<PAGE>

                     [LOGO OF CODDLE CREEK FINANCIAL CORP.

                      2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                    Page
-------------------------------------------------------------------------------------------
<S>                                                                                 <C>
Report to Stockholders                                                                    1
Selected Consolidated Financial Data                                                  2 - 3
Management's Discussion and Analysis                                                 4 - 16
Independent Auditor's Report                                                             17
Consolidated Financial Statements:
 Statements of financial condition at December 31, 2000 and 1999                         18
 Statements of income for the years ended December 31, 2000, 1999 and 1998               19
 Statements of stockholders' equity for the years ended December 31, 2000, 1999     20 - 21
   and 1998
 Statements of cash flows for the years ended December 31, 2000, 1999 and 1998      22 - 24
Notes to Consolidated Financial Statements                                          25 - 53
Corporate Information                                                               54 - 55
</TABLE>


This annual report to stockholders contains certain forward-looking statements
consisting of estimates with respect to the financial condition, results of
operations and other business of Coddle Creek Financial Corp. that are subject
to various factors which could cause actual results to differ materially from
those estimates. Factors which could influence the estimates include changes in
the national, regional and local market conditions, legislative and regulatory
conditions, and an adverse interest rate environment.
<PAGE>

                  [LETTERHEAD OF CODDLE CREEK FINANCIAL CORP.]

                            Report to Stockholders


Dear Stockholder:

December 31, 2000 marked the end of our third complete year of operations as a
public company. On December 30, 1997, Mooresville Savings Bank converted from a
state chartered mutual savings bank to a state chartered stock savings bank and
became a wholly-owned subsidiary of Coddle Creek Financial Corp.

The Company's consolidated total assets totaled $151.7 million at December 31,
2000 compared to $143.9 million a year earlier, representing a 5.5% increase.
Total stockholders' equity amounted to $35.0 million at December 31, 2000,
resulting in a book value per share of $50. During the 2000 fiscal year, the
Company paid cash dividends totaling $1.91 per share. A detail of financial
results and other information is contained in the accompanying 2000 Annual
Report.

The Company is dedicated to providing high quality service for all of our
customers. The Board of Directors continues to study various methods of
increasing the value of your investment. In the future, the Board intends to
consider such issues as regular cash dividends and the Company's repurchase of
outstanding common stock.

On behalf of the Board of Directors, management and staff, we would like to
thank you for your loyalty and confidence as demonstrated by your investment in
Coddle Creek Financial Corp.


                                             Sincerely,


                                             /s/ George W. Brawley, Jr.
                                             George W. Brawley, Jr.
                                             President and CEO

                                       1
<PAGE>

                  CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY
                     SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                           December 31,
                                             ----------------------------------------------------------------------------
                                                  2000           1999          1998             1997             1996
                                             ----------------------------------------------------------------------------
                                                            (Dollars In Thousands, Except Per Share Data)
<S>                                          <C>            <C>            <C>              <C>             <C>
Financial Condition Data:
Total assets                                 $    151,732   $    143,867   $     135,811    $    149,585    $     112,552
Investments securities/(1)/                        15,942         12,667          20,495          43,441           10,889
Loans receivable, net /(4)/                       130,518        124,863         110,578         101,982           97,951
Deposits                                          104,369         90,563          87,569          99,382           93,785
Stockholders' equity/(2)/                          35,008         34,445          45,119          46,993           14,412
Book value per share/(2)/                           50.07          49.29           66.89           69.67                -


                                                                   For the Years Ended December 31,
                                             ----------------------------------------------------------------------------
                                                  2000           1999          1998             1997             1996
                                             ----------------------------------------------------------------------------
                                                            (Dollars In Thousands, Except Per Share Data)
<S>                                          <C>            <C>            <C>              <C>             <C>
Operating Data:
Interest and dividend income                 $     11,405   $     10,188   $      10,316    $      8,997    $       8,679
Interest expense                                    5,964          4,195           4,096           4,820            4,658
                                             ----------------------------------------------------------------------------
Net interest income                                 5,441          5,993           6,220           4,177            4,021
Provision for loan losses                               -              -             205             335                -
Noninterest income                                    307            217             185             192              200
Noninterest expense                                 3,741          4,007           2,957           2,993            3,146
                                             ----------------------------------------------------------------------------
Income before income taxes                          2,007          2,203           3,243           1,041            1,075
Income tax expense                                    757            817           1,039             374              354
                                             ----------------------------------------------------------------------------
Net income                                          1,250          1,386           2,204             667              721
Other comprehensive income (loss),
   net of tax:
Unrealized gains (losses) on securities,
   net of tax                                          20            (67)             21              (3)             (35)
                                             ----------------------------------------------------------------------------
Comprehensive income                         $      1,270   $      1,319   $       2,225    $        664    $         686
                                             ============================================================================

Basic earnings per share/(2)/                $       1.99   $       2.20   $        3.54    $          -    $           -
Diluted earnings per share/(2)/                      1.97           2.20            3.54               -                -
Dividends per share/(2)/                             1.91           2.05            1.00               -                -
Return of capital dividends per share                   -          17.18               -               -                -
Dividend payout ratio/(6)/                          95.98%        874.09%          28.25%              -                -
</TABLE>

                                  (Continued)

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                                       At or For the Years Ended
                                                                               December 31,
                                                  ---------------------------------------------------------------------
                                                     2000/(5)/    1999/(5)/     1998/(5)/     1997/(5)/     1996/(5)/
                                                  ---------------------------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                               <C>             <C>           <C>           <C>           <C>
Selected Other Data:
   Number of outstanding loans                        2,571          2,474         2,397         2,482         2,476
   Number of deposit accounts                         7,152          6,880         7,109         7,957         7,752
   Number of full-service offices                         3              3             3             3             3
Return on average assets                               0.83%          1.00%         1.62%         0.58%         0.66%
Return on average equity                               3.61%          3.40%         4.98%         4.55%         5.37%
Average equity to average assets                      23.05%         29.25%        32.59%        12.87%        12.27%
Interest rate spread                                   2.41%          2.89%         3.11%         2.87%         3.08%
Net yield on average interest-earning
   assets                                              3.69%          4.38%         4.70%         3.68%         3.74%
Average interest-earning assets to
   average interest-earning liabilities              131.82%        148.65%       151.32%       119.06%       115.21%
Ratio of noninterest expense to
   average total assets                                2.49%          2.88%         2.18%         2.62%         2.88%
Nonperforming assets to total assets/(3)/              1.38%          1.01%         1.02%         1.02%         1.11%
Nonperforming loans to total loans/(3)/                1.55%          1.06%         1.20%         1.36%         1.23%
Allowance for loan losses to
   nonperforming loans/(3)/                           43.24%         64.98%        64.57%        47.83%        31.11%
Allowance for loan losses to total loans
   receivable                                          0.67%          0.69%         0.78%         0.65%         0.38%
Provision for loan losses to total
   loans receivable, net                               0.00%          0.00%         0.19%         0.33%         0.00%
Net charge-offs to average loans
   outstanding                                         0.00%          0.00%         0.00%         0.03%         0.01%
Stockholders' equity to total assets                  23.07%         23.94%        33.22%        31.42%        12.80%
</TABLE>

/(1)/   Includes interest-earning deposits, federal funds sold, certificates of
          deposit, FHLB stock and investment securities.
/(2)/   On December 30, 1997, Mooresville Savings Bank, S.S.B. converted from a
          state chartered mutual savings bank to a state chartered stock savings
          bank and became a wholly-owned subsidiary of Coddle Creek Financial
          Corp. Earnings per share has been calculated in accordance with
          Statement of Financial Accounting Standards No. 128, Earnings Per
          Share, and is based on net income for the year, divided by the
          weighted average number of shares outstanding for the year. In
          accordance with the AICPA's SOP 93-6, unallocated ESOP shares were
          deducted from outstanding shares used in the computation of earnings
          per share. Diluted earnings per share includes the effect of dilutive
          common stock equivalents in the weighted average number of shares
          outstanding.
/(3)/   Nonperforming assets include mortgage loans and consumer loans 90 days
          or more delinquent and real estate acquired in settlement of loans.
          Non performing loans include nonaccrual loans and accruing loans past
          due 90 days or more.
/(4)/   "Loans receivable, net," represents gross loans less net deferred loan
          fees, undisbursed loan funds and allowance for loan losses.
/(5)/   Ratios other than period-end ratios are based on monthly balances.
          Management does not believe the use of month-end balances has caused a
          material difference in the information provided.
/(6)/   The dividend payout ratio represents dividends per share, including the
          return of capital dividend, as a percent of basic earnings per share.

                                       3
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND OPERATING RESULTS

     The following discussion and analysis of financial condition and the
results of operations is intended to assist in understanding the financial
condition and changes therein and results of operations of the Company.  This
discussion and analysis is intended to compliment, and should be read in
conjunction with, the audited financial statements of the Company and related
notes appearing elsewhere in this annual report to stockholders.

Description of Business

     Coddle Creek Financial Corp. (the "Company") was incorporated under laws of
the State of North Carolina for the purpose of becoming the bank holding company
of Mooresville Savings Bank, Inc. S.S.B. (the "Bank," or "Mooresville Savings")
in connection with the Bank's conversion from a state chartered mutual savings
bank to a state chartered stock savings bank (the "Conversion"), pursuant to the
Plan of Holding Company Conversion of Mooresville Savings Bank, Inc. S.S.B. (the
"Plan of Conversion"). The Company was organized to acquire all of the common
stock of Mooresville Savings upon its conversion to stock form. A subscription
and community offering of the Company's shares closed on December 30, 1997, at
which time the Company acquired all of the shares of the Bank and commenced
operations.

     In accordance with the Plan of Conversion, the Company issued 674,475
shares of common stock at the price of $50 per share which resulted in proceeds
of $32,494,000, net of conversion costs. The Company transferred $14,134,000 of
the net proceeds to Mooresville Savings for the purchase of all of the capital
stock of the Bank.

     The Company has no operations and conducts no business of its own other
than owning Mooresville Savings, investing its portion of the net proceeds
received in the Conversion, and lending funds to the Employee Stock Ownership
Plan (the "ESOP") which was formed in connection with the Conversion. The
principal business of the Bank is accepting deposits from the general public and
using those deposits and other sources of funds to make loans secured by real
estate and other forms of collateral located in the Bank's primary market area
of northern Mecklenburg and southern Iredell counties of North Carolina.

     Mooresville Savings' results of operations depend primarily on its net
interest income, which is the difference between interest income from interest-
earning assets and interest expense on interest-bearing liabilities. The Bank's
operations are also affected by noninterest income, such as miscellaneous income
from loans, customer deposit account service charges, and other sources of
revenue. The Bank's principal operating expenses, aside from interest expense,
consist of compensation and associated benefits, federal deposit insurance
premiums, occupancy costs, and other general and administrative expenses.

                                       4
<PAGE>

Comparison of Financial Condition at December 31, 2000 and 1999

     Total assets of the Company amounted to $151.7 million, $143.9 million, and
$135.8 million at December 31, 2000, 1999 and 1998 respectively. The increase
during 2000 is a result of continued loan demand, funded by increased deposits.
The increase during 1999 was also attributable to increased loan demand, which
was funded by short-term borrowings and an increase in deposits.

     The principal category of earnings assets is loans receivable, which
amounted to $130.5 million $124.9 million, and $110.6 million at December 31,
2000, 1999 and 1998, respectively. The Bank was able to increase the size of its
loan portfolio during 2000 and 1999 primarily through its marketing efforts in
the origination of permanent residential 1-4 family mortgages, residential
construction and home equity loans. All other categories of the Bank's loan
portfolio have remained fairly constant from 1998 to 2000. Loan originations for
the year ended December 31, 2000 totaled $26.1 million, other net changes
totaled $.3 million, while loan principal repayments totaled $20.7 million as
the loan portfolio increased by $5.7 million. Loan originations for the year
ended December 31, 1999 totaled $44.3 million, other net changes totaled $0.2
million, while loan principal repayments totaled $30.2 million as the loan
portfolio increased by $14.3 million. Management believes that its marketing
efforts, competitive rates and contacts within its community contributed to the
increased loan demand. The Bank maintains underwriting and credit standards
designed to maintain the quality of the loan portfolio. Nonperforming loans at
December 31, 2000, 1999 and 1998 totaled $2,093,000, $1,382,000, and $1,386,000,
respectively, and were 1.55%, 1.06%, and 1.20% of total loans, respectively.
Management believes that the increase in nonperforming loans is primarily due to
a downturn in the economy resulting in more slow paying borrowers.

     In addition to loans, the Company invests in U. S. Treasury, Government and
federal agency, municipal and equity securities. Management does not engage in
the practice of trading securities; rather, the Company's investment portfolio
consists of securities designated as available for sale or held to maturity.
Investment securities, including interest-bearing deposits, at December 31,
2000, 1999 and 1998 totaled $15.9 million, $12.7 million, and $20.5 million,
respectively. The securities portfolio increased by $3.2 million for the year
ended December 31, 2000 from December 31, 1999 due to the increase in interest-
bearing cash from an increase in deposits. The securities portfolio decreased by
$7.8 million for the year ended December 31, 1999 from December 31, 1998
primarily due to maturing securities being used to fund loan growth.

     Savings deposits amounted to $104.4 million at December 31, 2000, an
increase of $13.8 million from $90.6 million at December 31, 1999, due to an
increase in certificates of deposits with competitive interest rates. Savings
deposits amounted to $90.6 million at December 31, 1999, an increase of $3.0
million from $87.6 million at December 31, 1998, due to an increase in
transaction accounts with competitive interest rates. The Bank has focused its
marketing efforts on building depositor relationships and setting its deposit
rates in the local market to compete favorably with rates offered by
competitors.

                                       5
<PAGE>

     Stockholder's equity increased by $0.6 million during 2000 due in part to
vesting of additional MRP shares and net income of $1.3 million, offset by
regular dividends of $1.2 million. Stockholders' equity decreased by $10.7
million during 1999 due to paying a special return of capital dividend totaling
$11.7 million and the adoption of the Management Recognition Plan ("MRP"). The
decrease in 1999 was offset slightly by net income of $1.4 million.
Stockholders' equity decreased by $1.9 million during 1998 due to the full
funding of the $4.2 million note receivable to the ESOP, as offset by net income
of $2.2 million. The unrealized gain (loss) on securities available for sale,
net of tax, amounted to $(1,000), $(21,000) and $46,000 at December 31, 2000,
1999 and 1998, respectively.

Market Risk

     The Company's net income is dependent on its net interest income. Net
interest income is susceptible to interest rate risk to the degree that
interest-bearing liabilities mature or reprice on a different basis than
interest-earning assets. When interest-bearing liabilities mature or reprice
more quickly than interest-earning assets in a given period, a significant
increase in market rates of interest could adversely affect net income.
Similarly, when interest-earning assets mature or reprice more quickly than
interest-bearing liabilities, falling interest rates could result in a decrease
in net income.

     In an attempt to manage its exposure to changes in interest rates,
management monitors the Company's interest rate risk. Management meets on a
regular basis to review the Company's interest rate risk position and
profitability and to recommend adjustments for consideration by the Board of
Directors. Management also reviews the Company's securities portfolio,
formulates investment strategies, and oversees the timing and implementation of
transactions to assure attainment of the Board's objectives in the most
effective manner. Notwithstanding the Company's interest rate risk management
activities, the potential for changing interest rates is an uncertainty that can
have adverse effect on net income.

     When adjusting the Company's asset/liability position, the Board and
management attempt to manage the Company's interest rate risk while enhancing
net interest margins. At times, depending on (i) the level of general interest
rates, (ii) the relationship between long and short term interest rates, (iii)
market conditions and (iv) competitive factors, the Board and management may
determine to increase the Company's interest rate risk position somewhat in
order to increase its net interest margin. The Company's results of operations
and net portfolio values remain vulnerable to increases in interest rates and to
fluctuations in the difference between long-and short-term interest rates.

     Consistent with the asset/liability management philosophy set forth above,
the Company has taken several steps to manage its market rate risk. In order to
mitigate and manage interest rate risk, the Company has adopted the following
policies: (i) investing its excess liquidity in shorter term or adjustable rate
instruments with maturities or repricing periods of three years or less; (ii)
promoting mortgage loans with ten-year balloons, or 15 year amortizations; (iii)
promoting adjustable rate equity line of credit loans; (iv) promoting longer
term certificates of deposit; (v) increasing the level of interest-earning
assets relative to interest-bearing liabilities; and (vi) maintaining a
relatively low level of operating expenses and non-earning assets.

     The following tables provide further information about the Company's
financial instruments that are sensitive to changes in interest rates.

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                                     December 31, 2000
                                                                    Loans Receivable (A)
                                                                   Expected Maturity Date
                                                                  Years Ending December 31,
                                    -------------------------------------------------------------------------------------------
                                                                                                                        Fair
                                       2001      2002         2003        2004        2005     Thereafter    Total      Value
                                                                      (Dollars In Thousands)
<S>                                 <C>         <C>         <C>         <C>         <C>        <C>          <C>        <C>
Fixed Rate                          $  9,846    $  4,231    $  4,283    $  3,869    $  3,892    $ 84,650    $110,771   $113,281
   Average interest rate                9.31%       9.54%       9.40%       8.99%       9.47%       7.62%
Variable Rate                       $ 20,652    $      -    $      -    $      -    $      -    $      -    $ 20,652   $ 20,652
   Average interest rate                9.38%          -%          -%          -%          -%          -%

<CAPTION>
                                                                  Investment Securities (B)
                                                                    Expected Maturity Date
                                                                  Years Ending December 31,
                                    -------------------------------------------------------------------------------------------
                                                                                                                        Fair
                                       2001      2002         2003        2004        2005     Thereafter    Total      Value
                                                                      (Dollars In Thousands)
<S>                                 <C>         <C>         <C>         <C>         <C>        <C>          <C>        <C>
Interest-bearing cash               $ 10,405    $      -    $      -    $      -    $      -   $       -    $ 10,405   $ 10,405
   Average interest rate                6.05%          -%          -%          -%          -%          -%
Certificates of deposit             $      -    $    100    $      -    $      -    $      -   $       -    $    100   $  1,000
   Average interest rate                   -%       6.67%          -%          -%          -%          -%
Securities available for sale       $  1,000    $    725    $  1,025    $      -    $      -   $     317    $  3,067   $  3,067
   Average interest rate                7.75%       5.50%       5.84%          -%          -%       6.25%
Securities held to maturity         $      -    $    150    $      -    $      -    $      -   $   1,032    $  1,182   $  1,203
   Average interest rate                   -%       4.80%          -%          -%          -%       4.62%
Nonmarketable equity securities     $      -    $      -    $      -    $      -    $      -   $   1,188    $  1,188   $  1,188
   Average interest rate                   -%          -%          -%          -%          -%       7.75%

<CAPTION>
                                                                 Expected Maturity Date (C)
                                                                  Years Ending December 31,
                                    -------------------------------------------------------------------------------------------
                                                                                                                        Fair
                                       2001      2002         2003        2004        2005     Thereafter    Total      Value
                                                                      (Dollars In Thousands)
<S>                                 <C>         <C>         <C>         <C>         <C>        <C>          <C>        <C>
Deposits                            $ 87,535    $ 12,430    $  1,262    $  1,236    $    218   $       -    $102,681   $103,128
   Average interest rate                5.95%       6.37%       5.82%       5.70%       6.15%          -%
Note payable and FHLB advances      $  9,000    $      -    $      -    $      -    $      -   $       -    $  9,000   $  9,000
   Average interest rate                7.29%          -%          -%          -%          -%          -%
</TABLE>

(A)  For loans receivable the table presents expected principal cash flows by
fixed and adjustable rate. The table includes contractual maturities including
scheduled principal repayments but excluding estimated prepayments for fixed
rate loans. Loans which have adjustable rates are shown as being due in the
period during which rates are next subject to change. The table presents fair
values at December 31, 2000 and weighted average interest rates by maturity
dates.
(B)  For investment securities, including securities available for sale,
securities held to maturity, and nonmarketable equity securities, the table
presents contractual maturities. Interest-bearing cash is a due on demand
financial instrument and is presented as due in the one year category.
Nonmarketable equity securities have no contractual maturity and are placed in
the longest expected maturity date. The table presents fair values for
securities available for sale and amortized costs for all other investment
securities at December 31, 2000 and weighted average interest rates by maturity
dates.
(C)  For deposits the table presents principal cash flows and weighted average
interest rates by contractual maturity dates.

                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                     December 31, 1999
                                                                    Loans Receivable (A)
                                                                   Expected Maturity Date
                                                                  Years Ending December 31,
                                    -------------------------------------------------------------------------------------------
                                                                                                                        Fair
                                       2001      2002         2003        2004        2005     Thereafter    Total      Value
                                                                      (Dollars In Thousands)
<S>                                 <C>         <C>         <C>         <C>         <C>        <C>          <C>        <C>
Fixed Rate                          $  4,150    $  4,106    $  3,990    $  4,089    $  3,689   $ 78,884     $ 98,908   $ 96,861
   Average interest rate                9.25%      10.47%      10.14%       8.41%       7.92%      7.48%
Variable Rate                       $ 26,853    $      -    $      -    $      -    $      -   $      -     $ 26,853   $ 26,853
   Average interest rate                8.88%          -%          -%          -%          -%         -%           -%

<CAPTION>
                                                                  Investment Securities (B)
                                                                   Expected Maturity Date
                                                                  Years Ending December 31,
                                    -------------------------------------------------------------------------------------------
                                                                                                                        Fair
                                       2001      2002         2003        2004        2005     Thereafter    Total      Value
                                                                      (Dollars In Thousands)
<S>                                 <C>         <C>         <C>         <C>         <C>        <C>          <C>        <C>
Interest-bearing cash               $  6,912    $      -    $      -    $      -    $      -   $      -     $  6,912   $  6,912
   Average interest rate                4.25%          -%          -%          -%          -%         -%           -%
Certificates of deposit             $    100    $      -    $      -    $      -    $      -   $      -     $    100   $    100
   Average interest rate                5.31%          -%          -%          -%          -%         -%           -%
Securities available for sale       $    873    $    509    $    843    $    876    $      -   $    313     $  3,414   $  3,414
   Average interest rate                4.29%       7.75%       5.34%       6.02%                  6.25%
Securities held to maturity         $      -    $      -    $    150    $      -    $      -   $  1,031     $  1,181   $  1,157
   Average interest rate                   -%          -%       4.80%          -%          -%      4.62%
Nonmarketable equity securities     $      -    $      -    $      -    $      -    $      -   $  1,060     $  1,060   $  1,060
   Average interest rate                   -%          -%          -%          -%          -%      7.75%

<CAPTION>
                                                                 Expected Maturity Date (C)
                                                                  Years Ending December 31,
                                    -------------------------------------------------------------------------------------------
                                                                                                                        Fair
                                       2001      2002         2003        2004        2005     Thereafter    Total      Value
                                                                      (Dollars In Thousands)
<S>                                 <C>         <C>         <C>         <C>         <C>        <C>          <C>        <C>
Deposits                            $ 74,291    $ 10,382    $  1,504    $  1,101    $  1,303   $      -     $ 88,581   $ 85,698
Average interest rate                   4.43%       5.32%       5.27%       5.30%       5.11%
Note payable and FHLB advances      $  5,000    $ 10,500    $      -    $      -    $      -   $      -     $ 15,500   $ 15,500
Average interest rate                   6.24%       7.25%
</TABLE>

(A)  For loans receivable the table presents expected principal cash flows by
fixed and adjustable rate. The table includes contractual maturities including
scheduled principal repayments but excluding estimated prepayments for fixed
rate loans. Loans which have adjustable rates are shown as being due in the
period during which rates are next subject to change. The table presents fair
values at December 31, 1999 and weighted average interest rates by maturity
dates.
(B)  For investment securities, including securities available for sale,
securities held to maturity, and nonmarketable equity securities, the table
presents contractual maturities. Interest-bearing cash is a due on demand
financial instrument and is presented as due in the one year category.
Nonmarketable equity securities have no contractual maturity and are placed in
the longest expected maturity date. The table presents fair values for
securities available for sale and amortized costs for all other investment
securities at December 31, 1999 and weighted average interest rates by maturity
dates.
(C)  For deposits the table presents principal cash flows and weighted average
interest rates by contractual maturity dates.

                                       8
<PAGE>

Comparison of Operating Results for the Years Ended December 31, 2000, 1999, and
1998

     Net Income. Net income for the years ended December 31, 2000, 1999, and
1998 amounted to $1.3 million, $1.4 million, and $2.2 million, respectively. Net
income decreased in 2000 primarily due to increased interest expense on FHLB
advances and notes payable, offset in part by the decrease in compensation
expense from 1999's adoption of the MRP. Net income decreased in 1999 primarily
due to expenses associated with the adoption of the MRP, as discussed below. Net
income increased in 1998 primarily due to an increase in interest income as
proceeds received in the Conversion were invested in securities and funded loan
growth.

     Net Interest Income. Net interest income amounted to $5.4 million, $6.0
million, and $6.2 million during the years ended December 31, 2000, 1999, and
1998, respectively. The average outstanding balance of interest-earning assets
in excess of interest-bearing liabilities amounted to $35.6 million, $44.7
million, and $44.8 million during 2000, 1999 and 1998, respectively. The Bank's
interest rate spread decreased from 3.11% in 1998 to 2.89% in 1999 and increased
to 2.41% in 2000. The decrease in interest rate spread from 1999 to 2000 was due
to the greater increase in the average balances of interest-bearing liabilities
(due mainly to the increase in notes payable and advances for which funds were
used in part to pay the return of capital dividend late in 1999) over interest-
earning assets and the cost of funds over the average yield in interest-earning
assets. The decrease in the interest rate spread in 1999 was due to a decrease
in the average yield on interest-earning assets, offset by a lesser decrease in
the cost of funds. The average balances of interest-earning assets over
interest-bearing liabilities remained constant from 1998 to 1999.

     Interest Income. Interest income amounted to $11.4 million, $10.2 million,
and $10.3 million for the years ended December 31, 2000, 1999, and 1998,
respectively. The Company's average yield on interest-earning assets decreased
from 7.80% in 1998 to 7.45% in 1999 and increased to 7.74% in 2000. The primary
interest-earning asset is loans receivable, which experienced an increase of 16
basis points during 2000 along with a $12 million increase to $132.9 million.
The average yield decreased 51 and 6 basis points during 1999 and 1998,
respectively. However, the average outstanding loan balance increased from
$108.3 million in 1998 to $120.9 million in 1999. The other significant
interest-earning asset is investment securities, for which the average
outstanding balance decreased from $14.3 million in 1998 to $6.8 million in
1999, and $4.9 million in 2000. The increase in loan volume and average yield,
along with the increase in average investment yield was offset slightly by the
decrease in average investments to produce a $1.2 million increase in interest
income in 2000. The increase in loan volume, offset by a decrease in investment
securities volume, resulted in a stable total interest income in 1999 and 1998.

     Interest Expense. Interest expense amounted to $6.0 million, $4.2 million,
and $4.1 million for the years ended December 31, 2000, 1999 and 1998,
respectively. Interest expense increased in 2000 due to both an increase in
average interest-bearing liabilities and an increase of 77 basis points in the
cost of funds. The increase in average interest-bearing liabilities is a result
of both strong deposit growth and the notes payable agreement which was entered
into late in 1999 to fund the return of capital dividend. The cost of this note
impacted interest expense for the whole year in 2000. The modest increase in
interest expense in 1999 is due to increases in the average outstanding balances
of interest-bearing liabilities, including short-term borrowings, offset by a 13
basis point decrease in the cost of funds.

                                       9
<PAGE>

Net Interest Income

Net interest income represents the difference between income derived from
interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is affected by both (i) the difference between
the rates of interest earned on interest-earning assets and the rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest bearing liabilities ("net
earning balance"). The following table sets forth information relating to
average balances of the Company's assets and liabilities for the years ended
December 31, 2000 and 1999. For the periods indicated, the table reflects the
average yield on interest-earning assets and the average cost of
interest-bearing liabilities (derived by dividing income or expense by the
monthly average balance of interest-earning assets or interest-bearing
liabilities, respectively) as well as the net yield on interest-earning assets
(which reflects the impact of the net earnings balance). Management does not
believe the use of month-end balances has caused a material difference in the
information provided.

<TABLE>
<CAPTION>
                                                 At December 31,                  For the Year Ended December 31,
                                                      2000                   2000                               1999
                                                 ----------------------------------------------------------------------------------
                                                 Average Yield/  Average                Average    Average                Average
                                                      Rate       Balance   Interest   Yield/Rate   Balance    Interest   Yield/Rate
                                                 ----------------------------------------------------------------------------------
                                                                                (Dollars in Thousands)
<S>                                              <C>            <C>       <C>         <C>         <C>         <C>        <C>
Interest-earning assets:
   Interest-bearing deposits                          6.05%     $   9,706 $     585       6.03%   $   9,007   $    430      4.77%
   Investments (1)                                    5.62%         4,868       308       6.33%       6,756        389      5.76%
   Loans receivable, net (4)                          8.00%       132,862    10,512       7.91%     120,908      9,369      7.75%
                                                                -------------------               --------------------
   Total interest-earning assets                      7.79%       147,436    11,405       7.74%     136,671     10,188      7.45%
                                                                          ---------                           --------
Other assets                                                        2,816                             2,622
                                                                ---------                         ---------
   Total assets                                                 $ 150,252                         $ 139,293
                                                                =========                         =========

Interest-bearing liabilities:
   NOW and Money market                               3.85%     $  20,432 $     682       3.34%   $  18,840   $    544      2.89%
   Passbook accounts                                  2.47%         9,848       230       2.34%      10,495        251      2.47%
   Certificates of deposit                            6.26%        63,439     3,652       5.76%      59,440      3,192      5.37%
   Note payable and FHLB advances                     7.29%        18,129     1,400       7.72%       3,167        208      6.57%
                                                                -------------------               --------------------
   Total interest-bearing liabilities                 5.65%       111,848     5,964       5.33%      91,942      4,195      4.56%
                                                                          ---------                           --------
Other liabilities                                                   3,774                             6,607
Stockholders' equity                                               34,630                            40,744
                                                                ---------                         ---------
     Total liabilities and stockholders' equity       2.14%     $ 150,252                         $ 139,293
                                                                =========                         =========
Net interest income and interest rate spread (2)                          $   5,441       2.41%               $  5,993      2.89%
                                                                          =========                           ========
Net yield on interest-earning assets (3)                                                  3.69%                             4.38%
Ratio of average interest-earning assets to
   average interest-earning liabilities
   interest-bearing liabilities                                                         131.82%                           148.65%
</TABLE>

(1)  Includes investment securities and FHLB stock.
(2)  Interest rate spread represents the difference between the average yield on
     interest-earning assets and the average cost of interest-bearing
     liabilities.
(3)  Net yield on interest-earning assets represents net interest income divided
     by average interest-earning assets.
(4)  Loans placed on nonaccruing status have been included in the computation of
     average balances.

                                       10
<PAGE>

Rate/Volume Analysis

The following table analyzes the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-
bearing liabilities. The table distinguishes between (i) changes attributable to
volume (changes in volume multiplied by the prior period's rate), (ii) changes
attributable to rates (changes in rate multiplied by the prior period's volume),
and (iii) changes in rate/volume (change in rate multiplied the change in
volume).

<TABLE>
<CAPTION>
                                             Year Ended December 31,                           Year Ended December 31,
                                                  2000 vs.1999                                       1999 vs. 1998
                                           Increase (Decrease) Due to                         Increase (Decrease) Due to
                                ------------------------------------------------------------------------------------------------
                                                           Rate/                                              Rate/
                                  Volume       Rate       Volume        Net        Volume         Rate       Volume        Net
                                ------------------------------------------------------------------------------------------------
                                                                                 (In Thousands)
<S>                             <C>         <C>          <C>         <C>          <C>          <C>          <C>         <C>
Interest income:
  Intererst-bearing deposits    $      33   $     113    $      9    $     155    $    (31)    $     (15)   $      -    $    (46)
  Investments                        (109)         39         (11)         (81)       (473)          (72)         38        (507)
   Loans receivable                   926         193          24        1,143       1,045          (553)        (67)        425
                                ------------------------------------------------------------------------------------------------
       Total interest income    $     850   $     345    $     22    $   1,217    $    541     $    (640)   $    (29)   $   (128)
                                ------------------------------------------------------------------------------------------------

Interest expense:
  NOW and money market
   accounts                     $      46   $      85    $      7    $     138    $    118     $      72    $     25    $    215
  Passbook accounts                   (16)        (14)          9          (21)        (19)          (30)          2         (47)
  Certificates of deposit             215         232          13          460        (160)         (119)          2        (277)
   payable and FHLB advances          983          36         173        1,192         208             -           -         208
                                ------------------------------------------------------------------------------------------------
       Total interest expense   $   1,228   $     339    $    202    $   1,769    $    147     $     (77)   $     29    $     99
                                ------------------------------------------------------------------------------------------------

Net Interest Income             $    (378)  $       6    $   (180)   $    (552)   $    394     $    (563)   $    (58)   $   (227)
                                ================================================================================================
</TABLE>

                                       11
<PAGE>

     Provision for Loan Losses and Asset Quality. The Bank's provision for loan
losses amounted to $-0-, $-0-, and $205,000 in 2000, 1999 and 1998. The
provision, which is charged to operations, and the resulting loan loss
allowances are amounts Mooresville Savings' management believes will be adequate
to absorb potential losses on existing loans that may become uncollectible.
Loans are charged off against the allowance when management believes that
collectibility is unlikely. The evaluation to increase or decrease the provision
and resulting allowances is based on prior loan loss experience and other
factors, such as changes in the nature and volume of the loan portfolio, overall
portfolio quality, and current economic conditions. During the year ended
December 31, 1998, management determined that its allowance for loan losses
should be increased to more closely reflect the credit risk inherent in the loan
portfolio resulting from the increase in the number of mortgage loans
collateralized by lakefront properties. These loans are inherently riskier,
because they are often the borrower's second residence. The Bank has adopted
policies to monitor, and increase when necessary, levels of loan loss
allowances. At December 31, 2000, the Bank's level of general valuation
allowances for loan losses amounted to $905,000 which management believes is
adequate to absorb potential losses in its loan portfolio.

     The Bank's level of nonperforming loans, defined as nonaccrual loans and
accruing loans past due 90 days or more, has historically been low as a
percentage of total loans outstanding. Loans outstanding which were delinquent
more than 90 days were approximately $2.1, $1.4 and $1.4 million at December 31,
2000, 1999 and 1998. The increase in 2000 was due primarily to an increase in
the number of slow payers as the economy experienced a slight downturn from
1999. Real estate acquired in settlement of loans amounted to $-0-, $65,000 and
$-0- at December 31, 2000, 1999 and 1998, respectively.

     Noninterest Income. Noninterest income amounted to $307,000, $217,000, and
$185,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Noninterest income consists primarily of service charges and fees associated
with the Bank's checking accounts.

     Noninterest Expense. Noninterest expense consists primarily of operating
expenses for compensation and employee benefits, occupancy, federal deposit
insurance premiums, data processing charges and other operating expenses.
Noninterest expense amounted to $3.7 million, $4.0 million, and $3.0 million for
the years ended December 31, 2000, 1999 and 1998 respectively. Compensation
expense decreased by $.5 million in 2000 as the Company did not incur as much
expense as it did in 1999, when the MRP was adopted. This decrease was offset by
a slight increase in other non-interest expense. Compensation and employee
benefits increased by $1.0 million in 1999 due to the adoption and vesting of
the MRP. The MRP reserved for issuance 26,979 shares of common stock to certain
officers, directors, and employees. The Company issued shares to fund the MRP on
January 26, 1999, and the restricted common stock under the MRP vests at the
rate of 25% annually beginning at the date of grant. The expense related to the
vesting of the MRP totaled $1.1 million for the year ended December 31, 1999.
Compensation and employee benefits decreased by $158,000 during 1998, primarily
due to recording a $275,000 charge to compensation expense in 1997 as a result
of the termination of the Bank's defined benefit pension plan. All other
expenses changed nominally during the years ended December 31, 2000, 1999 and
1998.

     Income Taxes. The Company's effective income tax rate was 37.7%, 37.1%, and
32.0% for the years ended December 31, 2000, 1999 and 1998, respectively. The
lower effective income rates for 1998 was due to permanent differences of
nontaxable interest income. The effective rates for 2000 and 1999 reflects
normal expected rates on taxable income.

                                       12
<PAGE>

Capital Resources and Liquidity

     The objective of the Bank's liquidity management is to ensure the
availability of sufficient cash flows to meet all of its financial commitments.
Liquidity management addresses the Bank's ability to meet deposit withdrawals
either on demand or at contractual maturity, to repay borrowings, if any, as
they mature and to originate new loans and make investments as opportunities
arise.

     Significant liquidity sources for the Bank are proceeds from the sale of
stock, cash provided by new savings deposits, operating activities, sale or
maturity of investments, principal and interest payments on loans receivable and
advances from the Federal Home Loan Bank ("FHLB").  Advances from the FHLB have
not historically been a primary source of liquidity for the Bank.

     Operating activities provided cash equal to $1.5 million, $2.0 million, and
$1.9 million for the years ended December 31, 2000, 1999 and 1998, respectively.
Historically, in addition to cash provided by operating activities, financing
activities have provided the Bank with sources of funds for asset growth and
liquidity. Financing activities provided $5.9 and $5.4 million for the years
ended December 31, 2000 and 1999, respectively. For the year ended December 31,
1998, $12.2 million was used in financing activities, primarily due to the
return of excess deposits from the Conversion and cash dividends paid.

     Cash provided by operating and financing activities is used by the Bank to
originate new loans to customers, to maintain investment portfolios and to meet
liquidity requirements. During 2000, 1999 and 1998, loans outstanding increased
$5.7 million, $14.3 million and $8.6 million, respectively.

     In January 2001, the Company declared a $20 per share return of capital
dividend and borrowed an additional $12,000,000 on its note payable to fund the
dividend. As a result of the additional borrowing, the Company will incur
additional interest expense, thereby reducing its net interest income.

     As a state chartered savings bank, Mooresville Savings must meet certain
liquidity requirements which are established by the Administrator of the North
Carolina Savings Institutions Division. The Bank's liquidity ratio at December
31, 2000, as computed under such regulations, was in excess of such
requirements. Given its excess liquidity and its ability to borrow from the
FHLB, the Bank believes that it will have sufficient funds available to meet
anticipated future loan commitments, unexpected deposit withdrawals, or other
cash requirements.

Asset/Liability Management

     The Bank's asset/liability management, or interest rate risk management, is
focused primarily on evaluating and managing the Bank's net interest income
given various risk criteria. Factors beyond the Bank's control, such as the
effects of changes in market interest rates and competition, may also have an
impact on the management of interest rate risk.

     In the absence of other factors, the Bank's overall yield on interest-
earning assets will increase as will its cost of funds on its interest-bearing
liabilities when market rates increase over an extended period of time.
Inversely, the Bank's yields and cost of funds will decrease when market rates
decline. The Bank is able to manage these swings to some extent by attempting to
control the maturity or rate adjustments of its interest-earning assets and
interest-bearing liabilities over given periods of time.

                                       13
<PAGE>

     The Bank's "gap" is typically described as the difference between the
amounts of such assets and liabilities which reprice within a period of time. In
a declining interest rate environment, a negative gap, or a situation where the
Bank's interest-bearing liabilities subject to repricing exceed the level of
interest-earning assets which will mature or reprice during the same period,
will have a favorable impact on the Bank's net interest income. Conversely, an
increase in general market rates over a sustained period of time will tend to
affect the Bank's net interest income adversely under circumstances when the
Bank has a negative gap. At December 31, 2000, the Bank had a negative gap
position of 37.07% as it reinvested its large interest-bearing cash balances
into long-term loans which will be adversely impacted during prolonged periods
of rising interest rates and positively affected during prolonged periods of
interest rate declines. The Bank's asset/liability management program has
generally helped to decrease the exposure of its earnings to interest rate
increases

     In order to minimize the potential effects of adverse material and
prolonged increases or decreases in market interest rates on the Bank's
operations, management has implemented an asset/liability program designed to
stabilize the Bank's interest rate gap. This program emphasizes the investment
of excess cash in (i) short or intermediate term interest-earning assets, (ii)
the solicitation of transaction deposit accounts which are less sensitive to
changes in interest rates and can be repriced rapidly, and (iii) to a lesser
extent, the origination of adjustable rate mortgage loans.

     In addition to shortening the average repricing period of its assets, the
Bank has sought to be price rate competitive in the marketplace on its maturing
certificates of deposit to encourage depositors to reinvest in certificates with
the Bank. The Bank has approximately $59.9 million in certificates maturing in
2001, and management believes that substantially all of the maturing
certificates will be renewed.

     The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2000, which are
projected to reprice or mature in each of the future time periods shown. The
computations were made without using assumptions for loan prepayments or deposit
decline. Except as stated below, the amounts of assets and liabilities shown
which reprice or mature within a given period were determined in accordance with
contractual terms of the assets or liabilities. In making the computations, all
adjustable rate loans were considered to be due at the end of the next upcoming
adjustment period. Fixed rate loans are reflected at their contractual
maturities with consideration given to scheduled payments. Marketable equity
securities and savings accounts with no stated maturities are subject to
immediate repricing and availability and have been classified in the earliest
category. FHLB stock must be maintained at certain regulatory levels and is
classified in the more than ten years category. The interest rate sensitivity of
the Bank's assets and liabilities illustrated in the following table would vary
substantially if different assumptions were used or if actual experience differs
from that indicated by such assumptions.

                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                      Terms to Repricing at December 31, 2000
                                                       -----------------------------------------------------------------------
                                                                       More than      More than
                                                          1 Year       1 Year to     3 Years to     More than
                                                         or Less        3 Years        5 Years       5 Years          Total
                                                       -----------------------------------------------------------------------
                                                                               (Dollars in Thousands)
<S>                                                    <C>            <C>            <C>            <C>            <C>
Interest-earning assets (1):
  Loans Receivable (2):
    Adjustable rate residential 1-4 family             $   10,639     $        -     $        -     $        -     $   10,639
    Fixed-rate residential 1-4 family                       4,570          8,075          7,361         80,281        100,287
    Other real estate loans - adjustable                   10,742              -              -              -         10,742
    Other real estate loans fixed                             143            252            230          2,510          3,135
    Construction                                            4,298              -              -              -          4,298
    Other loans                                               106            187            170          1,859          2,322
                                                       ----------------------------------------------------------------------
          Total loans                                      30,498          8,514          7,761         84,650        131,423
Interest-bearing deposits                                  10,405              -              -              -         10,405
Investments                                                 1,000            975          1,025          1,349          4,349
FHLB Stock                                                      -              -              -          1,188          1,188
                                                       ----------------------------------------------------------------------
          Total interest-earning assets                $   41,903     $    9,489     $    8,786     $   87,187     $  147,365
                                                       ======================================================================

Interest-bearing liabilities:
  Deposits
    Certificates of deposit                            $   59,866     $   13,692     $    1,454     $        -     $   75,012
    Money market deposit accounts                          11,381              -              -              -         11,381
    NOW accounts                                            6,736              -              -              -          6,736
    Passbook savings                                        9,552              -              -              -          9,552
                                                       ----------------------------------------------------------------------
          Total deposits                                   87,535         13,692          1,454              -        102,681
                                                       ----------------------------------------------------------------------
   Note payable and FHLB advances                           9,000              -              -              -          9,000
                                                       ----------------------------------------------------------------------
          Total interest-bearing liabilities           $   96,535     $   13,692     $    1,454     $        -     $  111,681
                                                       ======================================================================

Interest sensitivity gap per report                    $  (54,632)    $   (4,203)    $    7,332     $   87,187
Cumulative interest sensitivity gap                       (54,632)       (58,835)       (51,503)        35,684
Cumulative gap as a percentage of
  total interest-earning assets                            -37.07%        -39.92%        -34.95%         24.21%
Cumulative interest-earning assets
   as a percentage of interest-bearing liabilities          43.41%         46.62%         53.88%        131.95%
</TABLE>

(1)  Interest-earning assets are included in the period in which the balances
are expected to be redeployed and/or repriced as a result of scheduled rate
adjustments and contractual maturities.
(2)  Based upon amortization schedules of loan maturities using a weighted
average interest rate for the entire loan portfolio.

                                       15
<PAGE>

Impact of Inflation and Changing Prices

     The financial statements and accompanying footnotes have been prepared in
accordance with generally accepted accounting principles ("GAAP"), which require
the measurement of financial position and operating results in terms of
historical dollars without consideration for changes in the relative purchasing
power of money over time due to inflation. The assets and liabilities of the
Company are primarily monetary in nature and changes in market interest rates
have a greater impact on its performance than the effects of inflation, which
has not had a significant impact on the Company during the years ended December
31, 2000, 1999 and 1998.

Impact of New Accounting Standards

     The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which the Company has not been required to adopt as of
December 31, 2000. This Statement, which is effective for fiscal years beginning
after June 15, 2000, establishes accounting and reporting standards for
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. This Statement is not expected to have a significant impact on the
Company.

Recapture of Tax Bad Debt Reserves

     Prior to the enactment of the Small Business Job Protection Act of 1996
(the "1996 Act") on August 20, 1996, thrift institutions which met certain
definitional tests were permitted to establish tax reserves for bad debts and to
deduct annual additions to such reserves in arriving at taxable income. The Bank
was permitted to compute the annual bad debt deduction based upon an experience
method or a percentage equal to 8.0% of the Bank's taxable income before such
bad debt deduction (the "PTI Method"), subject to certain limitations. Under the
1996 Act, the PTI Method was repealed and the Bank is required to use the
experience method for computing its annual bad debt deduction for taxable years
beginning on or after December 31, 1995.

     The Bank will also have to recapture its excess tax bad debt reserves which
have accumulated since 1988, amounting to approximately $67,000, over a six year
period. The tax associated with the recaptured reserves is approximately
$26,000. The recapture was scheduled to begin with the Bank's 1996 year, but was
delayed two years because the Bank originated a required minimum level of
residential mortgage loans during 1996 and 1997. Deferred income taxes have been
previously established for the taxes associated with the recaptured reserves,
and the ultimate payment of the related taxes will not result in a charge to
earnings. The amount of reserves recaptured and associated tax were $11,000 for
each of the years ended December 31, 2000 and 1999.

                                       16
<PAGE>

                    [LETTERHEAD OF MCGLADREY & PULLEN LLP]


                         INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Coddle Creek Financial Corp.
Mooresville, North Carolina

We have audited the accompanying consolidated statements of financial condition
of Coddle Creek Financial Corp. and subsidiary as of December 31, 2000 and 1999,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three year period ended December 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Coddle Creek
Financial Corp. and subsidiary as of December 31, 2000 and 1999 and the results
of their operations and their cash flows for each of the years in the three year
period ended December 31, 2000, in conformity with generally accepted accounting
principles.


/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina
January 19, 2001

                                       17
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 2000 and 1999

<TABLE>
<CAPTION>
ASSETS                                                                             2000                  1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                   <C>
Cash
   Interest-bearing deposits (Note 2)                                         $   10,405,000        $    6,912,000
   Noninterest-bearing deposits                                                      407,000             1,502,000
Certificates of deposit (Note 2)                                                     100,000               100,000
Securities available for sale (Note 2)                                             3,067,000             3,414,000
Securities held to maturity (Fair value 2000 $1,203,000;
   1999 $1,157,000) (Note 2)                                                       1,182,000             1,181,000
Federal Home Loan Bank stock (Notes 2 and 6)                                       1,188,000             1,060,000
Loans receivable, net (Notes 3 and 6)                                            130,518,000           124,863,000
Office properties and equipment, net (Note 4)                                      1,059,000             1,112,000
Accrued interest receivable:
   Investment securities                                                              86,000                85,000
   Loans receivable                                                                  888,000               740,000
Cash value of life insurance (Note 7)                                              1,335,000             1,176,000
Real estate owned                                                                          -                65,000
Deferred income taxes (Note 9)                                                     1,200,000             1,219,000
Income tax refund receivable                                                         223,000               386,000
Prepaid expenses and other assets                                                     74,000                52,000
                                                                              ------------------------------------
          Total assets                                                        $  151,732,000        $  143,867,000
                                                                              ====================================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------
Liabilities:
   Deposits (Note 5)                                                          $  104,369,000        $   90,563,000
   Note payable (Note 6)                                                           4,000,000            10,500,000
   Federal Home Loan Bank advances (Note 6)                                        5,000,000             5,000,000
   Advances from borrowers for taxes and insurance                                    96,000                76,000
   Accounts payable and other liabilities                                            755,000               807,000
   Deferred compensation (Note 7)                                                  2,504,000             2,476,000
                                                                              ------------------------------------
          Total liabilities                                                      116,724,000           109,422,000
                                                                              ------------------------------------
Commitments (Notes 7 and 13)
   Stockholders' Equity: (Notes 6 and 8)
     Preferred stock, authorized 5,000,000 shares; none issued                             -                     -
     Common stock, no par value, authorized 20,000,000 shares;
        issued 699,156 shares in 2000 and 698,756 shares in 1999                           -                     -
     Additional paid-in capital                                                   22,889,000            23,057,000
     Accumulated other comprehensive income (loss) (Note 2)                           (1,000)              (21,000)
     Unearned ESOP shares (Note 10)                                               (3,468,000)           (3,725,000)
     Management recognition plan (Note 11)                                          (370,000)             (728,000)
     Unearned compensation (Note 10)                                                (774,000)             (839,000)
     Retained earnings, substantially restricted (Notes 8 and 9)                  16,732,000            16,701,000
                                                                              ------------------------------------
          Total stockholders' equity                                              35,008,000            34,445,000
                                                                              ------------------------------------
          Total liabilities and stockholders' equity                          $  151,732,000        $  143,867,000
                                                                              ====================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       18
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                             2000              1999              1998
----------------------------------------------------------------------------------------------------------
<S>                                                      <C>               <C>               <C>
Interest income:
   Loans                                                 $  10,512,000     $   9,369,000     $   8,944,000
   Investment securities                                       308,000           389,000           896,000
   Other                                                       585,000           430,000           476,000
                                                         -------------------------------------------------
                                                            11,405,000        10,188,000        10,316,000
                                                         -------------------------------------------------
Interest expense:
   Deposits (Note 5)                                         4,564,000         3,987,000         4,096,000
   Federal Home Loan Bank advances and
     note payable (Note 6)                                   1,400,000           208,000                 -
                                                         -------------------------------------------------
                                                             5,964,000         4,195,000         4,096,000
                                                         -------------------------------------------------
        Net interest income                                  5,441,000         5,993,000         6,220,000
Provision for loan losses (Note 3)                                   -                 -           205,000
                                                         -------------------------------------------------
        Net interest income after
          provision for loan losses                          5,441,000         5,993,000         6,015,000
                                                         -------------------------------------------------
Noninterest income                                             307,000           217,000           185,000
                                                         -------------------------------------------------
Other expenses:
   Compensation and employee
     benefits (Note 7)                                       2,539,000         2,992,000         1,973,000
   Net occupancy                                               210,000           146,000           318,000
   Deposit insurance premiums                                   21,000            56,000            59,000
   Data processing                                             202,000           202,000           186,000
   Other                                                       769,000           611,000           421,000
                                                         -------------------------------------------------
                                                             3,741,000         4,007,000         2,957,000
                                                         -------------------------------------------------
        Income before income taxes                           2,007,000         2,203,000         3,243,000
Income taxes (Note 9)                                          757,000           817,000         1,039,000
                                                         -------------------------------------------------
        Net income                                       $   1,250,000     $   1,386,000     $   2,204,000
                                                         =================================================

Basic earnings per share (Note 12)                       $        1.99     $        2.20     $        3.54
                                                         =================================================
Diluted earnings per share (Note 12)                     $        1.97     $        2.20     $        3.54
                                                         =================================================
Regular dividends per share                              $        1.91     $        2.05     $        1.00
                                                         =================================================
Return of capital dividend per share                     $           -     $       17.18     $           -
                                                         =================================================
</TABLE>

See Notes to Consolidated Financial Statements.
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                 Accumulated
                                                             Additional             Other            Unearned
                                                               Paid-in          Comprehensive          ESOP
                                                               Capital          Income (Loss)         Shares
-----------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>                 <C>
Balance, December 31, 1997                                  $    32,494,000     $      25,000       $    (577,000)
   Purchase of common stock by the ESOP                                   -                 -          (3,639,000)
   Principal payment received on note
     receivable from ESOP                                                 -                 -             195,000
   Cash dividends                                                         -                 -                   -
   ESOP contribution                                                (33,000)                -                   -
   Net income                                                             -                 -                   -
   Other comprehensive income, net of tax:
     Unrealized gain on securities, net of tax
        $10,000 (Note 2)                                                  -            21,000                   -
   Comprehensive income
                                                            -----------------------------------------------------
Balance, December 31, 1998                                       32,461,000            46,000          (4,021,000)
   Adoption of management recognition plan                        1,542,000
   Vesting of management recognition plan                                 -                 -                   -
   Principal payment received on note
     receivable from ESOP                                                 -                 -             296,000
   Cash dividends                                                         -                 -                   -
   Return of capital dividend                                   (10,849,000)                -                   -
   Amortization of unearned compensation                                  -                 -                   -
   ESOP contribution                                               (144,000)                -                   -
   Tax benefit of ESOP contribution                                  47,000                 -                   -
   Net income                                                             -                 -                   -
   Other comprehensive income, net of tax:
     Unrealized loss on securities, net of tax
        $(32,000) (Note 2)                                                -           (67,000)                  -
   Comprehensive income
                                                            -----------------------------------------------------
Balance, December 31, 1999                                       23,057,000           (21,000)         (3,725,000)
   Issuance of shares for management recognition plan                13,000                 -                   -
   Vesting of management recognition plan                                 -                 -                   -
   Principal payment received on note
     receivable from ESOP                                                 -                 -             257,000
   Cash dividends                                                         -                 -                   -
   Amortization of unearned compensation                                  -                 -                   -
   ESOP contribution                                               (255,000)                -                   -
   Tax benefit of ESOP contribution                                  74,000                 -                   -
   Net income                                                             -                 -                   -
   Other comprehensive income (loss), net of tax:
     Unrealized loss on securities, net of tax
        $6,000 (Note 2)                                                   -            20,000                   -
   Comprehensive income
                                                            -----------------------------------------------------
Balance, December 31, 2000                                  $    22,889,000     $      (1,000)      $  (3,468,000)
                                                            =====================================================
</TABLE>

See Notes to Consolidated Financial Statements.
<PAGE>

<TABLE>
<CAPTION>
                                       Retained
  Management                           Earnings,          Total
  Recognition       Unearned        Substantially     Stockholders'
     Plan         Compensation        Restricted          Equity
--------------------------------------------------------------------
<S>               <C>               <C>               <C>
$           -     $          -       $ 15,051,000     $   46,993,000
            -                -                  -         (3,639,000)

            -                -                  -            195,000
            -                -           (622,000)          (622,000)
            -                -                  -            (33,000)
            -                -          2,204,000          2,204,000



            -                -                  -             21,000
                                                      --------------
                                                           2,225,000
--------------------------------------------------------------------
            -                -         16,633,000         45,119,000
   (1,542,000)               -                  -                  -
      814,000                -                  -            814,000

            -                -                  -            296,000
            -                -         (1,318,000)        (1,318,000)
            -         (860,000)                 -        (11,709,000)
            -           21,000                  -             21,000
            -                -                  -           (144,000)
            -                -                  -             47,000
            -                -          1,386,000          1,386,000


            -                -                  -            (67,000)
                                                      --------------
                                                           1,319,000
--------------------------------------------------------------------
     (728,000)        (839,000)        16,701,000         34,445,000
      (13,000)               -                  -                  -
      371,000                -                  -            371,000

            -                -                  -            257,000
            -                -         (1,219,000)        (1,219,000)
            -           65,000                  -             65,000
            -                -                  -           (255,000)
            -                -                  -             74,000
            -                -          1,250,000          1,250,000


            -                -                  -             20,000
                                                      --------------
                                                           1,270,000
--------------------------------------------------------------------
$    (370,000)    $   (774,000)      $ 16,732,000     $   35,008,000
====================================================================
</TABLE>
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                        2000           1999           1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>            <C>             <C>
Cash Flows From Operating Activities
   Net income                                                       $ 1,250,000    $ 1,386,000     $ 2,204,000
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Provision for loan losses                                                -              -         205,000
     Provision for depreciation                                         125,000        102,000          64,000
     Provision for deferred income taxes                                 13,000          6,000        (195,000)
     ESOP contribution                                                 (181,000)       (97,000)        (33,000)
     Amortization of deferred loan fees                                (140,000)      (202,000)       (232,000)
     Gain on sale of equipment                                          (13,000)             -               -
     (Gain) loss on sale of real estate owned                            (4,000)             -          10,000
     Vesting of management recognition plan                             371,000        814,000               -
     Amortization of unearned compensation                               65,000         21,000               -
     Dividends on unvested management
        recognition plan shares                                               -        295,000               -
     Changes in assets and liabilities:
        (Increase) decrease in:
          Interest receivable                                          (149,000)        83,000        (153,000)
          Cash value of life insurance                                 (159,000)      (101,000)       (104,000)
          Income tax refund claim receivable                            163,000       (350,000)        (35,000)
          Prepaid expenses and other assets                             (22,000)        36,000         (55,000)
        Increase (decrease) in:
          Interest payable                                              121,000        (19,000)        (91,000)
          Accounts payable and other liabilities                         (8,000)         7,000          95,000
          Deferred compensation                                          28,000        (15,000)        221,000
                                                                    ------------------------------------------
             Net cash provided by
               operating activities                                   1,460,000      1,966,000       1,901,000
                                                                    ------------------------------------------
</TABLE>

                                  (Continued)

                                       22
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                         2000             1999             1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>               <C>
Cash Flows From Investing Activities
   Proceeds from maturities of
     certificates of deposit                                        $    100,000   $       100,000    $     100,000
   Purchases of certificates of deposit                                 (100,000)         (100,000)        (100,000)
   Purchases of securities available for sale                                  -          (500,000)     (16,013,000)
   Proceeds from maturities of securities
     available for sale                                                  372,000         7,231,000        8,854,000
   Proceeds from maturities of securities
     held to maturity                                                          -           200,000        1,327,000
   Purchase of Federal Home Loan Bank stock                             (128,000)          (96,000)         (34,000)
   Originations and principal payments on
     loans receivable, net                                            (5,515,000)      (14,148,000)      (8,501,000)
   Proceeds from the sale of equipment                                    21,000                 -                -
   Loan to ESOP for purchase of common stock                                   -                 -       (4,216,000)
   Principal payment received on note receivable
     from ESOP                                                           257,000           296,000          195,000
   Purchases of office properties and equipment                          (80,000)         (215,000)        (172,000)
   Proceeds from the sale of real estate owned                            69,000                 -            3,000
                                                                    -----------------------------------------------
        Net cash used in
          investing activities                                        (5,004,000)       (7,232,000)     (18,557,000)
                                                                    -----------------------------------------------
Cash Flows From Financing Activities
   Net increase (decrease) in deposits                                13,717,000         3,013,000      (11,722,000)
   Proceeds from Federal Home
     Loan Bank advances                                                8,000,000         5,000,000                -
   Payments on Federal Home
     Loan Bank advances                                               (8,000,000)                -                -
   Proceeds from note payable                                                  -        12,000,000
   Payments on note payable                                           (6,500,000)       (1,500,000)               -
   Increase (decrease) in advances from
     borrowers for taxes and insurance                                    20,000           (34,000)           5,000
   Cash dividends paid                                                (1,295,000)      (13,044,000)        (453,000)
                                                                    -----------------------------------------------
        Net cash provided by (used in)
          financing activities                                         5,942,000         5,435,000      (12,170,000)
                                                                    -----------------------------------------------
        Increase (decrease) in cash
          and cash equivalents                                         2,398,000           169,000      (28,826,000)
Cash and cash equivalents:
   Beginning                                                           8,414,000         8,245,000       37,071,000
                                                                    -----------------------------------------------
   Ending                                                           $ 10,812,000    $    8,414,000    $   8,245,000
                                                                    ===============================================
</TABLE>

                                  (Continued)

                                       23
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                         2000             1999             1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>               <C>
Supplemental Schedule of Cash and
   and Cash Equivalents
        Interest-bearing                                            $ 10,405,000    $    6,912,000    $   7,806,000
        Noninterest-bearing                                              407,000         1,502,000          439,000
                                                                    -----------------------------------------------
                                                                    $ 10,812,000    $    8,414,000    $   8,245,000
                                                                    ===============================================
Supplemental Schedule of
   Cash Flow Information
     Cash payments for:
        Interest                                                    $  5,843,000    $    4,214,000    $   4,187,000
        Income taxes                                                     581,000         1,161,000        1,269,000
Supplemental Disclosures of Noncash
   Transactions
   Change in unrealized gain (loss) on
        available for sale securities, net of
        deferred taxes                                                    20,000           (67,000)          21,000
   Real estate acquired in the settlement of loans                             -            65,000           12,000
   Loans originated to finance the sale of real estate
        estate acquired in the settlement of loans                             -                 -           80,000
   Change in dividends accrued                                            76,000           278,000          169,000
   Adoption of management recognition plan                                     -         1,542,000                -
   Additional shares purchased under management
        recognition plan                                                  13,000                 -                -
</TABLE>

See Notes to Consolidated Financial Statements.

                                       24
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 1.   Nature of Business and Summary of Significant Accounting Policies

Conversion and organization of holding company: On December 30, 1997, pursuant
----------------------------------------------
to a Plan of Conversion which was approved by its members and regulators,
Mooresville Savings Bank, S.S.B. ("Mooresville Savings" or the "Bank") converted
from a North Carolina-chartered mutual savings bank to a North Carolina-
chartered stock savings bank (the "Conversion"), and became a wholly-owned
subsidiary of Coddle Creek Financial Corp. (the "Company"). The Company was
formed to acquire all of the common stock of the Bank upon its conversion to
stock form. The Company has no operations and conducts no business of its own
other than owning the Bank, investing its portion of the net proceeds received
in the Conversion, and lending funds to the Employee Stock Ownership Plan (the
"ESOP") which was formed in connection with the Conversion.

Nature of business: The Bank is primarily engaged in the business of obtaining
------------------
savings deposits and originating single-family residential loans within its
primary lending area of Northern Mecklenburg and Southern Iredell Counties. The
Bank's underwriting policies require such loans to be made at 80% loan to value
based upon appraised values unless private mortgage insurance is obtained. These
loans are secured by the underlying properties. The Bank's primary regulators
are the Federal Deposit Insurance Company ("FDIC") and the Administrator of the
North Carolina Savings Institutions Division (the "NC Administrator"). The
Bank's deposits are insured by the Savings Association Insurance Fund ("SAIF")
of the FDIC.

The following is a description of the significant accounting policies used in
the preparation of the accompanying financial statements.

Principles of consolidation: The consolidated financial statements include the
---------------------------
accounts of Coddle Creek Financial Corp. and its wholly-owned subsidiary,
Mooresville Savings Bank, S.S.B. All significant intercompany transactions and
balances have been eliminated in consolidation.

Basis of financial statement presentation: The accounting and reporting policies
-----------------------------------------
of the Company conform to generally accepted accounting principles and general
practices within the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the statement of financial condition
and revenues and expenses for the period. Actual results could differ from those
estimates.

Cash and cash equivalents: For purposes of reporting the statements of cash
-------------------------
flows, the Company includes all interest and noninterest-bearing cash accounts,
which are not subject to withdrawal restrictions or penalties, as cash
equivalent and considers all highly liquid debt instruments with original
maturities when purchased of three months or less to be cash equivalents. The
Company also maintains deposits with financial institutions which are in excess
of the federally-insured amounts. Cash flows from loans and deposits are
reported on a net basis.

                                       25
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 1.   Nature of Business and Summary of Significant Accounting Policies
          (Continued)

Investment securities: The Company and the Bank have investments in debt and
---------------------
equity securities, which consist primarily of obligations of the U. S.
Government and federal agencies and municipal obligations.

SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities,
requires that management classify all securities as trading, available for sale,
or held to maturity as individual investment securities are acquired, and that
the appropriateness of such classification be reassessed at each statement of
financial condition date.

Since the Company and the Bank do not buy investment securities in anticipation
of short-term fluctuations in market prices, none of the investment securities
are classified as trading in accordance with Statement No. 115. All investment
securities have been classified as either held to maturity or available for
sale.

Securities available for sale: Securities classified as available for sale are
-----------------------------
those securities that the Company and the Bank intend to hold for an indefinite
period of time but not necessarily to maturity. Any decision to sell a security
classified as available for sale could be based on various factors, including
significant movements in interest rates, changes in the maturity mix of the
Company and the Bank's assets and liabilities, liquidity needs, regulatory
capital considerations, and other similar factors. Securities available for sale
are carried at their fair (market) value. Premium and discounts are amortized
using a method that approximates the interest method over the contractual lives.
Unrealized gains or losses are reported as increases or decreases in equity, net
of the related deferred tax effect. Realized gains or losses, determined on the
basis of the cost of specific securities sold, are included in income.

Securities held to maturity: Securities classified as held to maturity are those
---------------------------
securities the Company has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity needs or changes in
general economic conditions. These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed by a method that
approximates the interest method over their contractual lives. Based on the
Company and the Bank's financial position and liquidity, management believes the
Company and the Bank have the ability to hold these securities to maturity.

Declines in the fair value of individual securities classified as either held to
maturity or available for sale below their amortized cost that are determined to
be other than temporary result in write-downs of the individual securities to
their fair value with the resulting write-downs included in current earnings as
realized losses.

Investment in Federal Home Loan Bank stock: The Bank, as a member of the Federal
------------------------------------------
Home Loan Bank ("FHLB") system, is required to maintain an investment in capital
stock of the FHLB in an amount equal to the greater of 1% of its outstanding
home loans or 5% of advances from the FHLB. No ready market exists for the FHLB
stock, and it has no quoted market value.

                                       26
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 1.   Nature of Business and Summary of Significant Accounting Policies
          (Continued)

Loans receivable: Loans receivable are stated at unpaid principal balances, less
----------------
undisbursed loan funds, the allowance for loan losses, and net deferred loan-
origination fees and discounts. The Bank's loan portfolio consists principally
of long-term conventional loans collateralized by first deeds of trust on
single-family residences, other residential property, nonresidential property
and land. Interest income is accrued and credited to interest income as it is
earned, using the interest method.

Allowance for loan losses: The allowance for loan losses is increased by charges
--------------------------
to income and decreased by charge-offs (net of recoveries). The allowance is an
amount that management believes will be adequate to absorb estimated losses on
existing loans. Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to pay, the estimated value of any underlying collateral, and current
economic conditions. The loan portfolio is further analyzed by each loan type
and delinquency status to determine the risk category for each loan that is used
in calculating the allowance for loan losses. Loans delinquent greater than 90
days are evaluated individually for loss exposure, while other loans are
evaluated aggregately by type. Allocated and unallocated portions are determined
in the same manner. While management uses the best information to make
evaluations, future adjustments may be necessary, if economic or other
conditions differ substantially from the assumptions used.

Impaired loans: The Bank assesses loans delinquent greater than 90 days for
---------------
impairment. SFAS No. 114 requires that the Bank establish specific loan loss
allowances on impaired loans if it is doubtful that all principal and interest
due, according to the loan terms, will be collected. An allowance on an impaired
loan is required if the present value of the future cash flows discounted using
the loan's effective interest rate is less than the carrying value of the loan.
An impaired loan can also be valued based upon its fair value in the market
place or on the basis of its underlying collateral if the loan is collateral
dependent. If foreclosure is imminent, and the loan is collateral dependent, the
loan must be valued based upon the fair value of the underlying collateral.

Real estate owned: Real estate owned is initially recorded at the estimated fair
-----------------
value at the date of foreclosure, establishing a new cost basis. Based on
periodic evaluations by management, the carrying values are reduced where they
exceed fair value minus estimated costs to sell. Costs relating to the
development and improvement of the property are capitalized, while holding costs
of the property are charged to expense in the period incurred.

                                       27
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 1.   Nature of Business and Summary of Significant Accounting Policies
          (Continued)

Interest income: The Bank continues to accrue interest on loans, including loans
---------------
delinquent 90 days or more, when collectibility of interest is not in doubt. At
the time a loan becomes nonperforming and collectibility of principal is in
doubt, the loan is placed on nonaccrual status by establishing an allowance for
uncollected interest. When a loan is on nonaccrual status interest income is
recognized only to the extent cash payments are received. If and when management
determines that the collectibility of principal and interest is no longer in
doubt, the loan is returned to performing status and the reserve for uncollected
interest is reversed. The Bank anticipates that it will account for interest on
impaired loans in a similar fashion in the future if and when it has impaired
loans.

Loan-origination fees and related costs: Loan fees and certain direct loan
---------------------------------------
origination costs are deferred, and the net fee or cost is recognized as an
adjustment to interest income using the interest method over the contractual
life of the loans, adjusted for actual prepayments.

Office properties and equipment: Office properties and equipment are stated at
-------------------------------
cost less accumulated depreciation, which is computed principally by the
straight-line method.

Benefit plans: The Bank has a 401(k) plan covering substantially all of its
-------------
employees. The Bank matches 50% of the qualified employees contributions,
limited to 6% of the employee's salary.

The Bank has deferred compensation and retirement agreements for the benefit of
the Board of Directors and several key employees. The plans are unfunded and the
liabilities are being accrued over the term of active service of the
participants. The Bank has also purchased life insurance policies in amounts
sufficient to discharge its obligation under the agreements in the event of
death.

The Bank has an ESOP which covers substantially all of its employees.
Contributions to the plan are based upon the amortization requirement of the
ESOP's debt to the Company, subject to compensation limitations, and are
expensed in accordance with the AICPA's Statement of Position 93-6, Employer's
Accounting for Employee Stock Ownership Plans.

Additionally, the Company has implemented a non-qualified stock option plan
authorizing the grant of up to 67,447 stock options to certain officers,
directors and employers, either in the form of incentive stock options or
nonqualified stock options.  The bank has also implemented a management
recognition plan by reserving 26,979 shares of common stock for issuance to
certain officers, directors and employees.

Advance payments by borrowers for taxes and insurance: Certain borrowers make
-----------------------------------------------------
monthly payments, in addition to principal and interest, in order to accumulate
funds from which the Bank can pay the borrowers' property taxes and insurance
premiums.

                                       28
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 1.   Nature of Business and Summary of Significant Accounting Policies
          (Continued)

Income taxes: Deferred taxes are provided on a liability method whereby deferred
------------
tax assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Earnings per share: SFAS No. 128, Earnings Per Share, requires the presentation
------------------
of earnings per share by all entities that have common stock or potential common
stock, such as options, warrants and convertible securities, outstanding that
trade in a public market. Those entities that have only common stock outstanding
are required to present basic earnings per share amounts. Basic per share
amounts are computed by dividing net income (the numerator) by the weighted-
average number of common shares outstanding (the denominator). All other
entities are required to present basic and diluted per share amounts. Diluted
per share amounts assume the conversion, exercise or issuance of all potential
common stock instruments unless the effect is to reduce the loss or increase the
income per common share from continuing operations. For purposes of this
computation, the number of shares of common stock purchased by the Bank's
employee stock ownership plan which have not been allocated to participant
accounts are not assumed to be outstanding.

Comprehensive income: SFAS No. 130, Reporting Comprehensive Income, establishes
--------------------
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general purpose
financial statements. This statement requires that all items that are recognized
under accounting standards as components of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other
financial statements.

Fair value of financial instruments: The estimated fair values required under
-----------------------------------
SFAS No. 107, Disclosures About Fair Value of Financial Instruments, have been
determined by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is required to develop
the estimates of fair value. Accordingly, the estimates presented for the fair
value of the Company's financial instruments are not necessarily indicative of
the amounts the Company could realize in a current market exchange. The use of
different market assumptions or estimation methodologies may have a material
effect on the estimated fair market value amounts.

The fair value estimates presented are based on pertinent information available
to management as of December 31, 2000 and 1999. Although management is not aware
of any factors that would significantly affect the estimated fair value amount,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date and therefore, current estimates of fair
value may differ significantly from the amounts presented here.

Off-statement of financial condition risk: The Company is a party to financial
-----------------------------------------
instruments with off-statement of financial condition risk such as commitments
to extend credit and lines of credit. Management assesses the risk related to
these instruments for potential losses on an ongoing basis.

                                       29
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL  STATEMENTS
________________________________________________________________________________

Note 2.   Securities

The amortized cost and fair values of securities as of December 31, 2000 and
1999 are summarized as follows:

<TABLE>
<CAPTION>
                                                                             2000
                                           -------------------------------------------------------------------------
                                                                  Gross                Gross
                                             Amortized         Unrealized           Unrealized             Fair
                                               Cost               Gains                Losses              Value
                                           -------------------------------------------------------------------------
<S>                                        <C>                <C>                 <C>                  <C>
Securities available for sale:
U.S. Government and federal
  agencies obligations                     $   1,900,000      $           -       $            -       $   1,900,000
Municipal Obligations                            668,000                  -               (1,000)            667,000
Equity securities                                500,000                  -                    -             500,000
                                           -------------------------------------------------------------------------
                                           $   3,068,000      $           -       $       (1,000)      $   3,067,000
                                           =========================================================================
Securities held to maturity:
Municipal obligations                      $   1,182,000      $           -       $       21,000       $   1,203,000
                                           =========================================================================

Other investments:
Interest-earning deposits                  $  10,405,000      $           -       $            -       $  10,405,000
Certificates of deposit                          100,000                  -                    -             100,000
Federal Home Loan Bank stock                   1,188,000                  -                    -           1,188,000
                                           -------------------------------------------------------------------------
                                           $  11,693,000      $           -       $            -       $  11,693,000
                                           =========================================================================

<CAPTION>
                                                                             1999
                                           -------------------------------------------------------------------------
                                                                  Gross                Gross
                                             Amortized         Unrealized           Unrealized             Fair
                                               Cost               Gains                Losses              Value
                                           -------------------------------------------------------------------------
<S>                                        <C>                <C>                 <C>                  <C>
Securities available for sale:
U.S. Government and federal
  agencies obligations                     $   1,903,000      $           -       $      (21,000)      $   1,882,000
Municipal Obligations                          1,038,000                  -               (6,000)          1,032,000
Equity securities                                500,000                  -                    -             500,000
                                           -------------------------------------------------------------------------
                                           $   3,441,000      $           -       $      (27,000)      $   3,414,000
                                           =========================================================================
Securities held to maturity:
Municipal obligations                      $   1,181,000      $           -       $      (24,000)      $   1,157,000
                                           =========================================================================

Other investments:
Interest-earning deposits                  $   6,912,000      $           -       $            -       $   6,912,000
Certificates of deposit                          100,000                  -                    -             100,000
Federal Home Loan Bank stock                   1,060,000                  -                    -           1,060,000
                                           -------------------------------------------------------------------------
                                           $   8,072,000      $           -       $            -       $   8,072,000
                                           =========================================================================
</TABLE>

                                       30
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 2.   Securities (Continued)

The amortized cost and fair value of securities at December 31, 2000 by
contractual maturity are shown below:

<TABLE>
<CAPTION>
                                                                           Amortized         Fair
                                                                              Cost           Value
                                                                           --------------------------
<S>                                                                        <C>             <C>
Securities available for sale:
Due in one year or less                                                    $   500,000     $  500,000
Due after one year through five years                                        1,750,000      1,750,000
Due after five years through ten years                                         318,000        317,000
Equity securities                                                              500,000        500,000
                                                                           --------------------------
                                                                           $ 3,068,000     $3,067,000
                                                                           ==========================

Securities held to maturity:
Due in one year or less                                                    $         -     $        -
Due after one year through five years                                          150,000        151,000
Due after five years through ten years                                       1,024,000      1,044,000
Due after ten years                                                              8,000          8,000
                                                                           --------------------------
                                                                           $ 1,182,000     $1,203,000
                                                                           ==========================
</TABLE>

The Company has one municipal obligation with a carrying value of $225,000
pledged to the Mooresville Fireman's relief fund at December 31, 2000.

There were no sales of investment securities for the years ended December 31,
2000, 1999 and 1998.

The change in accumulated comprehensive income, which consists of unrealized
gains (losses) on securities available for sale, for the years ended December
31, 2000, 1999 and 1998 is as shown below:

<TABLE>
<CAPTION>
                                                              2000             1999           1998
                                                          -------------------------------------------
<S>                                                       <C>              <C>             <C>
Balance, beginning                                        $   (21,000)     $    46,000     $   25,000
   Change in unrealized holding gains (losses)                 26,000          (99,000)        31,000
   Change in deferred income taxes                             (6,000)          32,000        (10,000)
                                                          -------------------------------------------
Balance, ending                                           $    (1,000)     $   (21,000)    $   46,000
                                                          ===========================================
</TABLE>

                                       31
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 2.   Securities (Continued)

The following table sets forth certain information regarding the carrying value
and contractual maturities of the Company's investment portfolio at December 31,
2000:

<TABLE>
<CAPTION>
                                                                                 Carrying Value
                                              ------------------------------------------------------------------------------------
                                                                  After One        Five After
                                                                 Year Through    Years Through          After
                                                  One Year        Five Years        Ten Year          Ten Years         Total
                                              ------------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>               <C>               <C>
Securities available for sale:
  U.S. government and agency securities       $     500,000    $            -    $            -    $            -    $     500,000
  Federal Home Loan
    Bank bonds                                            -         1,400,000                 -                 -        1,400,000
  Municipal bonds                                         -           350,000           317,000                            667,000
  Equity securities                                 500,000                 -                 -                 -          500,000
Securities held to maturity:
  Municipal bonds                                         -           150,000         1,024,000             8,000        1,182,000
Other investments:
  Interest-earning deposits                      10,405,000                 -                 -                 -       10,405,000
  Certificates of deposit                                 -           100,000                 -                 -          100,000
  Federal Home Loan
    Bank stock                                            -                 -                 -         1,188,000        1,188,000
                                              ------------------------------------------------------------------------------------
                                              $  11,405,000    $    2,000,000    $    1,341,000    $    1,196,000    $  15,942,000
                                              ====================================================================================
</TABLE>

The following table sets forth the weighted average yield by maturity (tax
exempt obligations have not been computed on a tax equivalent basis) of the
Company's investment portfolio at December 31, 2000:

<TABLE>
<CAPTION>
                                                                                 Carrying Value
                                              ------------------------------------------------------------------------------------
                                                                  After One        Five After
                                                                 Year Through    Years Through          After
                                                  One Year        Five Years        Ten Year          Ten Years         Total
                                              ------------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>               <C>               <C>
Securities available for sale:
  U.S. government and agency securities                7.75%                -                 -                 -             7.75%
  Federal Home Loan
    Bank bonds                                            -              5.99%                -                 -             5.99%
  Municipal bonds                                         -              4.50%             6.25%                -             5.31%
  Equity securities                                       -                 -                 -                 -                -
Securities held to maturity:
  Municipal bonds                                         -              4.80%             4.62%                -             4.61%
Other investments:
  Interest-earning deposits                            6.05%                -                 -                 -             6.05%
  Certificates of deposit                                 -              6.67%                -                 -             6.67%
  Federal Home Loan
    Bank stock                                            -                 -                 -              7.75%            7.75%
                                              ------------------------------------------------------------------------------------
                                                       6.13%             5.67%             5.00%             7.75%            5.90%
                                              ====================================================================================
</TABLE>

                                       32
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 3.   Loans Receivable

Loans receivable at December 31, 2000 consist of the following: and 1999

<TABLE>
<CAPTION>
                                                      2000                             1999
                                         -------------------------------------------------------------
                                                            Percentage                      Percentage
                                               Amount        of Total           Amount       of Total
                                         -------------------------------------------------------------
<S>                                      <C>                <C>            <C>              <C>
Real estate loans:
  One-to-four family residential         $   109,631,000       84.00%      $    104,331,000     83.55%
  Multi-family residential                       909,000        0.70                850,000      0.68
  Nonresidential                               3,857,000        2.95              3,391,000      2.72
  Construction                                 6,970,000        5.34              9,849,000      7.89
  Equity line                                 10,088,000        7.73              8,195,000      6.56
                                         -------------------------------------------------------------
            Total real estate loans          131,455,000      100.72            126,616,000    101.40
                                         -------------------------------------------------------------
Consumer Loans:
  Installment loans                            2,455,000        1.88              2,491,000      1.99
  Other                                        1,144,000        0.88              1,416,000      1.13
                                         -------------------------------------------------------------
            Total consumer loans               3,599,000        2.76              3,907,000      3.12
                                         -------------------------------------------------------------
            Total gross loans                135,054,000      103.48            130,523,000    104.52
                                         -------------------------------------------------------------
Less:
  Construction loans in process               (2,672,000)      (2.05)            (3,823,000)    (3.05)
  Net deferred loan fees                        (959,000)      (0.74)              (939,000)    (0.75)
  Allowance for loan losses                     (905,000)      (0.69)              (898,000)    (0.72)
                                         -------------------------------------------------------------
                                              (4,536,000)      (3.48)            (5,660,000)    (4.52)
                                         -------------------------------------------------------------
                                         $   130,518,000      100.00%      $    124,863,000    100.00%
                                         =============================================================
</TABLE>

The following is an analysis of the allowance for loan losses for the years
ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                               2000           1999             1998
                                                           -------------------------------------------
<S>                                                        <C>            <C>             <C>
Balance at beginning of year                               $   898,000    $   895,000     $    693,000
                                                           -------------------------------------------
  Loans charged off:
          Real Estate                                                -              -           (5,000)
          Consumer                                                   -              -                -
                                                           -------------------------------------------
            Total loans charged off                                  -              -           (5,000)
                                                           -------------------------------------------
  Recoveries:
          Real Estate                                            7,000          3,000            2,000
          Consumer                                                   -              -                -
                                                           -------------------------------------------
            Total recoveries                                     7,000          3,000            2,000
                                                           -------------------------------------------
       Provision for loan losses                                     -              -          205,000
                                                           -------------------------------------------
Balance at end of year                                     $   905,000    $   898,000     $    895,000
                                                           ===========================================
Ratio of net charge-offs to average loans
  outstanding                                                     0.00%          0.00%            0.00%
                                                           ===========================================
</TABLE>

                                       33
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 3.   Loans Receivable (Continued)

The allocation of the allowance for loan losses applicable to each category of
loans at December 31, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                             2000
                                        -------------------------------------------
                                                          Percent of
                                                          Allowance     Percent of
                                          Amount of       to Total       Loans to
                                          Allowance       Allowance     Gross Loans
                                        -------------------------------------------
<S>                                     <C>               <C>           <C>
Real estate loans:
  One-to-four family residential        $    403,000          44.53%          81.18%
  Multi-family residential                         -              -            0.67
  Nonresidential                                   -              -            2.86
  Construction                                     -              -            5.16
  Equity line                                 40,000           4.42            7.47
                                        -------------------------------------------
     Total real estate loans                 443,000          48.95           97.34
                                        -------------------------------------------
Consumer loans:
  Installment loans                           25,000           2.77            1.82
  Other                                        7,000           0.77            0.84
                                        -------------------------------------------
     Total consumer loans                     32,000           3.54            2.66
                                        -------------------------------------------
Unallocated                                  430,000          47.51               -
                                        -------------------------------------------
                                        $    905,000         100.00%         100.00%
                                        ===========================================

<CAPTION>
                                                             1999
                                        -------------------------------------------
                                                          Percent of
                                                          Allowance     Percent of
                                          Amount of       to Total       Loans to
                                          Allowance       Allowance     Gross Loans
                                        -------------------------------------------
<S>                                     <C>               <C>           <C>
Real estate loans:
  One-to-four family residential        $    334,000          37.19%          79.93%
  Multi-family residential                         -              -            0.65
  Nonresidential                                   -              -            2.60
  Construction                                     -              -            7.55
  Equity line                                 26,000           2.90            6.28
                                        -------------------------------------------
     Total real estate loans                 360,000          40.09           97.01
                                        -------------------------------------------
Consumer loans:
  Installment loans                           17,000           1.89            1.91
  Other                                        5,000           0.56            1.08
                                        -------------------------------------------
     Total consumer loans                     22,000           2.45            2.99
                                        -------------------------------------------
Unallocated                                  516,000          57.46               -
                                        -------------------------------------------
                                        $    898,000         100.00%         100.00%
                                        ===========================================
</TABLE>

                                       34
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 3.   Loans Receivable (Continued)

The Bank assesses loans delinquent more than 90 days for impairment. Such loans
amounted to approximately $2,093,000 and $1,382,000 at December 31, 2000 and
1999, respectively, and had an average outstanding balance of approximately
$1,540,000 and $1,492,000 for the years ended December 31, 2000 and 1999,
respectively. These loans are primarily collateral dependent and management has
determined that the underlying collateral value is in excess of the carrying
amounts. As a result, the Bank has determined that specific allowances on these
loans are not required.

Nonperforming loans for which interest has been reduced totaled approximately
$1,436,000 and $1,237,000 at December 31, 2000 and 1999, respectively. The
differences between interest income that would have been recorded under the
original terms of such loans and the interest income actually recognized totaled
$41,000, $44,000 and $30,000 for the years ended December 31, 2000, 1999 and
1998, respectively.

The following table sets forth information with respect to nonperforming assets
identified by the Bank, including nonaccrual loans and accruing loans past due
90 days or more at the date indicated:

<TABLE>
<CAPTION>
                                                                  At December 31,
                                               -----------------------------------------------------
                                                    2000               1999               1998
                                               -----------------------------------------------------
<S>                                            <C>               <C>                 <C>
Nonaccrual loans                               $    1,436,000    $     1,237,000     $       996,000
Accruing loans past due 90 days or more               657,000            145,000             390,000
Troubled debt restructuring
Foreclosed real estate                                      -             65,000                   -
                                               -----------------------------------------------------
Total nonperforming assets                     $    2,093,000    $     1,447,000     $     1,386,000
                                               =====================================================

Nonperforming loans to total gross loans                 1.55%              1.06%               1.20%
                                               =====================================================

Nonperforming assets to total assets                     1.38%              1.01%               1.02%
                                               =====================================================
Total assets                                   $  151,732,000    $   143,867,000     $   135,811,000

Total gross loans                              $  135,054,000    $   130,523,000     $   115,213,000
</TABLE>

                                       35
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 4.   Office Properties and Equipment

Office properties and equipment at December 31, 2000 and 1999 consist of the
following:

<TABLE>
<CAPTION>
                                                       2000              1999
                                                  ---------------------------------
<S>                                               <C>                <C>
Cost:
  Land                                            $     364,000      $      364,000
  Buildings                                             879,000             879,000
  Building improvements                                 175,000             175,000
  Furniture and fixtures                                764,000             747,000
  Automobiles                                            54,000              47,000
                                                  ---------------------------------
                                                      2,236,000           2,212,000
Less accumulated depreciation                         1,177,000           1,100,000
                                                  ---------------------------------
                                                  $   1,059,000      $    1,112,000
                                                  =================================
</TABLE>

Note 5.   Deposits

Deposits December 31, 2000 and 1999 consist of at the following:

<TABLE>
<CAPTION>
                                                     2000                                           1999
                               --------------------------------------------------------------------------------------------
                                                   Weighted                                        Weighted
                                                   Average                                         Average
                                    Amount           Rate     Percent              Amount           Rate           Percent
                               --------------------------------------------------------------------------------------------
<S>                            <C>                 <C>        <C>          <C>                     <C>             <C>
Noninterest-bearing deposits   $    1,269,000           -         1.2%     $        1,652,000          -                1.8%
NOW accounts                        6,736,000        0.89%        6.5%              6,424,000       0.89%               7.1%
Money market                       11,381,000        5.46%       10.9%             13,332,000       4.63%              14.8%
Passbook savings                    9,552,000        2.47%        9.2%             10,062,000       2.47%              11.2%
                               --------------------------------------------------------------------------------------------
                                   28,938,000                    27.8%             31,470,000                          34.9%
                               --------------------------------------------------------------------------------------------
Certificates of deposit:
  2.00% to 3.99%                      801,000                     0.8%                646,000                           0.7%
  4.00% to 5.99%                   27,098,000                    26.1%             46,887,000                          52.0%
  6.00% to 7.99%                   47,113,000                    45.3%             11,230,000                          12.4%
                               --------------------------------------------------------------------------------------------
                                   75,012,000        6.26%       72.2%             58,763,000       5.31%              65.1%
                               --------------------------------------------------------------------------------------------
                                  103,950,000                   100.0%             90,233,000                         100.0%
                                                            =========                                             =========
Accrued interest  payable             419,000                                         330,000
                               --------------------------                  -----------------------------
                               $  104,369,000        5.40%                 $       90,563,000       4.49%
                               ==========================                  =============================
</TABLE>

The aggregate amount of certificates of deposit with a minimum denomination of$
100,000 was approximately $17,701,000 and $11,196,000 at December 31, 2000 and
December 31, 1999, respectively.

                                       36
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 5.   Deposits (Continued)

The aggregate amount of certificates of deposit by maturity with a minimum
denomination of $100,000 at December 31, 2000 is as follows:

Maturity Period:
  Within 3 months or less                                           $  3,013,000
  Over 3 months through 6 months                                       3,256,000
  Over 6 months through 12 months                                      7,696,000
  Over 12 months                                                       3,736,000
                                                                    ------------
                                                                    $ 17,701,000
                                                                    ============

At December 31, 2000, the scheduled maturities of certificates of deposits are
as follows:

Year Ending December 31,                                               Amount
------------------------                                            ------------
2001                                                                $ 59,866,000
2002                                                                  12,430,000
2003                                                                   1,262,000
2004                                                                   1,236,000
2005                                                                     218,000
                                                                    ------------
                                                                    $ 75,012,000
                                                                    ============

Interest expense on deposits for the years ended December 31, 2000, 1999 and
1998 is summarized as follows:

                                   2000             1999                1998
                               -------------------------------------------------
NOW and money market           $    682,000      $    544,000       $    329,000
Passbook savings                    230,000           251,000            298,000
Certificates of deposit           3,652,000         3,192,000          3,469,000
                               -------------------------------------------------
                               $  4,564,000      $  3,987,000       $  4,096,000
                               =================================================

Eligible savings accounts are insured up to $100,000 by the SAIF which is
administered by the FDIC.

The Bank has $100,000 of U. S. Government and federal agency obligations pledged
as security for public deposits at December 31, 2000.

Note 6.   Note Payable and Federal Home Loan Bank Advances

The Company has a note payable outstanding for $4,000,000 and $10,500,000 at
December 31, 2000 and 1999, respectively. The note is due in quarterly interest
only installments at the prime rate (9.50% at December 31, 2000) less 1.25%,
with the principal balance due February 1, 2001. The note is collateralized by
the Bank's common stock.

                                       37
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 6.   Note Payable and Federal Home Loan Bank Advances (Continued)

The Bank has advances from the FHLB outstanding for $5,000,000 at December 31,
2000 and 1999. Interest is payable at 6.52% and the balance is due on September
17, 2001, 2000. Advances are collateralized by the Bank's stock in the FHLB and
qualifying first mortgage loans.

Interest expense on the note payable and FHLB advances totaled $1,400,000,
$208,000 and $-0- for the years ended December 31, 2000, 1999 and 1998,
respectively.

Note 7.   Employee Benefit Plans

The Bank has adopted a savings plan under Section 401(k) of the Internal Revenue
Code. This plan allows employees, who meet certain service and age requirements,
to defer a percentage of their income through contributions to the plan. In
accordance with provisions of the plan, the Bank matches 50% of the employee's
contribution, limited to 6.0% of the employee's salary. The expense for the plan
was $86,000, $72,000 and $72,000 for the years ended December 31, 2000, 1999 and
1998, respectively.

The Bank has also entered into unfunded deferred compensation agreements and a
salary continuation agreement providing retirement and death benefits for the
directors and several key employees. Vested benefits under the agreements are
payable in installments upon death or retirement. The retirement age for these
plans was changed from 65 to 70 years old during the year ended December 31,
1999. The Bank has insured the lives of the directors and employees for amounts
sufficient to discharge its obligation under such agreements in the event of
death. The cash surrender value of these policies is $1,335,000 and $1,176,000
at December 31, 2000 and 1999, respectively. The present value of the liability
for the benefits is being accrued over the expected term of active service of
the directors and employees. The amount accrued is $2,504,000 and $2,476,000 at
December 31, 2000 and 1999, respectively. The expense related to the agreements
for the years ended December 31, 2000, 1999 and 1998 amounted to $109,000,
$44,000 and $391,000, respectively. The discount rate of 7% was used in
determining the present value of the future obligation at December 31, 2000 and
1999, respectively.

Note 8.   Stockholders' Equity

On December 30, 1997, the Company completed and closed its stock offering. Gross
proceeds from the sale of 674,475 shares amounted to $33,724,000 and were
reduced by conversion costs of $1,230,000. $4,216,000 of these net proceeds were
loaned to the ESOP to purchase 53,958 shares in the open market. The Company
transferred $14,134,000 of the net proceeds to the Bank for the purchase of its
common stock and retained the remaining net proceeds.

                                       38
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 8.   Stockholders' Equity (Continued)

Concurrent with the Conversion, the Bank established a liquidation account in an
amount equal to its net worth as reflected in its latest statement of financial
condition contained in the definitive prospectus used in connection with the
Company's initial public offering. The liquidation account will be maintained
for the benefit of eligible deposit account holders and supplemental eligible
deposit account holders who continue to maintain their deposit accounts in the
Bank after the Conversion. Only in the event of a complete liquidation will
eligible deposit account holders and supplemental eligible deposit account
holders be entitled to receive a liquidation distribution from the liquidation
account in the amount of the then current adjusted sub-account balance for
deposit accounts then held before any liquidation distribution may be made with
respect to common stockholders. Dividends paid by the Bank subsequent to the
Conversion cannot be paid from this liquidation account.

Subject to applicable law, the Board of Directors of the Company or the Bank may
each provide for the payment of dividends. Future declarations of cash
dividends, if any, by the Company may depend upon dividend payments by the Bank
to the Company. Subject to regulations promulgated by the NC Administrator, the
Bank will not be permitted to pay dividends on its common stock if its
stockholders' equity would be reduced below the amount required for the
liquidation account or its capital requirement. The Company has declared regular
dividends totaling $1.91, $2.05 and $1.00 per share for the years ended December
31, 2000, 1999 and 1998, respectively.

For a period of five years after its conversion from mutual to stock form, the
Bank must obtain the written approval from the NC Administrator before declaring
or paying a cash dividend to the Company on its capital stock in an amount in
excess of one-half of the greater of (i) the Bank's net income for the most
recent fiscal year end or (ii) the average of the Bank's net income after
dividends for the most recent fiscal year end and not more than two of the
immediately preceding fiscal year ends. During 2000, 1999 and 1998, the Bank
upstreamed $1,407,000, $1,295,000 and $675,000, respectively, in regular
dividends to the Company.

In connection with the Conversion, the Bank has agreed with the FDIC that,
within the first three years after completion of the Conversion, neither the
Company nor the Bank will pay any taxable dividend or make any taxable
distribution in excess of their current earnings and retained earnings. The
Company and the Bank agreed to notify the FDIC before making a return of capital
during the first three years following the Conversion.

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory -- and possibly additional discretionary -- actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative regulatory accounting practices.
The Bank's capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.

                                       39
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 8.   Stockholders' Equity (Continued)

The FDIC requires the Bank to have a minimum leverage ratio of Tier I Capital
(principally consisting of retained earnings and any other common stockholders'
equity, less any intangible assets) to all assets of at least 3%, provided that
it receives the highest rating during the examination process. For institutions
that receive less than the highest rating, the Tier I capital requirement is 1%
to 2% above the stated minimum. The FDIC also requires the Bank to have a ratio
of total capital to risk-weighted assets of 8%, of which at least 4% must be in
the form of Tier I capital. The NC Administrator requires a net worth equal to
at least 5% of total assets. The Bank complied with all of the capital
requirements at December 31, 2000 and 1999.

The following is a reconciliation of the Bank's capital in accordance with
generally accepted accounting principles (GAAP) to the components of regulatory
capital at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                               2000 - Bank Only
                                     -----------------------------------------------------------------
                                        Leverage           Tier I                             N.C.
                                        Ratio of        Risk-Adjusted     Risk-Based      Savings Bank
                                     Tier I Capital        Capital          Capital          Capital
                                     -----------------------------------------------------------------
                                                           (Dollars in Thousands)
<S>                                  <C>               <C>              <C>               <C>
Equity (GAAP)                        $       31,702    $      31,702    $       31,702    $     31,702
Unrealized loss on securities
   available for sale                             -                -                 -               -
Supplemental capital items:
   General valuation allowance                    -                -               905             905
                                     -----------------------------------------------------------------
Regulatory capital                           31,702           31,702            32,607          32,607
Minimum capital requirement                   4,571            2,459             6,557           7,619
                                     -----------------------------------------------------------------
Excess regulatory capital            $       27,131    $      29,243    $       26,050    $     24,988
                                     =================================================================
Average assets                       $      152,381                                       $    152,381
                                     ==============                                       ============
Risk-weighted assets                                   $      81,962    $       81,962
                                                       ===============================
Capital as a percentage
   of assets:
     Actual                                   20.80%           38.68%            39.78%          21.40%
     Required                                  3.00%            3.00%             8.00%           5.00%
                                     -----------------------------------------------------------------
Excess                                        17.80%           35.68%            31.78%          16.40%
                                     =================================================================
</TABLE>

                                       40
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 8.   Stockholders' Equity (Continued)

<TABLE>
<CAPTION>
                                                                      1999 -   Bank Only
                                       --------------------------------------------------------------------------------
                                          Leverage             Tier I                                        N.C.
                                          Ratio of          Risk-Adjusted           Risk-Based           Savings Bank
                                       Tier I Capital          Capital                Capital               Capital
                                       --------------------------------------------------------------------------------
                                                                  (Dollars in Thousands)
<S>                                    <C>                  <C>                   <C>                   <C>
Equity (GAAP)                          $       31,353       $        31,353       $         31,353      $        31,353
Unrealized loss on securities
  available for sale                               10                    10                     10                   10
Supplemental capital items:
  General valuation allowance                       -                     -                    898                  898
                                       --------------------------------------------------------------------------------
Regulatory capital                             31,363                31,363                 32,261               32,261
Minimum capital requirement                     4,257                 2,340                  6,240                7,094
                                       --------------------------------------------------------------------------------
Excess regulatory capital              $       27,106       $        29,023       $         26,021      $        25,167
                                       ================================================================================
Average assets                         $      141,884                                                   $       141,884
                                       ==============                                                   ===============
Risk-weighted assets                                        $        77,996       $         77,996
                                                            ===============       ================
Capital as a percentage
  of assets:
     Actual                                     22.10%                40.21%                 41.36%               22.74%
     Required                                    3.00%                 3.00%                  8.00%                5.00%
                                       --------------------------------------------------------------------------------
Excess                                          19.10%                37.21%                 33.36%               17.74%
                                       ================================================================================
</TABLE>

A ratio of 4% of total assets was used for purposes of computing the minimum
required leverage ratio of Tier I Capital.

As of December 31, 2000, the most recent notification from the FDIC categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
total capital to risk weighted assets of 10%, Tier I Capital to risk weighted
assets of 6% and Tier I Capital to total assets of 5% or $8,196,000, $4,918,000
and $7,299,000, respectively. There are no conditions or events since the
notification that management believes have changed the Bank's category.

                                       41
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 9.   Income Tax Matters

Under the Internal Revenue Code, the Bank is allowed a special bad debt
deduction related to additions to the tax bad debt reserve established for the
purpose of absorbing losses. The Bank is required to compute such deductions
using an experience method. The Bank's tax bad debt deduction was $-0-, $-0-and
$3,000 in 2000, 1999 and 1998, respectively.

The Bank will also have to recapture its excess tax bad debt reserves which have
accumulated since 1988, amounting to approximately $67,000, over a six year
period. The tax associated with the recaptured reserve is approximately $26,000.
The recapture was scheduled to begin with the Bank's 1996 year, but was delayed
two years because the Bank originated a required minimum level of residential
mortgage loans during 1996 and 1997. Deferred income taxes have been previously
established for the taxes associated with the recaptured reserves and the
ultimate payment of the related taxes will not result in a charge to earnings.
The amount of reserve was $11,000 for each of the years ended December 31, 2000
and 1999 and the $4,000 for the year ended December 31, 1998.

Deferred taxes have been provided for certain increases in the Bank's tax bad
debt reserves subsequent to 1987 which are in excess of recorded book loan loss
allowances. At December 31, 2000 and 1999, retained earnings contain certain
historical additions to the bad debt reserve for income tax purposes of
approximately $3,816,000, the balance prior to 1988, for which no deferred taxes
have been provided because the Bank does not intend to use these reserves for
purposes other than to absorb losses. If this pre-1988 reserve is used for
purposes other than to absorb losses or adjustments arising from the carryback
of net operating losses, income taxes may be imposed at the then existing rates.
The unrecorded deferred income tax liability on the above amount was
approximately $1,493,000 as of December 31, 2000 and 1999.

                                       42
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 9.   Income Tax Matters (Continued)

The tax effects of temporary differences that gave rise to significant portions
of the net deferred tax asset in the statement of financial condition were as
follows at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                     2000                 1999
                                               -------------------------------------
<S>                                            <C>                  <C>
Deferred tax assets:
  Unrealized loss on securities                $             -      $          6,000
  Interest income on non performing assets              16,000                19,000
  Deferred compensation                                965,000               956,000
  Allowance for loan losses                            350,000               347,000
  Pension plan contribution                            105,000               147,000
  Accrued expenses                                       4,000                     -
  Management recognition plan                           97,000                67,000
                                               -------------------------------------
                                                     1,537,000             1,542,000
                                               -------------------------------------
Deferred tax liabilities:
  Property and equipment                               124,000               115,000
  FHLB stock dividends                                 135,000               136,000
  Deferred loan fees                                    55,000                47,000
  Tax bad debt reserves                                 14,000                18,000
  FHLB accrued dividend                                  9,000                 7,000
                                               -------------------------------------
                                                       337,000               323,000
                                               -------------------------------------
     Net deferred tax asset                    $     1,200,000      $      1,219,000
                                               =====================================
</TABLE>

At December 31, 2000 and 1999, no valuation allowance was recorded for deferred
tax assets.

Income tax expense (credits) for the year ended December 31, 2000, 1999 and 1998
consists of the following:

<TABLE>
<CAPTION>
                                        2000              1999             1998
                                   -------------------------------------------------
<S>                                <C>               <C>               <C>
Current                            $     744,000     $     811,000     $   1,234,000
Deferred                                  13,000             6,000          (195,000)
                                   -------------------------------------------------
                                   $     757,000     $     817,000     $   1,039,000
                                   =================================================
</TABLE>

                                       43
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 9.   Income Tax Matters (Continued)

A reconciliation of the federal income tax rate to the effective tax rate for
the year ended December 31, 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                        2000        1999         1998
                                                       -------------------------------
<S>                                                    <C>          <C>          <C>
Statutory federal income tax rate                       34.0%       34.0%        34.0%
Increases (decreases) in taxes resulting from:
Nontaxable income                                       -4.1%       -3.3%        -4.5%
Nondeductible expense                                    5.0%        3.0%           -
State income tax, net of federal benefit                 2.3%        2.6%         2.3%
Other                                                    0.5%        0.8%         0.2%
                                                       -------------------------------
Effective tax rate                                      37.7%       37.1%        32.0%
                                                       ===============================
</TABLE>

Note 10.  Employee Stock Ownership Plan

The Bank has established an ESOP to benefit all qualified employees. The ESOP
purchased 53,958 shares of common stock in the open market subsequent to the
Conversion with proceeds received from a loan from the Company. The ESOP
purchased 21,240 additional shares with proceeds from the return of capital
dividend paid by the Company in 2000.

The Company's note receivable is to be repaid based upon 15 annual installments
of principal and interest on December 31 of each year through December 31, 2012.
Interest is based upon the prime rate, which will be adjusted and paid annually.
The note may be prepaid without penalty. The unallocated shares of stock held by
the ESOP are pledged as collateral for the debt. The ESOP is funded by
contributions made by the Bank in amounts sufficient to retire the debt. The
note receivable is presented as a reduction of stockholders' equity and had an
outstanding balance of $3,468,000 and $3,725,000 at December 31, 2000 and
December 31, 1999, respectively.

Shares are released as the debt is repaid and earnings from the common stock
held by the ESOP are allocated among participants on the basis of compensation
in the year of allocation. Benefits become 100% vested after five years of
credited service. Forfeitures of nonvested benefits will be reallocated among
remaining participating employees in the same proportion as contributions.

Dividends on unallocated shares may be used by the ESOP to repay the debt to the
Company and are not reported as dividends but as additional compensation expense
in the financial statements. Dividends on allocated or committed to be allocated
shares may also be used to repay the debt to the Company and are reported as
dividends in the financial statements. During the years ended December 31, 2000
and 1999, $65,000 and $21,000, respectively, was amortized as compensation
expense that related to the unearned compensation recorded as a result of the
return of capital dividends paid on unallocated shares in 1999.

                                       44
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 10.  Employee Stock Ownership Plan (Continued)

Expenses of $67,000, $173,000 and $162,000 have been incurred during 2000, 1999,
and 1998, respectively, in connection with the ESOP. The expenses include, in
addition to the cash contribution necessary to fund the ESOP, $(255,000),
$(144,000) and $(33,000) for 2000, 1999, and 1998, respectively, which
represents the difference between the fair value of the shares which have been
released or committed to be released to participants, and the cost of these
shares to the ESOP. The Bank has debited this amount to paid-in capital and
reduced the expense in accordance with the provisions of AICPA Statement of
Position 93-6. The related income tax benefit of $74,000, $47,000 and $-0- for
2000, 1999 and 1998, respectively have been credited to paid-in capital.

The ESOP has a put option which requires the Company to repurchase its common
stock from participants in the ESOP who are eligible to receive benefits under
the terms of the plan and elect to receive cash in exchange for their common
stock. The potential commitment for the put option is $681,000 at December 31,
2000 based on the fair value of the 16,805 shares released of $40.50 per share.
The fair value of the unallocated shares is $2,365,000 at December 31, 2000.
This commitment will fluctuate based on the fair value of the shares.

Note 11.  Management Recognition Plan and Stock Option Plan

The Company's stockholders approved the Company's Stock Option Plan and the
Bank's Management Recognition Plan and Trust (the "MRP") on January 26, 1999.
The Stock Option Plan reserves for issuance up to 67,447 stock options to
certain officers, directors, and employees either in the form of incentive stock
options or nonqualified stock options. The exercise price of the stock options
may not be less than the fair value of the Company's common stock at date of
grant. The options granted to employees, which vest at the rate of 25% annually
beginning at the date of grant, were all granted in 1999 and expire in 2009.
Options granted to non-employee directors vested immediately on the date of
grant. The weighted average fair value of the options on the grant date was
$31.00 per share. As permitted under the generally accepted accounting
principles, grants under the plan will be accounted for following the provisions
of APB Opinion No. 25 and its related interpretations. Accordingly, no
compensation cost has been recognized for grants made to date. Had compensation
cost been determined based on the fair value method prescribed in FASB Statement
No. 123, the pro forma effect on reported net income would be as follows for the
years ended December 31:

                                             2000              1999
                                        -----------------------------
Net income
   As reported                          $  1,250,000    $   1,386,000
   Pro forma                               1,127,000        1,179,000
Earnings per share
   As reported
     Basic                              $       1.99    $        2.20
     Diluted                                    1.97             2.20
   Pro forma
     Basic                              $       1.79    $        1.86
     Diluted                                    1.77             1.86

                                       45
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 11.  Management Recognition Plan and Stock Option Plan (Continued)

In determining the fair value of the option grant as prescribed in Statement No.
123, the Black-Scholes option pricing model was used with the following
assumptions: a risk-free interest rate of 6.43%, expected lives of 10 years,
expected volatility of 54.55% and expected dividends of $2.00 per year.

At December 31, 2000, 58,131 options have been granted at an exercise price of
$31.00, of which 34,124 options are currently exercisable. No options have been
exercised to date, and all options granted are outstanding at December 31, 2000.

The MRP reserved for issuance 26,979 shares of common stock to certain officers,
directors, and employees at the time of the adoption. The Company issued 24,281
shares and 400 shares to fund the MRP on January 26, 1999 and January 26, 2000,
respectively. The restricted common stock under the MRP vests at the rate of 25%
annually beginning at the date of grant. The expense related to the vesting of
the MRP totaled $371,000 for the year ended December 31, 2000 and $1,109,000 for
the year ended December 31, 1999, which includes $295,000 for dividends paid in
cash on unvested MRP shares in 1999.

Note 12.  Earnings Per Share

Earnings per share has been calculated in accordance with FASB Statement No.
128, Earnings Per Share. For purposes of this computation, the number of shares
of common stock purchased by the Bank's employee stock ownership plan which have
not been allocated to participant accounts are not assumed to be outstanding.
The following are reconciliations of the amounts used in the per share
calculations for 2000 and 1999, which are the years the Company was in
operation:

<TABLE>
<CAPTION>
                                          For the Year Ended December 31, 2000
                                      ---------------------------------------------
                                         Income           Shares         Per Share
                                       (Numerator)    (Denominator)       Amount
                                      ---------------------------------------------
<S>                                   <C>             <C>              <C>
Basis EPS
Income available to stockholders      $  1,250,000       629,049       $       1.99
                                                                       ============
Effect of dilutive securities
Stock options                                    -         6,137
                                      --------------------------
Dilutive EPS
Income available to stockholders      $  1,250,000       635,186       $       1.97
                                      =============================================
</TABLE>

                                       46
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 12.  Earnings Per Share (Continued)

                                        For the Year Ended December 31, 1999
                                      ----------------------------------------
                                         Income       Shares        Per Share
                                      (Numerator)  (Denominator)      Amount
                                      ----------------------------------------
Basis EPS
Income available to stockholders      $1,386,000        630,442    $      2.20
                                                                   ===========
Effect of dilutive securities
Stock options                                --             233
                                      -------------------------

Dilutive EPS
Income available to stockholders      $1,386,000        630,675    $      2.20
                                      ========================================

Note 13.  Commitments, Contingencies and Related Party Transactions

In addition to undisbursed loan funds outstanding, the Bank has mortgage loan
commitments and unused home equity loans and lines of credit outstanding at
December 31, 2000. Commitments, which are disbursed subject to certain
limitations, extend over varying periods of time with the majority subject to
disbursement over a 6-month period. A summary of these commitments, except for
undisbursed loan funds is as follows:

<TABLE>
<CAPTION>
                                               Fixed Rate   Variable Rate       Total
                                               -----------------------------------------
<S>                                            <C>          <C>             <C>
Commitments to extend credit, mortgage loans   $  394,000   $           -   $    394,000
Unused home equity loans and lines of credit            -       7,314,000      7,314,000
</TABLE>

The Bank has made loans to its officers and directors in the normal course of
business. The following is an analysis of the loans to officers and directors
for the year ended December 31, 2000:

Balance, beginning                                               $    1,447,000
Originations                                                              7,000
Payments                                                                (43,000)
                                                                 --------------
Balance, ending                                                  $    1,411,000
                                                                 ==============

Additionally, officers and directors maintain deposits with the Bank in the
normal course of business. Such deposits amounted to approximately $1,642,000 at
December 31, 2000.

                                       47
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 13. Commitments, Contingencies and Related Party Transactions (Continued)

The Bank has entered into employment agreements with certain key employees in
order to establish their duties and compensation and to provide for their
continued employment with the Bank. The agreements will provide for an initial
term of employment of three years. Commencing on the first anniversary date and
continuing on each anniversary date thereafter, following a performance
evaluation of the employee, each agreement may be extended for an additional
year so that the remaining term shall be three years, unless written notice of
non-renewal is given by the Board of Directors. In the event of a change in
control of the Company, the employees are to receive a minimum 6% salary
increase plus an amount equal to the average bonus from the two previous years.

Note 14.  Fair Value of Financial Instruments

The following table reflects a comparison of carrying amounts and the fair
values of the financial instruments as of December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                    2000                             1999
                                       --------------------------------------------------------------
                                           Carrying         Fair          Carrying          Fair
                                            Value          Value            Value          Value
                                       --------------------------------------------------------------
<S>                                    <C>            <C>              <C>             <C>
Financial assets:
   Cash
     Interest-bearing deposits         $  10,405,000  $   10,405,000   $    6,912,000  $    6,912,000
     Noninterest-bearing deposits            407,000         407,000        1,502,000       1,502,000
   Certificates of deposit                   100,000         100,000          100,000         100,000
   Investments                             4,249,000       4,270,000        4,595,000       4,571,000
   Loans receivable                      130,518,000     133,933,000      124,863,000     123,714,000
   Accrued interest receivable               974,000         974,000          825,000         825,000
   FHLB stock                              1,188,000       1,188,000        1,060,000       1,060,000

Financial liabilities:
   Deposits                              104,369,000     104,816,000       90,563,000      87,680,000
   Advances from borrowers
     for taxes and insurance                  96,000          96,000           76,000          76,000
   Note payable                            4,000,000       4,000,000       10,500,000      10,500,000
   FHLB advances                           5,000,000       5,000,000        5,000,000       5,000,000
   Accounts payable and other
     liabilities                             755,000         755,000          807,000         807,000
</TABLE>

                                       48
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 14.  Fair Value of Financial Instruments (Continued)

The fair values utilized in the table were derived using the information
described below for the group of instruments listed. It should be noted that the
fair values disclosed in this table do not represent market values of all assets
and liabilities of the Company and, thus, should not be interpreted to represent
the market or liquidation value of the Company.

The following methods and assumptions were used by the Company in estimating the
fair value of its financial instruments:

Cash and certificates of deposits: The carrying amounts for cash and short-term
----------------------------------
instruments approximate their fair values.

Investment securities: Fair values for securities are based on quoted market
----------------------
prices, where available. If quoted market prices are not available, fair values
are based on quoted market prices of similar securities.

Loans receivable: The fair value of fixed rate loans is estimated by discounting
-----------------
the future cash flows, adjusted for prepayments, using the current rates at
which similar loans would be made to borrowers with similar credit ratings and
for the same remaining maturities. For variable rate loans that reprice
frequently and with no significant change in credit risk, fair values are equal
to carrying amounts. Management believes that the allowance for loan losses is
an appropriate indication of the applicable credit risk associated with
determining the fair value of its loan portfolio and has been deducted from the
estimated fair value of loans.

Accrued interest receivable, advances from borrowers for taxes and insurance,
-----------------------------------------------------------------------------
accounts payable and other liabilities and deferred compensation: The fair value
-----------------------------------------------------------------
is the amount receivable on demand at the statement of financial condition date.

Deposits: The fair value of demand deposits, savings accounts, and certain money
---------
market deposits is the amount payable on demand at the statement of financial
condition. The fair value of fixed maturity certificates of deposit are
estimated based upon the discounted value of contractual cash flows using rates
currently offered for deposits with similar remaining maturities.

Note payable and FHLB advances: The fair values of the note payable and FHLB
-------------------------------
advances are equal to their recorded book values due to the market rates of
interest and short-term nature.

Off-statement of financial condition instruments: Fair values for the Bank's
-------------------------------------------------
off-statement of financial condition instruments (loan commitments) are based on
fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit standings. The
fair value for such commitments is nominal.

                                       49
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 15.  Parent Company Financial Data

The following are condensed financial statements for Coddle Creek Financial
Corp. as of and for the years ended December 31, 2000 and 1999:

                   Condensed Statements of Financial Condition
                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                 2000                    1999
                                                           ----------------------------------------
<S>                                                        <C>                    <C>
Assets:
  Cash                                                     $     5,961,000        $      12,113,000
  Certificates of Deposit                                          100,000                        -
  Investment in Mooresville Savings Bank, S.S.B.                31,702,000               31,353,000
  Securities available for sale                                  1,418,000                1,772,000
  Other assets                                                     198,000                  154,000
                                                           ----------------------------------------
          Total assets                                     $    39,379,000        $      45,392,000
                                                           ========================================

Note payable                                               $     4,000,000        $      10,500,000
Accounts payable and other liabilities                             371,000                  447,000
                                                           ----------------------------------------
          Total liabilities                                      4,371,000               10,947,000
                                                           ----------------------------------------
Stockholders' Equity:
     Additional paid-in capital                                 22,889,000               23,057,000
     Accumulated other comprehensive income (loss)                  (1,000)                 (21,000)
     Unearned ESOP shares                                       (3,468,000)              (3,725,000)
     Management recognition plan                                  (370,000)                (728,000)
     Unearned compensation                                        (774,000)                (839,000)
     Retained earnings                                          16,732,000               16,701,000
                                                           ----------------------------------------
          Total stockholders' equity                            35,008,000               34,445,000
                                                           ----------------------------------------
          Total liabilities and stockholders' equity       $    39,379,000        $      45,392,000
                                                           ========================================
</TABLE>

                         Condensed Statements of Income
                 For the Years Ended December 31, 2000 and 1999

<TABLE>
<S>                                                        <C>                    <C>
Equity in earnings of Mooresville Savings Bank, S.S.B.     $     1,492,000        $       1,352,000
Interest income                                                    362,000                  427,000
Interest expense                                                  (647,000)                (208,000)
Other income                                                       134,000                        -
Other expense                                                      (91,000)                (185,000)
                                                           ----------------------------------------
       Net income                                          $     1,250,000        $       1,386,000
                                                           ========================================
</TABLE>

                                       50
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 15.  Parent Company Financial Data (Continued)

                       Condensed Statements of Cash Flows
                     Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                  2000             1999
                                                              ----------------------------
<S>                                                           <C>             <C>
Cash Flows from Operating Activities:
Net income                                                    $  1,250,000    $  1,386,000
Adjustments to reconcile net income to net cash used in
  operating activities:
  Equity in earnings of Mooresville Savings Bank, S.S.B         (1,492,000)     (1,352,000)
  Changes in assets and liabilities:
     Increase in other assets                                      (44,000)        (50,000)
     Decrease in accounts payable and other liabilities                 --         (17,000)
                                                              ----------------------------
       Net cash used in operating activities                      (286,000)        (33,000)
                                                              ----------------------------
Cash Flows from Investing Activities:
  Upstream dividend from Mooresville Savings Bank, S.S.B         1,407,000       1,295,000
  Purchases of certificates of deposit                            (100,000)             --
  Purchases of securities available for sale                            --        (500,000)
  Proceeds from maturities of securities available for sale        365,000       3,623,000
  Principal payment received on note receivable from ESOP          257,000         296,000
                                                              ----------------------------
       Net cash provided by investing activities                 1,929,000       4,714,000
                                                              ----------------------------
Cash Flows from Financing Activities,
  Proceeds from note payable                                            --      12,000,000
  Payments on note payable                                      (6,500,000)     (1,500,000)
  Cash dividends paid                                           (1,295,000)    (13,044,000)
                                                              ----------------------------
       Net cash used in financing activities                    (7,795,000)     (2,544,000)
                                                              ----------------------------
Net increase (decrease) in cash                                 (6,152,000)      2,137,000
  Cash - beginning                                              12,113,000       9,976,000
                                                              ----------------------------
  Cash - ending                                               $  5,961,000    $ 12,113,000
                                                              ============================

Supplemental Disclosures of Noncash Transactions
  Changes in dividends accrued                                $     76,000    $    278,000
</TABLE>

                                       51
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 16. Selected Quarterly Financial Data (Unaudited)

The following tables present years summarized quarterly data for the years ended
December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                          Year Ended December 31, 2000
                                               Three Months Ended
                        March 31           June 30       September 30       December 31
                       ----------------------------------------------------------------
<S>                    <C>               <C>             <C>                <C>
Net interest income    $1,362,000        $1,411,000      $ 1,343,000        $ 1,325,000
Other income              117,000            57,000           73,000             60,000
Other expense           1,148,000         1,197,000        1,120,000          1,033,000
                       ----------------------------------------------------------------
Net income             $  331,000        $  271,000      $   296,000        $   352,000
                       ================================================================

Earnings per share     $     0.53        $     0.43      $      0.47        $      0.56
                       ================================================================

<CAPTION>
                                          Year Ended December 31, 1999
                                               Three Months Ended
                         March 31          June 30       September 30       December 31
                       ----------------------------------------------------------------
<S>                    <C>               <C>             <C>                <C>
Net interest income    $1,507,000 /(1)/  $1,506,000/(1)/ $ 1,587,000 /(1)/  $ 1,393,000
Other income               50,000            55,000           59,000             53,000
Other expense           1,357,000 /(2)/   1,119,000        1,309,000 /(3)/    1,039,000
                       ----------------------------------------------------------------
Net income             $  200,000        $  442,000      $   337,000        $   407,000
                       ================================================================

Earnings per share     $     0.32        $     0.69      $      0.53        $      0.66
                       ================================================================
</TABLE>

(1)  Net interest income decreased subsequent to the quarter ended September 30,
     1999 due to additional interest expense incurred on borrowings to fund a
     special return of capital dividend that was declared on September 14, 1999.

(2)  Management Recognition Plan adopted on January 26, 1999 with 25% of shares
     issued vesting immediately upon adoption resulting in additional
     compensation expense.

(3)  Compensation expense for the quarter ended September 30, 1999 included
     $295,000 related to the special return of capital dividends that were paid
     on unvested MRP shares.

                                       52
<PAGE>

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY


NOTES TO FINANCIAL STATEMENTS
________________________________________________________________________________

Note 17.  Future Reporting Requirements

The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which the Company has not been required to adopt as of
December 31, 2000. This Statement, which is effective for fiscal years beginning
after June 15, 2000, establishes accounting and reporting standards for
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated forecasted
transaction. This Statement is not expected to have a significant impact on the
Company.

Note 18.  Subsequent Event

On January 2, 2001, the Company declared a special cash return of capital
dividend in the amount of $20.00 per share. The dividend is payable on January
24, 2001 to shareholders of record as of the close of business on January 19,
2001. The Company borrowed an additional $12,000,000 on its note payable to fund
the dividend.

                                       53
<PAGE>

<TABLE>
<CAPTION>
                                                   CORPORATE INFORMATION
<S>                                        <C>                                            <C>
                                                     EXECUTIVE OFFICERS:
       George W. Brawley, Jr.                          Dale W. Brawley                         Billy R. Williams
         President and CEO                        Executive Vice President                    Secretary/Controller

                                                         DIRECTORS:
       George W. Brawley, Jr.                          Dale W. Brawley                        Claude U. Voils, Jr.
Chairman of the Board, President and       Executive Vice President of Mooresville               Retired Chemist
  CEO of Mooresville Savings Bank                        Savings Bank                          of National Starch

           Jack G. Lawler                                Don E. Mills                            Donald R. Belk
        Retired President of                             Optometrist                      President of E.F. Belk & Son
            Taltronics                             Optometric Eye Care Center                 Electrical Contractors

       Stock Transfer Agent                                                           Annual Meeting
  Registrar and Transfer Company                                       The 2000 annual meeting of stockholders of
        10 Commerce Drive                                              Coddle Creek Financial Corp. will be held
       Cranford, NJ 07016                                               at 11:00 A.M. on April 26, 2001 at the
                                                                   Company's corporate office at 347 North Main Street,
                                                                                     Mooresville, NC.

       Special Legal Counsel                                                       Form 10-K
     Brooks, Pierce, McLendon,                              A copy of Form 10-K, including the attached financial
      Humphrey & Leonard, LLP                               statements and financial statement schedules, for
      2000 Renaissance Plaza                                the year ended December 31, 2000, as filed with
       230 North Elm Street                                 the Securities and Exchange Commission will be
       Greensboro, NC 27420                                 furnished without charge to the Company's stockholders
                                                            upon written request to Coddle Creek Financial Corp., 347
                                                            Main Street, P.O. Box 117, Mooresville, NC 28115
      Independent Auditors                                  Attn: George Brawley, President
     McGladrey & Pullen, LLP
      One Morrocroft Centre                                                         Corporate Office
6805 Morrison Boulevard, Suite 200                                               347 North Main Street
       Charlotte, NC 28211                                                            P.O. Box 117
                                                                                 Mooresville, NC 28115
</TABLE>

                                       54
<PAGE>

                            Common Stock Information

The Company had 699,156 shares of common stock outstanding at March 1, 2001,
which are held by 424 shareholders of record, not including the number of
persons or entities where stock is held in nominee or "street" name through
various brokerage firms or banks. The Company's common stock began trading on
December 31, 1997 and is traded on the over the counter market with quotations
available through the OTC Bulletin Board under the symbol "CDLC". Payment of
dividends by the Bank to the Company is subject to various restrictions. Under
applicable banking regulations, the Bank may not declare or pay a cash dividend
if the effect thereof would be to reduce its net worth to an amount less than
the minimum amount required by applicable federal and state regulations. In
addition, for the five year period following the consummation of the Bank's
stock conversion, which occurred on December 30, 1997, the Bank must obtain
written approval from the Administrator of the Savings Institution Division,
North Carolina Department of Commerce, before it can declare a cash dividend in
an amount in excess of one-half of the greater of (i) its net income for the
most recent fiscal year or (ii) the average of its net income for the most
recent fiscal year and not more than two of the immediately preceding fiscal
years, as applicable. Also, the Bank is not permitted to declare a cash dividend
of the effect thereof would be to cause its net worth to be reduced below the
amount required for the liquidation account established in connection with the
Bank's conversion from mutual to stock form. In connection with such conversion,
the Bank agreed with the FDIC that, during the first three years following the
conversion, neither the Company nor the Bank will pay any taxable dividend in
excess of current and retained earnings.

The following table reflects the stock trading and dividend payment frequency of
the Company for the years ended December 31, 2000 and 1999.

                           Dividends           Stock Price
                      --------------------------------------
                      Regular    Special     High       Low
                      --------------------------------------
2000
First Quarter         $  0.34    $     -    $33.00    $39.50
Second Quarter           0.61          -     34.00     31.00
Third Quarter            0.43          -     39.50     33.75
Fourth Quarter           0.53          -     41.25     37.00

1999

First Quarter         $  0.25    $     -    $69.00    $58.00
Second Quarter           0.53          -     64.00     56.00
Third Quarter            0.63      17.18     60.50     38.50
Fourth Quarter           0.64          -     41.00     29.00

                                       55