FPB Bancorp (FPBI) 10QSB 2003 Q2 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended June 30, 2003

¨    Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from            to            

Commission File Number000-33351

FPB BANCORP, INC.

(Exact Name of Small Business Issuer 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) 398-1388

(Issuer’s Telephone Number, Including Area Code)

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

Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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  þ    NO  ¨

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Common stock, par value $.01 per share	817,775 shares
(class)	Outstanding at June 30, 2003

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

FPB BANCORP, INC. AND SUBSIDIARY

INDEX

PART I. FINANCIAL INFORMATION

	Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets—June 30, 2003 (unaudited) and December 31, 2002	2
Condensed Consolidated Statements of Earnings—Three and Six Months ended June 30, 2003 and 2002 (unaudited)	3
Condensed Consolidated Statements of Stockholders’ Equity—Six Months ended June 30, 2003 and 2002 (unaudited)	4
Condensed Consolidated Statements of Cash Flows—Six Months ended June 30, 2003 and 2002 (unaudited)	5
Notes to Condensed Consolidated Financial Statements (unaudited)	6-8
Review By Independent Accountants	9
Report on Review by Independent Accountants	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-16
Item 3. Controls and Procedures	17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	17
Item 4. Submission of Matters to Vote of Security Holders	17
Item 6. Exhibits and Reports on Form 8-K	18
SIGNATURES	19

1

FPB BANCORP, INC. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

(Dollars in thousands)

	June 30, 2003			December 31, 2002
	(unaudited)
Assets
Cash and due from banks	$	2,416		3,414
Interest-bearing deposits with banks		5,024		2,001
Federal funds sold		3,938		2,410
Total cash and cash equivalents		11,378		7,825
Securities available for sale		6,411		6,272
Securities held to maturity		718		425
Loans, net of allowance for loan losses of $654 and $553		46,568		41,662
Premises and equipment, net		1,797		1,778
Federal Home Loan Bank stock, at cost		122		80
Accrued interest receivable		188		197
Deferred income taxes		295		356
Other assets		337		172
Total assets	$	67,814		58,767
Liabilities and Stockholders’ Equity
Liabilities:
Noninterest-bearing demand deposits		10,938		9,447
Savings, NOW and money-market deposits		24,127		15,885
Time deposits		24,743		24,933
Total deposits		59,808		50,265
Official checks		491		1,026
Other liabilities		109		163
Total liabilities		60,408		51,454
Stockholders’ equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued or outstanding		—		—
Common stock, $.01 par value; 5,000,000 shares authorized, 817,775 shares issued and outstanding		8		8
Additional paid-in capital		7,930		7,932
Accumulated deficit		(550	)	(687	)
Accumulated other comprehensive income		18		60
Total stockholders’ equity		7,406		7,313
Total liabilities and stockholders’ equity	$	67,814		58,767

See Accompanying Notes to Condensed Consolidated Financial Statements.

2

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Earnings (Unaudited)

(Dollars in thousands, except share amounts)

	Three Months Ended June 30,			Six Months Ended June 30,
	2003		2002	2003	2002
Interest income:
Loans	$	765	696	1,510	1,340
Securities		50	73	108	139
Other		24	16	39	33
Total interest income		839	785	1,657	1,512
Interest expense:
Deposits		254	281	505	553
Other		—	1	—	2
Total interest expense		254	282	505	555
Net interest income		585	503	1,152	957
Provision for loan losses		89	51	172	106
Net interest income after provision for loan losses		496	452	980	851
Noninterest income:
Service charges and fees		56	50	109	99
Other fees		9	5	15	8
Gain on sale of securities available for sale		—	—	33	—
Loan brokerage fees		99	—	99	—
Other		38	1	65	3
Total noninterest income		202	56	321	110
Noninterest expenses:
Salaries and employee benefits		233	200	447	396
Occupancy and equipment		66	82	133	163
Advertising		48	10	86	29
Professional fees		41	23	98	51
Data processing		50	41	103	80
Other		114	91	211	166
Total noninterest expenses		552	447	1,078	885
Earnings before income taxes		146	61	223	76
Income taxes		56	24	86	31
Net earnings	$	90	37	137	45
Earnings per share, basic and diluted	$	.11	.07	.17	.09
Weighted-average number of shares, basic and diluted		817,775	502,971	817,775	496,191
Dividends per share	$	—	—	—	—

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2003 and 2002

(Dollars in thousands)

	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2001	489,410	$	5	4,846		(761	)	—		4,090
Comprehensive income:
Net earnings for the six months ended June 30, 2002 (unaudited)	—		—	—		45		—		45
Net change in unrealized gain on securities available for sale, net of taxes of $16 (unaudited)	—		—	—		—		25		25
Comprehensive income (loss) (unaudited)										70
Proceeds from issuance of common stock (unaudited)	84,235		1	811		—		—		812
Balance at June 30, 2002 (unaudited)	573,645	$	6	5,657		(716	)	25		4,972
Balance at December 31, 2002	817,775	$	8	7,932		(687	)	60		7,313
Comprehensive income:
Net earnings for the six months ended June 30, 2003 (unaudited)	—		—	—		137		—		137
Net change in unrealized gain on securities available for sale, net of tax benefit of $25 (unaudited)	—		—	—		—		(42	)	(42	)
Comprehensive income (unaudited)										95
Stock offering costs (unaudited)	—		—	(2	)	—		—		(2	)
Balance at June 30, 2003 (unaudited)	817,775	$	8	7,930		(550	)	18		7,406

See Accompanying Notes to Condensed Consolidated Financial Statements.

4

FPB BANCORP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Six Months Ended June 30,
	2003			2002
Cash flows from operating activities:
Net earnings	$	137		45
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation		43		47
Provision for loan losses		172		106
Deferred income taxes		86		31
Net amortization of loan fees		(7	)	2
Net amortization of securities		45		3
Gain on the sale of securities available for sale		(33	)	—
Decrease (increase) in accrued interest receivable		9		(32	)
Increase in other assets		(165	)	(16	)
Decrease in official checks and other liabilities		(589	)	(193	)
Net cash used in operating activities		(302	)	(7	)
Cash flows from investing activities:
Purchase of securities held to maturity		(500	)	—
Purchase of securities available for sale		(4,594	)	(2,500	)
Principal payments on securities available for sale		1,129		118
Proceeds from calls of securities available for sale		1,000		3,000
Proceeds from sale of securities available for sale		2,249		—
Principal payments on securities held to maturity		205		225
Purchase of Federal Home Loan Bank stock		(42	)	—
Maturity of time deposit		—		100
Net increase in loans		(5,071	)	(6,266	)
Purchase of premises and equipment		(62	)	(41	)
Net cash used in investing activities		(5,686	)	(5,364	)
Cash flows from financing activities:
Net increase in deposits		9,543		10,017
Decrease in federal funds purchased		—		(1,500	)
Decrease in Federal Home Loan Bank advance		—		(1,000	)
Net increase in notes payable		—		63
Proceeds from the issuance of common stock		—		812
Stock offering costs		(2	)	—
Net cash provided by financing activities		9,541		8,392
Net increase in cash and cash equivalents		3,553		3,021
Cash and cash equivalents at beginning of period		7,825		2,448
Cash and cash equivalents at end of period	$	11,378		5,469
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest, net of amount capitalized of $12 in 2002	$	503		550
Income taxes	$	—		—
Noncash transaction
Accumulated other comprehensive income, change in unrealized gain on securities available for sale	$	(42	)	25

See Accompanying Notes to Condensed Consolidated Financial Statements.

5

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(1) General.    FPB Bancorp, Inc. is a one-bank holding company and owns 100% of First Peoples Bank (the “Bank”), a Florida-chartered commercial bank (collectively, the “Company”). The Holding Company’s only business activity is the operation of the Bank. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation. The Bank offers a variety of community banking services to individual and corporate customers through its banking office located in Port St. Lucie, Florida.

In the opinion of management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at June 30, 2003, and the results of operations for the three- and six-month periods ended June 30, 2003 and 2002, and cash flows for the six month periods ended June 30, 2003 and 2002. The results of operations for the three and six months ended June 30, 2003 are not necessarily indicative of the results to be expected for the full year.

(2) Loan Impairment and Credit Losses.    Loans identified as impaired at March 31, 2003 and 2002 and for the three- and six-month periods then ended are as follows (in thousands):

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2003		2002	2003	2002
Gross loans with related allowance for losses recorded, at end of period	$	—	—	—	—
Less: Allowance on these loans		—	—	—	—
Net investment in impaired loans, at end of period	$	—	—	—	—
Average investment in impaired loans	$	22	—	37	—
Interest income recognized on impaired loans	$	—	—	—	—
Interest income received on impaired loans	$	—	—	—	—

The activity in the allowance for loan losses was as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2003			2002	2003		2002
Balance at beginning of period	$	614		409	553		359
Provision charged to earnings		89		51	172		106
(Charge-offs) recoveries, net		(49	)	2	(71	)	(3	)
Balance at end of period	$	654		462	654		462

(continued)

6

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(2) Loan Impairment and Credit Losses, Continued.    Nonaccrual and past due loans were as follows (in thousands):

	At June 30, 2003		At December 31, 2002
Nonaccrual loans	$	12	168
Past due ninety days or more, but still accruing		—	—
	$	12	168

(3) Regulatory Capital.    The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at June 30, 2003 of the regulatory capital requirements and the Bank’s capital on a percentage basis:

	Ratios of the Bank		Regulatory Requirement
Tier I capital to total average assets	13.49	%	4.00	%
Tier I capital to risk-weighted assets	12.24	%	4.00	%
Total capital to risk-weighted assets	8.71	%	8.00	%

(4) Earnings Per Share.    Basic and diluted earnings per share are computed on the basis of the weighted-average number of shares of common stock outstanding. Outstanding stock options are not dilutive.

(5) Stock Options.    The Company established an Incentive Stock Option Plan for officers and employees of the Company and reserved 97,882 shares of common stock for the plan. The Plan was amended in April 2003 to increase the number of shares available for grant to 122,666. The exercise price of the stock options is the greater of $10 or the fair market value of the common stock on the date of grant. The options vest 33.3% during the second and third year, respectively, after grant and are fully exercisable during the fourth year after the grant date. The options expire in ten years from the date of grant. A summary of stock option follows ($ in thousands, except share amounts):

	Number of Shares	Range of Per Share Option Price		Weighted- Average Per Share Price	Aggregate Option Price
Outstanding at December 31, 2002 and June 30, 2003	97,882	$	10.00-10.50	10.03	982

(continued)

7

FPB BANCORP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(5) Stock Options, Continued.    The Company accounts for their stock option plans under the recognition and measurement principles of APB No. 25. No stock-based employee compensation cost is reflected in net earnings, as all options granted under those plans had an exercise price which approximated the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of FASB No. 123 to stock-based employee compensation ($ in thousands, except per share amounts).

	Three Months Ended June 30,			Six Months Ended June 30,
	2003		2002	2003	2002
Net earnings as reported	$	90	37	137	45
Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax effect		3	10	6	20
Proforma net earnings	$	87	27	131	25
Earnings per share:
Basic and diluted, as reported	$	.11	.07	.17	.09
Basic and diluted, proforma	$	.11	.05	.16	.05

8

FPB BANCORP, INC. AND SUBSIDIARY

Review by Independent Accountants

Hacker, Johnson & Smith PA, the Company’s independent accountants, have made a limited review of the interim financial data as of June 30, 2003, and for the three- and six-month periods ended June 30, 2003 and 2002 presented in this document, in accordance with standards established by the American Institute of Certified Public Accountants.

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

9

Independent Accountant’s Report

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 June 30, 2003, and the related condensed consolidated statements of earnings, for the three- and six-month periods ended June 30, 2003 and 2002 and the related condensed consolidated statements of stockholders equity and cash flows for the six-month periods ended June 30, 2003 and 2002. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, 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 condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2002, and the related consolidated statements of earnings, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated January 24, 2003, 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, 2002, 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

July 25, 2003

10

FPB BANCORP, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Liquidity and Capital Resources

The Company’s primary sources of cash during the six months ended June 30, 2003 were from net deposit inflow of approximately $9.5 million, and proceeds from sales, prepayments and calls of securities available for sale totaling $4.5 million. Cash was used primarily for net loan originations of $5.1 million and purchase of securities of $5.1 million. At June 30, 2003, the Company had time deposits of $8.2 million that mature in one year or less. At June 30, 2003, the Bank exceeded its regulatory liquidity requirements. 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:

	Six Months Ended June 30, 2003		Year Ended December 31, 2002		Six Months Ended June 30, 2002
Average equity as a percentage of average assets	12.09	%	11.11	%	8.95	%
Equity to total assets at end of period	10.92	%	12.44	%	9.95	%
Return on average assets (1)	.45	%	14	%	19	%
Return on average equity (1)	3.74	%	1.29	%	2.12	%
Noninterest expenses to average assets (1)	3.56	%	3.53	%	3.72	%
Nonperforming loans to total assets at end of period	NIL		NIL		13	%
(1)    Annualized for the six months ended June 30, 2003 and 2002.

11

FPB BANCORP, INC. AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis

of Financial Condition and Results of Operations, Continued

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

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 include commitments to extend credit, unused lines of credit and construction loans 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 consolidated balance sheet. The contract or notional 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, unused lines of credit and construction loans 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.

A summary of the amounts of the Company’s financial instruments, with off-balance sheet risk at June 30, 2003, follows (in thousands):

	Contract Amount
Commitments to extend credit	$	1,875
Unused lines of credit and construction loans	$	5,965
Standby letters of credit	$	189

Management believes that the Company has adequate resources to fund all of its commitments and that substantially all its existing commitments will be funded in 2003.

12

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 June 30,
	2003						2002
	Average Balance		Interest and Dividends		Yield/ Rate		Average Balance		Interest and Dividends		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	44,214		765	6.92	%	$	37,090		696	7.51	%
Securities		6,879		50	2.91			5,987		73	4.88
Other (1)		3,382		24	2.84			3,966		16	1.61
Total interest-earning assets		54,475		839	6.16			47,043		785	6.67
Noninterest-earning assets		8,698						2,357
Total assets	$	63,173					$	49,400
Interest-bearing liabilities:
Savings, NOW and money-market deposit accounts		20,292		84	1.66			12,781		67	2.10
Time deposits		24,799		170	2.74			22,429		214	3.82
Other (2)		—		—	—			385		1	1.04
Total interest-bearing liabilities		45,091		254	2.24			35,595		282	3.17
Demand deposits		9,888						8,673
Noninterest-bearing liabilities		837						725
Stockholders’ equity		7,357						4,407
Total liabilities and stockholders’ equity	$	63,173					$	49,400
Net interest income			$	585					$	503
Interest-rate spread (3)					3.92	%					3.50	%
Net interest margin (4)					4.30	%					4.28	%
Ratio of average interest-earning assets to average interest-bearing liabilities		1.21						1.32

(1) Includes federal funds sold, Federal Home Loan Bank stock, time deposit and interest-bearing deposits with banks.

(2) Includes Federal Home Loan Bank advances and notes payable.

(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.

13

FPB BANCORP, INC. AND SUBSIDIARY

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest and dividend income of the Bank 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.

	Six Months Ended June 30, 2003						Six Months Ended June 30, 2002
	Average Balance		Interest and Dividends		Average Yield/ Rate		Average Balance		Interest and Dividends		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	43,503		1,510	6.94	%	$	35,490		1,340	7.55	%
Securities		6,575		108	3.29			5,627		139	4.94
Other (1)		2,956		39	2.64			4,069		33	1.62
Total interest-earning assets		53,034		1,657	6.25			45,186		1,512	6.69
Noninterest-earning assets		7,532						2,273
Total assets	$	60,566					$	47,459
Interest-bearing liabilities:
Savings, NOW and money-market deposit accounts		18,636		156	1.67			12,343		129	2.09
Time deposits		24,170		349	2.89			21,696		424	3.91
Other (2)		—		—	—			443		2	.90
Total interest-bearing liabilities		42,806		505	2.36			34,482		555	3.22
Demand deposits		9,525						8,042
Noninterest-bearing liabilities		914						687
Stockholders’ equity		7,321						4,248
Total liabilities and stockholders’ equity	$	60,566					$	47,459
Net interest income			$	1,152					$	957
Interest-rate spread (3)					3.89	%					3.47	%
Net interest margin (4)					4.34	%					4.24	%
Ratio of average interest-earning assets to average interest-bearing liabilities		1.24						1.31

(1) Includes federal funds sold, Federal Home Loan Bank stock, time deposit and interest-bearing deposits with banks.

(2) Includes Federal Home Loan Bank advances and notes payable.

(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.

14

FPB BANCORP, INC. AND SUBSIDIARY

Comparison of the Three-Month Periods Ended June 30, 2003 and 2002

General. Net earnings for the three months ended June 30, 2003, were $90,000 or $.11 per basic and diluted share compared to net earnings of $37,000 or $.07 per basic and diluted share for the period ended June 30, 2002. This increase in the Company’s net earnings was primarily due to an increase in net interest income and noninterest income which was partially offset by an increase in the provision for loan losses and noninterest expense.

Interest Income. Interest income increased to $839,000 for the three months ended June 30, 2003 from $785,000 for the three months ended June 30, 2002. Interest income on loans increased to $765,000 due primarily to an increase in the average loan portfolio balance for the three months ended June 30, 2003, partially offset by a decrease in the average yield earned in 2003. Interest on securities decreased to $50,000 due primarily to a decrease in the average yield earned during the three months ended June 30, 2003 partially offset by an increase in the average balance in the securities portfolio in 2003.

Interest Expense. Interest expense decreased to $254,000 for the three months ended June 30, 2003, from $282,000 for the three months ended June 30, 2002. Interest expense decreased primarily because of a decrease in the average rate paid on deposits during 2003, partially offset by an increase in the average balance of deposits during 2003.

Provision for Loan Losses. The provision for loan losses is charged to earnings 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 nonperforming 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 June 30, 2003, was $89,000 compared to $51,000 for the same period in 2002. The increase in the provision was due to increased charge-offs during the three months ended June 30, 2003. Management believes the balance in the allowance for loan losses of $654,000 at June 30, 2003, is adequate.

Noninterest Income. Total noninterest income increased to $202,000 for the three months ended June 30, 2003, from $56,000 for the three months ended June 30, 2002 primarily as a result of the $99,000 loan brokerage fee earned during 2003.

Noninterest Expenses. Total noninterest expenses increased to $552,000 for the three months ended June 30, 2003 from $447,000 for the three months ended June 30, 2002, primarily due to an increase in employee compensation and benefits of $33,000, an increase in professional fees of $18,000, an increase in data processing expense of $9,000 and an increase in other expenses of $23,000 all due to the continued growth of the Company.

Income Taxes. Income taxes for the three months ended June 30, 2003, were $56,000 (an effective rate of 38.4%) compared to an income taxes of $24,000 (an effective rate of 39.3%) for the three months ended June 30, 2002. The Company has recognized a deferred tax asset because management believes it will realize the deferred tax asset in future periods.

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FPB BANCORP, INC. AND SUBSIDIARY

Comparison of the Six-Month Periods Ended June 30, 2003 and 2002

General. Net earnings for the six months ended June 30, 2003, were $137,000 or $.17 per basic and diluted share compared to net earnings of $45,000 or $.09 per basic and diluted share for the period ended June 30, 2002. This increase in the Company’s net earnings was primarily due to an increase in net interest income and noninterest income which was partially offset by an increase in the provision for loan losses and noninterest expense.

Interest Income. Interest income increased to $1,657,000 for the six months ended June 30, 2003 from $1,512,000 for the six months ended June 30, 2002. Interest income on loans increased to $1,510,000 due primarily to an increase in the average loan portfolio balance for the six months ended June 30, 2003, partially offset by a decrease in the average yield earned in 2003. Interest on securities decreased to $108,000 due primarily to a decrease in the average yield earned during the six months ended June 30, 2003 partially offset by an increase in the average balance in the securities portfolio in 2003.

Interest Expense. Interest expense decreased to $505,000 for the six months ended June 30, 2003, from $555,000 for the six months ended June 30, 2002. Interest expense decreased primarily because of a decrease in the average rate paid on deposits during 2003, partially offset by an increase in the average balance of deposits during 2003.

Provision for Loan Losses. The provision for loan losses is charged to earnings 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 nonperforming 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 six months ended June 30, 2003, was $172,000 compared to $106,000 for the same period in 2002. The increase in the provision was due to increased charge-offs during the six months ended June 30, 2003. Management believes the balance in the allowance for loan losses of $654,000 at June 30, 2003, is adequate.

Noninterest Income. Total noninterest income increased to $321,000 for the six months ended June 30, 2003, from $110,000 for the six months ended June 30, 2003 primarily as a result of the $99,000 loan brokerage fee earned during 2003 and an increase in other noninterest income.

Noninterest Expenses. Total noninterest expenses increased to $1,078,000 for the six months ended June 30, 2003 from $885,000 for the six months ended June 30, 2002, primarily due to an increase in employee compensation and benefits of $51,000, an increase in professional fees of $47,000, an increase in data processing expense of $23,000 and an increase in other expenses of $45,000 all due to the continued growth of the Company.

Income Taxes. Income taxes for the six months ended June 30, 2003, were $86,000 (an effective rate of 38.6%) compared to an income taxes of $31,000 (an effective rate of 40.8%) for the six months ended June 30, 2002. The Company has recognized a deferred tax asset because management believes it will realize the deferred tax asset in future periods.

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FPB BANCORP, INC. AND SUBSIDIARY

Item 3. Controls and Procedures

a. Evaluation of Disclosure Controls and Procedures.    The Company maintains 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 90 days of the filing date of this report, the chief executive and chief financial officers of the Company concluded that the Company’s disclosure controls and procedures were adequate.

b. Changes in Internal Controls.    The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders (the “Annual Meeting”) of FPB Bancorp, Inc. was held on April 30, 2003 to vote on the following proposals:

Proposal I:      Election of four directors

Proposal II:     The adoption of an amendment to the 1998 stock option

Proposal III:    Ratification of the appointment of Hacker, Johnson & Smith PA as independent auditors

At the Annual Meeting, 560,580 shares were present in person or by proxy. Listed below are the results of the matters subject to a vote of security holders:

	Term	For	Against	Abstain	Broker Nonvote
Proposal I
James L. Autin M.D.	1 year	560,380	—	200	—
John R. Baker, Sr.	1 year	557,780	—	2,800	—
Donald J. Cuozzo	1 year	560,380	—	200	—
Paul A. Zinter	1 year	559,380	—	200	—
Proposal II	—	453,906	18,100	55,250	33,324
Proposal III	—	555,630	200	4,750	—

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FPB BANCORP, INC. AND SUBSIDIARY

Item 6. Exhibits and Reports on Form 8-K

(a)    Exhibits.  The following exhibits are filed with or incorporated by reference into this report. The exhibits marked with an asterisk (*) 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, and those marked with a double asterisk (**) were filed with the Company’s 2003 Proxy Statement filed with the Security and Exchange Commission.

Exhibit No.	Description of Exhibit
*      3.1	Articles of Incorporation
*      3.2	Bylaws
*      4.1	Specimen copy of certificate evidencing shares of the Company’s common capital stock, $0.01 par value
*      4.2	First Peoples Bank Stock Option Plan dated January 14, 1999
*      4.3	Warrant Agreement
*      4.4	Non-Qualified Stock Option Agreement
**    4.5	Amendment to First Peoples Bank Stock Option Plan
*    10.1	First Peoples Bank Qualified 401(k) Profit Sharing Plan, dated May 1, 1999
*    10.2	Employment Agreement for David W. Skiles
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

(b)    Reports on Form 8-K.  There were no Form 8-K’s filed during the three months ended June 30, 2003.

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FPB BANCORP, INC. AND SUBSIDIARY

PART II. OTHER INFORMATION

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:	August 11, 2003	By:	/s/    DAVID W. SKILES
			David W. Skiles, President and Chief Executive Officer
Date:	August 11, 2003	By:	/s/    NANCY E. AUMACK
			Nancy E. Aumack, Senior Vice President and Chief Financial Officer

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