<PAGE>

                                                                    Exhibit 13.2

                            WACCAMAW BANKSHARES, INC.
                         110 North J.K. Powell Boulevard
                        Whiteville, North Carolina 28472
                                 (910) 641-0044

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                                   To Be Held
                                 April 17, 2003

NOTICE is hereby given that the Annual Meeting of Shareholders of Waccamaw
Bankshares, Inc. (the "Company") will be held as follows:

     Place:   Waccamaw Bank and Corporate Center
              110 North J.K. Powell Boulevard
              Whiteville, North Carolina

     Date:    Thursday, April 17, 2003

     Time:    7:00 p.m.

     The purposes of the meeting are:

     1. To elect four (4) members of the Board of Directors for three year terms
and one (1) member of the Board of Directors for a two (2) year term.

     2. To ratify the appointment of Larrowe & Company P.L.C. as the Company's
independent public accountants for 2003.

     3. To transact any other business that may properly come before the
meeting.

You are cordially invited to attend the meeting in person. However, even if you
expect to attend the meeting, you are requested to complete, sign and date the
enclosed appointment of proxy and return it in the envelope provided for that
purpose to ensure that a quorum is present at the meeting. The giving of an
appointment of proxy will not affect your right to revoke it or to attend the
meeting and vote in person.

                                           By Order of the Board of Directors


                                           James G. Graham
                                           President and Chief Executive Officer

March 1, 2003

<PAGE>

                            WACCAMAW BANKSHARES, INC.
                         110 North J.K. Powell Boulevard
                        Whiteville, North Carolina 28472
                                 (910) 641-0044

                                 PROXY STATEMENT

                     Mailing Date: On or about March 1, 2003

                         ANNUAL MEETING OF SHAREHOLDERS

                                   To Be Held
                                 April 17, 2003

General

This Proxy Statement is furnished in connection with the solicitation of the
enclosed appointment of proxy by the Board of Directors of Waccamaw Bankshares,
Inc. (the "Company") for the Annual Meeting of Shareholders of the Company to be
held at the Waccamaw Bank and Corporate Center, 110 North J.K. Powell Boulevard,
Whiteville, North Carolina, at 7:00 p.m. on April 17, 2003, and any adjournments
thereof.

Solicitation and Voting of Appointments of Proxy; Revocation

Persons named in the appointment of proxy as proxies to represent shareholders
at the Annual Meeting are Crawford Monroe Enzor, III, Freda H. Gore, and David
A. Godwin. Shares represented by each appointment of proxy which is properly
executed and returned, and not revoked, will be voted in accordance with the
directions contained in the appointment of proxy. If no directions are given,
each such appointment of proxy will be voted FOR the election of each of the
five (5) nominees for director named in Proposal 1 below and FOR Proposal 2. If,
at or before the time of the Annual Meeting, any nominee named in Proposal 1 has
become unavailable for any reason, the proxies will have the discretion to vote
for a substitute nominee. On such other matters as may come before the meeting,
the proxies will be authorized to vote shares represented by each appointment of
proxy in accordance with their best judgment on such matters. An appointment of
proxy may be revoked by the shareholder giving it at any time before it is
exercised by filing with Alan W. Thompson, Secretary of the Company, a written
instrument revoking it or a duly executed appointment of proxy bearing a later
date, or by attending the Annual Meeting and announcing his or her intention to
vote in person.

Expenses of Solicitation

The Company will pay the cost of preparing, assembling and mailing this Proxy
Statement and other proxy solicitation expenses. In addition to the use of the
mails, appointments of proxy may be

<PAGE>

solicited in person or by telephone by the Company's officers, directors and
employees without additional compensation. The Company will reimburse banks,
brokers and other custodians, nominees and fiduciaries for their costs in
sending the proxy materials to the beneficial owners of the Company's common
stock.

Record Date

The close of business on February 20, 2003, has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. Only those shareholders of record on that
date will be eligible to vote on the proposals described herein.

Voting Securities

The voting securities of the Company are the shares of (i) common stock, no par
value per share, of which 5,000,000 shares are authorized and 1,528,110 shares
were outstanding on December 31, 2002; and (ii) preferred stock, no par value
per share, of which 1,000,000 shares are authorized and no shares were
outstanding on December 31, 2002. There are approximately 1,992 holders of
record of the Company's common stock.

Voting Procedures; Votes Required for Approval

Each shareholder is entitled to one vote for each share held of record on the
Record Date on each director to be elected and on each other matter submitted
for voting. In accordance with North Carolina law, shareholders will not be
entitled to vote cumulatively in the election of directors at the Annual
Meeting.

In the case of Proposal 1 below, the five (5) directors receiving the greatest
number of votes shall be elected.

In the case of Proposal 2 below, for such proposals to be approved, the number
of votes cast for approval must exceed the number of votes cast against the
proposal. Abstentions and broker nonvotes will have no effect.

Authorization to Vote on Adjournment and Other Matters

Unless the Secretary of the Company is instructed otherwise, by signing an
appointment of proxy, shareholders will be authorizing the proxyholders to vote
in their discretion regarding any procedural motions which may come before the
Annual Meeting. For example, this authority could be used to adjourn the Annual
Meeting if the Company believes it is desirable to do so. Adjournment or other
procedural matters could be used to obtain more time before a vote is taken in
order to solicit additional appointments of proxy or to provide additional
information to shareholders. However, appointments of proxy voted against the
Proposals will not be used to adjourn the Annual Meeting. The Company does not
have any plans to adjourn the meeting at this time, but intends to do so, if
needed, to promote shareholder interests.

                                       2

<PAGE>

Beneficial Ownership of Voting Securities

As of the December 31, 2002, no shareholder known to management owned more than
5% of the Company's common stock.

As of the December 31, 2002, the beneficial ownership of the Company's common
stock, by directors individually, and by directors and executive officers as a
group, was as follows:

                                              AMOUNT AND
                                               NATURE OF
   NAME AND ADDRESS OF                        BENEFICIAL      PERCENT OF
    BENEFICIAL OWNER                        OWNERSHIP /(1)/   CLASS /(2)/
--------------------------                  ---------------   -----------

M.B. ("Bo") Biggs                                5,767           0.38
Lumberton, NC

Dr. Maudie M. Davis                              9,811           0.64
Tabor City, NC

E. Autry Dawsey, Sr.                            59,138(3)        3.86
Whiteville, NC

Crawford Monroe Enzor, III                      49,093(4)        3.20
Cerro Gordo, NC

James G. Graham                                 44,414           2.84
Whiteville, NC

James E. Hill, Jr.                              14,633(5)        0.95
Whiteville, NC

Michael K. Jones                                51,562(6)        3.37
Tabor City, NC

Alan W. Thompson                                29,293(7)        1.91
Whiteville, NC

R. Dale Ward                                    31,452(8)        2.06
Whiteville, NC

J. Densil Worthington                           37,335(9)        2.44
Chadbourn, NC

All Directors and Executive Officers as a      342,077          21.37
group (13 persons)

     /(1)/ Except as otherwise noted, to the best knowledge of the Company's
management, the above individuals and group exercise sole voting and investment
power with respect to all shares shown as beneficially owned other than the
following shares as to which such powers are shared: Mr. Graham - 2,000 shares,
Mr. Hill - 3,000 shares and Mr. Worthington - 8,400 shares.

                                       3

<PAGE>

     /(2)/ The calculation of the percentage of class beneficially owned by each
individual and the group is based, in each case, on the sum of (1) 1,528,110
outstanding shares of common stock, and (2) options to purchase common stock
capable of being exercised by the individual or group within 60 days of December
31, 2002.

     (3) Includes 10,080 held by Mr. Dawsey as custodian for grandchildren.

     (4) Includes 28,544 shares held by members of Mr. Enzor's immediate family.

     (5) Includes 144 shares held by Mr. Hill as custodian for his child.

     (6) Includes 3,792 shares held by Mr. Jones as custodian for minor
children.

     (7) Includes 1,248 shares held by Mr. Thompson's spouse.

     (8) Includes 264 shares held by Mr. Ward as custodian for his child.

     (9) Includes 3,950 shares held by Mr. Worthington as custodian for his
child.

Reports of Changes in Beneficial Ownership

Directors and executive officers of the Company are required by federal law to
file reports with the Securities and Exchange Commission ("SEC") regarding the
amount of and changes in their beneficial ownership of the Company's common
stock. All such ownership reports have been filed and the ownership status of
the Company's common stock by its directors and executive officers is accurate
and current.

                        PROPOSAL 1: ELECTION OF DIRECTORS

The Company's Bylaws provide that its Board of Directors shall consist of
between five (5) and sixteen (16) members, as determined by the Board of
Directors or the shareholders, and, if more than nine (9), they shall be
staggered into terms of one, two, and three years in as equal numbers as
possible. The Board of Directors has set the number of directors of the Company
at ten (10). Each nominated and incumbent director has served as a director of
the Bank since 1997 and as a director of the Company since the Bank's
reorganization into a bank holding company on July 1, 2001 except Mr. Graham who
was first elected as a director of Waccamaw Bank, the wholly owned subsidiary of
the Company (the "Bank") in 1999. The five (5) directors whose terms expire at
the Annual Meeting have been renominated to terms of three and two years in
order to even out the staggering of the director classes.

                                       4

<PAGE>

<TABLE>
<CAPTION>
                      Position(s)   Director                Principal Occupation and
   Name and Age          Held         Since           Business Experience During Past 5 Years
-------------------   -----------   --------   ------------------------------------------------------
<S>                     <C>           <C>      <C>
Three Year Terms:
Dr. Maudie M. Davis     Director      1997     Principal, South Columbus High School, Tabor City, NC.
(50)

James E. Hill, Jr.      Director      1997     Attorney, Hill & High, L.L.P., Whiteville, NC; farming
(56)                                           operations; Hill & High Real Estate; Walker - Hill
                                               Real Estate.

Michael K. Jones        Director      1997     President, Jones Stores, Inc. (retail variety stores),
(53)                                           Tabor City, NC; Owner Broadway Ventures, LLC (real
                                               estate); Managing Partner; Conway Shopping Center,
                                               LLC (real estate); Managing Partner, JONCAR, LLC (real
                                               estate); Managing Partner, JACJPJ, LLC (real estate);
                                               Partner, Crown Investments, LLC (real estate).

Alan W. Thompson        Director      1997     President, Thompson, Price, Scott, Adams & Co., P.A.
(39)                                           (certified public accountants), Whiteville, NC;
                                               President, Medical Billing Organization, Inc. (medical
                                               billing company), Whiteville, NC; President, Medical
                                               Service Organization, Inc. (medical billing company),
                                               Whiteville, NC; Manager, AT Consulting Services, LLC
                                               (financial services), Whiteville, NC; Manager, TSA
                                               Rentals, LLC (Rental Real Estate), Whiteville, NC.

Two Year Term:
J. Densil Worthington   Director      1997     President, Worthington Funeral Home, Inc., Chadbourn,
(48)                                           NC.
</TABLE>

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES FOR DIRECTOR OF THE COMPANY.

Incumbent Directors

The Company's Board of Directors includes the following directors whose terms
will continue after the Annual Meeting. Certain information regarding those
directors is set forth in the following table:

<TABLE>
<CAPTION>
                             Director    Term                     Principal Occupation and
      Name and Age             Since    Expires           Business Experience During Past 5 Years
--------------------------   --------   -------   --------------------------------------------------------
<S>                            <C>        <C>     <C>
M. B. ("Bo") Biggs             1997       2005    Certified Public Accountant; Chief Financial Officer,
(47)                                              Comptroller/Secretary-Treasurer, K.M. Biggs, Inc.
                                                  (farming and commercial real estate management),
                                                  Lumberton, NC; Director, Biggs Park, Inc. (shopping
                                                  center), Lumberton, NC.
</TABLE>

                                       5

<PAGE>

<TABLE>
<CAPTION>
                             Director    Term                     Principal Occupation and
      Name and Age             Since    Expires           Business Experience During Past 5 Years
--------------------------   --------   -------   --------------------------------------------------------
<S>                            <C>        <C>     <C>
E. Autry Dawsey, Sr.           1997       2004    President and Chief Executive Officer, Premiere
(66)                                              Management Company, Inc. (management company for the
                                                  following enterprises); President, K.A.R. Enterprises,
                                                  Inc. (motel); President, B&D Enterprises (real estate);
                                                  President, Dawsey Investment Co., Inc. (fast food);
                                                  President, Premiere Construction, Inc. (construction
                                                  company); Managing Partner, Premiere Enterprises of
                                                  Whiteville, LLC (real estate); President, Premiere
                                                  Hospitality Group, Inc. (motel); Managing Partner,
                                                  Dawcut Hospitality, LLC (hotel); President, Lake
                                                  Waccamaw Convalescent Center, Inc. (nursing home);
                                                  President, 701 Associates (real estate); President,
                                                  Premiere Point (housing development); D&H Foods ("Sonic"
                                                  fast food restaurant).

James G. Graham                1999       2005    President and Chief Executive Officer, Waccamaw
(52)                                              Bankshares, Inc., Whiteville, NC, 2001-Present and
                                                  Waccamaw Bank, Whiteville, NC, 1999-Present;
                                                  President and Chief Executive Officer, Miners and
                                                  Merchants Bank & Trust Co. and its holding company,
                                                  Commonwealth Community Bancorp, Grundy, VA,
                                                  1984-1998.

Crawford Monroe Enzor, III     1997       2004    Owner, Monroe Enzor, III Farms, Cerro Gordo, NC;
(38)                                              President, Enzor Farms, Inc., Fair Bluff, NC.

R. Dale Ward                   1997       2004    President, J.D. Wright Roofing Co., Inc., Tabor City,
(50)                                              NC; Columbus County, NC, School Board, since 1994,
                                                  including three years as chairman; Partner, Crown
                                                  Investments, LLC (Real Estate).
</TABLE>

Director  Relationships

No director is a director of any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") or subject to the requirements of Section 15(d) of the Exchange Act, or
any company registered as an investment company under the Investment Company Act
of 1940.

Meetings and Committees of the Board of Directors

The Company held four (4) meetings of its Board in 2002. Except for Dr. Davis,
each director attended 75% or more of the aggregate number of meetings of the
Board and any committees on which he or she served. Dr. Davis' absences were due
to scheduling conflicts of meetings with her job as principal of South Columbus
High School.

                                       6

<PAGE>

The Company's Board has several standing committees, including an Executive
Committee and an Audit Committee.

Executive Committee. The functions of the Nominating & Compensation Committee
are performed by the Executive Committee whose membership consists of Messrs.
Dawsey, Enzor, Graham, Hill, Jones, and Thompson. The Executive Committee
reviews and approves all salaries and benefits of Company personnel and
nominates individuals for positions on the Board of Directors. The Executive
Committee met thirteen (13) times during 2002.

Audit Committee. The members of the Audit Committee are Messrs. Biggs, Jones,
Thompson, and Worthington. The Audit Committee met six (6) times during 2002.

                          Report of the Audit Committee

The Audit Committee of the Company is responsible for receiving and reviewing
the annual audit report of the Company's independent auditors and reports of
examinations by bank regulatory agencies, and helps formulate, implement, and
review the Company's internal audit program. The Audit Committee assesses the
performance and independence of Company's independent auditors and recommends
their appointment and retention for ratification by shareholders.

During the course of its examination of the Company's audit process in 2002, the
Audit Committee reviewed and discussed the audited financial statements with
management. The Audit Committee also discussed with the independent auditors,
Larrowe & Company, P.L.C., all matters required to be discussed by the Statement
of Auditing Standards No. 61, as amended. Furthermore, the Audit Committee
received from Larrowe & Company, P.L.C. disclosures regarding their independence
required by the Independence Standards Board Standard No. 1, as amended and
discussed with Larrowe & Company, P.L.C. their independence.

Based on the review and discussions above, the Audit Committee (i) recommended
to the Board that the audited financial statements be included in the Company's
annual report on Form 10-KSB for the year ended December 31, 2002 for filing
with the SEC and (ii) recommended that shareholders ratify the appointment of
Larrowe & Company, P.L.C. as auditors for 2003.

The Audit Committee has a written charter which is reviewed by the Committee for
adequacy on an annual basis.

The Audit Committee members are "independent" as defined by the Nasdaq listing
standards. The Company's common stock is not traded on any exchange as of
February 20, 2003.

The Audit Committee has considered whether the principal accountant's provision
of the information technology services and other non-audit services to the
Company is compatible with maintaining independence of Larrowe & Company, P.L.C.
The Audit Committee has determined that it is compatible with maintaining the
independence of Larrowe & Company, P.L.C.

                                       7

<PAGE>

This report is submitted by the Audit Committee:

                                M. B. "Bo" Briggs
                                Michael K. Jones
                                Alan W. Thompson
                              J. Densil Worthington

Director Compensation

Board Fees. During 2002, all directors were paid $350 for each Board meeting
attended. The Chairman of the Board received $750 for each Board meeting
chaired. Mr. Graham did not receive any compensation for attending committee
meetings.

1998 Nonstatutory Stock Option Plan. The shareholders previously approved the
1998 Nonqualified Stock Option Plan (the "Nonqualified Option Plan") pursuant to
which options are available for issuance to members of the Company's Board of
Directors and the Board of any subsidiary of the Company. In connection with the
reorganization of the Bank into the holding company form of organization which
resulted in the creation of the Company, the Nonqualified Option Plan was
adopted by the Company and options under such plan are now options of the
Company. No options were granted in 2002 under the Nonqualified Option Plan.

Executive Officers

Set forth below is certain information regarding the Company's Executive
Officers.

<TABLE>
<CAPTION>
     NAME         AGE       POSITION WITH COMPANY                         BUSINESS EXPERIENCE
---------------   ---   ---------------------------   ------------------------------------------------------------------------
<S>                <C>  <C>                           <C>
James G. Graham    52   Director, President & Chief   President and Chief Executive Officer, Waccamaw Bankshares,
                             Executive Officer        Inc., Whiteville, NC, 2001-Present and Waccamaw Bank,
                                                      Whiteville, NC, 1999-Present; President and Chief Executive
                                                      Officer, Miners and Merchants Bank & Trust Co. and its
                                                      holding company, Commonwealth Community Bancorp, Grundy, VA,
                                                      1984-1998.

Freda H. Gore      41     Vice President and Chief    Vice President and Chief Operating Officer of
                            Operating Officer of      Waccamaw Bank, Whiteville, NC, 1997-Present.
                               Waccamaw Bank

David A. Godwin    46     Vice President and Chief    Vice President and Chief Financial Officer of
                            Financial Officer of      Waccamaw Bank, Whiteville, NC, 2001-Present; prior to that, Comptroller,
                                Waccamaw Bank         Four Seasons Screen Printing Co., Conway, SC, February 2001-July 2001;
                                                      prior to that Chief Financial Officer/Comptroller, Jones Stores, Inc.,
                                                      Tabor City, NC, 1995-2001 (retail variety stores).
</TABLE>

                                        8

<PAGE>

<TABLE>
<CAPTION>
      NAME          AGE     POSITION WITH COMPANY                        BUSINESS EXPERIENCE
-----------------   ---   -------------------------   ----------------------------------------------------------
<S>                 <C>   <C>                         <C>
Timothy J. Reilly   57    Vice President and  Chief   Vice President and Chief Lending Officer of
                          Lending Officer of          Waccamaw Bank, Whiteville, NC, 2001-Present; prior to that
                          Waccamaw Bank               Senior Vice President and Charlotte Area Executive for
                                                      Lincoln Bank, Charlotte, NC, 1993-2001.

</TABLE>

Executive Compensation

The following table shows the cash and certain other compensation paid to or
received or deferred by James G. Graham for services rendered in all capacities
during fiscal year 2002. No other current executive officer of the Company
received compensation for 2002 which exceeded $100,000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                        Annual Compensation
                                       ---------------------------------------------------
                                                                        Other  Annual
    Name and Principal Position        Year   Salary($)   Bonus($)   Compensation ($)/(1)/
------------------------------------   ----   ---------   --------   ---------------------
<S>                                    <C>     <C>         <C>                <C>
James G. Graham, President and Chief   2002    130,000     12,500             5,201
Executive Officer
                                       2001    111,000      7,000               -0-

                                       2000    106,000      6,000             3,293
</TABLE>

     /(1)/ In addition to compensation paid in cash, the Company's executive
officers receive certain personal benefits. However, the aggregate value of such
non-cash benefits received by Mr. Graham during 2002 and 2001 did not exceed 10%
of cash compensation paid to him.

1998 Incentive Stock Option Plan. The shareholders previously approved the 1998
Incentive Stock Option Plan (the "Incentive Option Plan") pursuant to which
options are available for issuance to officers and key employees of the Company
and any of its subsidiaries. In connection with the reorganization of the Bank
into the holding company form of organization which resulted in the creation of
the Company, the Incentive Option Plan was adopted by the Company and options
under such plan are now options of the Company. Mr. Graham was not issued any
Incentive Options during the fiscal year ended December 31, 2002.

                                       9

<PAGE>

The following table sets forth information regarding option exercises and option
values as of the end of the fiscal year ended December 31, 2002.

                   AGGREGATED OPTION EXERCISES IN FISCAL 2002
                        AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
                                              Number of Securities          Value of Unexercised
                     Shares                  Underlying Unexercised        In-The-Money Options at
                    Acquired     Value     Options at Fiscal Year End        Fiscal Year End
      Name        on Exercise   Realized    Exercisable/Unexercisable   Exercisable/Unexercisable(1)
 --------------   -----------   --------   --------------------------   ----------------------------

<S>                   <C>        <C>             <C>                         <C>
James G. Graham       2,000      $20,720         33,246 / 8,810              $344,428 / $91,271
</TABLE>

     (1) Price of common stock at December 31, 2002 was $18.00 per share.

Employment Agreement. The Bank is party to an employment agreement dated January
1, 1999 with James G. Graham, President and Chief Executive Officer of the Bank
and Company (the "Employment Agreement"). The term of the Employment Agreement
is one year and on each anniversary of the effective date the term automatically
extends for one year unless notice is received 90 days prior to the anniversary
date that the term will not be extended. The Employment Agreement provides for
an annual base salary of $100,000, and for discretionary bonuses and
participation in other pension and profit-sharing plans maintained by the Bank
on behalf of its employees, as well as fringe benefits normally associated with
Mr. Graham's position or made available to all other employees.

The Employment Agreement provides that Mr. Graham may be terminated for "cause"
as defined in the Employment Agreement, and that the Employment Agreement may
otherwise be terminated, in some cases with certain financial consequences, by
the Bank or by Mr. Graham. The Employment Agreement provides that should the
Bank terminate the Employment Agreement other than for cause within 24 months of
a "change in control", or should Mr. Graham terminate the agreement within 24
months during which his compensation or responsibilities are reduced, or his
work place is moved an unreasonable distance from his current work place, then
he shall receive 200% of his "base salary" as defined in Section 280G(b)(3) of
the Internal Revenue Code.

Indebtedness of and Transactions with Management

The Company has had and expects to have in the future, banking transactions in
the ordinary course of business with certain of its current directors, nominees
for director, executive officers and their associates. All loans included in
such transactions will be made on substantially the same terms, including
interest rates, repayment terms and collateral, as those prevailing at the time
such loans were made for comparable transactions with other persons, and will
not involve more than the normal risk of collectibility or present other
unfavorable features.

Loans made by the Bank to directors and executive officers are subject to the
requirements of Regulation O of the Board of Governors of the Federal Reserve
System. Regulation O requires, among other things, prior approval of the Board
of Directors with any "interested director" not

                                       10

<PAGE>

participating, dollar limitations on amounts of certain loans and prohibits any
favorable treatment being extended to any director or executive officer in any
of the Bank's lending matters. To the best knowledge of the management of the
Company and the Bank, Regulation O has been complied with in its entirety.

           PROPOSAL 2: RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

The Audit Committee of the Board of Directors has appointed the firm of Larrowe
& Company, P.L.C., Certified Public Accountants, as the Company's independent
public accountants for 2003. A representative of Larrowe & Company, P.L.C. is
expected to be present at the Annual Meeting and available to respond to
appropriate questions, and will have the opportunity to make a statement if he
desires to do so.

The Company has paid Larrowe & Company, P.L.C. fees in connection with its
assistance in the Company's annual audit and review of the Company's financial
statements. Sometimes, the Company engages Larrowe & Company, P.L.C. to assist
in other areas of financial planning. The following table sets forth the fees
paid to Larrowe & Company, P.L.C. in various categories in 2002.

Category                                                           Amount Paid
--------                                                           -----------
Audit Fees:                                                          $30,250
Financial Information System Design and Implementation Fees:             -0-
All Other Fees/(1)/:                                                  18,850
                                                                     -------
Total Fees Paid:                                                     $49,100
                                                                     =======

     /(1)/ All Other Fees includes, among other things, fees paid for agreed
upon procedures, the internal audit, Bank Secrecy Act exam, and review of the
Form 10-KSB and Forms 10-QSB.

The Audit Committee has considered whether the services provided by Larrowe &
Company, P.L.C. under the category All Other Fees above is compatible with
maintaining Larrowe & Company, P.L.C.'s independence and determined that it is.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF
LARROWE & COMPANY, P.L.C. AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
2003.

                                  OTHER MATTERS

The Board of Directors knows of no other business that will be brought before
the Annual Meeting. Should other matters properly come before the meeting, the
proxies will be authorized to vote shares represented by each appointment of
proxy in accordance with their best judgment on such matters.

                                       11

<PAGE>

                        PROPOSALS FOR 2004 ANNUAL MEETING

It is anticipated that the 2004 Annual Meeting will be held on a date during
April 2004. Any proposal of a shareholder which is intended to be presented at
the 2004 Annual Meeting must be received by the Company at its main office in
Whiteville, North Carolina no later than November 15, 2003, in order that any
such proposal be timely received for inclusion in the proxy statement and
appointment of proxy to be issued in connection with that meeting. If a proposal
for the 2004 Annual Meeting is not expected to be included in the proxy
statement for that meeting, the proposal must be received by the Company by
February 15, 2004 for it to be timely received for consideration. The Company
will use its discretionary authority for any proposals received thereafter.

                                       12