SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934.

     For the fiscal year ended June 30, 1999
                               -------------

|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
    ACT OF 1934

     For the transition period from ______ to _______.


                         Commission file number: 0-23521
                                                ---------


                           Great Pee Dee Bancorp, Inc.
                  --------------------------------------------
                 (Name of Small Business Issuer in Its Charter)


           Delaware                               56-2050592
 -------------------------------       ----------------------------------
 (State or Other Jurisdiction of      (I.R.S. Employer Identification Number)
 Incorporation or Organization)

       515 Market Street
     Cheraw, South Carolina                          29520
  ---------------------------                      ----------
  (Address of Principal Executive                  (Zip Code)
           Offices)

Securities registered under Section 12(b) of the Exchange Act: None
                                                              ------


Securities registered under Section 12(g)
  of the Exchange Act: Common Stock par value $.01 per share
                      --------------------------------------
                                 (Title of Class)

                                 (843) 537-7656
                              --------------------
                (Issuer's Telephone Number, Including Area Code)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

Yes   X                 No
    -----                  -----

         Check if there is no disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained to the best of the  registrant's  knowledge,  in  definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

         The  Issuer's  revenues  for the fiscal  year ended June 30,  1999 were
$5,151,802.

         The aggregate market value of the voting stock held by nonaffiliates of
the Registrant,  computed by reference to the average of the closing bid and ask
price  of such  stock  on the  Nasdaq  National  Market  on June  30,  1999  was
approximately $21,734,030.

         The number of shares  outstanding  of the Issuer's  Common  Stock,  the
issuer's  only  class of  outstanding  capital  stock,  as of June 30,  1999 was
2,085,953.



<PAGE>



         Documents Incorporated by Reference

         The  following  documents,  in  whole  or  in  part,  are  specifically
incorporated  by reference in the  indicated  Part of this Annual Report on Form
10-KSB:

I.   Portions of the Great Pee Dee Bancorp,  Inc.  Proxy  Statement for the 1999
     Annual Meeting of Shareholders  are  incorporated by reference into certain
     items of Part III.
II.  Portions  of the Great Pee Dee  Bancorp,  Inc.  Annual  Report for the 1999
     Annual Meeting of Shareholders  are  incorporated by reference into certain
     items of Part II.


















































<PAGE>



                                     PART I

Item 1.       Business
-------       --------

     Great Pee Dee Bancorp,  Inc.  (the  "Company")  was organized in September,
1997 at the  direction of the Board of Directors  of First  Federal  Savings and
Loan Association of Cheraw (the "Association"), for the purpose of acquiring all
of the capital stock to be issued by the  Association  in the  conversion of the
Association   from  the   mutual  to  the  stock  form  of   organization   (the
"Conversion").   The  Company  received  approval  from  the  Office  of  Thrift
Supervision  ("OTS") to become a savings and loan holding company and as such is
subject to  regulation by the OTS. The  Conversion  was completed as of December
31, 1997, the Company issued  2,182,125 shares of Common Stock, and received all
of the proceeds of the offering, or $21.8 million ($10.6 million of the proceeds
was  transferred  to the  Association  in exchange for the capital  stock of the
Association).   In  connection   with  the   Conversion,   the  Company   loaned
approximately  $1,745,700  to the Great Pee Dee  Bancorp,  Inc.  Employee  Stock
Ownership Plan and Trust ("ESOP") to enable the ESOP to purchase  174,570 shares
of the Company's  Common  Stock.  The primary  business  activity of the Company
consists of the operations of its wholly-owned subsidiary, the Association.

              The Company is a savings and loan holding company and the owner of
all of the issued and outstanding shares of capital stock of the Association. At
June 30,  1999 the  assets of the  Company  consisted  of its  ownership  of the
capital stock of the Association, the loan to the ESOP, an interest-bearing note
receivable  from the  Association  of $5.9  million,  and $450,000 of investment
securities.  The  Association is a member of the Federal Home Loan Bank ("FHLB")
of Atlanta. At June 30, 1999, the Company had consolidated total assets of $72.6
million,  total deposits of $41.3  million,  and  stockholders'  equity of $29.8
million.

              The  Association  was  originally  organized  in 1920 and became a
federally-chartered  savings  and loan  association  in 1935.  Since  then,  the
Association  has conducted  business  from its  full-service  office  located in
Cheraw,  South  Carolina.  The  Association's  principal  business  consists  of
attracting  deposits  from the general  public and  originating  fixed-rate  and
adjustable-rate  loans  secured  primarily  by first  mortgage  liens on one- to
four-family  residential  real estate.  The  Association's  deposit accounts are
insured up to applicable limits by the SAIF of the FDIC.

              The Association  believes that it has developed a reputation among
its loyal  customer  base  because of the  commitment  to  personal  service and
because  of strong  support of the local  community.  The  Association  offers a
number of financial services including:  (i) residential real estate loans; (ii)
construction  loans;  (iii) commercial real estate loans;  (iv) home improvement
loans;  (v) money  market  demand  accounts  ("MMDAs");  (vi)  passbook  savings
accounts;  (vii)  checking  accounts;  (viii) full  banking  services;  and (ix)
certificates of deposit.

Lending Activities

              The Association has historically  concentrated  lending activities
on the  origination  of loans secured by first  mortgage liens for the purchase,
construction  or refinancing of one- to four-family  residential  real property.
One- to four-family residential mortgage loans continue to be the major focus of
loan origination  activities,  representing  $55.4 million or 86.0% of the total
loan portfolio at June 30, 1999. The  Association  also offers  commercial  real
estate loans, construction loans and consumer loans. Loans secured by commercial
real  estate  totaled  approximately  $5.2  million  or 8.0% of the  total  loan
portfolio  at June 30,  1999.  Construction  loans  totaled  approximately  $4.2
million  or 6.5% of  total  loans as of June  30,1999.  Home  improvement  loans
totaled $1.5 million, or 2.4% of the total loan portfolio at June 30, 1999.



<PAGE>



              Loan  Portfolio   Data.   The  following   table  sets  forth  the
composition  of loan  portfolio by loan type and  security  type as of the dates
indicated,   including  a   reconciliation   of  gross  loans  receivable  after
consideration of the allowance for loan losses and loans in process.
<TABLE>
<CAPTION>

                                                                               At June 30,
                                                               -------------------------------------------
                                                                     1999                      1998
                                                                     ----                      ----
                                                               Amount   Percent          Amount   Percent
                                                               ------   -------          ------   -------
                                                                           (Dollars in Thousands)
<S>                                                           <C>          <C>          <C>          <C>
Type of loan:
  Real estate loans:
   One- to four-family residential...................         $55,385      85.99%       $50,900      89.66%
   Commercial........................................           5,159       8.01          3,153       5.55
   Construction......................................           4,185       6.49          3,759       6.62
   Home improvement loans............................           1,534       2.38          1,325       2.34
                                                              -------    -------        -------    -------
      Total real estate loans........................          66,263     102.87         59,137     104.17

Other loans:
   Commercial........................................             272       0.43             --         --
   Consumer..........................................             279       0.43             --         --
   Loans secured by deposits.........................             263       0.41             326       0.58
                                                              -------    -------        --------   --------
      Total other loans..............................             814       1.27             326       0.58

  Total loans........................................          67,077     104.14          59,463     104.75

Less:
   Construction loans in process.....................           2,018       3.13           2,161        3.81
   Allowance for losses..............................             444       0.69             354        0.62
   Deferred loan origination fees, net of costs......             204       0.32             180        0.32
                                                              -------    -------         -------    --------
      Total, net.....................................         $64,411     100.00%        $56,768     100.00%
                                                              =======    =======         =======     ======

</TABLE>

         The following  table sets forth certain  information  at June 30, 1999,
regarding the dollar amount of loans maturing in the loan portfolio based on the
earlier of their contractual terms to maturity or their repricing.  Demand loans
having no stated  schedule of repayments  and no stated  maturity and overdrafts
are  reported  as due in one year or less.  This  schedule  does not reflect the
effects of possible  prepayments  or enforcement  of  due-on-sale  clauses.  The
Association expects that prepayments will cause actual maturities to be shorter.
<TABLE>
<CAPTION>

                                                                    At June 30, 1999
                                          ---------------------------------------------------------------------
                                                         More Than      More Than
                                          1 Year         1 Year to     3 Years to       More Than
                                          or Less         3 Years        5 Years         5 Years         Total
                                          ---------    -----------     -----------    -----------        -----
                                                                       (In Thousands)
<S>                                     <C>            <C>             <C>            <C>            <C>
Real estate loans:
     Adjustable.......................  $  23,690      $   1,006       $      37      $     330      $  25,063
     Fixed............................      1,981          1,087           2,193         33,717         38,978
                                        ---------      ---------       ---------       --------       --------
         Total real estate loans......     25,671          2,093           2,230         34,047         64,041

Other loans...........................        271             62             193            288            814
                                        ---------      ----------      ---------      ---------      ---------
              Total loans.............     25,942          2,115           2,423         34,335         64,855
Less:
  Allowance for loan losses...........       (178)           (15)            (17)          (234)          (444)
                                         ---------     ----------       ---------      ---------      ---------
     Total............................    $25,764         $2,140          $2,406        $34,101        $64,411
                                          =======         ======          ======        =======        =======
</TABLE>


         As of June 30, 1999,  the dollar amount of all loans due after one year
that have fixed  interest  rates was $37.0  million.  None of the  Association's
loans with  floating or adjustable  interest  rates are shown as being due after
one year.


                                        2

<PAGE>



         One-  to  Four-Family  Residential  Loans.  The  Association's  primary
lending activity consists of the origination of one- to four-family  residential
mortgage  loans  secured by property  located in the primary  market  area.  The
Association  generally originates  one-to-four family residential mortgage loans
in amounts up to 95% of the lesser of the  appraised  value or  purchase  price,
with private mortgage insurance required on loans with a loan-to-value  ratio in
excess of 80%. The  Association  originates  and retains  fixed rate loans which
provide for the payment of principal and interest for up to an 18-year period.

         The Association also offers adjustable-rate mortgage ("ARM") loans. The
interest rate on ARM loans is indexed to the cost of funds index  ("COFI").  The
COFI reacts to changes in market  interest rates more slowly than other indices.
Consequently,  ARM loans may not fully reflect  current market interest rates at
the time they reprice.  A substantial  portion of the ARM loans in the portfolio
at June 30, 1999 provide for maximum rate adjustments per year and over the life
of the loan of 1% and 5%, respectively. Residential ARMs are amortized for terms
up to 30 years.

         ARM loans decrease the risk  associated  with changes in interest rates
by  periodically  repricing,  but involve other risks because as interest  rates
increase, the underlying payments by the borrower increase,  thus increasing the
potential for default by the borrower.  At the same time, the  marketability  of
the underlying  collateral may be adversely  affected by higher  interest rates.
Upward  adjustment  of the  contractual  interest  rate is also  limited  by the
maximum  periodic and lifetime  interest rate  adjustment  permitted by the loan
documents,  and,  therefore,  is  potentially  limited in  effectiveness  during
periods of rapidly rising interest rates. At June 30,1999,  approximately  46.2%
of one- to four-family residential loans had adjustable rates of interest.

         All of the  one-to-four  family  residential  mortgage  loans  that the
Association originate includes "due-on-sale" clauses, which give the Association
the right to declare a loan immediately due and payable in the event that, among
other  things,  the borrower  sells or otherwise  disposes of the real  property
subject to the mortgage  and the loan is not repaid.  However,  the  Association
occasionally  permit  assumptions  of existing  residential  mortgage loans on a
case-by-case basis.

         At  June  30,  1999,  approximately  $55.4  million,  or  86.0%  of the
portfolio  of  loans,  consisted  of  one-  to  four-family  residential  loans.
Approximately  $271,000,  or 0.42% of total loans (which were comprised of eight
loans   secured  by  one-  to   four-family   properties),   were   included  in
non-performing assets as of that date.

         Commercial Real Estate Loans.  At June 30, 1999, $5.2 million,  or 8.0%
of the  total  loan  portfolio,  consisted  of  commercial  real  estate  loans.
Commercial  real estate loans are secured by  churches,  office  buildings,  and
other commercial  properties.  The Association  generally  originates fixed rate
commercial  real estate loans with maximum  terms of 15 years.  The  Association
also will originate  adjustable  rate commercial real estate loans with terms of
up to 30 years.  The interest rate on  adjustable  rate  commercial  real estate
loans is indexed to the COFI with maximum  loan-to-value  ratios of 80%. At June
30,1999, the largest commercial loan had a principal balance of $575,000 and was
secured by a funeral  home.  On June 30,  1999,  there were no  commercial  real
estate loans included in nonperforming assets.

         Loans secured by commercial real estate  generally are larger than one-
to  four-family  residential  loans  and  involve  a  greater  degree  of  risk.
Commercial  real  estate  loans  often  involve  large loan  balances  to single
borrowers  or groups of related  borrowers.  Payments on these loans depend to a
large degree on results of operations  and  management of the properties and may
be affected to a greater extent by adverse  conditions in the real estate market
or the economy in general.  Accordingly, the nature of the loans makes them more
difficult for management to monitor and evaluate.

         Construction  Loans.  The Association  offers  construction  loans with
respect to  residential  and commercial  real estate and, in certain  cases,  to
builders or developers  constructing  such  properties  on a  speculative  basis
(i.e., before the  builder/developer  obtains a commitment from a buyer).  Funds
are disbursed to borrowers upon the

                                        3

<PAGE>



successful  completion of particular  stages of construction.  Typically,  loans
made to builders who do not have a commitment for the sale of the property under
construction  will  be for a  term  of no  more  than  six  months.  Except  for
construction loans made on speculative basis, upon the successful  completion of
construction  the loan can be converted  into permanent  financing.  At June 30,
1999,  $4.2  million,  or  6.5%  of  the  total  loan  portfolio,  consisted  of
construction  loans. The largest  construction  loan had a principal  balance of
$202,000 on June 30, 1999 and was  secured by a one- to  four-family  residence.
None of the construction  loans were included in  non-performing  assets on that
date.

         Construction  loans  generally  match  the  term  of  the  construction
contract and are written with interest  calculated on the amount disbursed under
the loan. The maximum  loan-to-value ratio for a construction loan is based upon
the nature of the construction  project.  For example, a construction loan for a
one-to four-family  residence may be written with a maximum  loan-to-value ratio
of 95% with mortgage  insurance.  Inspections are made prior to any disbursement
under a construction loan.

         While  providing the Association  with a comparable,  and in some cases
higher,  yield than a conventional  mortgage loan,  construction loans involve a
higher  level of risk.  For  example,  if a  project  is not  completed  and the
borrower  defaults,  the  Association  may have to hire  another  contractor  to
complete the project at a higher cost. Also, a project may be completed, but may
not be salable, resulting in the borrower defaulting and taking the title to the
project.

         Home  Improvement  Loans.  At June 30,  1999,  home  improvement  loans
totaled  $1.5  million,  or 2.4% of total  loans.  Home  improvement  loans  are
typically secured by second mortgages on the secured property. At June 30, 1999,
three  home  improvement  loans  with an aggregate  balance  of  $7,548  were
included  in non-performing assets.

         Origination,  Purchase and Sale of Loans. The Association  historically
has originated  mortgage loans pursuant to its own underwriting  standards which
do not conform with the standard criteria of Freddie Mac or the FNMA because the
Association  does not require  current  property  surveys in most cases.  In the
event that the Association begins originating  fixed-rate  residential  mortgage
loans for sale to  Freddie  Mac in the  secondary  market,  such  loans  will be
originated  in accordance  with the  guidelines  established  by Freddie Mac and
could be sold after they are originated.

         The  Association  confines  loan  origination  activities  primarily to
Chesterfield  County  and  the  surrounding  counties.   Loan  originations  are
generated from  referrals  from existing  customers,  real estate  brokers,  and
advertising.

         The  Association's  loan  approval  process is  intended  to assess the
borrower's ability to repay the loan, the viability of the loan and the adequacy
of the value of the property that will secure the loan. To assess the borrower's
ability to repay, the Association  studies the employment and credit history and
information  on  the  historical  and  projected  income  and  expenses  of  its
mortgagors. All mortgage loans are approved by the loan committee.

         The  Association  generally  requires  appraisals  on all real property
securing loans and requiring an attorney's opinion and a valid lien on mortgaged
real  estate.  Appraisals  for all real  property  securing  mortgage  loans are
performed by independent  appraisers  who are  state-licensed.  The  Association
requires fire and extended  coverage  insurance in amounts at least equal to the
principal  amount of the loan and also  require  flood  insurance to protect the
property  securing  its  interest  if the  property  is in a  flood  plain.  The
Association  also  generally   requires  private  mortgage   insurance  for  all
residential  mortgage loans with  loan-to-value  ratios of greater than 80%. The
Association  requires escrow accounts for insurance premiums and taxes for loans
that  require  private  mortgage  insurance.  Mr. Watts and Mr. Long may approve
loans up to $100,000.  The Association's  Loan Committee may approve loans up to
$250,000  and any loan in excess of  $250,000  must be  approved by the Board of
Directors.

         Underwriting  standards  for home  improvement  loans are  intended  to
protect  against some of the risks  inherent in making home  improvement  loans.
Borrower paying habits and financial strengths are important considerations.

                                        4

<PAGE>




         The  Association's  one-to-four  family  residential loan  originations
during the year ended June 30, 1999  totaled  $17.4  million,  compared to $13.0
million during the year ended June 30, 1998.

Non Performing and Problem Assets

         After a  mortgage  loan  becomes  30 days  past  due,  the  Association
delivers a computer  generated  delinquency  notice to the borrower.  When loans
become 60 days past due, the Association  sends additional  delinquency  notices
and make personal  contact by letter or telephone with the borrower to establish
acceptable repayment schedules. When a mortgage loan is 90 days delinquent,  the
Association  will have either  entered  into a workout plan with the borrower or
refer the matter to the  Association's  attorney for  collection.  Management is
authorized  to  commence  foreclosure  proceedings  for any loan  upon  making a
determination that it is prudent to do so.

         The  Association  reviews  mortgage  loans on a regular basis and place
such loans on a non-accrual  status when they are specifically  determined to be
impaired  or when they  become 90 days  delinquent.  When  loans are placed on a
non-accrual  status,  unpaid accrued interest is written off, and further income
is recognized only to the extent received.

         Nonperforming  Assets.  At June 30, 1999,  $304,000,  or 0.41% of total
assets, were nonperforming (nonperforming loans and non-accruing loans). At June
30, 1999,  loans secured by real estate accounted for $271,000 of non performing
assets.  The Association had real estate owned ("REO")  properties in the amount
of $33,000 as of June 30, 1999.

         The table below sets forth the amounts and categories of  nonperforming
assets  (nonperforming loans and foreclosed real estate) for the last two years.
It is the Association's  policy that all earned but uncollected  interest on all
loans be  reviewed  monthly  to  determine  if any  portion  thereof  should  be
classified  as  uncollectible  for any  loan  past  due in  excess  of 90  days.
Delinquent loans that are 90 days or more past due are considered  nonperforming
assets. During the periods presented,  the Association did not have any troubled
debt restructurings.
<TABLE>
<CAPTION>

                                                                                        At June 30,
                                                                                --------------------------
                                                                                  1999             1998
                                                                                --------         ---------
                                                                                  (Dollars In Thousands)

<S>                                                                             <C>              <C>
Loans not accruing interest............................................         $  271           $   321
Accruing loans 90 days or more past due................................             --                --
   Total nonperforming loans...........................................            271               321
Foreclosed real estate.................................................             33                 9
                                                                                ------           -------
   Total nonperforming assets..........................................         $  304           $   330
                                                                                ======           =======
   Nonperforming assets to total assets................................           0.41%             0.48%
                                                                                ======           =======
</TABLE>


         Interest  on loans of  $10,000  would have been  reported  for the year
ended June 30,1999 if the non-performing loans summarized above had been current
in accordance with their original terms.  Interest totaling $12,000 was reported
on nonperforming loans for the year ended June 30, 1999.

         Classified  Assets.  Federal  regulations and the  Association's  asset
classification  policy provide for the  classification of loans and other assets
such as debt and equity securities considered by the OTS to be of lesser quality
as   "substandard,"   "doubtful"  or  "loss"  assets.  An  asset  is  considered
"substandard"  if it is  inadequately  protected  by the  current  net worth and
paying  capacity  of  the  obliger  or  of  the  collateral   pledged,  if  any.
"Substandard"  assets include those characterized by the "distinct  possibility"
that the institution will sustain "some loss" if the deficiencies

                                        5

<PAGE>



are not corrected.  Assets  classified as "doubtful"  have all of the weaknesses
inherent in those classified  "substandard," with the added  characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently  existing facts,  conditions,  and values,  "highly  questionable  and
improbable."  Assets  classified as "loss" are those considered  "uncollectible"
and  of  such  little  value  that  their  continuance  as  assets  without  the
establishment of a specific loss reserve is not warranted.

         An insured  institution is required to establish general allowances for
loan  losses in an amount  deemed  prudent by  management  for loans  classified
substandard or doubtful,  as well as for other problem loans. General allowances
represent loss allowances  which have been established to recognize the inherent
risk associated with lending activities,  but which, unlike specific allowances,
have  not  been  allocated  to  particular  problem  assets.   When  an  insured
institution  classifies  problem  assets as  "loss,"  it is  required  either to
establish  a specific  allowance  for losses  equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to  the  classification  of its  assets  and  the  amount  of  its  valuation
allowances is subject to review by the OTS which can order the  establishment of
additional general or specific loss allowances.

         At June 30, 1999,  the aggregate  amount of classified  assets,  and of
general and specific loss allowances, were as follows:

<TABLE>
<CAPTION>

                                                             Loan Loss
                                             Amount          Allowance
                                             ------          ---------
                                                  (In Thousands)
<S>                                     <C>               <C>
Classified loans receivable:
  Substandard.......................... $       502       $        126
  Doubtful.............................          --                 --
  Loss.................................          --                 --
                                               ----               ----
                                        $       502                126
                                                ===
General loss allowance.................                            318
                                                                   ---
Total allowance........................                    $       444
</TABLE>
                                                                   ===


         The  Association  regularly  reviews the loan  portfolio  to  determine
whether  any  loans  require   classification   in  accordance  with  applicable
regulations. Not all classified assets constitute non-performing assets.

Allowance for Loan Losses

         The  Association  provides  for loan  losses on the  allowance  method.
Accordingly,  all loan  losses are  charged  to the  related  allowance  and all
recoveries  are credited to it.  Additions to the  allowance for loan losses are
provided  by  charges  to  operations   based  on  various   factors  which,  in
management's  judgment,  deserve  current  recognition  in  estimating  possible
losses.  Such factors  considered by management  include the market value of the
underlying  collateral,  growth  and  composition  of the  loan  portfolio,  the
relationship of the allowance for loan losses to outstanding loans,  delinquency
trends, and economic conditions. The Association evaluates the carrying value of
loans periodically and the allowance is adjusted  accordingly.  While management
uses the best information  available to make evaluations,  future adjustments to
the  allowance  may be necessary if  conditions  differ  substantially  from the
assumptions used in making the evaluations.


                                        6

<PAGE>



         In addition,  various regulatory agencies, as an integral part of their
examination  process,  periodically review the Association's  allowance for loan
losses.  Such agencies may require the Association to recognize additions to the
allowance  based on  judgments of  information  available to them at the time of
examination.

         Summary of Loan Loss  Experience.  The following table analyzes changes
in the allowance during the fiscal years ended June 30, 1999, and 1998.
<TABLE>
<CAPTION>

                                                                                        At June 30,
                                                                                --------------------------
                                                                                  1999             1998
                                                                                --------         ---------
                                                                                  (Dollars In Thousands)
<S>                                                                             <C>              <C>
Balance at beginning of period.............................................     $  354           $   303
                                                                                ------           -------

Loans charged off:
  Real estate..............................................................          6                13
  Other....................................................................         --                --
                                                                                ------           -------

    Total loans charged-off................................................          6                13

Recoveries:
  Real estate..............................................................         --                --
  Other....................................................................         --                --
                                                                                ------           -------
    Total recoveries.......................................................         --                --
                                                                                ------           -------

Net loans charged-off......................................................          6                13
                                                                                ------           -------

Provision for loan losses..................................................         96                63
                                                                                ------           -------

Balance at end of period...................................................     $  444           $   354
                                                                                ======           =======

Ratio of net charge-offs to average loans outstanding during the period....       0.01%             0.02%
                                                                                ======           =======
</TABLE>

         Allocation of Allowance for Loan Losses.  The following  table presents
an  analysis  of the  allocation  of  allowance  for loan  losses  at the  dates
indicated.  The allocation of the allowance to each category is not  necessarily
indicative of future loss in any  particular  category and does not restrict the
use of the allowance to absorb losses in other categories.
<TABLE>
<CAPTION>

                                                                                     At June 30,
                                                           -------------------------------------------------------------
                                                                         1999                            1998
                                                           ------------------------------   ----------------------------
                                                                     Percent of  Percent              Percent of  Percent
                                                           Amount of  Allowance  of Loans   Amount of  Allowance of Loans
                                                           Loan Loss  to Total   to Gross   Loan Loss  to Total  to Gross
                                                           Allowance  Allowance  Loans      Allowance  Allowance   Loans
                                                           ---------  ---------  --------   --------- ---------- ---------
                                                                               (Dollars in Thousands)
<S>                                                        <C>        <C>        <C>        <C>        <C>       <C>
Real estate loans:
  One- to four-family residential.......................   $    257   57.89%     82.57%     $   230    65.04%    85.60%
  Commercial............................................         51   11.49       7.69           25     7.07      5.30
  Construction..........................................         10    2.25       6.24           25     7.07      6.32
  Home improvement loans................................          9    2.03       2.29           10     2.83      2.23
                                                           --------    ----     ------        -----  -------   -------
    Total real estate loans.............................        327   73.66      98.79          290    82.01     99.45

Other loans:
  Commercial..........................................            1   0.23        0.41           --       --       --
  Consumer............................................            1   0.23        0.41           --       --       --
  Loans secured by deposits...........................            1   0.23        0.39            1     0.28     0.55
Unallocated...........................................          114   25.65         --           62    17.71       --
                                                           --------   -----        ---        -----  -------     ----

    Total allowance for loan losses.....................   $    444   100.00%   100.00%      $  354   100.00%  100.00%
                                                           ========   ======    ======       ======  ======= ========
</TABLE>

                                        7

<PAGE>



Investments

         The  Association's  investment  portfolio  consists of short-term  U.S.
Treasury  and federal  agency  securities,  interest  earning  deposits in other
financial institutions, federal funds sold, and to a lesser extent mortgage back
securities,  marketable  equity  securities  and FHLB stock.  At June 30,  1999,
approximately  $5.3  million,  or  7.3%,  of  total  assets  consisted  of  such
investments.  The  Association had $726,000 in  interest-earning  deposits as of
that date.

         The  following  table sets forth the  carrying  value of the  Company's
investment portfolio at the dates indicated.
<TABLE>
<CAPTION>

                                                                                        At June 30,
                                                                                --------------------------
                                                                                  1999             1998
                                                                                --------         ---------
                                                                                      (In Thousands)

<S>                                                                             <C>              <C>
Securities available for sale:
Marketable equity securities...........................................         $    450         $     200

Securities held to maturity:
U.S. government and agency securities..................................            3,600             3,300
Mortgage-backed securities.............................................               21                41
                                                                                --------         ---------
   Total securities held to maturity...................................            3,621             3,341

Interest-earning balances in other banks...............................              726             5,013
Federal Funds sold.....................................................               --             1,400
Federal Home Loan Bank Stock...........................................              524               495
                                                                                --------         ---------
   Total investments...................................................         $  5,321         $  10,449
                                                                                ========         =========
</TABLE>


         At June 30,  1999,  the market  value of the  Association's  investment
securities held to maturity totaled $3.6 million.

                                                           8

<PAGE>



         The  following  table sets forth the  amount of  investment  securities
which  mature  during each of the periods  indicated  and the  weighted  average
yields for each range of maturities at June 30, 1999.
<TABLE>
<CAPTION>


                                                                                After One Year         After Five Years
                                                       One Year or Less       Through Five Years       Through Ten Years
                                                       ----------------       ------------------       ------------------
                                                       Carrying Average        Carrying   Average      Carrying   Average
                                                         Value   Yield           Value     Yield         Value     Yield
                                                         -----   -----           -----     -----         -----     -----
                                                                                                (Dollars in Thousands)
<S>                                                        <C>         <C>         <C>         <C>         <C>            <C>
                  Securities available for sale:

                  Marketable equity securities.........    $   450     7.48%       $    --        --        $    --        --
                  Securities held to maturity:
                  U.S. government and agency securities         --       --          3,600      5.92%            --        --
                  Mortgage-backed securities...........         --       --             21      8.60             --        --

                  Other:
                  Interest-earning balances in other banks     726     5.75%            --        --             --        --
                  Federal Funds Sold...................         --       --             --        --             --        --
                  Federal Home Loan Bank Stock.........         --       --             --        --             --        --
                                                           -------                 -------                  -------
                       Total                               $ 1,176     6.41%       $ 3,621      5.94%       $    --        --%
                                                           =======                 =======                  =======
</TABLE>


<TABLE>
<CAPTION>
                                                                After Ten Years           Total
                                                                ----------------     ---------------
                                                                Carrying  Average    Carrying  Average
                                                                  Value    Yield       Value    Yield
                                                                  -----    -----       -----    -----


<S>
                  Securities available for sale:                 <C>       <C>       <C>         <C>
                                                                 $   --       --     $   450     7.48%
                  Marketable equity securities.........
                  Securities held to maturity:                       --       --       3,600     5.92%
                  U.S. government and agency securities              --       --          21     8.60%
                  Mortgage-backed securities...........

                  Other:                                             --       --         726     5.75%
                  Interest-earning balances in other banks           --       --          --       --
                  Federal Funds Sold...................             524     7.75%        524     7.75%
                  Federal Home Loan Bank Stock.........          ------              -------
                                                                 $  524     7.75%    $ 5,321     6.22%
                       Total                                     ======              =======

</TABLE>




                                                                     9

<PAGE>



Sources of Funds

         General.  Deposits have  traditionally been the primary source of funds
for use in lending and  investment  activities.  In addition  to  deposits,  the
Association derives funds from scheduled loan payments,  investment  maturities,
loan prepayments,  retained  earnings,  income on earning assets and borrowings.
While scheduled loan payments and income on earning assets are relatively stable
sources  of  funds,  deposit  inflows  and  outflows  can  vary  widely  and are
influenced  by  prevailing  interest  rates,  market  conditions  and  levels of
competition.  Borrowings  from the FHLB of Atlanta may be used in the short-term
to  compensate  for  reductions  in  deposits  or  deposit  inflows at less than
projected levels.

         Deposits.  The Association  attracts  deposits  principally from within
Chesterfield  County and Marlboro  County through the offering of a selection of
deposit  instruments,  including  passbook accounts,  checking  accounts,  money
market  accounts,  fixed term  certificates  of deposit,  individual  retirement
accounts and savings  accounts.  The  Association  does not actively  solicit or
advertise  for deposits  outside of  Chesterfield  County and adjacent  Marlboro
County, and substantially all of the depositors are residents of Chesterfield or
Marlboro  County.  Deposit  account terms vary,  with the principal  differences
being the  minimum  balance  required,  the  amount of time the funds  remain on
deposit and the interest rate. The Association  does not pay broker fees for any
deposits received.

         The Association  establishes  the interest rates paid,  maturity terms,
service fees and  withdrawal  penalties on a periodic  basis.  Determination  of
rates and terms are predicated on funds acquisition and liquidity  requirements,
rates  paid by  competitors,  growth  goals,  and  applicable  regulations.  The
Association relies, in part, on customer service and long-standing relationships
with  customers to attract and retain  deposits.  The  Association  also closely
prices deposits to the rates offered by competitors.

         The flow of deposits is influenced  significantly  by general  economic
conditions,  changes in money  market and other  prevailing  interest  rates and
competition. The variety of deposit accounts offered has allowed the Association
to be competitive in obtaining funds and to respond with  flexibility to changes
in consumer  demand.  The Association has become more  susceptible to short-term
fluctuations  in deposit  flows as  customers  have  become more  interest  rate
conscious.  The  Association  manages the  pricing of  deposits in keeping  with
asset/liability  management and profitability  objectives.  Based on experience,
the Association  believes that passbook and MMDAs are relatively  stable sources
of  deposits.  However,  the ability to attract  and  maintain  certificates  of
deposit, and the rates paid on these deposits, have been and will continue to be
significantly affected by market conditions.  At June 30, 1999, 67.1% of deposit
accounts  were  certificate  of deposit  accounts,  of which $16.1  million have
maturities of one year or less.

         Total  deposits  at June  30,1999  were  approximately  $41.3  million,
compared  to  approximately  $36.7  million at June 30,  1998.  Deposit  base is
somewhat  dependent upon the  manufacturing  sector of Chesterfield and Marlboro
Counties.  Although  the  manufacturing  sector  in  Chesterfield  and  Marlboro
Counties is relatively  diversified  and not  significantly  dependent  upon any
industry,  a loss of a material  portion of the  manufacturing  workforce  could
adversely  affect the  ability to attract  deposits  due to the loss of personal
income  attributable  to the lost  manufacturing  jobs and the attendant loss in
service industry jobs.

         In the  unlikely  event of the  liquidation,  all  claims of  creditors
(including  those of deposit  account  holders,  to the extent of their  deposit
balances)  would be paid  first  followed  by  distribution  of the  liquidation
account to certain deposit account holders, with any assets remaining thereafter
distributed to the Company as the sole shareholder of the Association.

         Borrowings.  The  Association  focuses on generating high quality loans
and then  seek  the  best  source  of  funding  from  deposits,  investments  or
borrowings.  At June 30, 1999,  the  Association  had borrowings of $1.2 million
from the FHLB of Atlanta. The Association is required to maintain eligible loans
in its  portfolio of at least 170% of  outstanding  advances as  collateral  for
advances  from the FHLB of Atlanta.  The  Association  does not  anticipate  any
difficulty in obtaining  advances  appropriate to meet these requirements in the
future.



                                                        10

<PAGE>



         The  following  table  sets forth the  maximum  month-end  balance  and
average balance of FHLB advances, for the periods indicated.
<TABLE>
<CAPTION>

                                                                                    Year Ended June 30,
                                                                                --------------------------
                                                                                   1999           1998
                                                                                ----------     -----------


<S>                                                                             <C>            <C>
Maximum Balance:
----------------
   FHLB advances...........................................................     $1,200,000     $ 2,400,000

Average Balance:
----------------
   FHLB advances...........................................................     $   92,000     $ 1,427,000
</TABLE>


         The  following  table  presents  certain  information  relating  to the
maturities of FHLB of Atlanta borrowings at or for the years ended June 30, 1999
and 1998.
<TABLE>
<CAPTION>

                                                                    Balance At June 30,
  Maturing during the year                                          -------------------
  ------------------------
       ended June 30,              Interest Rates               1999                   1998
       --------------              --------------               ----                   ----

<S>                                <C>                   <C>                  <C>
2000                                    --               $         --         $         --
2001                                   5.09%                   1,200,000                --
Thereafter                              --%                        --                   --
                                                               ---------           -------
                                                                                        --
Total                                                    $      1,200,000     $         --
                                                                =========          =======

Weighted average interest
rate                                                             5.09%                  --%

</TABLE>

Additional Risk Factors

         In addition to factors  discussed in the description of the business of
the Company and  Association  and  elsewhere in this report,  the  following are
factors  that  could  adversely  affect  future  results of  operations  and the
financial condition of the Company.


The Impact of Changes in Interest Rates

     The  Association's  ability to make a profit,  like that of most  financial
institutions,  substantially  depends  upon net  interest  income,  which is the
difference  between the interest income earned on interest  earning assets (such
as mortgage loans) and the interest expense paid on interest-bearing liabilities
(such as deposits).  Approximately  61.0% of our real estate loans have rates of
interest which are fixed for the term of the loan ("fixed rate"),  while deposit
accounts  have  significantly  shorter terms to maturity than real estate loans.
Because  interest-earning assets generally have fixed rates of interest and have
longer effective maturities than interest-bearing  liabilities, the yield on the
Association's  interest  earning  assets  generally  will  adjust more slowly to
changes in interest rates than the cost of its interest-bearing liabilities. The
slower  adjustment of interest  earning  assets as compared to  interest-bearing
liabilities  results in First Federal having a "negative gap." At June 30, 1999,
our one year interest rate gap was negative 3.62%. As a result, our net interest
income will be  adversely  affected  by  material  and  prolonged  increases  in
interest  rates.  In addition,  rising  interest rates may adversely  affect our
earnings because there might be a lack of customer demand for loans.  Changes in
interest  rates also can affect the  average  life of loans and  mortgage-backed
securities.




                                                        11

<PAGE>



Reliance on Certificate of Deposit Accounts

         A significant  percentage of our deposit  accounts are  certificates of
deposit rather than passbook or money market  accounts.  At June 30, 1999, $27.7
million,  or 67.1% of our total deposits were certificate of deposit  accounts.
$16.1  million  of  our   certificates   of  deposit  mature  within  one  year.
Certificates  of deposit can be a more interest rate  sensitive  source of funds
than  passbook  or money  market  accounts.  In the event  that  interest  rates
significantly  increase,  or if we do not offer competitive rates of interest on
its  certificates  of deposit,  the  Association  may  experience a  significant
decrease in its deposit accounts.

Competition

         The Association experiences strong competition in its local market area
in originating loans, primarily from mortgage brokers. There is also significant
competition in attracting deposits, primarily from commercial banks, thrifts and
money center banks. Such competition may limit our growth in the future.

Geographic Concentration of our Loans

         All of the  Association's  real  estate  mortgage  loans are secured by
properties  located  in South  Carolina,  mostly in  Chesterfield  and  Marlboro
Counties.  A  weakening  in the  local  real  estate  market  or in the local or
national  economy,  or  a  reduction  in  the  workforce  at  the  manufacturing
facilities  in the area could  result in an increase in the number of  borrowers
who  default  on their  loans and a  reduction  in the  value of the  collateral
securing the loans, which would reduce our earnings.

Financial Institution Regulation and Future of the Thrift Industry

         The  Association  and the Company are subject to extensive  regulation,
supervision, and examination by the Office of Thrift Supervision ("OTS") and the
Federal  Deposit  Insurance   Corporation  (the  'FDIC").  Such  regulation  and
supervision  govern the  activities in which an  institution  can engage and are
intended  primarily for the  protection of the  insurance  fund and  depositors.
Regulatory authorities have been granted extensive discretion in connection with
their  supervisory and enforcement  activities  which are intended to strengthen
the  financial  condition of the banking and thrift  industries,  including  the
imposition   of   restrictions   on  the  operation  of  an   institution,   the
classification  of assets by an institution and the adequacy of an institution's
allowance for loan losses. Any change in such regulation and oversight,  whether
by the OTS, the FDIC or Congress,  could have a material  impact on the Company,
the Bank and their respective operations.

                                   REGULATION

General

         As  a  federally  chartered,   SAIF-insured  savings  association,  the
Association  is subject to  extensive  regulation  by the OTS and the FDIC.  For
example,  the  Association  must obtain OTS approval  before the Association may
engage in  certain  activities  and must  file  reports  with the OTS  regarding
activities  and  financial   condition.   The  OTS  periodically   examines  the
Association's  books and records  and, in  conjunction  with the FDIC in certain
situations,  has  examination  and  enforcement  powers.  This  supervision  and
regulation  are intended  primarily for the protection of depositors and federal
deposit  insurance funds. The Association's  semi-annual  assessment owed to the
OTS,  which is based upon a specified  percentage  of assets,  is  approximately
$11,500.

         The  Association is also subject to federal and state  regulation as to
such  matters  as loans  to  officers,  directors,  or  principal  shareholders,
required  reserves,  limitations  as to the  nature  and  amount  of  loans  and
investments,  regulatory  approval of any merger or  consolidation,  issuance or
retirements  of  securities,  and  limitations  upon  other  aspects  of banking
operations. In addition, the Association's activities and operations are subject
to a number of additional  detailed,  complex and sometimes  overlapping federal
and state laws and  regulations.  These include state usury and consumer  credit
laws, state laws relating to fiduciaries,  the Federal  Truth-In-Lending Act and
Regulation Z, the Federal  Equal Credit  Opportunity  Act and  Regulation B, the
Fair Credit  Reporting  Act,  the  Community  Reinvestment  Act,  anti-redlining
legislation and antitrust laws.

                                                        12

<PAGE>



Savings and Loan Holding Company Regulation

         As  the  holding  company  for  the  Association,   the  Company  is  a
"non-diversified  savings and loan  holding  company"  within the meaning of the
Home Owners' Loan Act, as amended ("HOLA"),  and subject to regulatory oversight
of the Director of the OTS. As such, the Company is registered  with the OTS and
thereby  subject to OTS  regulations,  examinations,  supervision  and reporting
requirements.  As a  subsidiary  of a  savings  and loan  holding  company,  the
Association is subject to certain  restrictions in its dealings with the Company
and with other companies affiliated with the Company.

         In general,  the HOLA  prohibits a savings  and loan  holding  company,
without  prior  approval of the Director of the OTS, from  acquiring  control of
another  savings  association  or savings and loan holding  company or retaining
more than 5% of the voting shares of a savings association or of another holding
company  which is not a  subsidiary.  The HOLA also  restricts  the ability of a
director  or officer  the  Company,  or any person who owns more than 25% of the
Company's  stock,  from  acquiring  control of another  savings  association  or
savings and loan holding  company  without  obtaining the prior  approval of the
Director of the OTS.

         Notwithstanding  the above rules as to permissible  business activities
of unitary  savings  and loan  holding  companies,  if the  savings  association
subsidiary of such a holding  company fails to meet the Qualified  Thrift Lender
("QTL") test,  then such unitary  holding  company  would become  subject to the
activities  restrictions  applicable to multiple holding companies.  (Additional
restrictions  on securing  advances from the FHLB also apply.) At June 30, 1999,
asset composition was in excess of that required to qualify the Association as a
Qualified Thrift Lender.

         If the Company were to acquire control of another  savings  association
other than through a merger or other business  combination with the Association,
the Company would thereupon  become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve  emergency
thrift  acquisitions and where each subsidiary savings association meets the QTL
test, the activities of the Company and any of its  subsidiaries  (other
than the Association or other subsidiary savings  associations) would thereafter
be subject to further restrictions.  The HOLA provides that, among other things,
no multiple savings and loan holding company or subsidiary  thereof which is not
a savings  association  shall  commence or continue for a limited period of time
after  becoming a  multiple  savings  and loan  holding  company  or  subsidiary
thereof,   any  business  activity  other  than  (i)  furnishing  or  performing
management  services for a subsidiary  savings  association,  (ii) conducting an
insurance agency or escrow  business,  (iii) holding,  managing,  or liquidating
assets owned by or acquired from a subsidiary savings association,  (iv) holding
or managing properties used or occupied by a subsidiary savings association, (v)
acting  as  trustee  under  deeds of trust,  (vi)  those  activities  previously
directly  authorized  by the  Federal  Savings  and Loan  Insurance  Corporation
("FSLIC")  by  regulation  as of March 5, 1987,  to be  engaged  in by  multiple
holding  companies,  or  (vii)  those  activities  authorized  by the  Board  of
Governors  of the Federal  Reserve  System (the "FRS") as  permissible  for bank
holding  companies,  unless the Director of the OTS by  regulation  prohibits or
limits such activities for savings and loan holding companies.  Those activities
described in (vii) above must also be approved by the Director of the OTS before
a multiple holding company may engage in such activities.

         The Director of the OTS may also approve acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
associations  in more than one state,  if the multiple  savings and loan holding
company involved controls a savings  association which operated a home or branch
office in the state of the association to be acquired as of March 5,1987,  or if
the  laws of the  state in which  the  association  to be  acquired  is  located
specifically permit associations to be acquired by state-chartered  associations
or savings and loan holding  companies  located in the state where the acquiring
entity is located (or by a holding  company that controls  such  state-chartered
savings associations).  Also, the Director of the OTS may approve an acquisition
resulting in a multiple  savings and loan holding  company  controlling  savings
associations  in more than one  state in the case of  certain  emergency  thrift
acquisitions.

         No subsidiary savings association of a savings and loan holding company
may declare or pay a dividend on its permanent or  nonwithdrawable  stock unless
it  first  gives  the  Director  of the  OTS 30  days  advance  notice  of  such
declaration  and payment.  Any dividend  declared  during such period or without
giving notice shall be invalid.


                                                        13

<PAGE>



Federal Home Loan Bank System

         The  Association  is a member of the FHLB of  Atlanta,  which is one of
twelve  regional  FHLBs.  Each FHLB serves as a reserve or central  bank for its
members within its assigned region.  It is funded primarily from funds deposited
by savings  associations  and  proceeds  derived  from the sale of  consolidated
obligations of the FHLB system.  It makes loans to members ("FHLB  advances") in
accordance with policies and procedures established by the Board of Directors of
the FHLB.  All FHLB advances  must be fully secured by sufficient  collateral as
determined  by  the  FHLB.  The  Federal  Housing  Finance  Board  ("FHFB"),  an
independent agency, controls the FHLB System, including the FHLB of Atlanta.

         As a member, the Association is required to purchase and maintain stock
in the FHLB of Atlanta in an amount equal to at least 1% of the aggregate unpaid
residential  mortgage loans, home purchase contracts,  or similar obligations at
the beginning of each year. At June 30, 1999, investment in stock of the FHLB of
Atlanta was $524,000.  The FHLB imposes various  limitations on advances such as
limiting the amount of certain types of real estate-related collateral to 30% of
a member's  capital and  limiting  total  advances to a member.  Interest  rates
charged for advances vary depending upon maturity, the cost of funds to the FHLB
of Atlanta and the purpose of the borrowing.

         The FHLBs are required to provide funds for the  resolution of troubled
savings  associations  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.  For the fiscal year ended June 30, 1999,  dividends  paid by the
FHLB of Atlanta to the Association totaled approximately  $37,200, for an annual
rate of 7.5%.

Insurance of Deposits

         Deposit  Insurance.  The FDIC is an  independent  federal  agency  that
insures  savings  institution  deposits up to  applicable  limits,  of banks and
thrifts  and  safeguards  the safety and  soundness  of the  banking  and thrift
industries.  The FDIC  administers  two separate  insurance  funds,  the BIF for
commercial  banks and state savings banks and the SAIF for savings  associations
such as the  Association  and banks that have  acquired  deposits  from  savings
associations.
The FDIC is required to maintain designated levels of reserves in each fund.

         Assessments.  The  FDIC is  authorized  to  establish  separate  annual
assessment rates for deposit insurance for members of the BIF and members of the
SAIF.  The FDIC may  increase  assessment  rates for either fund if necessary to
restore the fund's  ratio of reserves  to insured  deposits to the target  level
within a reasonable  time,  and may decrease these rates if the target level has
been met. The FDIC has established a risk-based  assessment system for both SAIF
and BIF members.  Under this system,  assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's  risk level is
determined  based on its capital  levels,  and the FDIC's  level of  supervisory
concern about the institution.

         In 1996,  federal  legislation was enacted to recapitalize the SAIF and
eliminate the significant  premium disparity between the BIF and the SAIF. Under
that law, the Association and other institutions with SAIF-insured deposits were
charged a one-time  special  assessment  equal to $0.657 per $100 of  assessable
deposits at March 31, 1995. The Association  recognized this special  assessment
as a charge to noninterest  expense of $312,000  ($197,000 after tax) during the
three-month period ended September 30, 1996. The assessment was fully deductible
for both federal and state  income tax  purposes.  Assessment  rates for regular
ongoing, deposit insurance premiums currently range from 0.0% of deposits for an
institution in the highest  category  (i.e.,  well-capitalized  and  financially
sound,  with no more than a few minor  weaknesses)  to 0.27% of deposits  for an
institution  in the lowest  category  (i.e.,  undercapitalized  and  substantial
supervisory  consent).  The FDIC is authorized to raise the assessment  rates as
necessary to maintain the required  reserve ratio of 1.25%, and both the BIF and
the SAIF currently satisfy the reserve ratio  requirement.  The semi-annual rate
of assessments on SAIF-assessable deposits for the payments on the FICO bonds is
currently  0.0622%.  Several  bills have been  introduced in Congress that would
eliminate the federal thrift charter and OTS. The  Association is also unable to
predict whether the SAIF and BIF funds will eventually be merged.

                                                        14

<PAGE>




Savings Association Regulatory Capital

         Currently,  savings  associations are subject to three separate minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires that savings  associations  maintain  "core  capital" of at least 3% of
total assets.  However,  to be considered  "Adequately  Capitalized",  a savings
institution  must  maintain  a 4.0%  leverage  capital  ratio.  Core  capital is
generally defined as common  shareholders'  equity (including  retained income),
noncummulative  perpetual preferred stock and related surplus,  certain minority
equity interests in subsidiaries,  qualifying  supervisory  goodwill,  purchased
mortgage  servicing rights and purchased credit card  relationships  (subject to
certain  limits) less  nonqualifying  intangibles.  Under the  tangible  capital
requirement,  a savings association must maintain tangible capital (core capital
less all intangible assets except purchased  mortgage servicing rights which may
be included after making the  above-noted  adjustment in an amount up to 100% of
tangible capital) of at least 1.5% of total assets. Under the risk-based capital
requirements,  a  minimum  amount of  capital  must be  maintained  by a savings
association to account for the relative risks inherent in the type and amount of
assets held by the  savings  association.  The  risk-based  capital  requirement
requires a savings  association to maintain capital (defined generally for these
purposes as core capital  plus general  valuation  allowances  and  permanent or
maturing capital  instruments such as preferred stock and subordinated debt less
assets required to be deducted) equal to 8.0% of  risk-weighted  assets.  Assets
are ranked as to risk in one of four  categories  (0-100%).  A credit  risk-free
asset,  such as cash,  requires  no  risk-based  capital,  while an asset with a
significant  credit risk, such as a non-accrual loan,  requires a risk factor of
100%.  Moreover, a savings association must deduct from capital, for purposes of
meeting the core capital,  tangible capital and risk-based capital requirements,
its entire  investment in and loans to a subsidiary  engaged in  activities  not
permissible for a national bank (other than  exclusively  agency  activities for
its  customers  or  mortgage  banking  subsidiaries).  At  June  30,  1999,  the
Association was in compliance with all capital requirements imposed by law.

         The OTS has  promulgated  a rule which sets forth the  methodology  for
calculating an interest rate risk  component to be used by savings  associations
in calculating  regulatory  capital.  The OTS has delayed the  implementation of
this rule, however.  The rule requires savings  associations with "above normal"
interest rate risk  (institutions  whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move in
interest rates) to maintain  additional capital for interest rate risk under the
risk-based capital framework. If the OTS were to implement this regulation,  the
Association would be exempt from its provisions because the Association has less
than $300 million in assets and its  risk-based  capital  ratio exceeds 12%. The
Association  nevertheless measures interest rate risk in conformity with the OTS
regulation.

         If an association is not in compliance  with the capital  requirements,
the OTS is required to prohibit  asset growth and to impose a capital  directive
that may  restrict,  among other  things,  the payment of dividends and officers
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements.  These actions may include restricting the operating activities of
the association,  imposing a capital directive, cease and desist order, or civil
money  penalties,  or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.

Prompt Corrective Regulatory Action

         The  Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991
("FDICIA")   requires,   among  other  things,   that  federal  bank  regulatory
authorities take "prompt corrective action" with respect to institutions that do
not meet minimum capital  requirements.  For these purposes,  FDICIA establishes
five capital tiers: well capitalized, adequately capitalized,  undercapitalized,
significantly  undercapitalized,  and critically  undercapitalized.  At June 30,
1999, the Association was categorized as "well capitalized,"  meaning that total
risk-based  capital ratio exceeded 10%, Tier I risk-based capital ratio exceeded
6%,  leverage  ratio  exceeded  5%,  and the  Association  was not  subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any capital measure.

         The FDIC may order savings associations which have insufficient capital
to take  corrective  actions.  For  example,  a  savings  association  which  is
categorized as "undercapitalized" would be subject to growth limitations and

                                                        15

<PAGE>



would be required to submit a capital  restoration  plan, and a holding  company
that controls such a savings association would be required to guarantee that the
savings   association   complies  with  the  restoration  plan.   "Significantly
undercapitalized"   savings   associations   would  be  subject  to   additional
restrictions.  Savings  associations  deemed  by  the  FDIC  to  be  "critically
undercapitalized"  would  be  subject  to  the  appointment  of  a  receiver  or
conservator.

Dividend Limitations

         An OTS regulation imposes limitations upon all "capital  distributions"
by savings associations, including cash dividends, payments by an association to
repurchase or otherwise acquire its shares,  payments to shareholders of another
institution  in a  cash-out  merger  and  other  distributions  charged  against
capital.  A  "well-capitalized"  institution can, after prior notice but without
prior approval from the OTS, make capital  distributions  during a calendar year
in an amount of up to 100 percent of its net income  during the  calendar  year,
plus its retained net income for the proceeding two years.  As of June 30, 1999,
the Association was a "well-capitalized" institution.

Loans to One Borrower

         Under OTS  regulations,  the  Association may not make a loan or extend
credit  to a single  or  related  group of  borrowers  in  excess  of 15% of its
unimpaired  capital  and  surplus.  Additional  amounts may be loaned to, not in
excess of 10% of unimpaired capital and surplus,  if such loans or extensions of
credit are fully secured by readily  marketable  collateral,  including  certain
debt and equity  securities  but not  including  real estate.  In some cases,  a
savings  association may lend up to 30 percent of unimpaired capital and surplus
to one  borrower  for  purposes  of  developing  domestic  residential  housing,
provided that the association meets its regulatory capital  requirements and the
OTS authorizes the association to use this expanded lending  authority.  At June
30, 1999,  the  Association  did not have any loans or extensions of credit to a
single or  related  group of  borrowers  in excess of its  lending  limits.  The
Association does not believe that the  loans-to-one-borrower  limits will have a
significant impact on business operations or earnings.

Qualified Thrift Lender

         The HOLA requires  savings  institutions to be qualified thrift lenders
("QTL").  To be a QTL, the Bank can either satisfy the QTL test, or the Domestic
Building and Loan  Association  ("DBLA") Test of the Code. Under the QTL test, a
savings  bank is required to  maintain  at least 65% of its  "portfolio  assets"
(total assets less (i) specified  liquid assets up to 20% of total assets,  (ii)
intangibles, including goodwill, and (iii) the value of property used to conduct
business)  in certain  "qualified  thrift  investments,"  primarily  residential
mortgages and related investments, including certain mortgage-backed and related
securities on a monthly basis in 9 out of every 12 months.  Under the DBLA test,
an  institution  must  meet a  "business  operations  test" and a "60% of assets
test." The business  operations  test requires the business of a DBLA to consist
primarily of  acquiring  the savings of the public and  investing  in loans.  An
institution  meets  the  public  savings  requirements  when it meets one of two
conditions:  (i) the  institution  acquires its savings in  conformity  with OTS
rules and  regulations;  or (ii) the general  public  holds more than 75% of its
deposits, withdrawable shares, and other obligations. The general public may not
include  family or  related  business  groups or  persons  who are  officers  or
directors of the institution.

         The 60% of assets test  requires  that at least 60% of a DBLA's  assets
must consist of assets that thrifts  normally  hold,  except for consumer  loans
that are not educational loans. The DBLA test does not include,  as the QTL test
does to a limited or optional  extent,  mortgage loans  originated and sold into
the secondary market and subsidiary investments. A savings bank that fails to be
a  QTL  must  either  convert  to  a  bank  charter  or  operate  under  certain
restrictions.  As of June 30, 1999, the  Association  was in compliance with its
QTL requirement, with approximately 84.3% of assets invested in QTIs.

Acquisitions and Branching

         The Bank  Holding  Company Act  specifically  authorizes a bank holding
company, upon receipt of appropriate regulatory approvals, to acquire control of
any savings association or holding company thereof wherever located.  Similarly,
a savings and loan  holding  company may  acquire  control of a bank.  Moreover,
federal savings associations

                                                        16

<PAGE>



may acquire or be acquired by any insured  depository  institution.  Regulations
promulgated by the FRB restrict the branching authority of savings  associations
acquired  by bank  holding  companies.  Savings  associations  acquired  by bank
holding  companies  may be  converted  to  banks  if they  continue  to pay SAIF
premiums, but as such they become subject to branching and activity restrictions
applicable to banks.

         Subject to certain  exceptions,  commonly-controlled  banks and savings
associations  must reimburse the FDIC for any losses suffered in connection with
a failed  bank or  savings  association  affiliate.  Institutions  are  commonly
controlled  if one is owned by another or if both are owned by the same  holding
company.  Such claims by the FDIC under this provision are subordinate to claims
of depositors,  secured creditors,  and holders of subordinated debt, other than
affiliates.

         The OTS has adopted  regulations which permit  nationwide  branching to
the extent permitted by federal statute. Federal statutes permit federal savings
associations to branch outside of their home state if the association  meets the
domestic  building  and loan  test in  ss.7701(a)(19)  of the Code or the  asset
composition  test of ss.7701(c) of the Code.  Branching that would result in the
formation of a multiple  savings and loan holding  company  controlling  savings
associations  in more  than one  state is  permitted  if the law of the state in
which the savings association to be acquired is located specifically  authorizes
acquisitions of its state-chartered associations by state-chartered associations
or their  holding  companies  in the state where the  acquiring  association  or
holding company is located.

         Finally,  The Riegle-Neal  Interstate Banking and Branching  Efficiency
Act of 1994 (the  "Riegle-Neal  Act") permits bank holding  companies to acquire
banks  in  other  states  and,   with  state  consent  and  subject  to  certain
limitations, allows banks to acquire out-of-state branches either through merger
or de novo expansion.

Transactions with Affiliates

         The  Association  is  subject  to  Sections  22(h),  23A and 23B of the
Federal  Reserve Act, which restrict  financial  transactions  between banks and
affiliated  companies.  The statute limits credit transactions between a bank or
savings  association and its executive  officers and its affiliates,  prescribes
terms and  conditions for bank  affiliate  transactions  deemed to be consistent
with safe and sound  banking  practices,  and  restricts the types of collateral
security  permitted  in  connection  with a bank's  extension  of  credit  to an
affiliate.


Federal Securities Law

         The  shares of  common  stock of the  Company  is  registered  with the
Securities and Exchange  Commission ("SEC") under the Securities Exchange Act of
1934,  as amended (the "1934 Act").  The Company is subject to the  information,
proxy solicitation, insider trading restrictions and other requirements the 1934
Act and the  rules  of the SEC  thereunder.  After  three  years  following  the
conversion to stock form, if the Company has fewer than 300 shareholders, it may
deregister  its  shares  under  the 1934  Act and  cease  to be  subject  to the
foregoing requirements.

Community Reinvestment Act Matters

         Federal law requires that ratings of depository  institutions under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both  a  four-unit  descriptive  rating--outstanding,   satisfactory,  needs  to
improve,   and  substantial   noncompliance--and  a  written  evaluation  of  an
institution's  performance.  Each FHLB is required  to  establish  standards  of
community  investment  or service that its members must  maintain for  continued
access to long-term  advances from the FHLBs.  The standards take into account a
member's  performance under the CRA and its record of lending to first time home
buyers.  The OTS has designated the  Association's  record of meeting  community
credit needs as "satisfactory."






                                                        17

<PAGE>



Item 2.  Properties
-------------------

         The Company  conducts  its  business  through one  facility  located in
Cheraw and Chesterfield County,  South Carolina.  The main office at its current
location  opened and has been owned by the  Association  since 1981. At June 30,
1999, the net book value of the Company's property and equipment was $740,000.

Item 3.  Legal Proceedings
--------------------------

         None.

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

         Not applicable.
                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters
------------------------------------------------------------------------------

         Information  included  in Great Pee Dee  Bancorp,  Inc.'s  1999  Annual
Report to Shareholders is herein incorporated by reference.

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations
--------------------------------------------------------------------------------


         Information  included  in Great Pee Dee  Bancorp,  Inc.'s  1999  Annual
Report to Shareholders is herein incorporated by reference.

Item 7.  Financial Statements
-----------------------------

         Information  included  in Great Pee Dee  Bancorp,  Inc.'s  1999  Annual
Report to Shareholders is herein incorporated by reference.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure
------------------------------------------------------------------------

         Not applicable.

                                    PART III

Item 9.  Directors and Officers of the Registrant
-------------------------------------------------

         Information  included in Great Pee Dee Bancorp,  Inc.'s Proxy Statement
for its 1999 Annual Meeting of Shareholders is incorporated herein by reference.

Item 10.   Executive Compensation
---------------------------------

         Information  included in Great Pee Dee Bancorp,  Inc.'s Proxy Statement
for its 1999 Annual Meeting of Shareholders is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

         Information  included in Great Pee Dee Bancorp,  Inc.'s Proxy Statement
for its 1999 Annual Meeting of Shareholders is incorporated herein by reference.



                                                        18

<PAGE>

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------

         Information  included in Great Pee Dee Bancorp,  Inc.'s Proxy Statement
for its 1999 Annual Meeting of Shareholders is incorporated herein by reference.

                                     PART IV

Item 13. Exhibits and Reports on Form 8-K
-----------------------------------------

         (a)      The following  documents appear in sections of the Registrants
                  1999 Annual Report to Shareholders under the same caption, and
                  are incorporated herein by reference. No other sections of the
                  1999 Annual Report to Shareholders are incorporated  herein by
                  this reference.

         (1)      Report to Shareholders
         (2)      Selected Financial and Other Data
         (3)      Managements Discussion and Analysis of Financial Condition and
                  Results of Operations
         (4)      Independent Auditors' Report
         (5)      Consolidated Financial Statements
                  (i)      Consolidated Statements of Financial Condition
                  (ii)     Consolidated Statements of Operations
                  (iii)    Consolidated Statements of Stockholders' Equity
                  (iv)     Consolidated Statements of Cash Flows
                  (v)      Notes to Consolidated Financial Statements
         (6)      Corporate Information
         (b)      The following exhibits are filed as part of this report.
      3.1         Certificate of Incorporation of Great Pee Dee Bancorp, Inc.*
      3.2         Bylaws of Great Pee Dee Bancorp, Inc.*
      4.0         Stock Certificate of Great Pee Dee Bancorp, Inc.*
      10.1        Employee Agreement for Herbert W. Watts*
      10.2        Great Pee Dee Bancorp, Inc. Employee Stock
                  Ownership Plan and Trust**
      13.1        Great Pee Dee Bancorp, Inc. 1999 Annual
                  Report to Shareholders
      23.2        Consent of Dixon, Odom PLLC
      27.1        EDGAR Financial Data Schedule
         (c)      Reports on Form 8-K
                                   None

*    Incorporated  herein by reference  into this  document from the Exhibits to
     Form SB-2  Registration  Statement,  initially filed on September 26, 1997,
     Registration No. 333-36489.


















                                                        19

<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                              GREAT PEE DEE BANCORP, INC.


Date:    September 28, 1999   By:/s/ Herbert W. Watts
                              --------------------------------------------
                              Herbert W. Watts,
                              President and Chief Executive Officer



     Pursuant to the  requirements  of the  Securities  Exchange  of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.



By:  /s/ Herbert W. Watts                  By: /s/ Johnnie L. Craft
     ----------------------------------        ---------------------------------
     Herbert W. Watts, President, Chief        Johnnie L. Craft, Secretary and
       Executive Officer and Director          Treasurer
     (Principal Executive Officer)             (Principal Financial and
                                               Accounting Officer)

Date:  September 28, 1999                  Date:  September 28, 1999



By:  /s/ Robert M. Bennett                 By:  /s/ William R. Butler
     ---------------------------------          --------------------------------
     Robert M. Bennett, Chairman                William R. Butler, Director
     of the Board

Date:  September 28, 1999                  Date:  September 28, 1999



By:  /s/ James C. Crawford, III            By:  /s/ Henry P. Duvall, IV
     ---------------------------------          --------------------------------
     James C. Crawford, III, Director           Henry P. Duvall, IV, Director


Date:  September 28, 1999                  Date:  September 28, 1999



By: /s/ John S. Long                       By:  /s/ Cornelius B. Young
    ----------------------------------          --------------------------------
     John S. Long, Director,                    Cornelius B. Young, Director
     Vice President and
     Chief Operating Officer

Date:  September 28, 1999                  Date:  September 28, 1999




<PAGE>





















                                   EXHIBIT 13

























<PAGE>


                           GREAT PEE DEE BANCORP, INC

                               1999 ANNUAL REPORT



<PAGE>



Great Pee Dee Bancorp, Inc. and Subsidiary
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>

TABLE OF CONTENTS


                                                                                                              Page No.

<S>                                                                                                              <C>
Report to Shareholders...................................................................................        1

Selected Financial and Other Data........................................................................        2

Management's Discussion and Analysis.....................................................................        3

Independent Auditors' Report.............................................................................       12

Consolidated Financial Statements

   Consolidated Statements of Financial Condition........................................................       13

   Consolidated Statements of Operations.................................................................       14

   Consolidated Statements of Stockholders' Equity.......................................................       15

   Consolidated Statements of Cash Flows.................................................................       16

   Notes to Consolidated Financial Statements............................................................       18

Common Stock Information.................................................................................       39

Corporate Information....................................................................................       40

</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  Great  Pee  Dee  Bancorp,   Inc.  and  its
wholly-owned  subsidiary  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 national,  regional and local market
conditions,   legislative   and   regulatory   conditions,   the  interest  rate
environment,  computer  system  failures  related  to the year  2000  and  other
factors.


<PAGE>







                  [LETTERHEAD OF GREAT PEE DEE BANCORP, INC.]




                             REPORT TO SHAREHOLDERS

Dear Shareholders:

June 30, 1999 marked the end of a very successful  first full year of operations
as a public company. It was a year marked with many changes, all positive.

Our  subsidiary,  First  Federal  Cheraw,  has now  become a full  service  bank
offering many new products and services. From our completely remodeled office to
our new  Chesterfield  Highway site and ATM, you can easily see the progress.  A
completely new computer  system has been installed and is fully  operational and
tested for the year 2000. Operationally,  First Federal has gone from no banking
deposits  to  474  accounts  with  more  than  $6.0  million  on  deposit.  Loan
originations increased to $21.5 million from $15.2 million, a record year. Total
assets increased to $72.6 million from $68.4 million for the previous year.

Total stockholders' equity amounted to $29.8 million after the Company paid cash
dividends of $.36 per share during 1999 and repurchased 192,000 shares of common
stock for a total of $2.5 million.

The Board of Directors  continues to study  various  methods of  increasing  the
value of your investment.  In the future, the Board will consider such issues as
expansion,   regular  cash  dividends,  special  dividends  and  repurchases  of
outstanding shares of 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
Great Pee Dee Bancorp, Inc.

Sincerely,


/s/ Herbert W. Watts

Herbert W. Watts
President and Chief Executive Officer



                                      -1-


<PAGE>


Great Pee Dee Bancorp, Inc. and Subsidiary
Selected Financial and Other Data
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                     At or for the year ended June 30,
                                                                                      1999         1998          1997
                                                                                  ------------  -----------  -----------
                                                                                          (Dollars in thousands)

Financial condition data:
<S>                                                                               <C>           <C>          <C>
   Total assets                                                                   $     72,601  $    68,400  $    60,538
   Investments (1)                                                                       5,321       10,449        5,770
   Loans receivable                                                                     64,411       56,768       53,974
   Deposits                                                                             41,332       36,663       46,863
   Stockholders' equity                                                                 29,813       31,475       11,090
Operating data:
   Interest income                                                                       5,067        4,897        4,558
   Interest expense                                                                      1,960        2,329        2,595
                                                                                  ------------  -----------  -----------
      Net interest income                                                                3,107        2,568        1,963
   Provision for loan losses                                                                96           63          143
                                                                                  ------------  -----------  -----------
      Net interest income after provision for
         loan losses                                                                     3,011        2,505        1,820
   Noninterest income                                                                       85           30           23
   Noninterest expense                                                                   1,718        1,047          915
                                                                                  ------------  -----------  -----------
      Income before income taxes                                                         1,378        1,488          928
   Income tax expense                                                                      488          583          342
                                                                                  ------------  -----------  -----------
      Net income                                                                  $        890  $       905  $       586
                                                                                  ============  ===========  ===========

Per Common Share Data:
   Net income, basic (3), (4)                                                     $       0.45  $      0.32  $         -
   Net income, diluted (3), (4)                                                           0.45         0.32            -
   Regular cash dividends (3)                                                             0.36        0.075            -
   Dividend payment ratio                                                               80.00%       23.44%            -

Selected Other Data:
   Number of:
      Outstanding loans                                                                  2,084        1,996        1,773
      Deposit accounts                                                                   4,329        3,770        4,206
      Full-service offices open                                                              1            1            1
      Return on average assets                                                           1.28%        1.41%        0.98%
      Return on average equity                                                           2.88%        5.27%        5.47%
      Average equity to average assets                                                  44.30%       26.73%       17.89%
      Interest rate spread                                                               2.39%        2.40%        2.37%
      Net yield on average interest-earning assets                                       4.58%        4.08%        3.32%
      Average interest-earning assets to average interest-
         bearing liabilities                                                           175.79%      145.45%      121.73%
      Ratio of noninterest expense to average total assets                               2.46%        1.63%        1.53%
      Nonperforming assets to total assets                                               0.41%        0.48%        0.18%
      Loan loss reserves to nonperforming loans at
         period end                                                                    163.84%      110.28%      312.37%

</TABLE>

(1)  Includes  interest-bearing  deposits,  federal  funds sold,  FHLB stock and
     investment securities.

(2)  Includes a special  assessment of $312,000 for the year ended June 30, 1997
     which was paid to recapitalize the Savings Association Insurance Fund

(3)  On December 31, 1997,  First Federal Savings and Loan Association of Cheraw
     converted from a federally-chartered mutual savings and loan association to
     a  federally-chartered  stock savings association and became a wholly-owned
     subsidiary of Great Pee Dee Bancorp, Inc.

(4)  Earnings  per share for the year ended June 30,  1998 is based on  earnings
     from  December 31, 1997 to June 30, 1998  divided by the  weighted  average
     number of shares outstanding during that period.


                                      -2-
<PAGE>


                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------


Management's  discussion  and  analysis  is  intended  to assist  readers in the
understanding  and  evaluation  of  the  financial   condition  and  results  of
operations of Great Pee Dee Bancorp,  Inc. and Subsidiary.  It should be read in
conjunction with the audited consolidated  financial statements and accompanying
notes  included in this report and the  supplemental  financial  data  appearing
throughout this discussion and analysis.

                             Description of Business

Great Pee Dee Bancorp, Inc. ("Great Pee Dee" or "Parent") was incorporated under
the laws of the State of Delaware  for the  purpose of becoming  the savings and
loan holding  company of First Federal  Savings and Loan  Association  of Cheraw
(the "Bank" or "First  Federal") in connection with First  Federal's  conversion
from  a   federally-chartered   mutual   savings  and  loan   association  to  a
federally-chartered  stock savings association (the  "Conversion"),  pursuant to
its Plan of Conversion. Great Pee Dee was organized to acquire all of the common
stock of First  Federal upon its  conversion to stock form. A  subscription  and
community  offering (the  "Offering")  of Great Pee Dee's common stock closed on
December 31, 1997,  at which time Great Pee Dee acquired all of the  outstanding
common stock of the Bank and commenced operations.

In  accordance  with the Plan of  Conversion,  Great Pee Dee issued common stock
with a value of $21.8  million in the Offering  and  received  proceeds of $21.1
million,  net of Conversion  costs.  From the net  proceeds,  Great Pee Dee paid
$10.6 million to First Federal in exchange for the common stock of First Federal
issued  in the  conversion,  and  retained  the  balance  of the net  conversion
proceeds.  The  transaction  was recorded as an "as-if"  pooling with assets and
liabilities recorded at historical cost.

Great Pee Dee has no  operations  and conducts no business of its own other than
owning First Federal,  investing its portion of the net proceeds received in the
Conversion,  and lending funds to the Great Pee Dee Bancorp, Inc. Employee Stock
Ownership  Plan and Trust (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 located in the Bank's primary market area of Chesterfield
and Marlboro counties,  South Carolina.  On June 30, 1999,  approximately 99% of
the Bank's total loans was composed of real estate loans.

Great Pee Dee's principal  sources of income are earnings on capital retained by
Great Pee Dee,  interest earned from the loan to the ESOP, and dividends paid by
the Bank to Great  Pee Dee,  if any.  Revenues  of  First  Federal  are  derived
primarily from interest on loans.  First Federal also receives  interest  income
from its investment securities and interest-earning deposit balances and various
types of non-interest  income.  The major expenses of First Federal are interest
on deposits and general and  administrative  expenses  such as personnel  costs,
occupancy, and federal deposit insurance premiums.

Great Pee Dee and its  subsidiary  are  collectively  referred  to herein as the
"Company".


                                      -3-
<PAGE>


                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------







                Asset/Liability and Interest Rate Risk Management

The Company's  asset/liability  management,  or interest  rate risk  management,
program is focused  primarily on evaluating and managing the  composition of its
assets and  liabilities  in view of various  interest  rate  scenarios.  Factors
beyond the Company's control, such as market interest rates and competition, may
also have an impact on the Company's interest income and interest expense.

In the  absence  of other  factors,  the  yield or  return  associated  with the
Company's  earning  assets  generally  will increase  from existing  levels when
interest rates rise over an extended period of time, and,  conversely,  interest
income will decrease when interest rates decrease. In general,  interest expense
will  increase when interest  rates rise over an extended  period of time,  and,
conversely, interest expense will decrease when interest rates decrease.

Interest  Rate Gap  Analysis.  As a part of its  interest  rate risk  management
policy,  the Company  calculates  an interest  rate "gap."  Interest  rate "gap"
analysis is a common,  though  imperfect,  measure of interest rate risk,  which
measures   the  relative   dollar   amounts  of   interest-earning   assets  and
interest-bearing liabilities which reprice within a specific time period, either
through  maturity or rate  adjustment.  The "gap" is the difference  between the
amounts  of such  assets  and  liabilities  that are  subject  to  repricing.  A
"negative"  gap for a given  period  means that the  amount of  interest-bearing
liabilities  maturing or  otherwise  repricing  within  that period  exceeds the
amount of  interest-earning  assets maturing or otherwise  repricing  within the
same  period.   Accordingly,  in  a  declining  interest  rate  environment,  an
institution with a negative gap would generally be expected,  absent the effects
of other  factors,  to  experience  a lower  decrease in the yield of its assets
relative  to the cost of its  liabilities  and its income  should be  positively
affected.  Conversely,  the cost of funds for an institution with a negative gap
would  generally  be  expected to increase  more  quickly  than the yield on its
assets  in a  rising  interest  rate  environment,  and such  institution's  net
interest income  generally would be expected to be adversely  affected by rising
interest rates.  Changes in interest rates generally have the opposite effect on
an institution with a "positive gap."

The  Company's  one-year  interest  sensitivity  gap as a  percentage  of  total
interest-earning assets at June 30, 1999 was a negative 3.62%. At June 30, 1999,
the Company's three-year and five-year cumulative interest sensitivity gaps as a
percentage of total interest-earning assets were a negative 3.16% and a negative
8.31%, respectively.


                                      -4-
<PAGE>


                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------



The  following  table sets  forth the  amounts  of  interest-earning  assets and
interest-bearing liabilities outstanding at June 30, 1999 which are projected to
reprice or mature in each of the future  time  periods  shown.  Except as stated
below,  the  amounts of assets and  liabilities  shown  which  reprice or mature
within a particular  period were  determined in accordance  with the contractual
terms of the assets or  liabilities.  Loans with  adjustable  rates are shown as
being due at the end of the next upcoming  adjustment period.  Passbook accounts
and money  market  deposit  accounts  are  assumed to be  subject  to  immediate
repricing  and  depositor  availability  and have been  placed  in the  shortest
period. In making the gap computations,  none of the assumptions  sometimes made
regarding  prepayment rates and deposit decay rates have been used for any other
interest-earning assets or interest-bearing  liabilities. In addition, the table
does not reflect scheduled  principal payments which will be received throughout
the lives of the loans.  The interest rate  sensitivity of the Company'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.

<TABLE>
<CAPTION>

                                                                   Terms to Repricing at June 30, 1999
                                            -----------------------------------------------------------------------------
                                                               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)
INTEREST-EARNING ASSETS:
   Loans receivable:
     Real estate loans:
<S>                                         <C>              <C>             <C>              <C>            <C>
         Adjustable                         $       23,690   $       1,006   $          37    $        330   $     25,063
         Fixed                                       1,981           1,087           2,193          33,717         38,978
   Other loans                                         271              62             193             288            814
   Interest-earning balances in other banks            726               -               -               -            726
   Investments                                         450(1)        3,600              21               -          4,071
   FHLB common stock(2)                                  -               -               -             524            524
                                            --------------   -------------   -------------    ------------   ------------

         Total interest-earning assets      $       27,118   $       5,755   $       2,444    $     34,859   $     70,176
                                            ==============   =============   =============    ============   ============

INTEREST-BEARING LIABILITIES:
   Deposits:
     Regular passbook savings               $        2,094   $           -   $           -    $          -   $      2,094
     Money market passbook and checking             11,490               -               -               -         11,490
     Certificate accounts                           16,075           5,432           6,057             184         27,748
                                            --------------   -------------   -------------    ------------   ------------

       Total interest-bearing liabilities   $       29,659   $       5,432   $       6,057    $        184   $     41,332
                                            ==============   =============   =============    ============   ============

INTEREST SENSITIVITY GAP PER PERIOD         $       (2,541)  $         323   $      (3,613)   $     34,675   $     28,844

CUMULATIVE INTEREST SENSITIVITY GAP         $       (2,541)  $      (2,218)  $      (5,831)   $     28,844   $     30,908

CUMULATIVE  GAP AS A PERCENTAGE  OF
  TOTAL INTEREST-EARNING ASSETS                    (3.62)%          (3.16)%         (8.31)%        41.10%          44.04%

CUMULATIVE INTEREST-EARNING
  ASSETS AS A PERCENTAGE OF
  INTEREST-BEARING LIABILITIES                     91.43%           93.68%          85.83%        169.79%         184.30%

</TABLE>

(1)  Equity security with no stated maturities; readily available and assumed to
     mature in less than one year.

(2)  Nonmarketable equity security;  substantially all required to be maintained
     and assumed to mature in periods greater than 10 years.

                                      -5-
<PAGE>
                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------



In addition to the  traditional  gap analysis,  the Company also uses a computer
based interest rate risk simulation  model.  This  comprehensive  model includes
rate  sensitivity  gap analysis,  rate shock net interest margin  analysis,  and
asset/liability  term and rate analysis.  The Company uses this model to monitor
interest  rate risk on a  quarterly  basis and to detect  trends that may affect
overall interest income. As a result, this analysis more accurately predicts the
risk to net interest income over the upcoming  twelve month period.  The Company
has a policy  establishing  the maximum  allowable  risk to net interest  income
caused by changes in interest  rates.  The modeling  results  indicate  that the
Company is within the established parameters of the interest rate risk policy.

                               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
June 30,  1999 and 1998.  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 earning  balance).  Nonaccruing loans were
included in the computation of average balances.

<TABLE>
<CAPTION>

                                                   Year Ended June 30, 1999                Year Ended June 30, 1998
                                            -------------------------------------    -------------------------------------
                                              Average                    Average       Average                    Average
                                              Balance      Interest       Rate         Balance     Interest        Rate
                                            ----------    ----------     -------     ---------    ---------       --------
                                                                         (Dollars in thousands)
Interest-earning assets:
<S>                                         <C>           <C>            <C>         <C>          <C>              <C>
  Interest-earning balances                 $    2,614    $      199     7.61%       $    5,409   $      405       7.49%
  Investments                                    4,375           243     5.55%            2,362          181       7.66%
  Loans                                         60,853         4,625     7.60%           55,232        4,311       7.81%
                                            ----------    ----------                 ----------   ----------
       Total interest-earning assets            67,842         5,067     7.47%           63,003        4,897       7.77%

Other assets                                     1,878                                    1,257
                                            ----------                               ----------

       Total assets                         $   69,720                               $   64,260
                                            ==========                               ==========

Interest-bearing liabilities:
  Deposits                                  $   38,501         1,953     5.07%       $   41,888        2,248       5.37%
  Borrowings                                        92             7     7.61%            1,427           81       5.68%
                                            ----------    ----------                 ----------   ----------

       Total interest-bearing liabilities       38,593         1,960     5.08%           43,315        2,329       5.38%
                                                          ----------                              ----------

Other liabilities                                  238                                    3,766

Stockholders' equity                            30,889                                   17,179
                                            ----------                               ----------

       Total liabilities and stockholders'
       equity                              $    69,720                              $   64,260
                                           ===========                              ==========

Net interest income and interest rate spread             $     3,107     2.39%                   $     2,568       2.40%
                                                         ===========     =====                   ===========       =====


Net yield on average interest-earning assets                             4.58%                                     4.08%
                                                                         =====                                     =====

Ratio of average interest-earning assets to
 average interest-bearing liabilities          175.79%                                 145.45%
                                              ========                                 =======

</TABLE>

                                      -6-

<PAGE>


                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------

                              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 rate  (changes in rate  multiplied by the
prior period's volume),  and (iii) net change (the sum of the previous columns).
The change  attributable  to both rate and volume (changes in rate multiplied by
changes in volume) has been allocated  equally to both the changes  attributable
to volume and the changes attributable to rate.

<TABLE>
<CAPTION>

                                                                       Year Ended June 30, 1999 vs. 1998
                                                            -----------------------------------------------------
                                                                          Increase (Decrease) Due To
                                                            -----------------------------------------------------
                                                                 Volume              Rate               Total
                                                            ----------------    --------------     --------------
                                                                            (Dollars in thousands)

         Interest income:
<S>                                                          <C>                <C>                <C>
            Interest-earning balances                        $         (213)    $            7     $         (206)
            Investments                                                  92                (30)                62
            Loans                                                       423               (109)               314
                                                             --------------     ---------------    --------------

                    Total interest income                               302               (132)               170
                                                             --------------     ---------------    --------------

         Interest expense:
            Deposits                                                   (176)              (119)              (295)
            Borrowings                                                 (116)                42                (74)
                                                             ---------------    --------------     ---------------

                    Total interest expense                             (292)               (77)              (369)
                                                             ---------------    ---------------    ---------------

         Net interest income                                 $          594     $          (55)    $          539
                                                             ==============     ===============    ==============
</TABLE>

                                      -7-

<PAGE>

                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------



      Comparison of Financial Condition at June 30, 1999 and June 30, 1998

The Company's total assets  increased by $4.2 million during the year ended June
30,1999,  from $68.4  million at June 30, 1998 to $72.6 million at the year-end.
The Company  continued to experience  strong loan demand during the year, as net
loans receivable  increased $7.6 million, or 13.5%, to $64.4 million at June 30,
1999.  The Company also  implemented  a stock  repurchase  plan during the year,
reacquiring  192,364  shares at an aggregate  cost of $2.5 million.  Funding for
these  activities  was  provided  through  reductions  of $4.3  million and $1.4
million,  respectively,  in interest-bearing balances in other banks and federal
funds sold,  and  through  borrowings  from the  Federal  Home Loan Bank of $1.2
million and an increase in deposits of $4.7 million.

The growth in deposits arose from the successful introduction during the year of
interest-bearing  checking  accounts that grew to $6.1 million by the end of the
year,  while  certificate of deposit  accounts  decreased by $1.1 million,  from
$28.8  million at the  beginning of the year to $27.7  million at year-end.  The
Company has made significant  progress in its efforts to develop a broader array
of banking products during the year. In addition, during 1999 the Bank purchased
for  $275,000 a  commercial  lot  located on Highway 9 West in Cheraw for future
development of another full service banking facility.


Total  stockholders'  equity was $29.8 million at June 30, 1999 as compared with
$31.5  million at June 30,  1998,  a  decrease  of $1.7  million.  Net income of
$890,000  for the year was offset by  regular  quarterly  dividends  aggregating
$726,000,  or $.36 per share, and by the $2.5 million purchase of treasury stock
discussed  above.  At June 30,  1999,  despite the  reduction  in  stockholders'
equity,  both the Company and the Bank  continued  to  substantially  exceed all
applicable regulatory capital requirements.

 Comparison of Results of Operations for the Years Ended June 30, 1999 and 1998

Net  Income.  Consolidated  net  income  for the year  ended  June 30,  1999 was
$890,000,  or $.45 per share,  as compared  with net income of $905,000  for the
year ended June 30,  1998,  a decrease  in  consolidated  net income of $15,000.
During the current  year,  the Company had  available  substantially  all of the
capital  generated in the conversion  stock offering that closed on December 31,
1997,  while such capital was  available  only during the last six months of the
year ended June 30, 1998. As a result, the average level of net interest-earning
assets during the current year was approximately $9.6 million higher than during
the previous year, with a resultant increase of $539,000 in net interest income.
During  the year,  the  Company  also  implemented  successfully  a  program  of
origination and sale of mortgage loans,  generating gains on sales of such loans
aggregating $53,000.  These increases in income,  however, were more than offset
by an increase of $670,000 in non-interest expenses.

Net Interest  Income.  Net interest  income for the year ended June 30, 1999 was
$3.1 million as compared with $2.6 million  during the year ended June 30, 1998,
an increase  of $539,000  relating  principally  to the  increase in average net
interest-earning assets discussed under the caption "Net Income" above. Detailed
analyses of the  components  of net interest  income and the changes in interest
income and expense are presented herein under the captions "Net Interest Income"
and "Rate/Volume Analysis".

Provision for Loan Losses. The provision for loan losses was $96,000 and $63,000
for the  years  ended  June 30,  1999 and  1998,  respectively,  while  net loan
charge-offs were $6,000 and $12,000, respectively.  Management believes that the
provision for loan losses and the resulting loan loss allowance at June 30, 1999
will  be  adequate  to  absorb  losses  on  existing  loans.  Non-accrual  loans
aggregated $271,000 at June 30, 1999 as compared with $321,000 at June 30, 1998.
The   allowance  for  loan  losses  of  $444,000  at  June  30,  1999  stood  at
approximately 164% of non-accrual loans.

Non-Interest Income.  Non-interest income increased by $55,000, from $30,000 for
the year ended June 30,  1998 to $85,000  for the year ended June 30,  1999.  Of
this increase, $53,000 represented gains from sales of mortgage loans originated
to be sold in the secondary market.

Non-Interest  Expenses.  Non-interest  expenses increased to $1.7 million during
the year ended June 30,  1999 as compared  with $1.0  million for the year ended
June 30, 1998, an increase of $670,000. Direct costs of $537,000 relating to the
adoption  and  implementation  of the  Company's  RRP  was  the  largest  single
component  of this  overall  expense  increase  (see Note H to the  consolidated
financial statements). Occupancy costs increased by $52,000 as a result of (1) a
significant  renovation  of the  Bank's  office  facility  and  (2)  substantial
additions and replacements of data processing  equipment and office furnishings.
Charitable contributions charged to expense decreased from $212,000 for the year
ended June 30, 1998 to $13,000 for the year ended June 30, 1999. The expense for
1998  included the $200,000  value of common shares  contributed  to the Company
sponsored charitable


                                      -8-
<PAGE>

                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------




foundation  in  connection  with the  Company's  public  stock  offering.  Other
non-interest  increased by $183,000,  from  $210,000 for the year ended June 30,
1998 to  $393,000  for the  year  ended  June 30,  1999.  The  Company  incurred
additional  costs of  approximately  $55,000  relating  to  upgrades of its data
processing  capabilities,  including training costs of $28,000. The Company also
charged to expense  during the  current  year costs of $48,000  incurred  in the
development of expanded  products and services to customers.  The balance of the
increase  in  non-interest  expenses  relates  principally  to the higher  costs
arising from a full year of operating as a publicly owned entity.

Provision for Income Taxes.  The provision for income taxes,  as a percentage of
income  before  income  taxes,  was 35.4% and 39.2% for the years ended June 30,
1999 and 1998, respectively.

                                  Asset Quality

Non-performing  assets include  non-accrual loans,  accruing loans contractually
past due 90 days or more,  restructured  loans, other real estate and other real
estate under contract for sale.  Loans are placed on non-accrual when management
has concerns relating to the ability to collect the loan principal and interest,
and generally when such loans are 90 days or more past due. While non-performing
assets represent potential losses to the Company, management does not anticipate
any  aggregate  material  losses since most loans are believed to be  adequately
secured.  Management  believes the  allowance  for loan losses is  sufficient to
absorb known risks in the  portfolio.  No assurance  can be given that  economic
conditions will not adversely affect  borrowers and result in increased  losses.
The  following  table  summarizes  non-performing  assets  by type at the  dates
indicated.  Other than the  amounts  listed,  there were no other loans that (i)
represent or result from trends or  uncertainties  which  management  reasonably
expects will materially  impact future operating  results,  liquidity or capital
resources  or  (ii)  represent  material  credits  about  which  management  has
information  that causes them to have  serious  doubts as to the ability of such
borrowers to comply with the loan repayment terms.

<TABLE>
<CAPTION>

                                                                                                        At June 30,
                                                                                                ------------------------
                                                                                                   1999           1998
                                                                                                -----------   ----------
Non-performing assets:
<S>                                                                                             <C>           <C>
     Non-accrual loans                                                                          $       271   $      321
     Loans past due 90 days or more and still accruing                                                    -            -
     Other real estate                                                                                   33            9
     Renegotiated troubled debt                                                                           -            -
                                                                                                -----------   ----------

                  Total non-performing assets                                                   $       304   $      330
                                                                                                ===========   ==========

</TABLE>

                         Liquidity and Capital Resources

During the year ended  June 30,  1999,  Great Pee Dee  Bancorp,  Inc.  paid cash
dividends of $.36 per share.  Although Great Pee Dee Bancorp,  Inc.  anticipates
that it will continue to declare cash dividends on a regular basis, the Board of
Directors  will  review its policy on the  payment  of  dividends  on an ongoing
basis, and such payment will be subject to future earnings,  cash flows, capital
needs, and regulatory restrictions.



                                      -9-

<PAGE>


                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------



Maintaining  adequate liquidity while managing interest rate risk is the primary
goal of  Great  Pee Dee  Bancorp's  asset  and  liability  management  strategy.
Liquidity  is the  ability  to  fund  the  needs  of the  Bank's  borrowers  and
depositors,  pay operating expenses, and meet regulatory liquidity requirements.
Maturing  investments,  loan and mortgage-backed  security principal repayments,
deposits  and income from  operations  are the main  sources of  liquidity.  The
Bank's primary uses of liquidity are to fund loans and to make investments.

As of June 30, 1999,  liquid assets (cash,  interest-earning  deposits,  federal
funds  sold  and  marketable  investment  securities)  were  approximately  $5.7
million,  which  represents  13.7% of deposits.  First Federal is required under
applicable  federal   regulations  to  maintain  specified  levels  of  "liquid"
investments in qualifying types of United States Government,  federal agency and
other  investments  having  maturities  of  five  years  or  less.  Current  OTS
regulations  require that a savings  association  maintain  liquid assets of not
less than 4% of its average daily balance of net  withdrawable  deposit accounts
and borrowings  payable in one year or less.  Monetary  penalties may be imposed
for failure to meet applicable liquidity  requirements.  At June 30, 1999, First
Federal's  liquidity,  as measured  for  regulatory  purposes,  was 8.3% or $2.4
million in excess of the minimum OTS requirement.

At June 30, 1999,  outstanding  mortgage loan commitments were $1.7 million, and
the  undisbursed  portion of  construction  loans was $2.0 million.  Funding for
these   commitments  is  expected  to  be  provided  from  deposits,   loan  and
mortgage-backed securities principal repayments, maturing investments and income
generated from operations.

Under federal capital regulations,  Great Pee Dee Bancorp and First Federal must
satisfy  certain  minimum  leverage ratio  requirements  and risk-based  capital
requirements.  Failure to meet such requirements can initiate certain mandatory,
and  possibly   additional   discretionary,   actions  by  regulators  that,  if
undertaken,  could have a direct material  effect on First  Federal's  financial
statements.  At June 30, 1999 and 1998,  Great Pee Dee Bancorp and First Federal
exceeded all such requirements.

The  Bank  is   restricted   in  its  ability  to  pay  dividends  and  to  make
distributions.  A  significant  source of Great Pee  Dee's  funds are  dividends
received from the Bank. In fiscal 2000, the amount of dividends that can be paid
by the Bank  without  prior  approval  from  regulators  is  approximately  $5.0
million. These funds should be adequate to cover Great Pee Dee's needs.

                               Regulatory Matters

Management is not aware of any known trends,  events,  uncertainties  or current
recommendations by regulatory authorities that will have, or that are reasonably
likely to have, a material effect on the Company's liquidity, capital resources,
or other operations.

                     Impact of Inflation and Changing Prices

The financial  statements and notes thereto  presented herein have been prepared
in accordance with generally accepted accounting  principles,  which require the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased cost of the Company's  operations.  Unlike most industrial  companies,
nearly all the Company's  assets and  liabilities  are monetary in nature.  As a
result,  interest rates have a greater impact on the Company's  performance than
do the effects of general levels of inflation. Interest rates do not necessarily
move in the same  direction  or to the same  extent  as the  price of goods  and
services.

                                      -10-
<PAGE>

                   Great Pee Dee Bancorp, Inc. and Subsidiary
                      Management's Discussion and Analysis
--------------------------------------------------------------------------------


                       Impact of New Accounting Standards

FASB Statement on Accounting for Derivative  Instruments and Hedging Activities.
In June 1998,  the FASB issued  Statement  No. 133,  Accounting  for  Derivative
Instruments and Hedging Activities.  In June 1999, this Statement was amended by
SFAS No. 137 to defer the effective  date to fiscal years  beginning  after June
15, 2000.  This Statement  establishes  accounting  and reporting  standards for
derivative  instruments and hedging  activities,  including  certain  derivative
instruments  embedded in other contracts,  and requires that an entity recognize
all derivatives as assets or liabilities in the statement of financial condition
and measure  them at fair value.  If certain  conditions  are met, an entity may
elect to designate a derivative  as follows:  (a) a hedge of 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 an unrecognized
firm commitment, an available-for-sale  security, a foreign currency denominated
forecasted  transaction,  or a  net  investment  in  a  foreign  operation.  The
Statement  generally  provides for matching the timing of the recognition of the
gain  or  loss  on  derivatives  designated  as  hedging  instruments  with  the
recognition of the changes in the fair value of the item being hedged. Depending
on the type of hedge,  such  recognition  will be in either  net income or other
comprehensive  income. For a derivative not designated as a hedging  instrument,
changes in fair value will be  recognized in net income in the period of change.
Management  anticipates  that the statement will have no material  effect on the
Company's consolidated financial statements.

                           Year 2000 Compliance Issues

All levels of the Company's  management  and its Board of Directors are aware of
the issues  presented by the Year 2000 century change and the serious effects it
may have on the Company and its customers.  In May 1997,  the Federal  Financial
Institutions  Examination  Council  ("FFIEC")  issued an Interagency  Statement,
"Year 2000 Project Management Awareness",  to emphasize the critical issues that
need to be addressed to  implement  an  effective  Year 2000 project  management
plan.  The FFIEC  Statement  identifies  five  phases  of the Year 2000  project
management process. The Company has formed a Year 2000 project team,  consisting
of  senior  officers  within  the  Company's  operations,  information  systems,
financial  and  management  areas,  to ensure that the Company will be Year 2000
compliant. Although the Company relies entirely upon outside vendors and service
providers  for  its  computer   hardware  and  software  and  its  security  and
communications  equipment,  all date sensitive  systems are being  evaluated for
Year 2000 compliance.  During 1998, the Company completed  upgrading and testing
of systems  that have been  identified  as  critical to  conducting  its banking
business.  Testing of systems with lower priorities was completed in early 1999.
The Company has also  developed  contingency  plans for its computer  processes,
including the use of  alternative  systems and the manual  processing of certain
critical operations.  In addition,  the Company is undertaking efforts to ensure
that  significant  vendor and  customer  relationships  are or will be Year 2000
compliant. There can be no guarantee that the systems of other entities on which
the Company either directly or indirectly  relies will be timely  converted,  or
that  a  failure  to  convert  by  another  entity,  or  a  conversion  that  is
incompatible  with the  Company's  systems,  would not have a  material  adverse
effect on the  Company in future  periods.  However,  the  Company's  management
believes  that all of its systems  will be  verified  Year 2000  compliant.  The
Company  estimates  that its total Year 2000  compliance  costs  will  aggregate
approximately $175,000, including capital expenditures of approximately $141,000
and other expenses of approximately $34,000 that have been or will be charged to
operations. In addition to the estimated costs of its Year 2000 compliance,  the
Company  routinely  makes annual  investments  in  technology  in its efforts to
improve  customer  service  and to  efficiently  manage its  product and service
delivery systems


                                      -11-
<PAGE>

                        [LETTERHEAD OF DIXON ODOM PLLC]

                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
Great Pee Dee Bancorp, Inc.
Cheraw, South Carolina


We have audited the accompanying  consolidated statements of financial condition
of Great Pee Dee Bancorp,  Inc. and  Subsidiary as of June 30, 1999 and 1998 and
the related  consolidated  statements of  operations,  changes in  stockholders'
equity and cash flows for the years then ended.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those 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 Great Pee Dee
Bancorp, Inc. and Subsidiary at June 30, 1999 and 1998, and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.



/S/ Dixon Odom PLLC

Sanford, North Carolina
August 13, 1999




                                      -12-

<PAGE>



GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


ASSETS                                                                                  1999                   1998
                                                                                  -----------------     ------------------

<S>                                                                               <C>                   <C>
Cash on hand and in banks                                                         $         857,267     $          510,412
Interest-earning balances in other banks                                                    726,203              5,013,308
Federal funds sold                                                                                -              1,400,000
Investment  securities  available  for sale,  at fair value  (amortized  cost of
  $450,000 and $200,000 at June 30, 1999 and 1998,
  respectively) (Note B)                                                                    450,000                200,000
Investment  securities held to maturity,  at amortized cost (fair
  value of $3,559,755  and  $3,341,035 at June 30, 1999 and 1998,
  respectively) (Note B)                                                                  3,621,297              3,340,675
Loans receivable, net (Note C)                                                           64,411,377             56,768,325
Loans held for sale                                                                         525,000                      -
Accrued interest receivable                                                                 356,328                277,931
Premises and equipment, net (Note D)                                                        740,012                211,766
Foreclosed real estate                                                                       33,300                  8,900
Stock in the Federal Home Loan Bank, at cost                                                524,000                495,200
Other assets                                                                                356,302                173,599
                                                                                  -----------------     ------------------

                                                                 TOTAL ASSETS     $      72,601,086     $       68,400,116
                                                                                  =================     ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Deposit accounts (Note G)                                                      $      41,332,445     $       36,663,436
   Advances from Federal Home Loan Bank (Note F)                                          1,200,000                      -
   Accrued interest payable                                                                  50,441                 68,614
   Advance payments by borrowers for property taxes
      and insurance                                                                          62,801                 62,176
   Accrued expenses and other liabilities                                                   142,272                130,855
                                                                                  -----------------     ------------------

                                                            TOTAL LIABILITIES            42,787,959             36,925,081
                                                                                  -----------------     ------------------

Commitments and Contingencies (Notes C and M)

STOCKHOLDERS' EQUITY (Note L)
   Preferred stock, no par value, 400,000 shares authorized,
      no shares issued and outstanding                                                            -                      -
   Common stock, $.01 par value, 3,600,000 shares
      authorized; 2,224,617 and 2,202,125 shares issued
      at June 30, 1999 and 1998, respectively                                                22,246                 22,021
   Additional paid in capital                                                            21,530,265             21,292,979
   Unearned compensation (Note H)                                                        (1,938,390)            (1,682,319)
   Retained earnings, substantially restricted                                           12,006,012             11,842,354
   Common stock in treasury, at cost (138,664 shares
      at June 30, 1999)                                                                  (1,807,006)                     -
                                                                                  -----------------     ------------------

                                                   TOTAL STOCKHOLDERS' EQUITY            29,813,127             31,475,035
                                                                                  -----------------     ------------------

                                   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $      72,601,086     $       68,400,116
                                                                                  =================     ==================
</TABLE>

See accompanying notes.

                                      -13-
<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 1999 and 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                            1999                1998
                                                                                      ----------------     ---------------

INTEREST INCOME
<S>                                                                                   <C>                  <C>
   Loans                                                                              $      4,625,506     $     4,311,381
   Investments                                                                                 242,692             181,006
   Deposits in other banks and federal funds sold                                              198,991             404,786
                                                                                      ----------------     ---------------

                                                             TOTAL INTEREST INCOME           5,067,189           4,897,173
                                                                                      ----------------     ---------------

INTEREST EXPENSE
   Deposits (Note G)                                                                         1,952,718           2,247,995
   Borrowed funds                                                                                7,309              80,839
                                                                                      ----------------     ---------------

                                                            TOTAL INTEREST EXPENSE           1,960,027           2,328,834
                                                                                      ----------------     ---------------

                                                               NET INTEREST INCOME           3,107,162           2,568,339

PROVISION FOR LOAN LOSSES (Note C)                                                              96,000              63,000
                                                                                      ----------------     ---------------

                                                         NET INTEREST INCOME AFTER
                                                         PROVISION FOR LOAN LOSSES           3,011,162           2,505,339
                                                                                      ----------------     ---------------

NON-INTEREST INCOME                                                                             84,613              29,591
                                                                                      ----------------     ---------------

NON-INTEREST EXPENSES
   Personnel costs                                                                           1,178,260             538,038
   Occupancy                                                                                   110,824              59,429
   Deposit insurance premiums                                                                   22,200              27,931
   Charitable contributions (Note J)                                                            13,084             212,050
   Other                                                                                       393,118             209,780
                                                                                      ----------------     ---------------

                                                       TOTAL NON-INTEREST EXPENSES           1,717,486           1,047,228
                                                                                      ----------------     ---------------

                                                        INCOME BEFORE INCOME TAXES           1,378,289           1,487,702

INCOME TAXES (Note K)                                                                          488,400             582,948
                                                                                      ----------------     ---------------

                                                                        NET INCOME    $        889,889     $       904,754
                                                                                      ================     ===============

EARNINGS PER COMMON SHARE (Note A)
   Basic and diluted                                                                  $           0.45     $          0.32
                                                                                      ================     ===============
</TABLE>


See accompanying notes.
                                      -14-


<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1999 and 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                      Additional                                                  Total
                             Common stock               paid-in       Unearned       Retained      Treasury   stockholders'
                          ------------------------
                          Shares         Amount         capital    compensation      earnings        stock        equity
                          ---------  -------------  -------------  --------------  ------------  ------------  ------------
<S>                       <C>        <C>            <C>            <C>             <C>           <C>           <C>
Balance at June 30, 1997          -  $           -  $           -  $            -  $ 11,089,666  $          -  $ 11,089,666

Net income                        -              -              -               -       904,754             -       904,754

Net proceeds from
issuance of 2,182,125
shares of $.01 par
value common stock        2,182,125         21,821     21,052,560               -             -             -    21,074,381

Purchase of 174,570
shares of common
stock by ESOP                     -              -              -      (1,745,700)            -             -    (1,745,700)

Issuance of 20,000
shares of common
stock to charitable
foundation                   20,000            200        199,800               -             -             -       200,000

Release of ESOP
shares                            -              -         40,619          63,381             -             -       104,000

Cash dividends paid
($.075 per share)                 -              -              -               -      (152,066)            -      (152,066)
                      -------------  -------------  -------------  --------------  ------------  ------------  ------------

Balance at June 30,
1998                      2,202,125         22,021     21,292,979      (1,682,319)   11,842,354             -    31,475,035

Net income                        -              -              -               -       889,889             -       889,889

Purchase of treasury
stock                             -              -              -               -             -    (2,503,891)   (2,503,891)

Adoption of Recognition
and Retention Plan           22,492            225        217,194        (914,304)            -       696,885             -

Recognition and Retention
Plan shares earned                -              -              -         537,198             -             -       537,198

Release of ESOP shares            -              -         20,092         121,035             -             -       141,127

Cash dividends paid
($.36 per share)                  -              -              -               -      (726,231)            -      (726,231)
                      -------------  -------------  -------------  --------------  ------------  ------------  ------------

Balance at June 30,
1999                      2,224,617  $      22,246  $  21,530,265  $   (1,938,390) $ 12,006,012  $ (1,807,006) $ 29,813,127
                      =============  =============  =============  ==============  ============  ============  ============
</TABLE>


See accompanying notes.

                                      -15-

<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1999 and 1998
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                            1999                1998
                                                                                      ----------------     ---------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                   <C>                  <C>
   Net income                                                                         $        889,889     $       904,754
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation                                                                              65,387              15,588
      Amortization, net                                                                         23,745                 643
      Loss on sale of foreclosed real estate, net                                                    -               1,892
      Provision for loan losses                                                                 96,000              63,000
      Deferred income taxes                                                                   (137,727)           (100,871)
      Contribution of common stock to charitable foundation                                          -             200,000
      ESOP contribution expense                                                                141,127             104,000
      Vesting of deferred recognition and retention plan                                       537,198                   -
      Change in assets and liabilities
        Increase in accrued interest receivable                                                (78,397)            (39,499)
        Increase in loans held for sale                                                       (525,000)                  -
        (Increase) decrease in other assets                                                    (44,976)             66,599
        Decrease in accrued interest payable                                                   (18,173)            (37,092)
        Increase in accrued expenses and other liabilities                                      11,417             111,672
                                                                                      ----------------     ---------------

                                                              NET CASH PROVIDED BY
                                                              OPERATING ACTIVITIES             960,490           1,290,686
                                                                                      ----------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of available-for-sale securities                                                  (250,000)           (200,000)
   Purchases of held to maturity investment securities                                      (2,400,000)         (3,700,000)
   Proceeds from maturities and calls of
      held to maturity investment securities                                                 2,119,378           2,125,456
   Purchase of Federal Home Loan Bank stock                                                    (28,800)            (10,600)
   Net increase in loans                                                                    (7,788,397)         (2,911,023)
   Purchase of premises and equipment                                                         (593,633)            (43,914)
   Proceeds from sale of real estate acquired in settlement of loans                             1,200              64,150
   Capital expenditures for real estate acquired in settlement of loans                              -             (12,142)
                                                                                      ----------------     ----------------

                                                                  NET CASH USED BY
                                                              INVESTING ACTIVITIES          (8,940,252)         (4,688,073)
                                                                                      -----------------    ---------------

</TABLE>

See accompanying notes.
                                      -16-

<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1999 and 1998
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                                            1999                1998
                                                                                      ----------------     ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                                   <C>                  <C>
   Net increase (decrease) in demand accounts                                         $      5,763,500     $    (1,164,385)
   Net decrease in certificates of deposit                                                  (1,094,491)         (9,035,186)
   Increase (decrease) in advance payments by borrower
      for taxes and insurance                                                                      625               2,191
   Net increase (decrease) in advances from Federal
      Home Loan Bank                                                                         1,200,000          (2,400,000)
   Net proceeds from issuance of common stock                                                        -          21,074,381
   Loan to ESOP for purchase of common stock                                                         -          (1,745,700)
   Purchase of treasury stock                                                               (2,503,891)                  -
   Cash dividends paid                                                                        (726,231)           (152,066)

                                                                                      -----------------    ---------------
</TABLE>
<TABLE>
<CAPTION>
<S>                                                                                   <C>                  <C>

                                                                 NET CASH PROVIDED
                                                           BY FINANCING ACTIVITIES           2,639,512           6,579,235
                                                                                      ----------------     ---------------

                                                        NET INCREASE (DECREASE) IN
                                                         CASH AND CASH EQUIVALENTS          (5,340,250)          3,181,848

CASH AND CASH EQUIVALENTS, BEGINNING                                                         6,923,720           3,741,872
                                                                                      ----------------     ---------------

                                                                     CASH AND CASH
                                                               EQUIVALENTS, ENDING    $      1,583,470     $     6,923,720
                                                                                      ================     ===============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for:
      Interest                                                                        $      1,978,200     $     2,365,926
                                                                                      ================     ===============

      Income taxes                                                                    $        700,590     $       499,603
                                                                                      ================     ===============


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
  AND FINANCING ACTIVITIES
   Loans receivable transferred to real estate acquired in
    settlement of loans
                                                                                      $         25,600     $        52,700
                                                                                      ================     ===============



   Adoption of deferred recognition and retention plan
                                                                                      $        914,304     $              -
                                                                                      ================     ================
</TABLE>

See accompanying notes.

                                      -17-


<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------




NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Organization and Operations
---------------------------

On December 31, 1997, pursuant to a Plan of Conversion which was approved by its
members and  regulators,  First Federal  Savings and Loan  Association of Cheraw
("First  Federal" or the "Bank")  converted  from a federally  chartered  mutual
savings and loan association to a federally-chartered  stock savings association
(the  "Conversion")  and  became a  wholly-owned  subsidiary  of  Great  Pee Dee
Bancorp, Inc. (the "Company" or "Parent"). The Company was formed to acquire all
of the common stock of First  Federal  upon its  conversion  to stock form.  The
Company has no operations  and conducts no business on its own other than owning
First  Federal,  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
------------------

First  Federal  maintains  its sole office and conducts its primary  business in
Cheraw,  Chesterfield County,  South Carolina.  The Bank is primarily engaged in
the  business of  attracting  deposits  from the  general  public and using such
deposits to make mortgage loans secured by one-to-four  family  residential real
estate located in its primary market area. The Bank also makes home  improvement
loans,  multi-family residential loans,  construction loans and loans secured by
deposit  accounts.  First  Federal  is a  portfolio  lender  in that it does not
originate its fixed or adjustable  rate loans for sale in the secondary  market.
First  Federal  has been and  intends  to  continue  to be a  community-oriented
financial institution offering a variety of financial services to meet the needs
of the communities it serves.

Basis of Presentation
---------------------

The accompanying  consolidated  financial statements include the accounts of the
parent and the Bank,  together  referred to as the  "Company."  All  significant
intercompany transactions and balances are eliminated in consolidation.

Cash and Cash Equivalents
-------------------------

For  purposes  of the  consolidated  statements  of cash  flows,  cash  and cash
equivalents  include  cash on hand and in banks,  interest-earning  balances  in
other banks, and federal funds sold.

Use of Estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.



                                      -18-


<PAGE>



GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates (Continued)
----------------

Material estimates that are particularly  sensitive to significant change relate
to the  determination  of the allowance for losses on loans and the valuation of
real estate  acquired in connection  with  foreclosures  or in  satisfaction  of
loans.  In connection  with the  determination  of the  allowances for losses on
loans and foreclosed real estate,  management obtains independent appraisals for
significant properties.

A majority of the Bank's loan portfolio  consists of  single-family  residential
loans in its market area. The regional  economy is currently stable and consists
of various types of industry. Real estate prices in this market are also stable;
however, the ultimate collectibility of a substantial portion of the Bank's loan
portfolio is susceptible to changes in local market conditions.

While  management  uses available  information to recognize  losses on loans and
foreclosed  real estate,  future  additions to the  allowances  may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances  for losses on loans and  foreclosed  real estate.  Such agencies may
require  the  Bank to  recognize  additions  to the  allowances  based  on their
judgments about information  available to them at the time of their examination.
Because of these  factors,  it is reasonably  possible that the  allowances  for
losses on loans and  foreclosed  real estate may change  materially  in the near
term.

Investment Securities
---------------------

The  Bank  classifies  its  securities  in one  of  three  categories:  trading,
available  for sale,  or held to maturity.  There were no trading  securities at
June 30, 1999 or 1998.  Securities  held to maturity  are those  securities  for
which the Bank has the ability and intent to hold to maturity.

Available-for-sale  securities  consist of marketable  equity securities and are
recorded  at fair  value.  Held to  maturity  securities  are  recorded at cost,
adjusted for the amortization or accretion of premiums or discounts.  Unrealized
holding gains and losses, net of the related tax effect, on securities available
for sale are excluded  from  earnings  and are  reported in other  comprehensive
income until realized.  Transfers of securities  between categories are recorded
at fair  value at the  date of  transfer.  Unrealized  holding  gains or  losses
associated  with transfers of securities  from held to maturity to available for
sale are recorded as a separate component of stockholders' equity.

A decline  in the market  value of any  available-for-sale  or  held-to-maturity
investment below cost that is deemed other than temporary is charged to earnings
and establishes a new cost basis for the security.

Premiums and  discounts  are  amortized or accreted over the life of the related
security as an adjustment to the yield.  Realized  gains and losses are included
in earnings  and the costs of  securities  sold are derived  using the  specific
identification method.

Loans Held for Sale
-------------------

Mortgage  loans  originated  and intended for sale in the  secondary  market are
carried at the lower of cost or  estimated  market value in the  aggregate.  Net
unrealized  losses are  recognized  through a valuation  allowance by charges to
income.



                                      -19-
<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans Receivable
----------------

Loans  receivable  are stated at unpaid  balances,  less the  allowance for loan
losses and net deferred loan fees.

Loan  origination  and commitment  fees, as well as certain  direct  origination
costs,  are deferred and amortized as a yield  adjustment  over the  contractual
lives of the related loans using the interest  method.  Amortization of deferred
loan fees is discontinued when a loan is placed on nonaccrual status.

Loans are placed on  nonaccrual  when a loan is  specifically  determined  to be
impaired  or when  principal  or  interest  is  delinquent  for 90 days or more.
Interest  income  generally is not recognized on specific  impaired loans unless
the  likelihood of further loss is remote.  Interest  payments  received on such
loans are applied as a reduction of the loan principal balance.  Interest income
on other nonaccrual loans is recognized only to the extent of interest  payments
received.

The Bank accounts for impaired  loans in accordance  with Statement of Financial
Accounting Standards ("SFAS") No. 114, Accounting by Creditors for Impairment of
a Loan,  amended for SFAS No. 118,  Accounting by Creditors for  Impairment of a
Loan - Income  Recognition  and  Disclosure.  A loan is impaired when,  based on
current information and events, it is probable that all amounts due according to
the  contractual  terms of the loan  agreement  will not be collected.  Impaired
loans are  measured  based on the present  value of  expected  future cash flows
discounted at the loan's effective  interest rate, the loan's  observable market
price, or the fair value of the collateral of the loan if the loan is collateral
dependent.  Interest  income from impaired  loans is  recognized  using the cash
basis method of accounting during the time within that period in which the loans
were impaired.

Allowance for Loan Losses
-------------------------

The Bank provides for loan losses on the allowance method. Accordingly, all loan
losses are charged to the related  allowance and all  recoveries are credited to
it.  Additions  to the  allowance  for loan  losses are  provided  by charges to
operations  based on various factors which, in  management's  judgment,  deserve
current  recognition in estimating  possible losses.  Such factors considered by
management  include the market value of the  underlying  collateral,  growth and
composition of the loan  portfolio,  the  relationship of the allowance for loan
losses to  outstanding  loans,  delinquency  trends,  and  economic  conditions.
Management  evaluates the carrying value of loans periodically and the allowance
is adjusted accordingly. While management uses the best information available to
make  evaluations,  future  adjustments  to the  allowance  may be  necessary if
conditions  differ  substantially  from  the  assumptions  used  in  making  the
evaluations.

In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance based
on  their  judgments  of  information  available  to them at the  time of  their
examination.



                                      -20-
<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Premises and Equipment
----------------------

Bank premises and equipment  are stated at cost less  accumulated  depreciation.
Depreciation of premises and equipment is recorded on a straight-line basis over
the estimated useful lives of the related assets.

Expenditures  for  maintenance  and repairs are charged to expense as  incurred,
while  those  for  improvements  are  capitalized.  The  costs  and  accumulated
depreciation relating to premises and equipment retired or otherwise disposed of
are eliminated from the accounts, and any resulting gains or losses are credited
or charged to earnings.

Investment in Federal Home Loan Bank Stock
------------------------------------------

As a requirement for  membership,  the Bank invests in stock of the Federal Home
Loan Bank of Atlanta ("FHLB"). This investment is carried at cost.

Real Estate Acquired In Settlement of Loans
-------------------------------------------

Real estate  acquired in  settlement of loans is carried at the lower of cost or
fair  value less  estimated  costs to  dispose.  Generally  accepted  accounting
principles  define fair value as the amount that is expected to be received in a
current  sale  between a  willing  buyer and  seller  other  than in a forced or
liquidation  sale.  Fair values at foreclosure  are based on appraisals.  Losses
arising from the  acquisition of foreclosed  properties are charged  against the
allowance  for loan losses.  Subsequent  writedowns  are provided by a charge to
operations  through the  allowance for losses on other real estate in the period
in which the need arises.

Income Taxes
------------

Deferred tax assets and liabilities are recorded for the future tax consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective  tax bases.  Future tax
benefits are recognized to the extent that  realization of such benefits is more
likely than not.  Deferred tax assets and liabilities are measured using enacted
tax rates  expected to apply to taxable  income in the years in which the assets
and liabilities are expected to be recovered or settled.  The effect on deferred
tax assets and  liabilities of a change in tax rates is recognized in income tax
expense in the period that includes the enactment date.

In the event the future tax  consequences  of differences  between the financial
reporting bases and the tax bases of the Bank's assets and liabilities result in
deferred tax assets,  applicable  accounting  standards require an evaluation of
the probability of being able to realize the future  benefits  indicated by such
assets.  A valuation  allowance is provided when it is more likely than not that
some  portion  or all of the  deferred  tax  assets  will  not be  realized.  In
assessing the realizability of the deferred tax assets, management considers the
scheduled  reversals  of deferred  tax  liabilities,  projected  future  taxable
income, and tax planning strategies.


                                      -21-
<PAGE>



GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes (Continued)
------------

A deferred tax  liability is not  recognized  for portions of the  allowance for
loan  losses  for  income  tax  purposes  in excess of the  financial  statement
balance,  as  described in Note K. Such a deferred  tax  liability  will only be
recognized  when it becomes  apparent  that  those  temporary  differences  will
reverse in the foreseeable future.

Stock Compensation Plans
------------------------

Statement of  Financial  Accounting  Standards  (SFAS) No. 123,  Accounting  for
Stock-Based  Compensation,  encourages  all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is  measured  at the  grant  date  based on the  value of the  award and is
recognized  over the  service  period,  which is  usually  the  vesting  period.
However,  it also allows an entity to continue to measure  compensation cost for
those plans using the intrinsic  value based method of accounting  prescribed by
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees, whereby compensation cost is the excess, if any, of the quoted market
price of the stock at the grant date (or other measurement date) over the amount
an  employee  must pay to acquire  the stock.  Stock  options  issued  under the
Company's  stock  option plan have no  intrinsic  value at the grant date,  and,
under Opinion No. 25, no  compensation  cost is recognized for them. The Company
has elected to continue with the  accounting  methodology in Opinion No. 25 and,
as a result,  has provided pro forma  disclosures of net income and earnings per
share and other disclosures, as if the fair value based method of accounting had
been applied.

Earnings Per Common Share
-------------------------

Basic  earnings per share  represent  income  available  to common  shareholders
divided by the  weighted-average  number of common shares outstanding during the
period.  Diluted earnings per share reflect  additional common shares that would
have been outstanding if dilutive  potential  common shares had been issued,  as
well as any  adjustment  to income that would result from the assumed  issuance.
Potential  common shares that may be issued by the Company relate to outstanding
stock options and unvested  shares in the Recognition and Retention Plan and are
determined using the treasury stock method.

Basic and diluted  earnings per common share for the year ended June 30, 1998 is
based on unaudited net income earned from the date of  Conversion,  December 31,
1997, to the end of the fiscal year,  divided by the weighted  average number of
shares outstanding during that period.

                                      -22-

<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common Share (Continued)
-------------------------

Earnings per common share have been computed based on the following:

<TABLE>
<CAPTION>
                                                                                             Years Ended June 30,
                                                                                             1999                1998
                                                                                          ----------          ----------

Average number of common shares outstanding used to calculate
<S>                                                                                        <C>                 <C>
basic earnings per common share                                                            1,990,342           2,027,555

Effect of dilutive options                                                                     2,062                   -

Effect of dilutive RRP shares                                                                    845                   -
                                                                                    ----------------    ----------------

Average number of common shares outstanding used to calculate
diluted earnings per common share                                                          1,993,249           2,027,555
                                                                                    ================    ================
</TABLE>

Comprehensive Income
--------------------

The Company  adopted SFAS 130,  Reporting  Comprehensive  Income,  as of July 1,
1998. Accounting principles generally require that recognized revenue, expenses,
gains and losses be included in net income.  Although  certain changes in assets
and  liabilities,  such as  unrealized  gains and  losses on  available-for-sale
securities,  are reported as a separate  component of the equity  section of the
balance  sheet,   such  items,   along  with  net  income,   are  components  of
comprehensive  income.  The Adoption of SFAS 130 had no effect on the  Company's
net income or shareholders'  equity,  and the Company had none of the components
of other  comprehensive  income at or during the years  ended June 30,  1999 and
1998.

Recent Accounting Pronouncements
--------------------------------

FASB Statement on Accounting for Derivative  Instruments and Hedging Activities.
In June 1998,  the FASB issued  Statement  No. 133,  Accounting  for  Derivative
Instruments and Hedging Activities.  In June 1999, this Statement was amended by
SFAS No. 137 to defer the effective  date to fiscal years  beginning  after June
15, 2000.  This Statement  establishes  accounting  and reporting  standards for
derivative  instruments and hedging  activities,  including  certain  derivative
instruments  embedded in other contracts,  and requires that an entity recognize
all derivatives as assets or liabilities in the statement of financial condition
and measure  them at fair value.  If certain  conditions  are met, an entity may
elect to designate a derivative  as follows:  (a) a hedge of 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 an unrecognized
firm commitment, an available-for-sale  security, a foreign currency denominated
forecasted  transaction,  or a  net  investment  in  a  foreign  operation.  The
Statement  generally  provides for matching the timing of the recognition of the
gain  or  loss  on  derivatives  designated  as  hedging  instruments  with  the
recognition of the changes in the fair value of the item being hedged. Depending
on the type of hedge,  such  recognition  will be in either  net income or other
comprehensive  income. For a derivative not designated as a hedging  instrument,
changes in fair value will be  recognized in net income in the period of change.
Management  anticipates  that the statement will have no material  effect on the
Company's consolidated financial statements.


                                      -23-
<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE B - INVESTMENT SECURITIES
<TABLE>
<CAPTION>

The following is a summary of the securities portfolios by major classification:


                                                                              June 30, 1999
                                                 ------------------------------------------------------------------------
                                                                         Gross              Gross
                                                    Amortized         Unrealized         Unrealized             Fair
                                                      Cost               Gains             Losses               Value
                                                 ---------------   ----------------   -----------------   ---------------
Securities available for sale:
<S>                                              <C>               <C>                <C>                 <C>
   Marketable equity securities                  $       450,000   $              -   $               -   $       450,000
                                                 ===============   ================   =================   ===============

Securities held to maturity:
   U. S. government securities and
     obligations of U. S. government
     agencies                                    $     3,600,000   $            281   $          61,526   $     3,538,755
   FHLMC mortgage-backed securities                       21,297                  -                 297            21,000
                                                 ---------------   ----------------   -----------------   ---------------

                                                 $     3,621,297     $          281    $         61,823   $     3,559,755
                                                 ===============     ==============    ================   ===============

                                                                              June 30, 1998
                                                 ------------------------------------------------------------------------
                                                                         Gross              Gross
                                                    Amortized         Unrealized         Unrealized             Fair
                                                      Cost               Gains             Losses               Value
                                                 ---------------   ----------------   -----------------   ---------------
Securities available for sale:
   Marketable equity securities                  $       200,000   $              -   $               -   $       200,000
                                                 ===============   ================   =================   ===============

Securities held to maturity:
   U. S. government securities and
    obligations of U. S. government
    agencies                                     $     3,300,000   $          5,408   $           4,467   $     3,300,941
   FHLMC mortgage-backed securities                       40,675                491               1,072            40,094
                                                 ---------------   ----------------   -----------------   ---------------

                                                 $     3,340,675   $          5,899   $           5,539   $     3,341,035
                                                 ===============   ================   =================   ===============
</TABLE>

The amortized  cost and fair values of  securities  held to maturity at June 30,
1999 by contractual maturity are shown below.  Available-for-sale securities are
not included in this table  because they  consist  solely of equity  securities.
Expected  maturities will differ from contractual  maturities  because borrowers
may have  the  right  to call or  prepay  obligations  with or  without  call or
prepayment penalties.
<TABLE>
<CAPTION>

                                                                                            Securities Held to Maturity
                                                                                         ---------------------------------
                                                                                            Amortized            Fair
                                                                                              Cost               Value
                                                                                         --------------     --------------

<S>                                                                                      <C>                <C>
     Due within one year                                                                 $            -     $            -
     Due after one year through five years                                                    3,621,297          3,559,755
     Due after five years through ten years                                                           -                  -
     Due after ten years                                                                              -                  -
                                                                                         --------------     --------------

                                                                                         $    3,621,297     $    3,559,755
                                                                                         ==============     ==============
</TABLE>

                                      -24-

<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE B - INVESTMENT SECURITIES (Continued)

Proceeds from  maturities  and calls of investment  securities  held to maturity
during the years ended June 30, 1999 and 1998 were  $2,119,378  and  $2,125,456,
respectively.  No gains or losses were realized on those  maturities  and calls.
There were no sales of available-for-sale securities during the years ended June
30, 1999 or 1998.

Securities  with a carrying  value of $1,407,905 and $1,111,582 and a fair value
of  $1,389,326  and  $1,111,838  at June 30, 1999 and 1998,  respectively,  were
pledged to secure public monies on deposit as required by law.

The  following  table sets forth  certain  information  regarding  the  carrying
values,  weighted  average  yields and  contractual  maturities of the Company's
investment  portfolio  and  other  interest-earning  assets  at June  30,  1999.
Marketable  equity securities which have no stated  maturities,  and are readily
available, are assumed to mature in less than one year, while FHLB common stock,
a nonmarketable  equity security,  substantially  all of which is required to be
maintained, is assumed to mature in periods greater than ten years.
<TABLE>
<CAPTION>


                                                                              Carrying value
                                                 -----------------------------------------------------------------------
                                                                   After one     After five
                                                   One year     year through    years through  After ten
                                                    or less       five years      ten years       years          Total
                                                 -------------  -------------   -----------  -------------  ------------
                                                                          (Dollars in thousands)

Securities available for sale:
<S>                                              <C>            <C>             <C>          <C>            <C>
     Marketable equity securities                $         450  $           -   $        -   $           -  $        450

Securities held to maturity:
     U. S. government and agency
        securities                                           -          3,600            -               -         3,600
     Mortgage-backed securities                              -             21            -               -            21

Other:
     Interest-earning balances in other
        banks                                              726              -            -               -           726
     Federal Home Loan Bank Stock                            -              -            -             524           524
                                                 -------------  -------------   ----------   -------------  ------------

Total                                            $       1,176  $       3,621   $        -   $         524  $      5,321
                                                 =============  =============   ==========   =============  ============


</TABLE>

                                      -25-
<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE B - INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>

                                                                              Average Yield
                                               -------------------------------------------------------------------------
                                                               After one       After five
                                               One year      year through    years through   After ten
                                                or less       five years        ten years        years           Total
                                               -----------   -------------   -------------   -------------     ---------

Securities available for sale:
<S>                                                  <C>     <C>             <C>             <C>               <C>
     Marketable equity securities                    7.48%               -               -               -         7.48%

Securities held to maturity:
     U. S. government and agency
        securities                                       -           5.92%               -               -         5.92%
     Mortgage-backed securities                          -           8.60%               -               -         8.60%

Other:
     Interest-earning balances in other banks        5.75%               -               -               -         5.75%
     Federal Home Loan Bank Stock                        -               -               -           7.75%         7.75%

Weighted average                                     6.41%           5.94%               -           7.75%         6.22%

</TABLE>


NOTE C - LOANS RECEIVABLE
<TABLE>
<CAPTION>

Loans receivable consist of the following:

                                                                1999                                 1998
                                                  -------------------------------    -----------------------------------
                                                                     Percentage                              Percentage
                                                       Amount         of total            Amount              of total
                                                  --------------     ---------       ----------------        -----------
       Type of loan
          Real estate loans:
<S>                                               <C>                  <C>           <C>                        <C>
              One-to-four family residential      $   55,385,112       85.99%        $     50,899,168           89.66%
              Commercial                               5,159,052        8.01%               3,153,027            5.55%
              Construction                             4,184,450        6.49%               3,759,400            6.62%
              Home improvement loans                   1,534,236        2.38%               1,325,487            2.34%
                                                  --------------     --------        ----------------       ----------

              Total real estate loans                 66,262,850      102.87%              59,137,082          104.17%

          Other loans:
              Commercial                                 272,316        0.43%                       -            -
              Consumer                                   278,452        0.43%                       -            -
              Loans secured by deposits                  262,956        0.41%                 326,236            0.58%
                                                  --------------     --------        ----------------       ----------

          Total other loans                              813,724        1.27%                 326,236            0.58%
                                                  --------------     --------        ----------------       ----------

          Total loans                                 67,076,574      104.14%              59,463,318          104.75%

       Less:
          Construction loans in process                2,017,568        3.13%               2,161,418            3.81%
          Allowance for loan losses                      443,951        0.69%                 353,643            0.62%
          Deferred loan origination fees,
              net of costs                               203,678        0.32%                 179,932            0.32%
                                                  --------------     --------        ----------------       ----------

                                                  $   64,411,377      100.00%        $     56,768,325          100.00%
                                                  ==============     ========        ================       ==========

</TABLE>

                                      -26-

<PAGE>



GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE C - LOANS RECEIVABLE (Continued)
<TABLE>
<CAPTION>


The allowance for loan losses is summarized as follows:

                                                                                          1999                1998
                                                                                    ----------------    ----------------

<S>                                                                                 <C>                 <C>
         Balance at beginning of year                                               $       353,643     $        303,381
         Provision for loan losses                                                           96,000               63,000
         Charge-offs                                                                         (5,692)             (12,738)
         Recoveries                                                                               -                    -
                                                                                    ---------------     ----------------

         Balance at end of year                                                     $       443,951     $        353,643
                                                                                    ===============     ================
</TABLE>

The allocation of the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>



                                             1999                                              1998
                         ----------------------------------------------  -----------------------------------------------
                                          Percent of         Percent                          Percent          Percent
                                           allowance        of loans                         allowance        of loans
                           Amount of       to total         to gross         Amount of       to total         to gross
                           allowance       allowance          loans          allowance       allowance          loans
                         -------------  --------------  ---------------  --------------  ---------------  --------------
<S>                      <C>                    <C>              <C>     <C>                      <C>             <C>
Real estate loans:
     One-to-four family
        residential      $     257,000          57.89%           82.57%  $      230,000           65.04%          85.60%
     Commercial                 51,000          11.49%            7.69%          25,000            7.07%           5.30%
     Construction               10,000           2.25%            6.24%          25,000            7.07%           6.32%
     Home improvement
        loans                    9,000           2.03%            2.29%          10,000            2.83%           2.23%
                         -------------  --------------  ---------------  --------------  ---------------  --------------

     Total real estate
        loans                  327,000          73.66%           98.79%         290,000           82.01%          99.45%
                         -------------  --------------  ---------------  --------------  ---------------  --------------

Other loans:
     Commercial                  1,000           0.23%            0.41%               -                -               -
     Consumer                    1,000           0.23%            0.41%               -                -               -
     Loans secured by
        deposits                 1,000           0.23%            0.39%           1,000            0.28%           0.55%
                         -------------  --------------  ---------------  --------------  ---------------  --------------

     Total other loans           3,000           0.69%            1.21%           1,000            0.28%           0.55%
                         -------------  --------------  ---------------  --------------  ---------------  --------------

Unallocated                    113,951          25.65%                -          62,643           17.71%               -
                         -------------  --------------  ---------------  --------------  ---------------  --------------

Total allowance for
     loan losses         $     443,951         100.00%          100.00%  $      353,643          100.00%         100.00%
                         =============  ==============  ===============  ==============  ===============  ==============

</TABLE>


At  June  30,  1999  and  1998,  respectively,   the  Bank  had  loans  totaling
approximately $271,221 and $321,500 which were in a nonaccrual status.

Loans serviced for other investors amounted to $1,611,494 and $1,921,511 at June
30, 1999 and 1998, respectively.

At June  30,  1999,  the Bank  had  mortgage  loan  commitments  outstanding  of
$1,706,060,  including  loans of $1,015,400  to be originated at fixed  interest
rates ranging from 6.88% to 7.63%. In management's  opinion,  these commitments,
and  undisbursed  proceeds on  construction  loans in process  reflected  above,
represent  no more than normal  lending risk to the Bank and will be funded from
normal sources of liquidity.


                                      -27-




GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------




NOTE C - LOANS RECEIVABLE (Continued)

The Bank has had loan  transactions  with its directors and executive  officers.
Such  loans  were  made  in  the  ordinary   course  of  business  and  also  on
substantially  the same terms and  collateral as those  comparable  transactions
prevailing  at the  time  and did not  involve  more  than  the  normal  risk of
collectibility or present other unfavorable features. A summary of related party
loan transactions is as follows:
<TABLE>
<CAPTION>
                                                                                          1999                1998
                                                                                    ----------------    ----------------

<S>                                                                                 <C>                 <C>
         Balance at beginning of year                                               $        376,190    $         50,087
         Additional borrowings                                                                34,932             445,630
         Loan repayments                                                                     (39,017)           (119,527)
                                                                                    ----------------    ----------------

         Balance at end of year                                                     $        372,105    $        376,190
                                                                                    ================    ================

</TABLE>

NOTE D - PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>

Premises and equipment consist of the following:

                                                                                          1999                1998
                                                                                    ----------------    ----------------

<S>                                                                                 <C>                 <C>
         Land                                                                       $        335,686    $         59,250
         Building and improvements                                                           316,090             316,090
         Furniture and equipment                                                             503,213             186,016
                                                                                    ----------------    ----------------

                                                                                           1,154,989             561,356
         Accumulated depreciation                                                           (414,977)           (349,590)
                                                                                    -----------------   ----------------

                                                                                    $        740,012    $        211,766
                                                                                    ================    ================
</TABLE>


NOTE E - FEDERAL INSURANCE OF DEPOSITS

Eligible  deposit  accounts  are insured up to  $100,000 by the Federal  Deposit
Insurance Corporation.


NOTE F - ADVANCES FROM FEDERAL HOME LOAN BANK
<TABLE>
<CAPTION>

Advances from the Federal Home Loan Bank of Atlanta, with weighted average interest rates, are as follows:

                                                                                                   June 30,
                                                                                             -------------------

                                                                                          1999                1998
                                                                                    ----------------    ----------------

<S>   <C>                   <C> <C>                                                 <C>                 <C>
      5.09% due on February 17, 2000                                                $      1,200,000    $              -
                                                                                    ================    ================
</TABLE>


                                      -28-

<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE F - ADVANCES FROM FEDERAL HOME LOAN BANK (Continued)

At June 30,  1999,  First  Federal  also had  $4,600,000  available on a line of
credit from the Federal  Home Loan Bank.  All  advances are secured by a blanket
floating lien on the Bank's one-to-four family residential mortgage loans.


NOTE G - DEPOSIT ACCOUNTS
<TABLE>
<CAPTION>

A comparative summary of deposit accounts at June 30, 1999 and 1998 follows:

                                                            1999                                      1998
                                           -------------------------------------     -------------------------------------
                                                                    Weighted                                  Weighted
                                                Balance             Avg. Rate             Balance             Avg. Rate
                                           -------------------------------------     -------------------------------------
   Demand accounts:
<S>                                        <C>                        <C>            <C>                          <C>
     Regular passbook savings              $       2,093,942          2.79%          $      2,084,601             2.79%
     Money market passbook
       savings                                     5,434,617          4.33%                 5,735,798             4.16%
     Checking accounts                             6,055,340          4.82%                         -                  -
                                           -----------------                         ----------------
                                                  13,583,899          4.31%                 7,820,399             3.79%
   Certificates of deposit                        27,748,546          5.23%                28,843,037             5.70%
                                           -----------------                         ----------------

   Total deposit accounts                  $      41,332,445          4.93%          $     36,663,436             5.29%
                                           =================                         ================
</TABLE>

<TABLE>
<CAPTION>

A summary of  certificate  accounts  by  maturity  as of June 30,  1999  follows
(amounts in thousands):

                                                                    Less than           $100,000
                                                                    $100,000             or More              Total
                                                                ----------------    ---------------     ----------------
<S>                                                             <C>                 <C>                 <C>
         One year or less                                       $         12,404    $         3,672     $         16,076
         More than one year to three years                                 4,247              1,185                5,432
         More than three years to five years                               6,057                  -                6,057
         More than five years                                                 84                100                  184
                                                                ----------------    ---------------     ----------------

         Total certificate accounts                             $         22,792    $         4,957     $         27,749
                                                                ================    ===============     ================
</TABLE>

<TABLE>
<CAPTION>
Interest  expense  on  deposits  for the years  ended June 30 is  summarized  as
follows:

                                                                                            1999              1998
                                                                                      ---------------    ---------------

<S>                                                                                   <C>                <C>
         Checking accounts                                                            $        67,871    $             -
         Passbook savings accounts                                                             33,832             53,968
         Money market savings accounts                                                        139,225            214,614
         Certificates of deposit                                                            1,713,942          1,984,830
                                                                                      ---------------    ---------------

                                                                                            1,954,870          2,253,412
         Penalties for early withdrawal                                                        (2,152)            (5,417)
                                                                                      ----------------   ----------------

                                                                                        $    1,952,718     $     2,247,995
                                                                                        ==============     ===============
</TABLE>

                                      -29-


<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE H - EMPLOYEE AND DIRECTOR BENEFIT PLANS

Recognition and Retention Plan
------------------------------

At the Company's first annual meeting of  stockholders  held on January 7, 1999,
the Company's stockholders approved the 1998 Recognition and Retention Plan (the
"RRP).  Under the RRP,  88,085 shares of common stock were reserved for issuance
to key officers and directors.  Upon approval of the RRP at the annual  meeting,
76,192 shares of common stock were granted at a value of $12.00 per share at the
date of grant.  The Company  funded the grants with 53,700  shares of previously
purchased  treasury  stock and 22,492 shares of newly issued  common stock.  The
Company will recognize compensation costs of $914,000 over the vesting period of
the RRP shares granted,  and is including such compensation  costs in operations
as rapidly as is permissible,  resulting in the recognition of costs of $537,000
during the year ended June 30, 1999, and costs of $241,000, $106,000 and $30,000
during the years ending June 30, 2000, 2001 and 2002, respectively.

Stock Option Plan
-----------------

At the  Company's  annual  meeting,  held on January 7, 1999,  the  stockholders
approved the Great Pee Dee Bancorp,  Inc. Stock Option Plan (the "SOP"). The SOP
provides  for the issuance to  directors,  officers,  and  employees of the Bank
options to purchase up to 220,212  shares of the Company's  common  stock.  Upon
approval of the SOP, the Company granted  options to purchase  190,484 shares of
the Company's  common stock at an exercise price of $12.00 per share,  including
66,064 options granted to the Company's directors and 124,420 options granted to
the Company's  executive  officers and employees.  Options  granted to directors
were fully vested on the date of grant.  Options  granted to executive  officers
and  employees  vested  one-third  on the date of grant and will vest  one-third
annually  thereafter.  All options will expire if not exercised within ten years
from the date of grant. None of the options were exercised during the year ended
June 30, 1999. At such date,  options to purchase  107,537  shares at $12.00 per
share were  exercisable.  As  permitted by SFAS No. 123, the Company has applied
APB  Opinion  No.  25  for  measurement  of  stock-based   compensation  in  the
accompanying financial statements.  If the Company had used the fair value based
method of accounting for stock-based  compensations,  operating  results for the
year ended June 30, 1999 would have been affected as set forth below:
<TABLE>
<CAPTION>

                                                                                     As Reported            Pro Forma
                                                                                   ---------------        -------------
<S>                                                                                <C>                    <C>
       Net income                                                                  $       889,889        $     547,252

       Net income per share, basic and diluted                                     $          0.45        $        0.27

</TABLE>

In  determining  the pro forma  disclosures  above,  the fair  value of  options
granted  was  estimated  to be $2.67 per  option as of the grant  date under the
Black-Scholes Option Pricing Model using the following assumptions:  a risk-free
interest rate of 5.25%, a dividend yield of 3.00%,  an expected life of 7 years,
and a volatility ratio of 20%. The effects of applying SFAS No. 123 in the above
pro forma disclosure are not indicative of future amounts.


                                      -30-


<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE H - EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

Employee Stock Ownership Plan
-----------------------------

In  the  mutual  to  stock  conversion,  the  First  Federal  Savings  and  Loan
Association  Employee Stock Ownership Plan (the "ESOP") purchased 174,570 shares
of the common stock of Great Pee Dee Bancorp,  Inc. sold in the public  offering
at a total cost of $1,745,700. The ESOP executed a note payable to Great Pee Dee
Bancorp,  Inc.  for the full  price of the shares  purchased.  The note is to be
repaid over ten years in  quarterly  installments  of  principal  and  interest.
Interest is based upon the prime rate and will be adjusted annually.  Dividends,
if any,  paid on  shares  held by the  ESOP  may be  used to  reduce  the  loan.
Dividends  paid on  unallocated  shares  held by the  ESOP are not  reported  as
dividends in the financial statements.  The note may be prepaid without penalty.
The  unallocated  shares of stock held by the ESOP are pledged as collateral for
the  note.  The ESOP is  funded  by  contributions  made by the Bank in  amounts
sufficient to retire the debt. At June 30, 1999, the outstanding  balance of the
note is $1,561,284  and is included in unearned  compensation  as a reduction of
stockholders' equity.

Shares released as the debt is repaid and earnings from the common stock held by
the ESOP are allocated among active 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.

Expense of $138,515  has been  incurred in  connection  with the ESOP during the
year  ended  June 30,  1999.  The  expense  includes,  in  addition  to the cash
contribution necessary to fund the ESOP, $20,092 which represents the difference
between  the fair  market  value of the  shares  which  have  been  released  or
committed  to be released to  participants  and the cost of these  shares to the
ESOP for the year ended June 30,  1999.  The Bank has  credited  this  amount to
additional paid-in capital.

At June 30, 1999, 18,442 shares held by the ESOP have been released or committed
to be released to the plan's participants for purposes of computing earnings per
share. The fair value of the unallocated  shares amounted to approximately  $2.0
million at June 30, 1999.

Deferred Compensation Plan
--------------------------

The Bank has a deferred  compensation  plan for  certain  officers  whereby  the
executive officers can make elective deferrals in lieu of receiving a portion of
the salary to which they otherwise would be entitled.  This plan is not entitled
to favorable  tax  treatment  under  current law.  Related  deferred  income tax
benefits  are  included  in  the  accompanying  financial  statements.  Expenses
associated with this plan were $-0- and $2,700 for the years ended June 30, 1999
and 1998, respectively.

401(k) Retirement Plan
----------------------

The Bank  maintains  for the benefit of its  eligible  employees a 401(k)  plan.
Under  the  plan,  the Bank  matches  fifty-percent  of  participant's  elective
contributions up to an additional one and one-half percent of base compensation.
The only eligibility  requirement is completion of one year's full-time service.
At June 30, 1999 and 1998,  substantially  all full-time  employees are eligible
and are covered by the plan. 401(k)  contributions are funded when accrued.  The
total 401(k)  retirement plan expense was $6,387 and $11,763 for the years ended
June 30, 1999 and 1998, respectively.


                                      -31-

<PAGE>



GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------

NOTE I - STOCK REPURCHASE PLAN

During the year ended June 30, 1999,  the Company's  Board of Directors  adopted
stock  repurchase  plans  under which the Company is  authorized  to  repurchase
shares  of its  outstanding  common  stock in the open  market  or in  privately
negotiated  transactions  at times  deemed  appropriate.  Under the  plans,  the
Company could repurchase up to 10% of the outstanding  common stock.  During the
year ended June 30, 1999, the Company  repurchased  192,364 shares of its common
stock at an aggregate cost of $2,503,891 of which 53,700 were reissued as grants
under the RRP and 138,664 are held as treasury stock at June 30, 1999.


NOTE J - CHARITABLE FOUNDATION

In connection with the mutual to stock conversion,  the Holding Company formed a
charitable foundation to which it contributed 20,000 shares of its common stock.
Charitable  contributions  for the year ended June 30, 1998  include a charge of
$200,000 for this contribution.


NOTE K - INCOME TAXES
<TABLE>
<CAPTION>

The components of income tax expense are as follows for the years ended June 30,
1999 and 1998:

                                                                                            1999              1998
                                                                                      ---------------    ---------------

<S>                                                                                   <C>                <C>
         Current tax expense                                                          $       626,127    $       683,819
         Deferred tax benefit                                                                (137,727)          (100,871)
                                                                                      ---------------    ----------------

         Provision for income taxes                                                   $       488,400    $       582,948
                                                                                      ===============    ===============
</TABLE>

<TABLE>
<CAPTION>


The  differences  between the provision for income taxes and the amount computed
by applying the statutory federal income tax rate of 34% to income before income
taxes were as follows for the years ended June 30, 1999 and 1998:

                                                                                            1999              1998
                                                                                      ---------------    ---------------

<S>                                                                                   <C>                <C>
         Income tax at federal statutory rate                                         $       468,618    $       505,819
         State income tax, net of federal tax benefit                                          34,121             45,615
         ESOP expense differences                                                               7,635             13,810
         Other                                                                                (21,974)            17,704
                                                                                      ----------------   ---------------

         Provision for income taxes                                                   $       488,400    $       582,948
                                                                                      ===============    ===============
</TABLE>



                                      -32-
<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE K - INCOME TAXES (Continued)
<TABLE>
<CAPTION>

Deferred tax assets and liabilities arising from temporary differences at June 30, 1999 and 1998 are summarized
as follows:

                                                                                            1999              1998
                                                                                      ---------------    ---------------

         Deferred tax assets relating to:
<S>                                                                                   <C>                <C>
            Deferred compensation                                                     $       196,470    $        77,159
            Allowance for loan losses                                                         164,703            129,285
            Charitable contributions carryforward                                              52,471             66,370
                                                                                      ---------------    ---------------

            Gross deferred tax assets                                                         413,644            272,814
            Valuation allowance                                                                     -                  -
                                                                                      ---------------    ---------------

            Total deferred tax assets                                                         413,644            272,814
                                                                                      ---------------    ---------------

         Deferred tax liabilities relating to:
            Premises and equipment                                                            (41,258)           (38,078)
            FHLB stock dividends                                                              (72,314)           (72,390)
                                                                                      ---------------    ---------------

            Total deferred tax liabilities                                                   (113,572)          (110,468)
                                                                                      ----------------   ---------------

            Net deferred tax asset                                                    $       300,072    $       162,346
                                                                                      ===============    ===============
</TABLE>

Retained earnings at June 30, 1999 includes approximately $1.7 million for which
no deferred income tax liability has been recognized.  This amount represents an
allocation  of income to bad debt  deductions  for  income  tax  purposes  only.
Reductions  of the  amount so  allocated  for  purposes  other than tax bad debt
losses or  adjustments  arising  from  carryback of net  operating  losses would
create income for tax purposes only,  which would be subject to the then current
corporate income tax rate.

During 1996,  Congress  enacted  certain tax  legislation  that exempted  thrift
institutions from being taxed on these pre-1987 bad debt reserves.  Further, the
use of the  reserve  method  is now  required  for  all  thrifts.  The  Bank  is
recapturing  $20,000 of its bad debt reserve created in prior years by using the
percentage of taxable  income  method,  requiring  payment of additional  income
taxes of  approximately  $8,000.  Deferred  income  taxes  have been  previously
established  for the taxes  arising  from the  reserve  recapture,  and thus the
ultimate payment of the taxes will not result in a charge to earnings.



                                      -33-

<PAGE>


GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------


NOTE L - REGULATORY MATTERS

Capital Requirements
--------------------

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  measures of the Bank's  assets,
liabilities,  and certain off-balance sheet items as calculated under 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.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Bank to  maintain  minimum  amounts  and ratios of total and Tier 1
capital (as defined) to risk-weighted assets (as defined), and of Tier 1 capital
(as defined) to adjusted assets (as defined) and of tangible capital to adjusted
assets.  Management  believes,  as of June 30,  1999,  that the Bank  meets  all
capital adequacy requirements to which it is subject.

As of June 30,  1999,  the most  recent  notification  from the Office of Thrift
Supervision  categorized  the  Bank as well  capitalized  under  the  regulatory
framework for prompt  corrective  action. To be categorized as well capitalized,
the Bank must maintain  minimum total  risk-based,  Tier 1 risk-based and Tier 1
leverage ratios as set forth in the following table.  There are no conditions or
events  since that  notification  that  management  believes  have  changed  the
institution's  category.  A reconciliation of stockholders' equity to the Bank's
regulatory capital at June 30, 1999 is as follows.

<TABLE>
<CAPTION>

<S>                                                                                      <C>
     Consolidated stockholders' equity                                                   $      29,813,127
     Less separate equity of Great Pee Dee Bancorp, Inc.                                        (6,599,629)
                                                                                         ------------------
     Tier 1 and tangible capital                                                                23,213,498
     Add general loan loss allowance                                                               443,951
                                                                                         -----------------

     Risk-based capital                                                                  $      23,657,449
                                                                                         =================
</TABLE>
<TABLE>
<CAPTION>

The Bank's regulatory capital amounts and ratios are presented below.

                                                                                                         To be well
                                                                                                      capitalized under
                                                                              For capital             prompt corrective
                                                   Actual                 adequacy purposes           action provisions
                                           ----------------------    ------------------------     ------------------------
                                              Amount       Ratio           Amount       Ratio          Amount       Ratio
                                           -------------   ------    -------------   --------     -----------       ------

As of June 30, 1999
    Total Capital
<S>                                        <C>              <C>        <C>              <C>     <C>
      (to Risk Weighted Assets)            $  23,657,449    68.7%    > $ 2,754,867   >  8.0%   >$ 3,443,584        >  10.0%
                                           -                         -               -         -                   -
    Tier 1 Capital
      (to Risk Weighted Assets)               23,213,498    67.4%    >   1,377,434   >  4.0%   >  2,066,150        >   6.0%
                                                                     -               -         -                   -
    Tier 1 Capital
      (to Adjusted Assets)                    23,213,498    33.3%    >   2,091,606   >  3.0%   >  3,486,010        >   5.0%
                                                                     -               -         -                   -
    Tangible Capital
      (to Adjusted Assets)                    23,213,498    33.3%    >   1,045,803   >  1.5%           N/A             N/A
                                                                     -               -
</TABLE>
                                      -34-
<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------



NOTE M - CONCENTRATION OF CREDIT RISK AND OFF-BALANCE SHEET RISK


The Bank generally originates single-family residential loans within its primary
lending  area of  Chesterfield  County  and  surrounding  counties.  The  Bank's
underwriting  policies  require  such  loans to be made at no  greater  than 80%
loan-to-value  based upon appraised values unless private mortgage  insurance is
obtained. These loans are secured by the underlying properties.

The Bank is a party to financial  instruments with off-balance sheet risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial instruments consist of commitments to extend credit on mortgage loans.
Those instruments  involve, to varying degrees,  elements of credit and interest
rate risk in excess of the amount  recognized  in the  statements  of  financial
condition.  The contract or notional  amounts of those  instruments  reflect the
extent  of  involvement  the  Bank  has  in  particular   classes  of  financial
instruments.

A  summary  of the  approximate  contract  amount  of  the  Bank's  exposure  to
off-balance sheet risk as of June 30, 1999 is as follows:
<TABLE>
<CAPTION>

         Financial instruments whose contract amounts represent credit risk:
<S>                                                                                           <C>
                Commitments to extend credit, mortgage loans                                  $    1,706,060
                Undisbursed construction loans in process                                          2,017,568
</TABLE>


NOTE N - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The Bank has implemented  Statement of Financial  Accounting  Standards No. 107,
Disclosures  About Fair  Value of  Financial  Instruments  ("SFAS  107"),  which
requires  disclosure  of the  estimated  fair  values  of the  Bank's  financial
instruments  whether  or  not  recognized  in the  balance  sheet,  where  it is
practical   to   estimate   that   value.   Such   instruments   include   cash,
interest-earning  balances,  federal funds sold, investment  securities,  loans,
stock in the Federal Home Loan Bank of Atlanta, deposit accounts,  advances from
Federal Home Loan Bank,  and  commitments.  Fair value  estimates  are made at a
specific point in time,  based on relevant  market  information  and information
about the financial  instrument.  These  estimates do not reflect any premium or
discount  that could result from offering for sale at one time the Bank's entire
holdings of a particular financial instrument.  Because no active market readily
exists for a portion of the Bank's financial  instruments,  fair value estimates
are based on  judgments  regarding  future  expected  loss  experience,  current
economic conditions, risk characteristics of various financial instruments,  and
other   factors.   These   estimates  are   subjective  in  nature  and  involve
uncertainties  and matters of  significant  judgment and,  therefore,  cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

     Cash on hand and in banks,  interest-earning  balances in other banks,  and
     federal funds sold

          The carrying  amounts for these  approximate fair value because of the
          short maturities of those instruments.

                                      -35-
<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------



NOTE N - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

         Investment Securities

            Fair value for investment  securities  equals quoted market price if
            such  information  is  available.  If a quoted  market  price is not
            available,  fair value is estimated  using quoted  market prices for
            similar securities.

         Loans

           For  certain  homogenous  categories  of loans,  such as  residential
           mortgages, fair value is estimated using the quoted market prices for
           securities backed by similar loans,  adjusted for differences in loan
           characteristics.  The fair value of other types of loans is estimated
           by discounting the future cash flows using the current rates at which
           similar loans would be made to borrowers  with similar credit ratings
           and for the same remaining maturities.

         Loans Held for Sale

            Fair value for loans held for sale is determined by available market
            prices.

         Stock in Federal Home Loan Bank of Atlanta

            The fair value for FHLB stock is its carrying  value,  since this is
            the amount for which it could be redeemed. There is no active market
            for this  stock  and the Bank is  required  to  maintain  a  minimum
            balance based on the unpaid principal of home mortgage loans.

         Deposit Liabilities

            The fair value of savings  deposits is the amount  payable on demand
            at the reporting  date. The fair value of certificates of deposit is
            estimated  using rates  currently  offered  for  deposits of similar
            remaining maturities.

         Advances from Federal Home Loan Bank

           The fair value of these advances is based upon the  discounted  value
           using current rates at which  borrowings of similar maturity could be
           obtained.

         Financial Instruments with Off-Balance Sheet Risk

            With regard to financial  instruments  with  off-balance  sheet risk
            discussed  in Note M, it is not  practicable  to  estimate  the fair
            value of future financing commitments.


                                      -36-
<PAGE>

GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------



NOTE N - DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The  carrying  amounts  and  estimated  fair  values  of  the  Bank's  financial
instruments, none of which are held for trading purposes, are as follows at June
30, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                 1999                                  1998
                                                   ----------------------------------   --------------------------------
                                                       Carrying          Estimated          Carrying        Estimated
                                                        amount          fair value           amount        fair value
                                                   ---------------    ---------------   ----------------  --------------
      Financial assets:
        Cash, interest-earning balances, federal
<S>                                                <C>                <C>               <C>               <C>
           funds sold                              $     1,583,470    $     1,583,470   $      6,923,720  $    6,923,720
        Investment securities                            4,071,297          4,009,755          3,540,675       3,541,035
        Loans receivable                                64,411,377         64,700,000         56,768,325      57,350,000
        Loans held for sale                                525,000            525,000                  -               -
        Stock in Federal Home Loan Bank of
           Atlanta                                         524,000            524,000            495,200         495,200
      Financial liabilities:
        Deposits                                        41,332,445         41,400,000         36,663,436      36,820,000
        Advances from Federal Home Loan Bank             1,200,000          1,195,000                  -               -

</TABLE>

NOTE O - PLAN OF CONVERSION

On July 14,  1997,  the Board of Directors of the Bank adopted a Plan of Holding
Company  Conversion whereby the Bank converted from a  federally-charted  mutual
savings and loan association to a federally-chartered  stock savings association
(the "Bank") and became a wholly-owned subsidiary of Great Pee Dee Bancorp, Inc.
(the "Company" or "Holding Company") a holding company formed in connection with
the  conversion.  On December 31, 1997,  First Federal  completed its conversion
from  a   federally-chartered   mutual   savings  and  loan   association  to  a
federally-chartered  stock savings association.  The conversion occurred through
the sale of  2,182,125  shares of common stock ($.01 par value) of Great Pee Dee
Bancorp,  Inc. Total proceeds of $21,821,250 were reduced by conversion expenses
of $746,869.  Great Pee Dee Bancorp,  Inc. paid  $10,550,000 to First Federal in
exchange for the common stock of First  Federal  issued in the  conversion,  and
retained  the  balance  of the net  conversion  proceeds.  The  transaction  was
recorded  as  an  "as-if"  pooling  with  assets  and  liabilities  recorded  at
historical cost.

At the time of  conversion,  the Bank  established a  liquidation  account in an
amount equal to its net worth as reflected in its latest  statement of financial
condition used in its final conversion prospectus.  The liquidation account will
be maintained for the benefit of eligible  deposit  account holders who continue
to maintain  their deposit  accounts in the Bank after  conversion.  Only in the
event of a complete  liquidation  will each eligible  deposit  account holder be
entitled to receive a subaccount  balance for deposit  accounts then held before
any liquidation distribution may be made with respect to common stock. Dividends
paid  by the  Bank  subsequent  to the  conversion  cannot  be  paid  from  this
liquidation account

The Bank may not  declare or pay a cash  dividend  on or  repurchase  any of its
common  stock if its net  worth  would  thereby  be  reduced  below  either  the
aggregate  amount  then  required  for the  liquidation  account or the  minimum
regulatory capital requirements imposed by federal and state regulations.

                                      -37-
<PAGE>



GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
--------------------------------------------------------------------------------



NOTE P - PARENT COMPANY FINANCIAL DATA

Following are condensed financial  statements of Great Pee Dee Bancorp,  Inc. as
of and for the periods ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>

                                    Condensed Statements of Financial Condition
                                              June 30, 1999 and 1998


                                                                                           1999               1998
                                                                                    -----------------   -----------------
   Assets:
<S>                                                                                 <C>                 <C>
     Cash on hand and in banks                                                      $         73,459    $               -
     Interest bearing balances in other banks                                                 19,330                    -
     Investment securities, available for sale                                               450,000              200,000
     Note receivable from First Federal                                                    5,950,483            8,646,931
     Investment in First Federal                                                          23,213,498           22,556,437
     Accrued interest receivable                                                               8,665                1,115
     Other assets                                                                             97,692               70,552
                                                                                    ----------------    -----------------

                                                                                    $     29,813,127    $      31,475,035
                                                                                    ================    =================
   Stockholders' equity:
     Common stock                                                                   $         22,246    $          22,021
     Additional paid-in capital                                                           21,530,265           21,292,979
     ESOP loan receivable and unearned compensation                                       (1,938,390)          (1,682,319)
     Retained earnings                                                                    12,006,012           11,842,354
     Treasury stock                                                                       (1,807,006)
                                                                                    ----------------    -----------------

                                                                                    $     29,813,127    $      31,475,035
                                                                                    ================    =================
</TABLE>
<TABLE>
<CAPTION>


                                        Condensed Statements of Operations
                    Year Ended June 30, 1999 and Period from  December  31, 1997 to June 30, 1998

                                                                                           1999               1998
                                                                                    -----------------   -----------------

<S>                                                                                 <C>                 <C>
   Equity in earnings of subsidiary                                                 $         648,980   $         605,350
   Interest and other income                                                                  529,207             303,147
   Operating expenses                                                                        (141,898)           (236,003)
   Income taxes                                                                              (146,400)            (25,448)
                                                                                    -----------------   -----------------

   Net income                                                                       $         889,889   $         647,046
                                                                                    =================   =================
</TABLE>


                                      -38-



<PAGE>


                           GREAT PEE DEE BANCORP, INC.
                            COMMON STOCK INFORMATION
--------------------------------------------------------------------------------


The  Company's  stock began  trading on December 31, 1997.  There are  2,085,953
shares  of  common  stock  outstanding  which  were  held by  approximately  450
stockholders of record  (excluding shares held in street name) on June 30, 1999.
The  Company's  common stock is quoted on the NASDAQ  National  market under the
symbol  "PEDE".  The  following  table  reflects the stock  trading and dividend
payment frequency of the Company for the years ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>

                                                                             Stock Price                      Dividends
                                                               --------------------------------------
                                                                       High                  Low              per share
                                                               -------------------   ----------------    ----------------
For the year ended June 30, 1999:

<S>                                                            <C>                   <C>                 <C>
First Quarter Ending September 30                              $             16.63   $          10.88    $           0.09
Second Quarter Ending December 31                              $             14.00   $          10.75    $           0.09
Third Quarter Ending March 31                                  $             13.88   $          11.75    $           0.09
Fourth Quarter Ending June 30                                  $             13.00   $          11.38    $           0.09

For the year ended June 30, 1998:

First Quarter Ending September 30                              $                 -   $              -    $              -
Second Quarter Ending December 31                              $                 -   $              -    $              -
Third Quarter Ending March 31                                  $             16.25   $          14.75    $              -
Fourth Quarter Ending June 30                                  $             17.38   $          14.75    $          0.075

</TABLE>




























                                      -39-

<PAGE>


                           GREAT PEE DEE BANCORP, INC.
                              CORPORATE INFORMATION
-------------------------------------------------------------------------------


                               EXECUTIVE OFFICERS

Herbert W. Watts                  John S. Long                  Johnnie L. Craft
President and CEO             Vice President and COO           Secretary and CFO


                                  DIRECTORS

      Robert M. Bennett - Chairman                     William R. Butler
    President, Bennett Motor Company                 Owner, P & H Pharmacy

        James C. Crawford, III                        Henry P. Duvall, IV
      COO, B.C. Moore & Sons, Inc.                Retired Corporate Executive

                               Cornelius B. Young
                           Retired Corporate Executive

STOCK TRANSFER AGENT                                    ANNUAL MEETING

Registrar and Transfer Company           The annual meeting of stockholders of
     10 Commerce Drive                   Great Pee Dee Bancorp, Inc. will be
 Cranford, New Jersey 07016              held at 2:00 p.m. on October 19, 1999
                                         at the Matheson Memorial Library,
                                         Huger Street, Cheraw, SC.

   SPECIAL LEGAL COUNSEL
                                                    FORM 10-KSB
Luse Lehman Gorman Pomerenk & Schick
 5335 Wisconsin Ave. N.W., Suite 400     A  copy  of  Form  10-KSB  as  filed
      Washington, DC 20015               with  the  Securities  and  Exchange
                                         Commission will be furnished without
                                         charge to the Company's  stockholders
                                         for the Company's most recent fiscal
                                         year upon written  request to Herbert
                                         W. Watts,  President, Great Pee Dee
                                         Bancorp,  Inc.,  515 Market  Street,
                                         Cheraw, SC  29520.


    INDEPENDENT AUDITORS
                                                 CORPORATE OFFICE
      Dixon Odom PLLC
      408 Summit Drive                          515 Market Street
      Sanford, NC 2733                          Cheraw, SC 29520



                              DISCLAIMER

This annual  report has not been reviewed or confirmed for accuracy or relevance
by the Federal Deposit Insurance Corporation.







                                      -40-

<PAGE>
















                                   EXHIBIT 21


































<PAGE>




                                                    EXHIBIT 21


                                            SUBSIDIARIES OF REGISTRANT

<TABLE>
<CAPTION>
<S>                                                                        <C>

Subsidiary                                                                 Percent Owned
----------                                                                 -------------

First Federal Savings and Loan Association of Cheraw                       100% Owned by Company
</TABLE>

                                                        24

<PAGE>





















                                                    EXHIBIT 23





























<PAGE>



                                          [LETTERHEAD OF DIXON ODOM PLLC]





                                          Consent of Independent Auditors


To the Board of Directors
Great Pee Dee Bancorp, Inc.
Cheraw, South Carolina


     We consent to the incorporation by reference in the Registration  Statement
of Great Pee Dee Bancorp,  Inc. on Form S-8 (No.  333-79339) of our report dated
August 13, 1999 on the consolidated  statements of financial  condition of Great
Pee Dee Bancorp, Inc. and Subsidiary as of and for the years ended June 30, 1999
and 1998,  which  appears in the 1999 Annual  Report of Form 10-KSB of Great Pee
Dee Bancorp, Inc.


/s/ Dixon Odom PLLC


Sanford, North Carolina
September 20, 1999
                                                            26