Dear Shareholders, Customers,
Employees and Friends:

It’s been said that true success lies in the ability to adapt to change, act on opportunities and overcome challenges while holding on to unchanging principles and core values.

First State Bank of the Florida Keys has prospered since 1955 through a combination of managed growth, prudent business practices and responsible lending decisions.

These principles combined with a knowledgeable, local Board of Directors and a remarkable team of experienced professionals with a dedicated commitment to the Florida Keys community have ensured that First State Bank of the Florida Keys continues to succeed.

We will expand our leadership position by focusing our organization and talented team of seasoned professionals to:

• Embrace change, adapt, identify opportunities and overcome any obstacles during challenging economic times.
• Profile and leverage market opportunities to their fullest, acting with sensible business practices and intelligent decisiveness.
• Grow the Bank in a professional and financially sound manner.
• Rededicate our commitment to employees, customers, shareholders, friends and the Keys community we serve.

While 2007 was a challenging year, First State Bank continued to prosper and enjoyed some important accomplishments. We expanded customer relationship development programs, successfully launched new products, rewarded staff with well-earned promotions and expanded our team of experienced professionals, while continuing to invest in our future.

Current events proved that being bigger isn’t always better…being better is best.

Despite challenging economic times, we are proud to report that First State Bank remains a financially sound institution, safe, secure and well capitalized with a long-term strategy and focused vision to serve the people and businesses of Monroe County for decades to come.

Careful planning and early preparation have positioned First State Bank to prosper as the economy and financial challenges present new opportunities.

While many other financial institutions struggle as a result of losses experienced in 2007, First State Bank’s capital increased by 18%. We were able to build and maintain reserves, deposits and assets while continuing with a steady growth in loan balances.

Our local focus, experience, dedication and the high energy of our team of professionals are the driving forces behind our continued success.

2007 Highlights:

• Consistent annual earnings.
• Grew capital by 18%.
• Designated as “Well Capitalized” by regulators.
• Grew assets by 28% to $845 million.
• Ranked #1 in deposit market share for Monroe County.
• Ranked #1 local lender in Monroe County.
• Grew loans by 9% to $470 million.
• Named “Best Bank” & “Best Business”.
• Employees donated thousands of volunteer hours in countless community & civic events from Key Largo to Key West.

During 2007, we continued to identify new opportunities and implemented technological improvements that enhanced the Bank’s website and infrastructure. This allowed us to align ourselves with new technologies and innovations in order to provide customers the latest features in online banking services.

First State Bank led the local market with its innovative Keys Credit Card that provides both consumers and businesses with low interest rates, rewards and the ability to personalize their cards with pictures.

The Bank proactively developed two new products for local businesses to help increase their efficiency while reducing costs.

Easy Deposit is a remote deposit capture service that allows businesses to make check deposits directly from their offices 24/7. Smart Escrow represents an efficient business account service that delivers a “state of the art” escrow account management service to professionals who manage multiple escrow accounts.

To increase our footprint in the Lower Keys, the Bank purchased and began renovations on a prime location in Big Pine Key. Strategically located on US1, the new full-service branch is scheduled to become operational in 2008. 

First State Bank extended its operational strength by opening a secondary operations center in Miramar to increase the depth of our team, provide back up systems and to ensure continued and timely operations in the event of a disruption of services in the Keys.

Our employees & customers represent our greatest asset.

18 professionals earned promotions including four officers:

• Gary Carney, Executive Vice President 
Senior Loan Administration Officer
• Lori Menendez, Assistant Vice President
Deposit Operations Manager
• Merica Strader, Deposit Operations Officer, Business Analyst
• Jennifer Fish, Commercial Closing Officer

Expanding its team of professionals represents the Bank’s competitive edge.

First State Bank recruited experienced officers to its dedicated management team: 

• Tony Romano, Executive Vice President,
Retail Market Executive
• Robert Murrell, Vice President, Loan Administration Officer
• Nelson Irene, Assistant Vice President, 
Information Technology Officer
• Lucy Cruz, Compliance Officer

Our 49 exceptional officers represent over 476 years of experience at First State Bank and 1,000 years of professional expertise in banking, financial services or related services. 

Locally Owned & Operated

The Bank welcomed two new board members, Dennis Bishop of Marathon and Jay Hershoff of Key Largo, to its ranks of directors. These two long-term residents are respected professionals who will enable us to better meet the needs of our customers Keyswide.

Safe, Sound & Secure with a dedication to excellence & world class customer service. 

As we move forward into 2008, First State Bank of the Florida Keys will continue to meet any challenges with adaptability and consistency. Strategic vision, wise decisions, conservative local lending practices and a carefully planned approach of controlled growth will keep us safe, sound and secure for the long term. 

To meet all opportunities and any challenges, we have strengthened our team of professionals while strategically realigning other bank resources. 

While our competitors are distracted, we will continue to operate as the only well managed, well capitalized and locally owned and operated Keyswide bank in Monroe County.

As we prepare to meet the changes in the economy, First State Bank of the Florida Keys is positioned to manage the challenges and opportunities presented. We will be here, as we have been since 1955, supporting the changing financial needs of our residents and the communities where we live, work and play.