities available for sale:
Municipal bonds-taxable	$	2,059		-		(157	)		1,902
SBA securities		2,059		-		(60	)		1,999
Mortgage-backed securities		12,969		2		(202	)		12,769
CMO securities		20,166		-		(570	)		19,596
Total securities available for sale	$	37,253		2		(989	)		36,266
Security held to maturity -
Mortgage-backed security	$	1,465		17		-			1,482

There were no sales of securities classified as available for sale during the three months ended March 31, 2011 or 2010.

Information pertaining to securities with gross unrealized losses at March 31, 2011, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows (in thousands):

	Less Than Twelve Months
	Gross Unrealized Losses			Fair Value
Securities Available for Sale:
Municipal bonds-taxable	$	(139	)	$	1,920
SBA securities		(77	)		1,960
Mortgage-backed securities		(148	)		12,376
CMO securities		(509	)		19,448
Total	$	(873	)	$	35,704

(continued)

10

Notes to Condensed Consolidated Financial Statements (unaudited)

Securities., continued.  The scheduled maturities of securities at March 31, 2011 are as follows (in   thousands):

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in more than ten years		2,059		1,920		-		-
SBA securities		2,037		1,960		-		-
Mortgage-backed securities		12,604		12,458		1,415		1,437
CMO securities		19,957		19,448		-		-
	$	36,657	$	35,786	$	1,415	$	1,437

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

The unrealized losses on twenty-two investment securities available for sale were caused by market conditions. 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 market conditions 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) Lending Activities.  Our primary source of income is generated from the interest earned on our loan portfolio and fees generated from our lending activities.  We primarily focus our lending activities on commercial real estate lending to small and medium-sized businesses, including professionals, such as physicians, law firms and accountants. Our commercial mortgage loans include loans for the acquisition/development, construction or rehabilitation of commercial, multi-family or residential real property.

We also emphasize commercial loans secured by assets other than real estate.  Our target commercial loan market includes companies in the medical services, retail construction, wholesale, manufacturing and tourism industries. We also offer residential mortgage loans, as well as consumer loans, such as home equity lines of credit.  Our goal is to develop commercial lending opportunities where the loan relationships provide us with opportunities to develop depository relationships and other non-commercial loan relationships.

We offer Small Business Administration, or SBA, 7(a) and 504 loans to small businesses throughout our market area. SBA loans are a complement to our focus on strengthening and supporting local communities. SBA loans are generally made pursuant to a federal government program designed to assist small businesses in obtaining financing. The federal government guarantees 75% to 90% of the SBA loan balances as an incentive for financial institutions to make loans to small businesses.  We generally sell the guaranteed portion of the SBA loan at a premium sale price between approximately 5% and 9%.  We had $13.6 million of outstanding SBA loans at March 31, 2011.

(continued)

11

Notes to Condensed Consolidated Financial Statements (unaudited)

Lending Activities, continued.

Loan Portfolio. The following tables summarize our loan portfolio by type of loan as of the dates indicated (dollars in thousands):

	As of March 31,			As of December 31,
	2011			2010
	Amount			Amount
Commercial real estate	$	89,602		$	92,835
Commercial and industrial		57,653			59,003
Residential real estate		8,948			9,182
Consumer		5,053			6,175
Total loans		161,256			167,195
Allowance for loan losses		(5,851	)		(4,809	)
Deferred loan costs, net		(382	)		(440	)
Loans, net	$	155,023		$	161,946

The contractual maturity ranges of our loan portfolio and the amount of such loans with fixed and variable interest rates in each maturity range classified by borrower type as of March 31, 2011 are as follows (dollars in thousands):

	One Year or Less		After One Through Five Years		After Five Years		Total
Commercial real estate	$	5,957		8,779		74,866	$	89,602
Commercial and industrial		11,040		16,466		30,147		57,653
Residential real estate		1,952		4,213		2,783		8,948
Consumer		1,287		3,494		272		5,053
Total loans	$	20,236		32,952		108,068	$	161,256
Loans with a fixed interest rate	$	17,454		22,249		12,325	$	52,028
Loans with a variable interest rate		2,782		10,703		95,743		109,228
Total loans	$	20,236		32,952		108,068	$	161,256

As of March 31, 2011, our loan portfolio was composed of approximately 32.26% fixed interest rate loans and 67.74% variable interest rate loans.  Scheduled contractual principal repayments do not reflect the actual maturities of loans.  The average actual maturity of our loans is substantially less than their average contractual term because of prepayments.  The average life of a mortgage loan tends to increase when the current mortgage loan rates are substantially higher than rates on existing mortgage loans and, conversely, decrease when current mortgage loan rates are substantially lower than rates on existing mortgages, due primarily to refinancing of adjustable rate and fixed rate loans at lower rates.

(continued)

12

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

An analysis of the change in the allowance for loan losses for the three months ended March 31, 2011 follows (in thousands):

	For the Three Months Ended March 31, 2011
	Commercial and Industrial			Commercial Real Estate			Consumer			Residential Real Estate			Total
Beginning balance	$	2,192			1,931			135			551			4,809
Provision for loan losses		1,066			1,770			16			70			2,922
Charge-offs		(675	)		(1,170	)		(42	)		(56	)		(1,943	)
Recoveries		26			1			29			7			63
Ending balance	$	2,609			2,532			138			572			5,851
Individually evaluated for impairment:
Recorded investment	$	10,686			15,620			143			677			27,126
Balance in allowance for loan losses	$	729			688			13			72			1,502
Collectively evaluated for impairment:
Recorded investment	$	46,966			73,983			4,910			8,271			134,130
Balance in allowance for loan losses	$	1,881			1,843			125			500			4,349

The activity in the allowance for loan losses for the three months ended March 31, 2010 follows (in thousands):

	Three Months Ended  March 31, 2010
Balance at beginning of period	$	4,730
Provision for loan losses		1,890
(Charge-offs), net of recoveries		(1,025	)
Balance at end of period	$	5,595

Asset Quality, Loan Impairment and Credit Losses.  Although we continue to experience increases in our impaired loans due to the economic decline and decreased real estate values, our non-performing asset to total assets ratio of 8.06% at March 31, 2011 is less than the 9.26% non-performing asset to total assets ratio at December 31, 2010.

We have endeavored to deal aggressively with problem assets in our loan portfolio.  Since the Bank’s inception in 1999, we have engaged a third-party firm to conduct independent asset quality reviews that are specialized and targeted loan reviews by type.  We believe our enhanced credit risk management process positions us to deal effectively with reducing our credit risk profile and maintaining a high quality loan portfolio on an ongoing basis.  Additionally, in the future we intend to develop a more balanced real estate portfolio by reducing our concentration of higher risk non-owner occupied commercial real estate and construction and development loans.

(continued)

13

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

Furthermore, during 2010 and 2011, we enhanced our credit risk management processes by:

·   Developing processes for supervising criticized and classified loans;

·   Adopting a specific action plan for managing and disposing of foreclosed assets;

·   Performing a quarterly assessment of the Bank’s monitoring systems for timely identification of problem loans;

·   Forming a Special Assets Committee of the Board that meets monthly to review management’s progress on all classified assets; and

·   Creating a Special Assets Department to reduce the Bank’s underperforming credits.

The following summarizes the loan credit quality (in thousands):

At March 31, 2011	Pass		Potential Problem		OLEM (Other Loans Especially Mentioned)		Substandard		Doubtful		Loss		Total
Commercial and Industrial:
Equipment secured	$	6,651	$	765	$	128	$	1,710	$	-	$	-	$	9,254
Real estate secured		30,174		2,663		304		11,653		-		-		44,794
Other		3,002		-		33		570		-		-		3,605
Total commercial and industrial	$	39,827	$	3,428	$	465	$	13,933	$	-	$	-	$	57,653
Commercial Real Estate:
Owner-occupied	$	42,400	$	4,431	$	228	$	9,941	$	-	$	-	$	57,000
Nonowner-occupied		15,315		1,900		-		7,442		-		-		24,657
Land		2,302		895		2,380		2,368		-		-		7,945
Total commercial Real Estate	$	60,017	$	7,226	$	2,608	$	19,751	$	-	$	-	$	89,602
Consumer:
Vehicles and other tangible assets	$	3,111	$	12	$	-	$	45	$	-	$	-	$	3,168
Other		1,781		-		-		104		-		-		1,885
Total consumer	$	4,892	$	12	$	-	$	149	$	-	$	-	$	5,053
Residential Real Estate:
HELOC	$	3,836	$	62	$	-	$	331	$	-	$	-	$	4,229
Closed-end		4,149		159		60		351		-		-		4,719
Total residential Real estate	$	7,985	$	221	$	60	$	682	$	-	$	-	$	8,948
Total	$	112,721	$	10,887	$	3,133	$	34,515	$	-	$	-	$	161,256

(continued)

14

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

At December 31, 2010	Pass		Potential Problem		OLEM (Other Loans Especially Mentioned)		Substandard		Doubtful		Loss		Total
Commercial and Industrial:
Equipment secured	$	6,819	$	754	$	197	$	1,887	$	-	$	-	$	9,657
Real estate secured		31,245		3,362		1,238		10,154		-		-		45,999
Other		2,759		-		94		494		-		-		3,347
Total commercial and industrial	$	40,823	$	4,116	$	1,529	$	12,535	$	-	$	-	$	59,003
Commercial Real Estate:
Owner-occupied	$	46,147	$	1,762	$	3,112	$	8,930	$	-	$	-	$	59,951
Nonowner-occupied		16,836		1,186		3,120		3,657		-		-		24,799
Land		2,524		611		2,380		2,570		-		-		8,085
Total commercial Real Estate	$	65,507	$	3,559	$	8,612	$	15,157	$	-	$	-	$	92,835
Consumer:
Vehicles and other tangible assets	$	3,831	$	78	$	-	$	39	$	-	$	-	$	3,948
Other		2,217		-		10		-		-		-		2,227
Total consumer	$	6,048	$	78	$	10	$	39	$	-	$	-	$	6,175
Residential Real Estate:
HELOC	$	4,029	$	85	$	-	$	268	$	-	$	-	$	4,382
Closed-end		4,430		162		113		95		-		-		4,800
Total residential Real estate	$	8,459	$	247	$	113	$	363	$	-	$	-	$	9,182
Total	$	120,837	$	8,000	$	10,264	$	28,094	$	-	$	-	$	167,195

Internally assigned loan grades are defined as follows:

Pass – a Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary.  These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment risk has been identified.

Potential Problem – a Potential Problem loan is considered performing, but may exhibit some weaknesses that warrant more frequent review by management.

OLEM (Other Loans Especially Mentioned) – an Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date.

Substandard – a Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

(continued)

15

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

Doubtful – a loan classified Doubtful has all the weaknesses inherent in one classified Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The Company fully charges off any loan classified as Doubtful.

Loss – a loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted.  This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.  The Company fully charges off any loan classified as Loss.

Age analysis of past due loans is as follows (in thousands):

At March 31, 2011	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due 90 Days or More but Still Accruing		Nonaccrual Loans
Commercial and Industrial
Equipment-secured	$	150		253		588		991		8,263	$	9,254	$	18		1,023
RE - secured		532		-		2,329		2,861		41,933		44,794		-		2,971
Other		67		-		-		67		3,538		3,605		-		445
Subtotal	$	749		253		2,917		3,919		53,734	$	57,653	$	18		4,439
Commercial Real Estate
Owner-Occupied	$	248		916		3,112		4,276		52,724	$	57,000	$	57		3,357
Non Owner Occupied		-		-		-		-		24,657		24,657		-		-
Land		-		-		531		531		7,414		7,945		461		799
Subtotal	$	248		916		3,643		4,807		84,795	$	89,602	$	518		4,156
Consumer
Vehicles & Other Tangible	$	1		-		38		39		3,129	$	3,168	$	-		38
Other		24		-		9		33		1,852		1,885		-		9
Subtotal	$	25		-		47		72		4,981	$	5,053	$	-		47
Residential Real Estate
HELOC	$	30		20		226		276		3,953	$	4,229	$	-		296
Closed - End		-		-		1		1		4,718		4,719		-		1
Subtotal	$	30		20		227		277		8,671	$	8,948	$	-		297
Total	$	1,052		1,189		6,834		9,075		152,181	$	161,256	$	536		8,939

(continued)

16

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

At December 31, 2010	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans		Past Due 90 Days or More but Still Accruing		Nonaccrual Loans
Commercial and Industrial
Equipment-secured	$	-		101		212		313		9,344	$	9,657	$	-		1,175
RE - secured		314		1,201		2,944		4,459		41,540		45,999		-		4,521
Other		6		-		-		6		3,341		3,347		-		524
Subtotal	$	320		1,302		3,156		4,778		54,225	$	59,003	$	-		6,220
Commercial Real Estate
Owner-Occupied	$	382		976		3,339		4,697		55,254	$	59,951	$	-		5,369
Non Owner Occupied		-		-		-		-		24,799		24,799		-		-
Land		-		584		465		1,049		7,036		8,085		-		465
Subtotal	$	382		1,560		3,804		5,746		87,089	$	92,835	$	-		5,834
Consumer
Vehicles & Other Tangible	$	-		66		-		66		3,882	$	3,948	$	-		39
Other		-		-		-		-		2,227		2,227		-		-
Subtotal	$	-		66		-		66		6,109	$	6,175	$	-		39
Residential Real Estate
HELOC	$	-		-		160		160		4,222	$	4,382	$	-		232
Closed - End		187		82		-		269		4,531		4,800		-		-
Subtotal	$	187		82		160		429		8,753	$	9,182	$	-		232
Total	$	889		3,010		7,120		11,019		156,176	$	167,195	$	-		12,325

(continued)

17

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

The following summarizes the amount of impaired loans (in thousands):

	At March 31, 2011						At December 31, 2010
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial and Industrial
Equipment-secured	$	455	$	811	$	-	$	487	$	848	$	-
RE-secured		1,441		1,779		-		3,942		4,380		-
Other		464		473		-		447		456		-
Subtotal		2,360		3,063		-		4,876		5,684		-
Commercial Real Estate
Owner-occupied		5,296		7,184		-		6,866		7,897		-
Nonowner –occupied		57		57		-		264		310		-
Land		-		-		-		201		397		-
Subtotal		5,353		7,241		-		7,331		8,604		-
Consumer
Vehicles & Other Tangible		39		39		-		39		39		-
Subtotal		39		39		-		39		39		-
Residential Real Estate
HELOC		296		296		-		232		321		-
Subtotal		296		296		-		232		321		-
Subtotal no related allowance		8,048		10,639		-		12,478		14,648		-
With allowance recorded:
Commercial and Industrial
Equipment-secured		817		825		265		974		1,065		257
RE-secured		7,463		8,043		453		3,374		3,374		289
Other		46		46		11		-		-		-
Subtotal		8,326		8,914		729		4,348		4,439		546
Commercial Real Estate
Owner-occupied		3,541		3,631		164		3,757		3,757		157
Nonowner –occupied		5,795		5,795		167		2,486		2,486		72
Land		931		1,063		357		-		-		-
Subtotal		10,267		10,489		688		6,243		6,243		229
Consumer
Other		104		104		13		10		10		1
Subtotal		104		104		13		10		10		1
Residential Real Estate
Closed-end		381		381		72		-		-		-
Subtotal		381		381		72		-		-		-
Subtotal with related allowance		19,078		19,888		1,502		10,601		10,692		776
Total	$	27,126	$	30,527	$	1,502	$	23,079	$	25,340	$	776

(continued)

18

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):

	For the Three Months Ended March 31, 2011						For the Year Ended December 31, 2010
	Average Net Investment		Interest Income Recognized		Interest Income Received		Average Net Investment		Interest Income Recognized		Interest Income Received
Commercial and Industrial
Equipment-secured	$	1,104		1		1	$	1,303		5		5
RE-secured		7,791		49		50		7,032		180		177
Other		470		-		-		483		-		-
Subtotal		9,365		50		51		8,818		185		182
Commercial Real Estate
Owner-occupied	$	9,291		78		66	$	7,888		200		196
Nonowner –occupied		4,208		48		52		1,791		-		-
Land		276		-		-		215		-		-
Subtotal		13,775		126		118		9,894		200		196
Consumer
Vehicles & Other Tangible	$	60		-		-	$	3		-		-
Other		67		1		1		3		-		-
Subtotal		127		1		1		6		-		-
Residential Real Estate
HELOC	$	200		-		-	$	272		-		-
Closed-end		103		-		5		-		-		-
Subtotal		303		-		5		272		-		-
Total	$	23,570		177		175	$	18,990		385		378

(continued)

19

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

During the quarter ending March 31, 2011, there was a net increase in net impaired loans of $3.3 million, primarily due to an increase in charge-offs taken during the quarter and the addition of 28 loans to impaired status, totaling $8.1 million. Appraisals are obtained on collateral dependent (impaired) loans at least annually. We do not make non-recourse commercial real estate loans and do not adjust appraised values. Instead, we would discuss any perceived discrepancy with the appraiser and allow the appraiser to adjust the value if he or she agreed with our comments. Our allowance for loan loss calculations are always based on current appraisals. At this time, due to the collateral value associated with these impaired loans, no material losses are expected to be incurred above those already reserved or charged-off. However, if the economy continues to deteriorate, or property values decline further, additional adjustments may be necessary in the future.

Troubled debt restructurings during the three months ended March 31, 2011 are as follows (dollars in thousands):

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial real estate
Owner-occupied
Modified interest rate		2	$	1,114	$	1,104
Modified amortization		4		1,820		1,890
Modified interest rate and amortization		2		2,331		2,233
Non Owner-occupied
Modified interest rate		1		944		944
Modified amortization		1		400		400
Modified interest rate and amortization		2		4,857		4,852
Commercial
Equipment secured
Modified amortization		3		141		140
Modified interest rate and amortization		1		94		92
Real-estate secured
Modified amortization		9		2,305		2,296
Modified interest rate and amortization		6		3,400		3,255
Other modified amortization		2		66		66
Consumer
Other
Modified amortization		5		391		390
Total Troubled Debt Restructurings:		38	$	17,863	$	17,662

(continued)

20

Notes to Condensed Consolidated Financial Statements (unaudited)

(3)   Lending Activities, continued.

The allowance for loan losses on all loans that have been restructured and are considered troubled debt restructurings (“TDR”) is included in the Company’s specific reserve.  The specific reserve is determined on a loan by loan basis by either the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent. At March 31, 2011, one loan in the amount of $10,000 secured by equipment subsequently defaulted.

(4)   Foreclosed Assets.

The following table illustrates the activity in foreclosed assets as of the dates indicated (dollars in thousands):

	For the Three  Months Ended			For the Year  Ended
	March, 31, 2011			December, 31, 2010
Total foreclosed assets at beginning of period	$	9,190		$	6,763
Additions to foreclosed assets:
Commercial real estate		507			4,546
Residential real estate		160			-
Vacant land		423			436
Other		238			586
Total		1,328			5,568
Sales of foreclosed assets:
Commercial real estate		(539	)		(282	)
Residential real estate		-			(445	)
Vacant land		-			(468	)
Other		(16	)		(41	)
Total		(555	)		(1,236	)
Transfer of foreclosed assets to loans		(162	)		-
Write-down of foreclosed assets		(840	)		(1,211	)
Pay-down on foreclosed assets		-			(300	)
Loss on sale of foreclosed assets		(61	)		(152	)
Credit (provision) for losses on foreclosed assets		17			(242	)
Foreclosed assets at end of period	$	8,917		$	9,190

(continued)

21

Notes to Condensed Consolidated Financial Statements (unaudited)

(4)   Foreclosed Assets, continued

An analysis of the allowance for losses on foreclosed assets is as follows (in thousands):

	Three Months Ended
	March 31, 2011
Balance at the beginning of the year	$	(242	)
Credit for losses on foreclosed assets		17
Charge-offs		220
Balance at the end of the quarter	$	(5	)

There was no activity in the allowance for losses on foreclosed assets in the three months ended March 31, 2010.

Expenses applicable to foreclosed assets include the following (in thousands):

	For the Three Months Ended			For the Three Months Ended
	March 31, 2011			March 31, 2010
Net loss on sales of foreclosed assets	$	61			73
Credit for losses on foreclosed assets		(17	)		-
Write-down of foreclosed assets		840			291
Operating expenses, net of rental income		202			82
	$	1,086			446

(5)   Regulatory Capital.The Bank is required to maintain certain minimum regulatory capital requirements, pursuant to a Consent Order (see page 27). The following is a summary at March 31, 2011 of the regulatory capital requirements and the Bank's capital on a percentage basis:

	Percentage			Minimum for
	of			Capital Adequacy			Requirements of
	the Bank(1)			Purposes			Consent Order
Tier I capital to total average assets		1.31	%		4.00	%	8.00	%
Tier I capital to risk-weighted assets		1.81	%		4.00	%	N/A
Total capital to risk-weighted assets		3.09	%		8.00	%	11.00	%

(1)AtMarch 31, 2011 the Bank was considered critically undercapitalized and imminently insolvent under Florida Law.

22

Notes to Condensed Consolidated Financial Statements (unaudited)

(6) 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, 2011 and 2010, outstanding stock options and warrants are not considered dilutive due to the losses incurred by the Company.

(7) Share-Based Compensation.  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, 2011, 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, 2009		30,700		$	11.94
Options forfeited		(2,791	)		9.52
Options outstanding at December 31, 2010 and  March 31, 2011		27,909		$	12.18		3.18 years	$	-
Options exercisable at March 31, 2011		27,678		$	12.21		3.14 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, 2011, 50,507 shares remain available for grant.

                                   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, 2009		117,116		$	14.16
Options forfeited		(8,880	)		13.13
Options outstanding at December 31, 2010 and March 31, 2011		108,236		$	14.24		5.48 years	$	-
Options exercisable at March 31, 2011		104,319		$	14.50		5.41 years	$	-

There were no options granted during the three months ended March 31, 2011 or 2010.

23

Notes to Condensed Consolidated Financial Statements (unaudited)

(8) Share-Based Compensation, continued.

The total fair value of shares vested and recognized as compensation expense was $5,000 and $16,000 for the three-month periods ended March 31, 2011 and 2010, respectively. As of March 31, 2011, the Company had 4,148 stock options not fully vested and there was $9,000 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    1.17 years on a straight-line basis.

In addition, as discussed in more detail in Note 9, 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.

(9) 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 represented what the Company believed 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.

Beginning with the dividend payment due on February 15, 2010, the Company has suspended paying dividends on its Series A Preferred stock. The total arrearage as of March 31, 2011 was $363,000.

24

Notes to Condensed Consolidated Financial Statements (unaudited)

(10)   Fair Value Measurements.

The following table summarizes financial assets measured at fair value on a recurring basis as of  March 31, 2011 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

			Fair Value Measurements at Reporting Date Using
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of March 31, 2011:
Municipal bonds-taxable	$	1,920		-		1,920		-
SBA securities		1,960		1,960		-		-
Mortgage-backed securities		12,458		-		12,458		-
CMO securities		19,448		-		19,448		-
	$	35,786		1,960		33,826		-
As of December 31, 2010:
Municipal bonds-taxable	$	1,902		-		1,902		-
SBA securities		1,999		1,999		-		-
Mortgage-backed securities		12,769		-		12,769		-
CMO securities		19,596		-		19,596		-
	$	36,266		1,999		34,267		-

During the three months ended March 31, 2011, no securities were transferred in or out of Level 1, Level 2, and Level 3.

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 assets. Those impaired collateral-dependent assets which are measured at fair value on a nonrecurring basis are as follows (in thousands):

											Losses Recorded
											in Operations
	At March 31, 2011										For the Three
	Fair Value(1)		Level 1		Level 2		Level 3		Total Losses		Months Ended March 31, 2011
Commercial & Industrial
Equipment-secured	$	635		-		-		635	$	541	$	30
RE - secured		2,751		-		-		2,751		1,076		424
Subtotal	$	3,386		-		-		3,386	$	1,617	$	454
Commercial Real Estate
Owner-Occupied	$	3,092		-		-		3,092	$	1,942	$	937
Other		227		-		-		227		435		360
Subtotal	$	3,319		-		-		3,319	$	2,377	$	1,297
Total impaired loans	$	6,705		-		-		6,705	$	3,994	$	1,751
Foreclosed assets	$	8,917		-		-		8,917	$	1,953	$	640

            (1) In addition, impaired loans with a carrying value of $2.0 million were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

25

Notes to Condensed Consolidated Financial Statements (unaudited)

(10)   Fair Value Measurements, continued.

The following table summarizes financial assets measured at fair value on a nonrecurring basis as of December 31, 2010, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

											Losses Recorded
											in Operations For
	At December 31, 2010										the Year Ended
	Fair Value(1)		Level 1		Level 2		Level 3		Total Losses		December 31,   2010
Commercial & Industrial
Equipment-secured	$	937		-		-		937	$	646	$	371
RE - secured		3,080		-		-		3,080		718		485
Other		-		-		-		-		-		-
Subtotal	$	4,017		-		-		4,017	$	1,364	$	856
Commercial Real Estate
Owner-Occupied	$	3,739		-		-		3,739	$	1,139	$	974
Non Owner Occupied		264		-		-		264		46		-
Other		190		-		-		190		154		125
Subtotal	$	4,193		-		-		4,193	$	1,339	$	1,099
Residential Real Estate
HELOC	$	160		-		-		160	$	89	$	46
Closed - End		-		-		-		-		-		-
Subtotal	$	160		-		-		160	$	89	$	46
Total impaired loans	$	8,370		-		-		8,370	$	2,792	$	2,001
Foreclosed assets	$	9,190		-		-		9,190	$	1,667	$	1,428

(1) In addition, impaired loans with a carrying value of $3.4 million were measured for impairment using Level 3 inputs and had a fair value in excess of carrying value.

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

	At March 31, 2011				At December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	14,584	$	14,584		12,229		12,229
Securities available for sale		35,786		35,786		36,266		36,266
Securities held to maturity		1,415		1,437		1,465		1,482
Loans, net		155,023		154,410		161,946		157,376
Federal Home Loan Bank stock		1,087		1,087		1,087		1,087
Accrued interest receivable		861		861		884		884
Financial liabilities:
Deposit liabilities	$	208,764	$	209,541		208,366		209,757
Federal Home Loan Bank advances		14,600		14,796		14,600		14,794
Off-balance-sheet financial instruments		-		-		-		-

26

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 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 maximum amounts by the Federal Deposit Insurance Corporation, which are $250,000 for all qualified accounts, and unlimited for non-interest bearing transaction accounts through December 31, 2012. 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. Treasure Coast Holdings, Inc. was incorporated in September 2008 for the sole purpose of managing foreclosed assets.

At March 31, 2011, the Bank was “critically undercapitalized” pursuant to Federal Deposit Insurance Corporation (“FDIC”) regulations and “imminently insolvent” pursuant to Florida law. If the Company does not raise significant capital for the Bank in the immediate term, it is likely that the Florida Office of Financial Regulation (“OFR”) will close the Bank and place it into receivership with the FDIC. In such case, we will cease to have any business operations.

Supervisory Prompt Corrective Action Directive. On February 2, 2011, the Bank received a Supervisory Prompt Corrective Action Directive (the “Directive”), effective as of January 28, 2011 (the “Effective Date”) from the FDIC.  The FDIC issued the Directive due to the Bank’s failure to submit an acceptable capital restoration plan to the FDIC, the deteriorating condition of the Bank and management’s failure to improve the condition of the Bank.  The Directive requires that: (1) within 30 days of the Effective Date (by February 27, 2011), the Bank must comply with the requirements of its Consent Order by attaining a Tier 1 Leverage Capital Ratio of 8% and a Total Risk Based Capital Ratio of 11% and (2) within 10 days of the Effective Date (extended to February 11, 2011) submit an acceptable capital restoration plan to the FDIC, which expressly provides that the Bank will attain such capital levels.  An updated capital restoration plan was submitted on February 11, 2011; however, the Bank has not been able to comply with the required capital ratios.

The Directive further requires that if the Bank does not increase its capital to such levels by February 27, 2011, the Bank must take any necessary action for the Bank to be acquired by, or merged into, another financial institution.

If the Bank continues to fail to satisfy the requirements of the Directive, it is likely that the OFR will close the Bank and place it into receivership with the FDIC. In such case, we will cease to have any business operations.

The Directive also prohibits the Bank from: (1) making any payments on its subordinated debt or paying any capital distributions or dividends; (2) providing certain compensation to senior executive officers or excessive compensation or bonuses generally; (3) accepting, renewing or rolling over any brokered deposits; (4) paying interest on deposits in excess of FDIC-established market rates; and (5) acquiring any interest in any company, establishing any branches, engaging in any new line of business, entering into any material transaction outside the ordinary course of business, extending credit for any highly leveraged transaction, amending its Articles of Incorporation or Bylaws, materially changing its accounting methods, or engaging in certain transactions with affiliates (including the holding company), without the FDIC’s prior approval.  Furthermore, the Directive requires the Bank to alter, reduce or terminate any activity the FDIC determines poses excessive risk to the Bank.

27

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Consent Order.  Effective March 18, 2010, the Bank entered into a Stipulation to the Issuance of a Consent Order (“Stipulation”) FDIC and the OFR. Pursuant to the Stipulation, the Bank consented, without admitting or denying any charges of unsafe or unsound banking practices or violations of law or regulation, to the issuance of a Consent Order by the FDIC and the OFR, also effective as of March 18, 2010.

The Consent Order represents an agreement among the Bank, the FDIC and the OFR as to areas of the Bank’s operations that warrant improvement and presents a plan for making those improvements. The Consent Order imposes no fines or penalties on the Bank.

At March 31, 2011, the Bank failed to meet the most significant requirement of the Consent Order, specifically the need to maintain a Tier 1 Leverage Capital Ratio of 8% and a Total Risk Based Capital Ratio of 11%. The Bank’s continued failure to maintain those ratios will likely result in the OFR closing the Bank and placing it into receivership with the FDIC. In such case, we will cease to have any business operations

Pursuant to the Consent Order:

Ø   The Bank’s Board of Directors is required to increase its participation in the affairs of the Bank. This participation shall include comprehensive, documented meetings to be held no less frequently than monthly. Prior to the entry of the Consent Order, the Board conducted such meetings, but now requires more detailed management reports. The Board has also established a committee to oversee the Bank’s compliance with the Consent Order.

Ø   By June 16, 2010, and during the life of the Consent Order, the Bank shall achieve and maintain a Tier 1 leverage capital ratio of not less than 8% and a total risk-based capital ratio of not less than 11%. At March 31, 2011, the Bank’s Tier 1 leverage capital ratio was 1.31% and its total risk-based capital ratio was 3.09%. As of March 31, 2011, an additional $17.0 million in capital would be required by the Bank to attain the required capital levels.

Ø   The Bank must maintain a fully funded Allowance for Loan and Lease Losses (“ALLL”), which must be satisfactory to the FDIC and the OFR. The Board of Directors shall quarterly review the adequacy of the ALLL. The Bank has always endeavored to maintain a fully funded, adequate ALLL and believes its ALLL is adequate.

Ø   The Bank shall also reduce the aggregate balance of assets classified “Substandard” by the FDIC in October 2009: (i) by June 16, 2010, to not more than 140% of Tier 1 capital plus the ALLL; (ii) by September 14, 2010, to not more than 120% of Tier 1 capital plus the ALLL; (iii) by December 13, 2010, to not more than 100% of Tier 1 capital plus the ALLL; (iv) by March 23, 2011, to not more than 80% of Tier 1 capital plus the ALLL; and (v) by September 19, 2011, to not more than 60% of Tier 1 capital plus the ALL. As of March 31, 2011, the Bank’s ratio was 230%.

Ø   The Bank shall not extend any credit to, or for the benefit of, any borrower who has a loan that has been charged off or classified “Substandard” and is uncollected, unless the Bank documents that such extension of credit is in the Bank’s best interest. The Bank had, and has, no intention of extending credit to such borrowers in violation of these requirements.

(continued)

28

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Consent Order, continued.

Ø   By May 2, 2010, the Bank shall perform a risk segmentation analysis with respect to any concentration cited by the FDIC, including commercial real estate loans. The Bank shall also develop a plan to reduce any segment of the portfolio deemed by the FDIC or OFR to be an undue concentration of credit. Both were completed and submitted on April 29, 2010.

Ø   By June 16, 2010, the Bank shall formulate and implement a strategic plan and a plan to improve and sustain Bank earnings. Additionally, the Bank must prepare a budget and update the profit plan by November 30th of each year. All such items must be submitted to the FDIC and the OFR. The Bank was granted an extension to September 28, 2010 to submit its strategic plan and submitted it prior to that date.

Ø   By May 17, 2010, the Bank must review, revise and adopt its liquidity, contingency funding and funds management policy, including implementing any changes recommended by the FDIC or the OFR. These were completed and submitted on May 27, 2010, following an extension granted to May 28, 2010.

Ø   Throughout the life of the Consent Order, the Bank shall not accept, renew, or rollover any brokered deposit, and shall comply with the restrictions on the effective yields on deposits exceeding national averages. In addition, by March 28, 2010, the Bank was required to submit to the FDIC and the OFR a plan to reduce reliance on brokered deposits, which it has done. The Bank has not accepted, renewed or rolled over any brokered deposits since July 2009. With respect to the yield limitations, it is possible that the Bank could experience a decrease in deposit inflows, or the migration of current deposits to competitor institutions, if other institutions offer higher interest rates than those permitted to be offered by the Bank.

Ø   During the life of the Consent Order, the Bank shall limit its asset growth to 10% per year, unless the FDIC and the OFR consent to greater growth. Under the recently adopted strategic plan, the growth percentage will not exceed these growth parameters.

Ø   While the Consent Order is in effect, the Bank shall not declare or pay dividends, or any other form of payment representing a reduction in capital without the prior written approval of the FDIC and the OFR. The Bank has never paid a dividend to FPB.

Ø   Within 30 days of the end of each calendar quarter, the Bank shall furnish written progress reports to the FDIC and the OFR detailing the form, manner, and results of any actions taken to secure compliance. The Bank has, and will continue to prepare and submit such reports.

Restrictive Board Resolutions. At the request of the Federal Reserve Bank of Atlanta (“Federal Reserve”) our board of directors, on October 21, 2009 adopted resolutions limiting us from reducing our capital position. Pursuant to these resolutions, we have committed to: (i) not incurring debt at the holding company level without prior Federal Reserve approval; (ii) not paying dividends on our securities (including our Series A Preferred Stock) without prior Federal Reserve approval; (iii) not purchasing or redeeming stock without Federal Reserve approval; (iv) not making any other payment which would represent a reduction in capital, other than normal and routine operating expenses; and (v) providing to the Federal Reserve on a quarterly basis, a parent-only balance sheet and confirmation of compliance with the resolutions. These resolutions prohibit us from paying dividends on, or redeeming, the Series A Preferred Stock without Federal Reserve approval.

29

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Liquidity and Capital Resources

The Company's primary source of cash during the three months ended March 31, 2011 was from the net decrease of loans of approximately $2.9 million. At March 31, 2011, the Company had time deposits of  $85.1 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:

	At or for the
	Three months Ended			Year Ended			Three months Ended
	March 31,			December 31,			March 31,
	2011			2010			2010
Average equity as a percentage of average assets		2.04	%		4.60	%		5.65	%
Equity to total assets at end of period		.99	%		2.89	%		4.90	%
Return on average assets (1)		(7.81	%)		(3.18	%)		(3.86	%)
Return on average equity (1)		(382.42	%)		(69.27	%)		(68.29	%)
Non-interest expenses to average assets (1)		6.47	%		4.65	%		4.21	%
Non-performing loans and foreclosed assets to total assets at end of period		8.06	%		9.26	%		8.82	%

                                    (1)  Annualized for the three months ended March 31, 2011 and 2010 

The following table indicates selected trends over the periods shown (dollars in thousands):

	For the Three Months Ended			For the Year Ended
	March 31, 2011			December 31, 2010
Ratio of past-due loans to total loans		5.63	%		6.16	%
Non-performing loans		9,475			12,325
Foreclosed assets		8,917			9,190
Troubled debt restructured		17,863			10,754
Non-performing loans to total loans		5.88	%		7.37	%
Non-performing assets to total assets		8.06	%		9.26	%
Allowance for loan losses to total loans		3.63	%		2.88	%
Operating loss before the provision
for loan loss and taxes		(1,645	)		(1,907	)
Net interest margin		3.50	%		3.36	%

(continued)

30

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 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 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.

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, 2011, follows (in thousands):

	Contract Amount
Commitments to extend credit	$	289
Available lines of credit	$	8,620
Standby letters of credit	$	26

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

31

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,
	2011							2010
			Interest		Average					Interest		Average
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Rate			Balance		Dividends		Rate
	(Dollars in thousands)
Interest-earning assets:
Loans (1)	$	159,515		2,408		6.04	%	$	184,613		2,688		5.82	%
Securities		39,571		284		2.87			33,175		318		3.83
Other (2)		13,579		9		.27			12,873		6		.19
Total interest-earning assets		212,665		2,701		5.08			230,661		3,012		5.22
Noninterest-earning assets		19,077							19,840
Total assets	$	231,742						$	250,501
Interest-bearing liabilities:
Savings, NOW and money-market deposit accounts		51,566		114		.88			59,257		147		.99
Time deposits		136,930		669		1.95			138,794		927		2.67
Borrowings		14,600		56		1.53			15,492		66		1.70
Total interest-bearing liabilities		203,096		839		1.65			213,543		1,140		2.14
Demand deposits		17,469							19,583
Noninterest-bearing liabilities		6,445							3,217
Stockholders' equity		4,732							14,158
Total liabilities and stockholders' equity	$	231,742						$	250,501
Net interest income			$	1,862						$	1,872
Interest-rate spread (3)						3.43	%						3.08	%
Net interest margin (4)						3.50	%						3.25	%
Ratio of average interest-earning assets to average interest-bearing liabilities		1.05							1.08

(1) Includes non-performing loans.

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

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

(4) Net interest margin is net interest income divided by average interest-earning assets.

32

Comparison of the Three-Month Periods Ended March 31, 2011 and 2010

General.  Net losses for the three months ended March 31, 2011, were $4.5 million or $(2.24) per basic and diluted common share compared to net losses of $2.4 million or $(1.22) per basic and diluted common share for the three-month period  ended March 31, 2010. This increase in the Company's net losses was primarily due to decreases in interest income and an increase in the provision for loan losses and non-interest expense, partially offset by a decrease in interest expense and an increase in non-interest income.

Interest Income.  Interest income decreased to $2.7 million for the three months ended March 31, 2011 from $3.0 million for the three months ended March 31, 2010. Interest income on loans decreased to $2.4 million due to a decrease in the average loan portfolio balance for the three months ended March 31, 2011, partially offset by an increase in the average yield earned.

Interest Expense.  Interest expense decreased by $301,000 for the three months ended March 31, 2011, from the three months ended March 31, 2010. Interest expense decreased due to a decrease in the average yield paid on deposits, and a decrease in the average balance of deposit accounts for the three months ended March 31, 2011. In addition, the cost of average borrowings from the Federal Home Loan Bank decreased for the three months ended March 31, 2011 as compared to the same period in 2010.

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, 2011, was $2.9 million compared to $1.9 million for the same period in 2010.  Management believes the balance in the allowance for loan losses of $5.9 million at March 31, 2011 is adequate.

Allowance for Loan Losses to Nonperforming Loans. At March 31, 2011, the ratio of the allowance for loan losses to nonperforming loans was 61.75%. At March 31, 2010, this ratio was 33.64%.

Non-interest Income.  Total non-interest income increased to $240,000 for the three months ended March 31, 2011, from $235,000 for the three months ended March 31, 2010. The increase in 2011 was primarily due to an increase in loan brokerage fees.

Non-interest Expenses.  Total non-interest expenses increased to $3.7 million for the three months ended March 31, 2011 from $2.6 million for the three months ended March 31, 2010, primarily due an increase of $640,000 in losses, write-downs and expenses on foreclosed assets, and increases of $521,000 in data processing, professional fees and other non-interest expenses, partially offset by decreases in employee compensation, occupancy and advertising expense totaling $79,000.

Income Taxes.  The income tax benefit was $43,000 for the three months ended March 31, 2011. There was no tax benefit recognized for the three months ended March 31, 2010.

    (continued)

33

Commercial Real Estate Lending

We have significant exposure to commercial real estate loans.

Loan extensions. On occasion, we may extend such loans at or near original maturity and, due to the existence of guarantees, do not consider them to be impaired. As of March 31, 2011, we had fewer than ten loans that would be classified in this category. Terms vary by the individual circumstances, guarantor strength and collateral. We typically look for some improvement in our position in exchange for a renewal. This improvement may come in the form of a principal reduction, revised amortization and/or additional conditions agreed upon via a written forbearance agreement. We have offered some of these borrowers periods of interest-only payment (typically one year or less) or some other reduced amortization, but this is not always the case. None of these loans would be considered collateral dependent.

Furthermore, we never extend loan terms solely due to the existence of a guarantee. A loan extension would be considered a troubled debt restructuring if we granted a distressed borrower reduced payment terms for six months or longer. We may offer such terms at the same or a reduced rate to allow for improved cash flow. We do not typically offer reduced payment terms in excess of one year at a time without revaluating the credit.

Evaluation of guarantors. We require personal guarantees on all commercial real estate loans, except a small number of loans to non-profit organizations where guarantees are not available. We perform a cash flow analysis of the guarantor and the project, along with a consolidated global analysis of the entire credit relationship. Information used in this review is collected from personal financial statements, credit reports and tax returns as well as any other available information. We review a guarantor’s payment history and any collections, judgments or other adverse filings. When originating new loans we generally require that personal financial statements be no older than one month, but in no case older than six months. We require the last three years of complete tax returns and extensions if the most recent return is not available. Financial statements and W-2’s are used to supplement this information when the tax returns are stale. We do not make a loan where the guarantor is outside of a tax filing extension period and has not provided us with a current return. Updated financial information is required, and loans are reviewed, at least annually.

Collection from guarantors. We have often found that the threat or filing of a suit will bring a guarantor to commence settlement negotiations. In these cases we have occasionally considered and accepted the release of a guarantee in exchange for the payment of an expected deficiency. We have also released guarantees in exchange for deeds-in-lieu and voluntary foreclosures. In these instances we obtain a current certified financial disclosure from the guarantor. We consider the guarantor’s assets, cash flow, the size of any expected deficiency and the cost of litigation to determine whether it is appropriate to release a guarantee or whether to require an additional payment in exchange for a release.

We have classified our experience pursuing corporate borrowing relationships with personal guarantees over the last three years into three categories: Resolved Satisfactorily, Resolved Unsatisfactorily and Pending. Both categories referred to as Resolved include any relationship where we have either come to an agreement with the borrower, come to a settlement, completed our litigation or are otherwise very close to settling the entire relationship. The Satisfactory subset of Resolved are where the borrower/guarantor is still in compliance with an agreement or where we have been able to take possession of collateral to recover at least 90% of our exposure, with or without additional guarantor support. Some of these have required a series of simple forceful discussions, others have required varying degrees of legal involvement and others have required court action. Many of these did not require a change in terms. A Resolved Unsatisfactorily situation is one were we have either completed litigation or reached a settlement where the 90% recovery threshold has not been met. Pending relationships are almost all in litigation currently.

(continued)

34

Commercial Real Estate Lending, Continued

In the table below, the year correlates to the year the borrower first began having financial difficulty. Some negotiations have carried on through multiple years. The large jump in 2008 and then the subsequent decline are noteworthy. This is especially true in 2010 where new issues were limited to $7.3MM. There has been some uptick in these number during early 2011 and we will cautiously watch this trend over the remainder of the year.  The majority of our current issues have been ongoing for a while and are now continuously coming to some resolution

	Status as of  March 31, 2011
	Resolved Satisfactorily			Resolved Unsatisfactorily			Pending			Totals
	#	Approximate Amount		#	Approximate Amount		#	Approximate Amount		#	Approximate Amount
2008	19		21.62	10		7.33	2		2.52	31		31.46
2009	24		14.51	9		4.62	2		1.91	35		21.04
2010	5		4.32	0		0	1		3.01	6		7.33
2011	7		4.52	1		0	1		.05	8		4.57
Total	55	$	44.97	20	$	11.95	6	$	7.49	80	$	64.40

Updating appraisals. We obtain updated appraisals at least annually for non-accrual loans. We regularly monitor a variety of local and national economic data such as unemployment, foreclosures and current sales prices on various types of properties. When we observe continued deterioration or other issues on any of those factors we may choose to obtain an earlier valuation, such as a comparable market analysis or updated appraisal. We also closely monitor comparable sales on properties similar to its collateral on non-accrual loans. All appraisals are reviewed for accuracy by our credit department and the responsible loan officer. We do not make adjustments to appraised values. If we perceive a discrepancy with an appraisal, we discuss it with the appraiser and allow the appraiser to adjust the value if he or she agrees with our comments. Our allowance for loan losses calculations are always based on current appraisals. Our credit department is independent from the lending staff and provides an additional level of control to the process.

Out of market lending. We operate as a community bank; as such all of our loans are located in the South Florida markets, with one out-of-area loan participation exception. The out-of-area participation loan is nonperforming and is currently controlled by the FDIC. We have a 1.77% participation ownership in this loan for a total balance of just under $1,000,000. We received an updated appraisal on this property within the last quarter and we obtain monthly progress reports on its resolution. The property is located in North Florida and an onsite inspection has been conducted by one of our officers.

Interest reserves. We have made only one loan with an interest reserve within the last twenty-one months.  The original principal was less than $200,000 and the interest reserve was depleted prior to February 2010. The guarantors have the ability to make their payments without cash flow from the collateral property and have been doing so since February 2010. The interest reserve was made as an inducement to approve and was not needed to support our analysis of the borrower’s and guarantors’ cash flow. This loan is not on non-accrual status.

We also recently entered into an agreement with a borrower to pre-pay a year of amortized payments in advance on another commercial real estate loan relationship that is in workout. The borrower has been making the payments for these loans on its own since 2007, without an interest reserve. This borrower-funded reserve was obtained as an inducement to us to grant an extension and no new bank-lent funds were extended to fund the reserve.

We have only made three other loans with interest reserves in our entire operating history and we do not intend to make any in the future, unless such reserves are established by the borrower with funds from sources other than a loan made by us.

(continued)

35

Commercial Real Estate Lending, Continued

Construction Lending

All of our construction loans are underwritten based on project feasibility and historical cash flow. We have very few construction loans and all of them are intended to be owner occupied. We ceased making non-owner occupied construction loans in 2008.

We perform the same underwriting procedures for construction loans as described above for commercial real estate loans. We also require a current title insurance policy and satisfactory environmental report. Construction is monitored by an independent construction inspector with supervision and review by the responsible officer. A draw request, current construction inspection and construction lien releases are required prior to the dispersal of each draw.

Restructured Loans

A borrower must make at least nine consecutive monthly payments on time to be considered eligible to be returned to accrual status once a loan is restructured. Additionally, a borrower would be required to demonstrate the ability to service the debt with financial statements and/or tax returns.

With respect to troubled debt restructurings, the primary concession we offer is a reduced amortization or an interest-only period lasting from one month to one year. We rarely grant payment extensions on anything other than small consumer loans. We have found that payment extensions cause extended periods of delayed amortization that do not work to the benefit of the borrower or us. We have made a few exceptions when a borrower grants us additional collateral that improves our position beyond the impact of the payment deferral.

We currently have fewer than ten loan relationships where we have granted some interest rate relief. These were granted for limited periods of less than three years. Our policy is to have an interest rate floor of 5% and to charge as close to the current market rate as possible for a similar term loan.

We have no instances where we have forgiven principal. We have two instances where we have charged-off a note and have not required the borrower to make payments until another note is satisfied or collateral is sold. Each of those charge-offs was for less than $100,000.

We typically require written forbearance agreements for any commercial real estate loan modifications in excess of nine months and frequently require them on shorter modifications. Our forbearance agreement form requires a borrower to admit a default and grants us numerous legal benefits in the event we are forced to foreclose.

We have had significant success working with borrowers. A modification is discussed thoroughly among our senior officers prior to making an offer to a borrower. All modifications are vetted and customized to be feasible considering a borrower’s circumstances and to match the best possible circumstances available for us. The addition of a written forbearance agreement provides substantial leverage with a borrower and expedites legal action or settlement in the event a borrower is not able to meet the revised terms.

36

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 as of March 31, 2011, 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 our internal controls over financial reporting during the quarter ended March 31, 2011 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.

37

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 3. Defaults Upon Senior Securities.

Beginning with the dividend payment due on February 15, 2010, we have suspended paying dividends on our Series A Preferred Stock. The total arrearage as of March 31, 2011 was $363,000.

38

Part II.  Other Information, continued

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; those marked with an (h) were filed with the Company’s Form 8-K on December 5, 2008; and those marked with a (j) were filed with the Company’s Form 10-QSB with the SEC on November 16, 2009.

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
(h)3.4	Articles of Amendment to the Articles of Incorporation authorizing the Preferred Shares
(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
(h)4.3	Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A
(h)4.4	Warrant to Purchase Up to 183,158 Shares of Common Stock
(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
(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
(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
(j)3.5	Articles of Amendment to the Articles of Incorporation
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

39

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 13, 2011	By:	/s/David W. Skiles
			David W. Skiles, Principal Executive Officer, President and Chief Executive Officer
Date:	May 13, 2011	By:	/s/Nancy E. Aumack
			Nancy E. Aumack, Principal Financial Officer, Senior Vice President and Chief Financial Officer

40