SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D. C.

                                   FORM 10-KSB

              Annual Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 2002

                          COMMISSION FILE NO. 000-30001

                       DARLINGTON COUNTY BANCSHARES, INC.
                       ----------------------------------
             (Exact name or Registrant as specified in its charter)

       South Carolina                                     57-0805621
       --------------                                     ----------
(State of other jurisdiction of                          (IRS Employer
 incorporation or organization)                        Identification No.)

                     202 CASHUA STREET, DARLINGTON, SC 29532
                     ---------------------------------------
           (Address of Principal Executive Office, Including Zip Code)

       Registrant's Telephone Number, Including Area Code: (843) 395-1956

             Securities Registered Pursuant to Section 12(b) of the
                        Securities Exchange Act of 1934:
                                      NONE
                                      ----

             Securities Registered Pursuant to Section 12(g) of the
                        Securities Exchange Act of 1934:
                          COMMON STOCK. $.01 PAR VALUE
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 contained in this form, and no disclosure will be contained, to
the best of 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 its fiscal year were $2,206,119.

The aggregate market value of the voting and non-voting common equity held by
nonaffiliates of the Registrant (135,577 shares) has not been determined. As of
such date, no organized trading market existed for the common stock of the
Registrant. For the purpose of this response, officers, directors and holders of
5% or more of the Registrant's common stock are considered affiliates of the
Registrant at that date.

The number of shares outstanding of the Registrant's common stock, as of March
15, 2002: 158,000 shares of $.01 par value common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

  Portions of the Registrant's Proxy Statement for the 2003 Annual Meeting of
                            Shareholders - Part III

         Transitional Small Business Disclosure Format Yes [ ] No [ X ]



<PAGE>
                                     PART I


ITEM 1.    BUSINESS

FORWARD LOOKING STATEMENTS

From time to time, Darlington County Bancshares, Inc. (the "Company") may
publish forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with terms of the safe harbor, the Company notes that a variety of factors could
cause the Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performances, development and results of the Company's business
include, but are not limited to, the following: risks from changes in economic
and industry conditions; changes in interest rates; risks inherent in making
loans including repayment risks and value of collateral; dependence on senior
management; and recently-enacted or proposed legislation. Statements contained
in this filing regarding the demand for the Company's products and services,
changing economic conditions, interest rates, consumer spending and numerous
other factors may be forward-looking statements and are subject to uncertainties
and risks. When relying on forward-looking statements to make decisions with
respect to the Company, investors and others are cautioned to consider these and
other risks and uncertainties.

Such forward-looking statements speak only of the date on which such statements
are made. We undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made
to reflect the occurrence of unanticipated events. In addition, certain
statements in future filings by the Company with the Securities and Exchange
Commission, in press releases and in oral and written statements made by or with
the approval of the Company which are not statements of historical fact
constitute forward-looking statements.

THE COMPANY

Darlington County Bancshares, Inc. was organized in July 1999 for the purpose of
being the holding company for Darlington County Bank (the "Bank"). On July 1,
1999, pursuant to a Plan of Merger approved by the stockholders, all of the
outstanding shares of common stock of the Bank were exchanged for shares of
common stock of the Company. The Company presently engages in no other business
other than that of owning the Bank, has no employees and operates as one
business segment. The Company is subject to regulation by the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board").

Prior to the organization of the Company, the Bank filed its periodic securities
- related reports with the Federal Deposit Insurance Corporation. Beginning July
1, 1999, with the formation of the bank holding company, the Company became
subject to the informational requirements of the Securities Exchange Act of
1934.

Darlington County Bank was incorporated under the laws of South Carolina and
began operations on March 10, 1986 for the purpose of becoming a community bank.

The Company's principal offices are located at 202 Cashua Street, Darlington,
South Carolina 29532. The Company's telephone number is (843) 395-1956. The sole
branch is also located in this facility.




                                       -1-


<PAGE>

GENERAL BUSINESS

The Bank provides a variety of services and products to small business and
individual customers. The Bank's services include checking accounts, NOW
accounts, certificates of deposit, money market accounts, savings accounts, real
estate loans, overdraft protection, lines of credit, and personal and business
use loans. The Bank has no material concentration of deposits from one customer
or group of customers. No significant portion of loans is concentrated within a
single industry or group of related industries. There are no material seasonal
factors that would have an adverse effect on the Bank.

The Company's significant accounting policies are included throughout the
following discussion and are summarized in Note 1 of the Company's 2002
consolidated financial statements (See Item 7).

TERRITORY AND COMPETITION

The Bank serves its customers from one location. It primarily services
individuals and small businesses in the South Carolina midlands region.

The Bank competes with one other community bank and a credit union as well as
three other major banks. In Darlington County, such competitors have broader
geographical markets and higher lending limits than the Bank and may, therefore,
make more effective use of media advertising, support services and electronic
technology than can the Bank.

Competition between commercial banks and thrift institutions (savings and loan
associations and credit unions) has been intensified significantly by the
elimination of many previous distinctions between the various types of financial
institutions and the expanded powers and increased activity of thrift
institutions in areas of banking which previously had been the sole domain of
commercial banks. The Company believes that recent legislation, together with
other regulatory changes by the primary regulators of the various financial
institutions, has resulted in the almost total elimination of practical
distinctions between a commercial bank and thrift institution. Consequently,
competition among financial institutions of all types is virtually unlimited
with respect to legal ability and authority to provide most financial services.

INTEREST RATES AND INTEREST DIFFERENTIAL

<TABLE>
<CAPTION>
                                                AVERAGE BALANCES (IN THOUSANDS), INCOME AND EXPENSES, AND RATES
                                                                          DECEMBER 31,
                                        -----------------------------------------------------------------------------------
                                                         2002                                      2001
                                         ---------------------------------------- -----------------------------------------
                                            AVERAGE       REVENUE/      YIELD/        AVERAGE        REVENUE/     YIELD/
                                            BALANCE        EXPENSE       RATE         BALANCE        EXPENSE       RATE
                                         -------------- -------------- ---------- ---------------- ------------ -----------

Interest earnings assets
<S>                                         <C>            <C>           <C>         <C>            <C>             <C>
   Loans                                    $   18,468     $1,427,972    7.73%       $     18,047   $1,536,015      8.51%
   Investment securities
     Taxable                                     7,566        340,231    4.50               4,874      287,216      5.89
     Tax exempt                                    667         28,617    4.35                 719       31,130      4.33
                                         -------------- -------------- ---------- ---------------- ------------ -----------

       Total investment securities               8,233        368,848    4.48               5,593      318,346      5.69

Federal funds sold and securities
   purchased under agreements to
   resell                                        1,822         28,964    1.59               4,364      163,260      3.74
                                         -------------- -------------- ---------- ---------------- ------------ -----------

       Total average interest earning
         assets                                 28,523      1,825,784    6.40              28,004    2,017,621      7.20
Non-interest assets
   Cash and due from banks                       1,064                                      1,172
   Premises and equipment                        1,035                                      1,021
   Other, less rserve for loan losses              208                                        232
                                         --------------                           ----------------

       Total average non-interest
         earning assets                          2,307                                      2,425
                                         --------------                           ----------------

       Total average assets                 $   30,830                                 $    30,429
                                         ==============                           ================

</TABLE>

                                       -2-

<PAGE>
<TABLE>
<CAPTION>

                                                  AVERAGE BALANCES (IN THOUSANDS), INCOME AND EXPENSES, AND RATES
                                                                           DECEMBER 31,
                                        --------------------------------------------------------------------------------------
                                                          2002                                       2001
                                         ------------------------------------------ ------------------------------------------
                                            AVERAGE       REVENUE/       YIELD/        AVERAGE       REVENUE/       YIELD/
                                            BALANCE       EXPENSE         RATE         BALANCE       EXPENSE         RATE
                                         -------------- ------------- ------------- -------------- ------------ --------------

<S>                                          <C>           <C>              <C>         <C>          <C>               <C>
Interest-bearing liabilities
   Deposits:
   Savings                                   $   2,351     $  40,688        1.73%       $   2,368    $  48,291         2.04%
   NOW and money market                         12,117       218,750        1.81            8,663      181,004         2.09
   Time deposits                                 7,680       208,529        2.72           10,537      562,447         5.34
   Federal funds purchased                           3            27        0.90                -            -            -
                                         -------------- -------------               -------------- ------------

     Total interest-bearing liabilities         22,151       467,994        2.11           21,568      791,742         3.67
                                         -------------- -------------               -------------- ------------

Non-interest-bearing liabilities
   Demand deposits                               4,789                                      5,110
   Other liabilities                               143                                        116
                                         --------------                             --------------

     Total non-interest-bearing
         liabilities                             4,932                                      5,226
Stockholders' equity                             3,747                                      3,635
                                         --------------                             --------------

       Total average liabilities and
         stockholders' equity               $   30,830                                  $  30,429
                                         ==============                             ==============

Net interest income                                      $ 1,357,790                               $ 1,225,879
                                                        =============                              ============

Interest rate spread                                                          4.29                                   3.53

Interest income/earning assets                                                6.40                                   7.20

Interest expense/earning assets                                               1.64                                   2.83
                                                                      -------------                             --------------

Net interest income/earning
   Assets (interest yield)                                                    4.76%                                  4.38%
                                                                      =============                             ==============

</TABLE>


NET INTEREST INCOME
Net interest income, the principal source of earnings, is the difference between
the income earned on earning assets (primarily loans and investment securities)
and the interest expenses incurred on interest bearing liabilities (mainly
deposits). The net interest spread represents the differential between the yield
earned on average earning assets and the rate paid on the average
interest-bearing liabilities. The net interest yield represents net interest
income divided by average earning assets.

Net interest income in 2002 increased $131,911 or 10.8% from net interest income
in 2001. Net interest income in 2001 decreased $148,319 or 10.8% from net
interest income in 2000. Interest income in 2002 decreased $191,837 or 9.5 %
from the corresponding amount earned in 2001. Interest income in 2001 decreased
$103,100 or 4.9% from the corresponding amount earned in 2000. Interest expense
in 2002 decreased $323,748 or 40.9% from the amount paid in 2001. Interest
expense in 2001 increased $45,219 or 6.1% from the amount paid in 2000. The net
interest yield increased to 4.76% in 2002 from 4.38% in 2001.

The primary reason for the increase is net interest income in 2002 resulted from
re-pricing of a lower deposit base at lower rates.


                                       -3-

<PAGE>

VOLUME AND YIELDS/RATE VARIANCE

The volume and yield/rate variance table below analyzes the increase or decrease
in interest income due to growth or change of rate in each category of earning
assets and interest bearing liabilities. Volume-rate changes have been allocated
to each category based on the percentage of total change.

<TABLE>
<CAPTION>

                                                   2002 COMPARED TO 2001                2001 COMPARED TO 2000
                                             ----------------------------------   -----------------------------------
                                              VOLUME       RATE        NET          VOLUME      RATE         NET
                                             ---------- ----------- -----------   ----------- ---------- ------------
Interest income
<S>                                           <C>       <C>         <C>           <C>         <C>         <C>
     Loans                                    $36,896   $(144,939)  $(108,043)    $169,889    $(219,700)  $(49,811)
     Investment securities:
        Taxable                                92,835     (39,820)     53,015      (14,268)     (23,073)   (37,341)
        Tax exempt                             (2,244)       (269)     (2,513)      (3,410)         274     (3,136)
Federal funds sold and securities
     purchased under agreements
     to resell                                (67,578)    (66,718)   (134,296)     (77,978)      65,166    (12,812)
                                             ---------- ----------- -----------   ----------- ---------- ------------

             Total earning assets              59,909    (251,746)   (191,837)      74,233     (177,333)  (103,100)
                                             ---------- ----------- -----------   ----------- ---------- ------------

Interest expense
     Savings                                     (351)     (7,252)     (7,603)      10,344     (10,682)       (338)
     NOW and money market                      57,281     (19,535)     37,746       33,427      (5,622)     27,805
     Time deposits                           (125,852)   (228,066)   (353,918)      35,367     (17,615)     17,752
     Federal funds purchased and
        securities sold under
        agreements to repurchase                   27         -            27           -           -          -
                                             ---------- ----------- -----------   ----------- ---------- ------------

             Total interest-bearing
                liabilities                   (68,895)   (254,853)   (323,748)      79,138     (33,919)     45,219
                                             ---------- ----------- -----------   ----------- ---------- ------------

             Net interest income             $128,804   $ 3,107     $131,911      $( 4,905)   (143,414)  $(148,319)
                                             ========== =========== ===========   =========== ========== ============

</TABLE>

LOAN PORTFOLIO

The Bank engages in a full complement of lending activities, including
commercial, consumer, installment and real estate loans.

Commercial loans are spread across various industry groups, with no single
industry accounting for a significant amount of the portfolio. Commercial loans
are made on either a secured or unsecured basis. When taken, security consists
of liens on inventories, receivables, equipment, and furniture and fixtures.
Unsecured commercial loans are generally short-term with emphasis on repayment
strengths and low debt to net worth ratios. At December 31, 2002, approximately
$1,931,000 of loans were unsecured.

Consumer loans are primarily secured installment loans to individuals for
personal, family and household purposes, including automobile loans and
pre-approved lines of credit.









                                       -4-


<PAGE>

Management believes that the loan portfolio is adequately diversified. There are
no foreign loans in the portfolio. The following table presents the major
categories of loans in the Bank's loan portfolio and total amount of all loans
at December 31, 2002 and 2001:
<TABLE>
<CAPTION>
                                                             2002             2001
                                                       ---------------- ---------------
                                                               (IN THOUSANDS)

<S>                                                         <C>             <C>
Real estate - mortgage                                      $    8,714      $    7,954
Real estate - construction                                         732             611
Commercial and industrial                                        3,797           3,477
Loans to individuals for household, family and
     other consumer expenditures                                 4,001           4,090
Agriculture                                                      1,034             833
All other loans, including overdrafts                              719             629
Deferred loan origination costs                                     18              19
                                                       ---------------- ---------------

                                                            $   19,015      $   17,613
                                                       ================ ===============
</TABLE>

Accrual of interest is discontinued on a loan when management of the Bank
determines, after consideration of economic and business factors affecting
collection efforts, that collection of interest is doubtful. At December 31,
2002, and 2001 the Bank had approximately $58,800 and $15,900 in non-accruing
loans, respectively.

With respect to the loans accounted for on a non-accrual basis, the gross
interest income that would have been recorded if the loans had been current in
accordance with their original terms and outstanding throughout the period or
since origination amounts to $3,900 for the year ended December 31, 2002 and
$1,364 for the year ended December 31, 2001.

As of December 31, 2002, there were no loans classified for regulatory purposes
as doubtful, substandard or special mention which (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 is aware of any information
which causes management to have serious doubts as to the ability of such
borrowers to comply with the loan repayment terms.

At December 31, 2002, management is not aware of any potential problem loans.

The Bank accounts for impaired loans in accordance with SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". This standard requires that
all creditors value loans at the loan's fair value if it is probable that the
creditor will be unable to collect all amounts due according to the terms of the
loan agreement. Fair value may be determined based upon the present value of
expected cash flows, market price of the loan, if available, or value of the
underlying collateral. Expected cash flows are required to be discounted at the
loan's effective interest rate. SFAS No. 114 was amended by SFAS No. 118 to
allow a creditor to use existing methods for recognizing interest income on an
impaired loan and by requiring additional disclosures about how a creditor
recognizes interest income on an impaired loan. When the ultimate collectibility
of an impaired loan's principal is in doubt, wholly or partially, all cash
receipts are applied to principal. When this doubt does not exist, cash receipts
are applied under the contractual terms of the loan agreement first to principal
then to interest income. Once the recorded principal balance has been reduced to
zero, future cash receipts are applied to interest income, to the extent that
any interest has been foregone. Further cash receipts are recorded as recoveries
of any amounts previously charged off.

A loan is also considered impaired if its terms are modified in a troubled debt
restructuring. For these accruing impaired loans, cash receipts are typically
applied to principal and interest receivable in accordance with the terms of the
restructured loan agreement. Interest income is recognized on these loans using
the accrual method of accounting. As of December 31, 2002 and 2001 the Bank had
no impaired loans.

                                       -5-

<PAGE>

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is based on management's ongoing evaluation of the
loan portfolio and reflects an amount that, in management's opinion, is adequate
to absorb losses in the existing portfolio. In evaluating the portfolio,
management takes into consideration numerous factors, including current economic
conditions, prior loan loss experience, the composition of the loan portfolio,
and management's estimate of anticipated credit losses. Loans are charged
against the allowance at such time as they are determined to be losses.
Subsequent recoveries are credited to the allowance. The allowance for loan
losses is estimated by applying average loss percentages to accounts graded by
management as substandard or doubtful and adding a percentage of all outstanding
loans to allow for unidentified losses inherent in the portfolio. Management
reviews loans that are exhibiting signs of weakness and grades those loans
according to the borrowers' financial status, ability to repay, estimated
collateral values, etc. Management considers the year-end allowance appropriate
and adequate to cover possible losses in the loan portfolio. However,
management's judgment is based upon a number of assumptions about future events,
which are believed to be reasonable, but which may or may not prove valid. Thus,
there can be no assurance that charge-offs in future periods will not exceed the
allowance for loan losses or that additional increases in the allowance for loan
losses will not be required.

The Bank is subject to regulatory examinations which include a review of the
methodology used to calculate loan losses and the size of the allowance for loan
losses in comparison to a group of peer banks identified by the regulatory
agencies. Regulatory agencies may require additions to the allowance for loan
losses based upon the regulators' credit evaluations and information available
to them at the time of their examination.

In assessing the adequacy of the allowance, management relies predominantly on
its ongoing review of the loan portfolio, which reviews specific loans for
potential charge-off as well as an assessment of the portfolio in the aggregate.

On December 31, 2002 and 2001, the allowance for loan losses was $206,000 and
$187,808, respectively. The ratio of the allowance for loan losses to loans
outstanding was 1.08% at December 31, 2002 and 1.07% at December 31, 2001.
During 2002, the Bank experienced net charge-offs of $52,000 compared to net
charge-offs of $124,403 in the prior year. Net charge-offs in 2001 included one
loan on which the Bank is the loss payee on certain insurance policies. Those
policies may allow the Bank to recover certain amounts in future periods.
However, the timing of collection of those amounts may not be in the near
future. Therefore, the Bank has charged off the entire loan balance as of
December 31, 2001.

The Bank made recoveries of loans previously charged off of $786 and $118,465
for the years ended December 31, 2002 and 2001, respectively.

The Bank made provisions for loan losses of approximately $70,000 for the year
ended December 31, 2002. The Bank made provisions for loan losses of
approximately $60,000 for the year ended December 31, 2001.

Management continues to closely monitor the levels of non-performing and
potential problem loans and will address the weaknesses in these loans to
enhance the ultimate collection or recovery on these assets. Should increases in
the overall level of non-performing and potential problem loans accelerate from
the historical trend, management will adjust the methodology for determining the
allowance for loan losses and will increase the provision and allowance for loan
losses. This would likely decrease net income.




                                       -6-

<PAGE>

The following table summarizes changes in the allowance arising from charge-offs
and recoveries by category and additions to the allowance which have been
charged to expense.
<TABLE>
<CAPTION>

                                                     SUMMARY OF LOAN LOSS EXPERIENCE
                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                       2002                    2001
                                                 ------------------      -----------------

<S>                                                   <C>                    <C>
Balance at beginning of year                          $   187,808            $   252,219
Charge-offs:
     Commercial and industrial                            (12,000)              (209,000)
     Consumer                                             (40,866)               (33,868)
                                                 ------------------      -----------------

                                                          (52,866)              (242,868)
                                                 ------------------      -----------------
Recoveries:
     Commercial and industrial                                  -                      -
     Real estate                                                -                 80,000
     Consumer                                                 786                 38,465
                                                 ------------------      -----------------

                                                              786                118,465
                                                 ------------------      -----------------

Net charge-offs                                           (52,080)              (124,403)

Provision for loan losses                                  70,000                 59,992
                                                 ------------------      -----------------

Balance at end of year                                $   205,728            $   187,808
                                                 ==================      =================
</TABLE>

The following table presents the allocation of the allowance for loan losses at
December 31, 2002 and 2001, based on the percentage of total loans in each
category for the applicable year. Management does not segregate the allowance by
category, and the entire allowance is available to absorb losses from all
categories.
<TABLE>
<CAPTION>

                                                           YEARS ENDED DECEMBER 31,
                                        ----------------------------------------------------------------
                                                      2002                             2001
                                        ---------------------------------- -----------------------------
                                                             % OF                             % OF
                                            AMOUNT           LOANS          AMOUNT           LOANS
                                        --------------- -------------------------------- ---------------

<S>                                           <C>             <C>             <C>            <C>
Commercial and industrial                     $41,146         20.0%           $ 36,998       19.7%
Real estate - construction                      7,818          3.8               6,573        3.5
Real estate - mortgage                         94,223         45.8              84,890       45.2
Consumer installment                           62,541         30.4              59,347       31.6
                                        --------------- -------------------------------- ---------------

         Total                              $ 205,728        100.0%         $  187,808      100.0%
                                        =============== ================================ ===============
</TABLE>


Management considers the allowance for loan losses adequate to cover inherent
losses on loans outstanding as of December 31, 2002 and 2001. The determination
of the allowance for loan losses using the Bank's procedures and methods is
based upon judgements and assumptions about future economic conditions and other
factors affecting loans. No assurance can be given that the Bank will not
sustain losses which are sizeable in comparison to the amount reserved or that
subsequent evaluation of the loan portfolio will not require changes to the
allowance for loan losses. The allowance for loan losses is also subject to
review by regulatory agencies through periodic examinations. Such examination
could result in required changes to the allowance for loan losses.






                                       -7-

<PAGE>

INVESTMENTS

The Bank invests primarily in federal agency obligations and mortgage backed
securities. Federal agency obligations are guaranteed by the United States.

The amortized cost and approximate fair value of investment securities,
including maturities, are summarized at December 31 in the table below.
Weighted-average yields on investment securities available for sale are based on
amortized cost. The weighted-average yields on state, county and municipal
securities are calculated on a fully taxable equivalent basis using a federal
tax rate of 34%.
<TABLE>
<CAPTION>
                                                                                              2002 (IN THOUSANDS)
                                                                  WEIGHTED-         -----------------------------------------
                                                                   AVERAGE              AMORTIZED                FAIR
                                                                    YIELD                  COST                 VALUE
                                                               -----------------    -------------------   -------------------
AVAILABLE FOR SALE
------------------
<S>                                                                      <C>           <C>                          <C>
      Federal Agencies
         One to five years                                               4.36%         $         2,595              $  2,622
                                                                                    -------------------   -------------------

      Mortgage backed
         Less than one year                                              5.81                      368                   376
         Five to ten years                                               4.05                    1,488                 1,503
         After ten years                                                 5.61                    1,364                 1,403
                                                               -----------------    -------------------   -------------------

                                                                         4.91                    3,220                 3,282
                                                               -----------------    -------------------   -------------------

      Total available for sale                                                          $        5,815              $  5,904
                                                                                    ===================   ===================

HELD TO MATURITY
----------------
      State, county and municipal
         Less than one year                                             6.39%           $           80               $    81
         One to five years                                              6.50                        86                    90
         Five to ten years                                              6.02                       475                   482
                                                               -----------------    -------------------   -------------------

      Total held to maturity                                            6.13            $          641               $   653
                                                               -----------------    ===================   ===================


                                                                                                      2001
                                                                                    -----------------------------------------
                                                                                        AMORTIZED                FAIR
                                                                                           COST                 VALUE
                                                                                    -------------------   -------------------
AVAILABLE FOR SALE
------------------
      Federal Agencies
         One to five years                                              4.72%           $        5,000             $  4,980
                                                                                    -------------------   -------------------

      Mortgage backed
         One to five years                                              5.81                       660                  666
         After ten years                                                5.99                     2,011                1,992
                                                               -----------------    -------------------   -------------------

                                                                        5.94                     2,671                2,658
                                                               -----------------    -------------------   -------------------

      Total available for sale                                                            $      7,671             $  7,638
                                                                                    ===================   ===================

HELD TO MATURITY
----------------
      State, county and municipal
          Less than one year                                            6.31%             $        75              $     76
         One to five years                                              6.39                      169                   175
         Five to ten years                                              6.39                      474                   466
                                                               -----------------    -------------------   -------------------

      Total held to maturity                                            6.38              $       718              $    717
                                                               -----------------    ===================   ===================

</TABLE>

                                       -8-


<PAGE>


For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings based
on an average maturity life computation of the underlying collateral. The
mortgage-backed securities may mature earlier than their average maturity lives
because of principal prepayments.

Investment securities with an aggregate amortized cost of approximately
$1,200,000 ($1,205,188 fair value) and $1,162,225 ($1,168,885 fair value) at
December 31, 2002 and 2001, respectively, were pledged to secure public deposits
and for other purposes.

The Bank accounts for investment securities in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." Debt securities are classified upon
purchase as available for sale, held to maturity or trading. Such assets
classified as available for sale are carried at fair value. Unrealized gains or
losses are reported as a component of shareholders' equity net of deferred
income taxes. Securities classified as held to maturity are carried at cost and
adjusted for the amortization of premiums and the accretion of discounts. In
order to qualify as held to maturity, the Bank must have the ability to hold the
securities to maturity. Trading securities are carried at market value. The Bank
has no trading securities. Gains or losses on disposition of securities are
based on the difference between the net proceeds and the adjusted carrying
amount of the securities sold, using the specific identification method.

DEPOSITS

The Bank offers a full range of interest-bearing and noninterest-bearing
accounts, including commercial and retail checking accounts, negotiable orders
of withdrawal ("NOW") accounts, money market accounts, individual retirement
accounts, regular interest-bearing statement savings accounts and certificates
of deposit with fixed rates and a range of maturity date options. The sources of
deposits are residents, businesses and employees of businesses within the
midlands region. The Bank pays competitive interest rates on interest checking,
savings, money market, time and individual retirement accounts.

The Bank's average interest-bearing deposits in 2002 were $22,148,000, compared
to $21,568,000, in the prior year, an increase of $580,000 or 2.69%.

The following tables presents, for the years ended December 31, 2002 and 2001,
the average amount and average rate paid on each of the following deposit
categories:
<TABLE>
<CAPTION>

                                                AVERAGE AMOUNT
                                                (IN THOUSANDS)                 AVERAGE RATE PAID
                                        ----------------------------------------------------------------
                                             2002            2001            2002             2001
                                        --------------- -------------------------------- ---------------

<S>                                            <C>             <C>           <C>           <C>
Noninterest-bearing deposits                   $ 4,789         $  5,110       -  %           - %
Interest-bearing deposits
    Savings deposits                             2,351            2,368      1.73          2.04
    NOW and Money market                        12,117            8,663      1.81          2.09
    Time deposits                                7,680           10,537      2.72          5.34
</TABLE>


The Bank's core deposits consist of consumer time deposits, savings accounts,
NOW accounts, money market accounts and checking accounts. Although such core
deposits are becoming increasingly interest sensitive for both the Bank and the
industry as a whole, such core deposits continue to provide the Bank with a
large and stable source of funds. The Bank closely monitors its reliance on
certificates of deposit greater than $100,000, which are generally considered
less stable and less reliable as a source of funds than core deposits.



                                       -9-

<PAGE>

At December 31, 2002 and 2001, certificates of deposit of $100,000 or more
totaled $773,000 and $1,822,000, respectively. At December 31, 2002,
approximately $347,000 matures within three months, and $426,000 matures over
three through six months.

RETURN ON EQUITY AND ASSETS

The following table presents certain ratios relating to the Company's equity and
assets:

                                                      YEAR ENDED DECEMBER 31,
                                                  ------------------------------
                                                       2002             2001
                                                  ---------------- -------------

Return on average total assets                             1.04%           .82%
Return on average stockholders' equity                     8.57           6.96
Cash dividend payout ratio                                49.19          63.09
Average equity to average assets ratio                    12.15          11.95

DIVIDENDS

State banking regulations restrict the amount of dividends that can be paid and
require prior approval of the State Board of Financial Institutions. The Bank
paid a cash dividend of $1.00 per share in January 2002 to stockholders of
record as of December 31, 2001. The Bank paid a cash dividend of $1.00 per share
in January 2001 to stockholders of record as of December 31, 2000.

CAPITAL RESOURCES

The capital base for the Bank increased by $251,294 during 2002. This is
comprised of $321,229 of net income and a $88,065 increase in unrealized gain on
available for sale securities offset by $158,000 paid in dividends to
stockholders. The Bank's equity to asset ratio was 13.04 percent on December 31,
2002, as compared to 11.95 percent on December 31, 2001.

The Federal Deposit Insurance Corporation has issued guidelines for risk-based
capital requirements. As of December 31, 2002, the Bank exceeds the capital
requirement levels that are to be maintained.

                                 CAPITAL RATIOS
                             (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                            ADEQUATELY
                                                                             WELL CAPITALIZED               CAPITALIZED
                                                    ACTUAL                     REQUIREMENT                  REQUIREMENT
                                          ---------------------------- ---------------------------- ---------------------------
                                             AMOUNT         RATIO         AMOUNT         RATIO         AMOUNT        RATIO
                                          -------------- ------------- ------------- -------------- ------------ --------------

<S>                                       <C>                  <C>         <C>              <C>         <C>             <C>
Total capital (to risk weighted assets)   $  4,062             19.7%       $  2,067         10.0%       $  1,653        8.0%

Tier 1 capital (to risk weighted assets)  3,857                18.7%          1,240          6.0%            827        4.0%

Tier 1 capital (to average assets)        3,857                12.5%          1,541          5.0%          1,233        4.0%

</TABLE>

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

Asset/liability management is the process by which the Bank monitors and
controls the mix and maturities of its assets and liabilities in order to
promote stable growth in net interest income. The goal of liquidity management
is to ensure the availability of adequate funds to meet the loan demand and the
deposit withdrawal needs of bank customers. Maintaining an adequate level of
liquidity is achieved through a combination of sufficient liquid assets, core
deposit growth and access to alternate sources of funds which provide a sizable
base from which to draw as liquidity needs arise.



                                      -10-
<PAGE>

At December 31, 2002, the Bank has an unused line of credit to purchase Federal
funds from an unrelated bank totaling $2,500,000. This line of credit is
available on a one to seven day basis for general corporate purposes of the
Bank. The lender has reserved the right to withdraw this line at its option.

Interest sensitive assets and liabilities are those that are subject to
repricing in the near term, including both floating rate instruments and those
with approaching maturities. The interest sensitivity gap is the difference
between total interest sensitive assets and liabilities in a given time period.
The objective of interest rate sensitivity management is to maintain the
difference between interest sensitive assets and liabilities at a level that
will minimize the effects on the net interest margin of significant interest
rate shifts.

The Bank's periodic and cumulative interest sensitivity positions which existed
at year-end are as follows.

<TABLE>
<CAPTION>

                                                                      TOTAL         OVER ONE
        (DOLLARS IN THOUSANDS)             0-3           4-12         WITHIN        YEAR OR
                                          MONTHS        MONTHS       ONE YEAR     NON-SENSIIVE      TOTAL
                                       ------------- ------------- -------------  -------------  -------------
<S>                                     <C>          <C>           <C>            <C>            <C>
Earning assets
     Loans net of unearned income      $    7,865    $    1,527    $    9,392     $    9,623     $    19,015
     Investment securities and FFS          2,386           498         2,884          6,098           8,982
                                       ------------- ------------- -------------  -------------  -------------

          Total earning assets             10,251         2,025        12,276         15,721          27,997

Percentage of total earning assets          36.61%         7.23%        43.85%         56.15%         100.00%

Interest-bearing liabilities
     Certificates of deposits of
     $100,000 or more                         347           426           773              -             773
     Other time and savings deposits       10,448         3,370        13,818            213          14,031
                                       ------------- ------------- -------------  -------------  -------------

        Total interest-bearing
          liabilities                      10,795         3,796        14,591            213          14,804
Other sources                                   -             -             -         13,193          13,193
                                       ------------- ------------- -------------  -------------  -------------

          Total sources                $   10,795    $    3,796    $   14,591     $   13,406     $    27,997
                                       ============= ============= =============  =============  =============

Percentage of total earning assets          38.56%        13.56%        52.12%         47.88%         100.00%

Interest sensitive gap                       (544)       (1,771)       (2,315)         2,315

Cumulative interest sensitive gap            (544)       (2,315)       (2,315)


</TABLE>







                                      -11-
<PAGE>
<TABLE>
<CAPTION>

                                              SOURCES AND USES OF FUNDS
                             (AVERAGE BALANCES FOR YEARS ENDED DECEMBER 31 IN THOUSANDS)

                                                                               DECEMBER 31,
                                                      ----------------------------------------------------------------
                                                                   2002                            2001
                                                      ----------------------------------------------------------------
                                                          AMOUNT          PERCENT         AMOUNT          PERCENT
                                                      --------------- -------------------------------- ---------------

<S>                                                        <C>              <C>            <C>               <C>
Composition of sources:
    Demand deposits                                        $   4,789        15.53%         $    5,110        16.79%
    NOW and money market                                      12,117        39.30               8,663        28.47
    Time and savings deposits                                 10,031        32.55              12,905        42.41
    Short-term borrowings                                          3          .01                   -            -
    Other non interest-bearing funds                             143          .46                 116          .38
    Stockholders' equity                                       3,747        12.15               3,635        11.95
                                                      --------------- -------------------------------- ---------------

       Total sources                                       $  30,830       100.00%         $   30,429       100.00%
                                                      =============== ================================ ===============

Composition of sources:
    Loans*                                                 $  18,468        59.90%         $   18,048          59.31%
    Investment securities                                      8,233        26.70               5,593          18.38
    Other earning assets                                       1,822         5.92               4,364          14.34
Other assets                                                   2,307         7.48               2,424           7.97
                                                      --------------- -------------------------------- ---------------

         Total uses                                        $  30,830       100.00%         $   30,429         100.00%
                                                      =============== ================================ ===============

  * Loan balances stated net of unearned income

</TABLE>

SOURCES OF FUNDS

Average sources of funds increased $401,000 to $30,830,000 from December 31,
2001 to December 31, 2002, compared to $2,652,000 to $30,429,000 from December
31, 2000 to December 31, 2001. This represents an increase of 1.3% in total
average sources of funds. Average NOW and money market deposits and time and
savings deposits increased $3,454,000 or 39.9%. This was partially offset by a
decrease of $2,874,000, or 22.3% in time and savings deposits. Average loans
increased $421,000 or 2.3% while average investment securities increased
$2,640,000 or 47.2% and other earning assets decreased $2,542,000 or 58.2%, to
account for the majority of the overall increase of total uses of funds in 2002.

OFF BALANCE SHEET RISK

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 include available credit on credit lines and commitments
to extend credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statements of financial position. The contract amounts of these instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on balance sheet
instruments.

                                                                 CONTRACT
                                                                  AMOUNT
                                                          -------------------
     Financial instruments whose contract
     amounts Represent credit risk at
     December 31, 2002:

          Commitments to extend credit                            $3,511,000
                                                          ===================


Of these commitments to extend credit, $2,684,000 are at variable rates and
$827,000 are at fixed rates.

                                      -12-

<PAGE>

Commitments to extend credit are agreements to lend as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Bank upon extension of credit is based on management's credit evaluation.

EFFECTS OF REGULATORY ACTION

REGULATION OF THE BANK

The Bank is subject to examination by the State Board. In addition, the Bank is
subject to various other state and federal laws and regulations, including state
usury laws, laws relating to fiduciaries, consumer credit and laws relating the
branch banking. The Bank's loan operations are also subject to certain federal
consumer credit laws and regulations promulgated thereunder, including, but not
limited to: the federal Truth-In-Lending Act, governing disclosures of credit
terms to consumer borrowers; the Home Mortgage Disclosure Act, requiring
financial institutions to provide certain information concerning their mortgage
lending; the Equal Credit Opportunity Act and the Fair Housing Act, prohibiting
discrimination on the basis of certain prohibited facts in extending credit; the
Fair Credit Reporting Act, governing the use and provision of information to
credit reporting agencies; the Bank Secrecy Act, dealing with, among other
things, the reporting of certain currency transactions; and the Fair Debt
Collection Act, governing the manner in which consumer debts may be collected by
collection agencies.

The deposit operations of the Bank are also subject to the Truth in Savings Act,
requiring certain disclosures about rates paid on savings accounts; the
Expedited Funds Availability Act, which deals with disclosure of the
availability of funds deposited in accounts and the collection and return of
checks by banks; the Right to Financial Privacy Act, which imposes a duty to
maintain certain confidentiality of consumer financial records and the
Electronic Funds Transfer Act, which govern automatic deposits to and
withdrawals from deposit accounts and customers' rights and liabilities arising
from the use of automated teller machines and other electronic banking services.

The Bank is also subject to the requirements of the Community Reinvestment Act
(the "CRA"). The CRA imposes on financial institutions an affirmative and
ongoing obligation to meet the credit needs of their local communities,
including low and moderate-income neighborhoods, consistent with the safe and
sound operation of those institutions. Each financial institution's actual
performance in meeting community credit needs are evaluated as part of the
examination process, and are also considered in evaluating mergers, acquisitions
and applications to open a branch or facility.

OTHER SAFETY AND SOUNDNESS REGULATIONS

Prompt Corrective Action. The federal banking agencies have broad powers under
current federal law to take prompt corrective action to resolve problems of
insured depository institutions. The extent of these powers depends upon whether
the institutions in question are "well capitalized, "adequately capitalized",
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized."

A bank that is "undercapitalized" becomes subject to provisions of the Federal
Deposit Insurance Act; restricting payment of capital distributions and
management fees; requiring the Federal Deposit Insurance Corporation ("FDIC") to
monitor the condition of the bank; requiring submission by the bank of a capital
restoration plan; restricting the growth of the bank's assets and requiring
prior approval of certain expansion proposals. A bank that is "significantly
undercapitalized" is also subject to restrictions on compensation paid to senior
management of the bank, and a bank that is "critically undercapitalized" is
further subject to restrictions on the activities of the bank and restrictions
on payment of subordinated debt of the bank. The purpose of these provisions is
to require banks with less than adequate capital to act quickly to restore their
capital and to have the FDIC move promptly to take over banks that are unwilling
or unable to take such steps. At December 31, 2002, the Bank is categorized as
"well capitalized" under the regulatory framework for prompt corrective action.

                                      -13-

<PAGE>

Brokered Deposits Under current FDIC regulations, "well capitalized" banks may
accept brokered deposits without restriction, "adequately capitalized" banks may
accept brokered deposits with a waiver from the FDIC (subject to certain
restrictions on payment of rates), while "undercapitalized" banks may not accept
brokered deposits. Management does not believe that these regulations will have
a material adverse effect on the operations of the Bank.

INTERSTATE BANKING

Current Federal law authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation. Effective June 1, 1998, a bank
headquartered in one state was authorized to merge with a bank headquartered in
another state, as long as neither of the states had opted out of such interstate
merger authority prior to such date. After a bank has established branches in a
state through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where a bank
headquartered in that state could have established or acquired branches under
applicable Federal or state law.

GRAMM-LEACH-BLILEY ACT

On November 12, 1999, the President signed the Gramm-Leach-Bliley Act (the
"Act"), which makes it easier for affiliations between banks, securities firms
and insurance companies to take place. The Act removes Depression-era barriers
that had separated banks and securities firms, and seeks to protect the privacy
of consumers' financial information. Most of the provisions of the Act require
the applicable regulators to adopt regulations in order to implement these
provisions.

Under provisions of the legislation, which were effective March 11, 2000, banks,
securities firms and insurance companies are able to structure new affiliations
through a holding company structure or through a financial subsidiary. The
legislation creates a new type of bank holding company called a "financial
holding company" which has powers much more extensive than those of standard
holding companies. These expanded powers include authority to engage in
"financial activities," which are activities that are (1) financial in nature;
(2) incidental to activities that are financial in nature; or (3) complimentary
to a financial activity and that do not impose a safety and soundness risk.
Significantly, the permitted financial activities for financial holding
companies include authority to engage in merchant banking and insurance
activities, including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well-managed, well-capitalized
and have received a rating of "satisfactory" on their last Community
Reinvestment Act examination.

The legislation also creates another new type of entity called a "financial
subsidiary." A financial subsidiary may be used by a national bank or a group of
national banks to engage in many of the same activities permitted for a
financial holding company, though several of these activities, including real
estate development or investment, insurance or annuity underwriting, insurance
portfolio investing and merchant banking, are reserved for financial holding
companies. A bank's investment in a financial subsidiary affects the way in
which the bank calculates its regulatory capital, and the assets and liabilities
of financial subsidiaries may not be consolidated with those of a bank. The bank
must also be certain that its risk management procedures are adequate to protect
it from financial and operational risks created both by itself and by any
financial subsidiary. Further, the bank must establish policies to maintain the
separate corporate identities of the bank and its financial subsidiary and to
prevent each from becoming liable for the obligations of the other.


                                      -14-

<PAGE>

The Act also establishes the concept of "functional supervision," meaning that
similar activities should be regulated by the same regulator. Accordingly, the
Act spells out the regulatory authority of the bank regulatory agencies, the
Securities and Exchange Commission and state insurance regulators so that each
type of activity is supervised by the regulator with corresponding expertise.
The Federal Reserve Board is intended to be an umbrella supervisor with the
authority to require a bank holding company or financial holding company or any
subsidiary of either to file reports as to its financial condition, risk
management systems, transactions with depository institution subsidiaries and
affiliates, and compliance with any federal law that it has authority to
enforce.

Although the Act reaffirms that states are the regulators for insurance
activities of all persons, including federally-chartered banks, the Act
prohibits states from preventing depository institutions and their affiliates
from conducting insurance activities.

The Act also establishes a minimum federal standard of privacy to protect the
confidentiality of a consumer's personal financial information and gives the
consumer the power to choose how personal financial information may be used by
financial institutions. The privacy provisions of the Act will not go into
effect until after adoption of implementing regulations by various federal
agencies.

The Company anticipates that the Act and the regulations which are to be adopted
pursuant to the Act will be likely to create new opportunities for it to offer
expanded services to customers in the future, though the Company has not yet
determined what the nature of the expanded services might be or when the Company
might find it feasible to offer them. The Company further expects that the Act
will increase competition from larger financial institutions that are currently
more capable than the Company of taking advantage of the opportunity to provide
a broader range of services. However, the Company continues to believe that its
commitment to providing high quality, personalized service to customers will
permit it to remain competitive in its market area.

LEGISLATIVE PROPOSALS

New proposed legislation which could significantly affect the business of
banking has been introduced or may be introduced in Congress from time to time.
Management of the Bank cannot predict the future course of such legislative
proposals or their impact on the Company and the Bank should they be adopted.

FISCAL AND MONETARY POLICY

Banking is a business that depends largely on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
its other borrowings, and the interest received by a bank on its loans and
securities holdings, constitutes the major portion of a bank's earnings. Thus,
the earnings and growth of the company and the Bank are subject to the influence
of economic conditions generally, both domestic and foreign, and also to the
monetary and fiscal policies of the United States and its agencies, particularly
the Federal Reserve. The Federal Reserve regulates the supply of money through
various means, including open-market dealings in United States government
securities, the discount rate at which banks may borrow from the Federal
Reserve, and the reserve requirements on deposits. The nature and timing of any
changes in such policies and their impact on the Company and the Bank cannot be
predicted.

IMPACT OF INFLATION

Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Bank are primarily monetary in nature. Therefore,
interest rates have a more significant impact on the Bank's performance than do
the effects of changes in the general rate of inflation and changes in prices.
In addition, interest rates do not necessarily move in the same magnitude as the
prices of goods and services. As discussed previously, management seeks to
manage the relationships between interest sensitive assets and liabilities in
order to protect against wide rate fluctuations, including those resulting from
inflation.

                                      -15-

<PAGE>

EMPLOYEES

The Bank presently employs 15 full-time equivalent employees. Management
believes that its employee relations are good.

ITEM 2. PROPERTIES

The Company's corporate office is located at 202 Cashua Street, Darlington,
South Carolina. The building also houses the Bank's branch facilities and
central operations, including data processing and accounting.

The Company currently owns its building free and clear of any liens. The Company
believes that its facilities are adequate for its current operations. The
Company believes the building is adequately insured.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party
or of which any of their properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company, or any associate of any of the foregoing, is a
party or has an interest adverse to the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter ended December 31, 2002 to a
vote of security holders of the Company.


























                                      -16-

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS

During the period covered by this report and to date, there has been no
established trading market for the Company's stock, and one is not expected to
develop in the near future.

As of March 10, 2003, the number of holders of record for the Company's common
stock was 493.

In January 2002, 2001 and 2000, the Company paid dividends of $1.00, $1.00 and
$.80 per share, respectively, to the shareholders of record as of December 31,
2001, 2000 and 1999, respectively. State banking regulations restrict the amount
of dividends that can be paid and require prior approval of the State Board of
Financial Institutions.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

GENERAL

This discussion is intended to assist in understanding the financial condition
and results of operations of the Company, and should be read in conjunction with
the Company's consolidated financial statements and related notes filed with
this report. Because the Bank is responsible for all of the Company's
operations, the discussion will refer to the results of operations of the Bank.

CRITICAL ACCOUNTING POLICIES

The Company has adopted various accounting policies which govern the application
of accounting principles generally accepted in the United States of America in
the preparation of the Company's financial statements. The significant
accounting policies of the Company are described in the footnotes to the
consolidated financial statements.

Certain accounting policies involve significant judgments and assumptions by
management which have a material impact on the carrying value of certain assets
and liabilities. Management considers such accounting policies to be critical
accounting policies. The judgments and assumptions used by management are based
on historical experience and other factors, which are believed to be reasonable
under the circumstances. Because of the nature of the judgments and assumptions
made by management, actual results could differ from these judgments and
estimates which could have a material impact on the carrying values of assets
and liabilities and the results of operations of the Company.

The Company believes the allowance for loan losses is a critical accounting
policy that requires the most significant judgments and estimates used in
preparation of its consolidated financial statements. Refer to the "Allowance
for Loan Losses" sections above for a detailed description of the Company's
estimation process and methodology related to the allowance for loan losses.

2002 COMPARED TO 2001

Net income for the year ended December 31, 2002 was $321,229 compared to 2001
net income of $250,448. The Company earned $2.03 per common share in 2002
compared to $1.59 per common share in 2001.



                                      -17-

<PAGE>

Net interest income, which is the difference between interest earned on the
Company's interest earning assets and interest paid on interest bearing
liabilities, was $1,357,790 for the year ended December 31, 2002 compared to
$1,225,879 for the year ended December 31, 2001. Net interest income, which is
the main driver of the Company's earnings increased $131,911 or 10.8% in 2002
compared to a decrease of $148,319 or 10.8% in 2001. Net interest income
increased in 2002 primarily due to the drop in average rates on interest bearing
liabilities exceeding the drop in average rates on interest earning assets.

Average earning assets were $28,523,000 or 92.5% of total average assets as
compared to $28,004,000 or 92.1% of total average assets in 2001. The primary
types of earning assets are loans, investment securities and short-term
investments. Loans comprised approximately 64.7% of the Bank's total earning
assets, while investment securities comprised 28.9% and short-term investments
6.4% in 2002.

Average loans increased $421,000 or 2.3% during 2002 as compared to an increase
in average loans of $1.3 million or 7.9% during 2001. However, the average yield
on loans dropped 9% to 7.73% in 2002 and 10% to 8.51% in 2001. The increase in
loans in 2002 was due to these lower rates because these lower rates encouraged
refinancings and other loan growth.

Commercial, industrial and agricultural loans comprised 25.4% of the loan
portfolio as of December 31, 2002. Commercial, industrial and agricultural loans
comprised 24.5% of the loan portfolio as of December 31, 2001. Loans secured by
real estate comprised 49.7% of the portfolio, while consumer and other loans
comprised 24.9% of the loan portfolio as of year ended December 31, 2002. Loans
secured by real estate comprised 48.6% of the portfolio, while consumer and
other loans comprised 26.9% of the portfolio at December 31, 2001.

During 2002 interest expense on deposits was $467,967, a decrease of $323,748
over 2001 levels. During the year, the Bank was able to decrease the average
rate paid on time deposits as quickly and by the same magnitude that rates
decreased on interest earning assets. As a result, the interest rate spread rose
from 3.53% in 2001 to 4.29% in 2002.

The amount of net loans charged off in 2002 was approximately $52,000 compared
to approximately $124,000 in 2001. The ratio of net charge-offs to average
loans, net of unearned income, for 2002 was 0.29% as compared to 0.69% in 2001.

Provision for loan losses in 2002 was approximately $70,000 and in 2001 was
approximately $60,000. The allowance for loan losses as a percentage of loans,
net of unearned income, was 1.08% at December 31, 2002 and 1.07% at December 31,
2001. The allowance as a percentage of loans has increased due to an increase in
non-performing assets at December 31, 2002. Loans greater than 90 days past due
totaled $188,000 at December 31, 2002 compared to $54,000 at December 31, 2001.
Management believes that the allowance for loan losses is adequate to cover
losses inherent in the loan portfolio as of December 31, 2002.

Non-interest income increased $43,568 or 12.9% in 2002 and $71,139 or 26.8% in
2001. Service charges on deposit accounts increased $48,012 or 15.5% while other
service charges and fees decreased $4,444 or 16.1% in 2002. The increase in
service fees on deposit accounts is due to an increase in overall account
balances and in overdraft charges. Overdraft charges increased approximately
$41,000 or 18.4% in 2002 compared to an increase of $50,000 or 28.8% in 2001. In
addition, the Bank earned approximately $38,000 in miscellaneous bookkeeping
charges in 2002, which represented an increase of 50.5% over 2001 levels.

Non-interest expense increased $52,510 or 4.6% in 2002 and $74,534 or 7.0% in
2001. Salaries and employee benefits expense increased $32,520 or 5.2% in 2002
and $80,897 or 14.7% in 2001. Furniture and equipment increased $15,885 or
19.8%, due to depreciation expenses and service contracts associated with new
equipment. Other operating expense plus data processing fees increased $1,694 or
0.5% in 2002 and decreased $28,863 or 8.4% in 2001.

                                      -18-

<PAGE>

2001 COMPARED TO 2000

Net income for the year ended December 31, 2001 was $250,448 compared to 2000
net income of $343,196. The Company earned $1.59 per common share in 2001
compared to $2.17 per share in 2000. The decrease in net income is mainly
attributable to a lower net interest margin as a result of significant interest
rate reductions during the year.

Net interest income, was $1,225,879 for the year ended December 31, 2001
compared to $1,374,198 for the year ended December 31, 2000. Net interest
income, the main driver of the Company's earnings, decreased $148,319 or 10.8%
in 2001 compared to 2000. Interest income decreased in 2001 primarily due to
lower interest rates.

Average earning assets were $28,004,000 or 92.1% of total average assets as
compared to $25,719,000 or 92.6% of total average assets in 2000. The primary
types of earning assets are loans, investment securities and short-term
investments. Loans comprised approximately 64.4% of the Bank's total earning
assets, while investment securities comprised 20.0% and short-term investments
15.6% in 2001.

Average loans increased $1.3 million or 7.9% during 2001 as compared to average
loans in 2000. However, the average yield on loans dropped 10% to 8.51% in 2001
from 9.48% in 2000 due to decreases in overall short-term market interest rates.
The Federal Reserve decreased the Federal Funds rate eleven (11) times during
2001. The total decrease in the Federal Funds rate was 425 basis points in 2001,
bringing the Federal Funds rate to its lowest level in forty (40) years.

Commercial, industrial and agricultural loans comprised 24.5% of the loan
portfolio as of December 31, 2001. Loans secured by real estate comprised 48.6%
of the portfolio, while consumer and other loans comprised 26.9% of the loan
portfolio as of the year ended December 31, 2001.

During 2001 interest expense on deposits was $791,742, an increase of $45,219
over 2000 levels. During the year, the Bank was not able to decrease the average
rate paid on time deposits as quickly or by the same magnitude that rates
decreased on interest earning assets. As a result, the interest rate spread
dropped from, 4.35% in 2000 to 3.53% in 2001.

The amount of net loans charged off in 2001 was approximately $124,000 compared
to $68,000 in 2000. The ratio of net charge-offs to average loans, net of
unearned income, for 2001 was 0.69% as compared to 0.41% in 2000.

Provision for loan losses in 2001 was approximately $60,000 and in 2000 was
approximately $111,000. The allowance for loan losses as a percentage of loans,
net of unearned income, was 1.07% at December 31, 2001 and 1.55% at December 31,
2000. The decrease in the allowance as a percentage of loans is due to a
decrease in non-performing assets at December 31, 2001. Loans greater than 90
days past due totaled $54,000 at December 31, 2001 compared to $1,011,000 at
December 31, 2000. 2000 included a Small business administration ("SBA") insured
loan that comprised the majority of the balance, and payment from the SBA was
received in 2001.

Non-interest income increased $71,139 or 26.8% in 2001. Service charges on
deposit accounts increased $70,660 or 29.6% and accounted for almost 100% of the
increase. The increase in service fees on deposit accounts is due to an increase
in overall account balances and in overdraft charges. Overdraft charges
increased approximately $50,000 or 28.8% in 2001 compared to 2000. In addition,
the Bank earned approximately $25,000 in miscellaneous bookkeeping charges in
2001, which represented an increase of 89.2% over 2000 levels.

Non-interest expense increased $74,534 or 7.0% in 2001. Salaries and employee
benefits expense increased $80,897 or 14.7% in 2001. Additional employees hired
in 2000 were included in salary expense for a full year in 2001. Furniture and
equipment increased $16,864 or 26.6%, due to depreciation expenses and service
contracts associated with new equipment. Other operating expense decreased
$40,471 or 16.1% in 2001. 2000 included expenses related to misappropriations by
a former employee. Data processing fees also increased 12.5% during the year
ended December 31, 2001 due to an upgrade in the system used by the Bank.

                                      -19-

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Information and disclosures related to liquidity and capital resources is
contained in Item 1 of this report under the headings "Capital Resources",
"Liquidity" and "Off-Balance Sheet".

RECENTLY ISSUED ACCOUNTING STANDARDS

The following is a summary of recent authoritative pronouncements that affect
accounting, reporting, and disclosure of financial information by the Company:

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, "Accounting for Asset Retirement Obligations". This statement requires
companies to record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets that result from the acquisition,
construction development and/or normal use of assets. A corresponding asset
(which is depreciated over the life of the asset) must also be recorded. The
provisions of SFAS No. 143 were adopted by the Company on January 1, 2003 with
no impact on financial position and results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections".
This statement rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishments of Debt", and SFAS No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements". This statement also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers" and amends SFAS No. 13,
"Accounting for Leases". This new statement requires gains and losses from
extinguishment of debt to be classified as an extraordinary item only if they
meet the criteria of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions",
which will distinguish transactions that are part of an entity's recurring
operations from those that are unusual or infrequent or that meet the criteria
for classification as an extraordinary item. The adoption of the provision of
SFAS No. 145 had no impact on the Company's financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring)". This statement applies
to costs associated with specific exit activities and requires a liability for a
cost associated with an exit or disposal activity to be recognized and measured
initially at its fair value in the period in which the liability is incurred. A
liability for a cost associated with an exit or disposal activity is incurred
when the definition of a liability is met. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002. The provisions of this statement were adopted by the Company on January 1,
2003 with no impact on financial position or results of operations.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9", which brings all business combinations involving
financial institutions, except mutual financial institutions, into the scope of
SFAS No. 141, "Business Combinations". This statement requires that all
acquisitions of financial institutions that meet the definition of a business,
including acquisitions of part of a financial institution that meet the
definition of a business, must be accounted for in accordance with SFAS No. 141
and the related intangibles accounted for in accordance with SFAS No. 142. SFAS
No. 147 removes such acquisitions form the scope of SFAS No. 72, "Accounting for
Certain Acquisitions of Banking or Thrift Institutions". SFAS No. 147 also
amends SFAS No. 144 to include in its scope long-term customer relationship
intangibles of financial institutions. SFAS No. 147 was effective upon issuance
and had no impact on the Company's financial statements.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transaction and Disclosure - an amendment of FASB Statement No.
123". This statement amends SFAS No. 123,

                                      -20-

<PAGE>

"Accounting for Stock-Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of Statement No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company adopted this standard effective December 31, 2002 and has
included the required disclosures in the footnotes to the financials. The
Company has not elected the fair value treatment of stock-based compensation,
and the adoption of this standard had no impact on its financial position.

Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.

INFLATION

Since the assets and liabilities of a bank are primarily monetary in nature
(payable in fixed, determinable amounts), the performance of a bank is affected
more by changes in interest rates than by inflation. Interest rates generally
increase as the rate of inflation increases, but the magnitude of the change in
rates may not be the same.

While the effect of inflation on banks is normally not as significant as is its
influence on those businesses which have large investments in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally corresponding increases in the money supply, and banks will normally
experience above-average growth in assets, loans and deposits. Also, general
increases in the prices of goods and services will result in increased operating
expenses.








                                      -21-
<PAGE>

ITEM 7.        FINANCIAL STATEMENTS









                DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY

                   REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

























                                      -22-
<PAGE>


                DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY


<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                    Page

<S>                                                                                     <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                                      1

FINANCIAL STATEMENTS
     Consolidated balance sheets                                                        2
     Consolidated statements of income                                                  3
     Consolidated statements of stockholders' equity and comprehensive income           4
     Consolidated statements of cash flows                                              5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                         6 - 18

</TABLE>











                                      -23-
<PAGE>






               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



The Directors and Stockholders
Darlington County Bancshares, Inc. and Subsidiary
Darlington, South Carolina


             We have audited the accompanying consolidated balance sheets of
Darlington County Bancshares, Inc. and Subsidiary as of December 31, 2002 and
2001, and the related consolidated statements of income, stockholders' equity
and comprehensive income and cash flows for each of the years in the three year
period ended December 31, 2002. These consolidated 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 auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated 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 consolidated financial
position of Darlington County Bancshares, Inc. and Subsidiary as of December 31,
2002 and 2001 and the results of their operations and cash flows for each of the
years in the three year period ended December 31, 2002, in conformity with
auditing standards generally accepted in the United States of America.





Greenville, South Carolina
January 17, 2003



                                      -24-
<PAGE>

<TABLE>
<CAPTION>


                DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS


                                                                                                    December 31,
                                                                                      -----------------------------------------
                                                                                             2002                  2001
                                                                                      -------------------   -------------------
                                                            ASSETS

<S>                                                                                        <C>                  <C>
CASH AND DUE FROM BANKS                                                                    $   1,441,161        $     314,713

FEDERAL FUNDS SOLD                                                                             2,386,000            3,513,000

INVESTMENT SECURITIES HELD TO MATURITY
     (fair value $653,556 in 2002 and $716,725 in 2001)                                          641,054              717,804

INVESTMENT SECURITIES AVAILABLE FOR SALE                                                       5,904,573            7,638,226

OTHER INVESTMENTS, AT COST                                                                        50,405               50,405

LOANS                                                                                         19,015,019           17,612,538

     Less allowance for loan losses                                                             (205,728)            (187,808)
                                                                                      -------------------   -------------------

            Net loans                                                                         18,809,291           17,424,730

PREMISES AND EQUIPMENT                                                                         1,002,578            1,063,384

ACCRUED INTEREST RECEIVABLE                                                                      282,438              253,713

OTHER ASSETS                                                                                      47,021              196,937
                                                                                      -------------------   -------------------

                                                                                       $      30,267,521     $     31,172,912
                                                                                      ===================   ===================

                                             LIABILITIES AND STOCKHOLDERS' EQUITY

DEPOSITS
     Demand                                                                               $    4,606,528         $  4,910,391
     Savings and NOW                                                                          15,252,327           12,743,457
     Other time                                                                                6,344,674            9,705,264
                                                                                      -------------------   -------------------

            Total deposits                                                                    26,203,529           27,359,112

OTHER LIABILITIES                                                                                118,311              119,413
                                                                                      -------------------   -------------------

            Total liabilities                                                                 26,321,840           27,478,525
                                                                                      -------------------   -------------------

COMMITMENTS AND CONTINGENCIES - Note 9

STOCKHOLDERS' EQUITY
     Common stock - $.01 par value, 1,000,000 shares authorized,
        158,000 shares issued and outstanding                                                      1,580                1,580
     Capital in excess of par value of stock                                                   1,617,920            1,617,920
     Retained earnings                                                                         2,259,503            2,096,274
     Accumulated other comprehensive income (loss)                                                66,678              (21,387)
                                                                                      -------------------   -------------------

            Total stockholders' equity                                                         3,945,681             3,694,387
                                                                                      -------------------   -------------------

                                                                                           $  30,267,521         $ 31,172,912
                                                                                      ===================   ===================

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      -25-

<PAGE>

<TABLE>
<CAPTION>


                                         DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY
                                                 CONSOLIDATED STATEMENTS OF INCOME


                                                                                      For the years ended December 31,
                                                                   ------------------------------------------------------------
                                                                          2002                 2001                2000
                                                                   -------------------   ------------------  ------------------
INTEREST INCOME
<S>                                                                <C>                       <C>                 <C>
     Loans                                                         $        1,427,972        $  1,536,015        $  1,585,826
     Investment securities
        Taxable                                                               339,127             285,394             322,026
        Exempt from federal income taxes                                       28,617              31,130
                                                                                                                       34,266
                                                                   -------------------   ------------------  ------------------

            Total interest on investment securities                           367,744             316,524             356,292

     Federal funds sold                                                        28,964             163,260             176,072
     Other                                                                      1,104               1,822
                                                                                                                        2,531
                                                                   -------------------   ------------------  ------------------

            Total interest income                                           1,825,784           2,017,621           2,120,721

INTEREST EXPENSE
     Deposits                                                                 467,994             791,742             746,523
                                                                   -------------------   ------------------  ------------------

            Net interest income                                             1,357,790           1,225,879           1,374,198

PROVISION FOR LOAN LOSSES                                                      70,000              59,992             111,213
                                                                   -------------------   ------------------  ------------------

            Net interest income after provision for loan
            losses                                                          1,287,790           1,165,887           1,262,985

NONINTEREST INCOME
     Service charges on deposit accounts                                      357,094             309,082             238,422
     Other service charges and fees                                            23,241              27,685              27,206
                                                                   -------------------   ------------------  ------------------

            Total noninterest income                                          380,335             336,767             265,628

NONINTEREST EXPENSES
     Salaries and employee benefits                                           663,244             630,724             549,827
     Occupancy                                                                 73,550              69,472              64,951
     Furniture and equipment                                                   96,032              80,147              63,283
     Office supplies                                                           44,997              46,664              45,549
     Data processing fees                                                     146,384             104,622              93,014
     Other operating                                                          171,409             211,477             251,948
                                                                   -------------------   ------------------  ------------------

            Total noninterest expenses                                      1,195,616           1,143,106           1,068,572
                                                                   -------------------   ------------------  ------------------

            Income before income taxes                                        472,509             359,548             460,041

PROVISION FOR INCOME TAXES                                                    151,280             109,100             116,845
                                                                   -------------------   ------------------  ------------------

            Net income                                                   $    321,229       $     250,448         $   343,196
                                                                   ===================   ==================  ==================

NET INCOME PER SHARE OF COMMON STOCK                                     $       2.03       $        1.59         $      2.17
                                                                   ===================   ==================  ==================


</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      -26-

<PAGE>
<TABLE>
<CAPTION>

                                           DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                         For the years ended December 31, 2002, 2001, and 2000


                                                                       Capital in                     Accumulated        Total
                                                 Common stock           excess of                      other com-        stock-
                                            ------------------------    of stock        Retained       prehensive       holders'
                                              Shares       Amount       of stock        earnings     income (loss)       equity
                                            -----------  -----------  --------------  -------------  --------------- ---------------

<S>                                            <C>        <C>          <C>            <C>              <C>            <C>
BALANCE, DECEMBER 31, 1999                     158,000    $  1,580     $ 1,617,920    $ 1,787,030      $  (102,648)   $  3,303,882
                                                                                                                     ---------------
    Net income                                                                            343,196                          343,196
    Other comprehensive income, net of
       income taxes of $34,145:
       Unrealized gain on securities
           available for sale                                                                               66,279          66,279
                                                                                                                     ---------------
       Comprehensive income                                                                                                409,475
    Cash dividend, $.80 per share                                                        (126,400)                        (126,400)
                                            -----------  -----------  --------------  -------------  --------------- ---------------

BALANCE, DECEMBER 31, 2000                     158,000       1,580        1,617,920     2,003,826          (36,369)      3,586,957
                                                                                                                     ---------------
    Net income                                                                            250,448                          250,448
    Other comprehensive income, net of
       income taxes of $7,715:
       Unrealized gain on securities
           available for sale                                                                               14,982          14,982
                                                                                                                     ---------------
       Comprehensive income                                                                                                265,430
    Cash dividend, $1.00 per share                                                       (158,000)                        (158,000)
                                            -----------  -----------  --------------  -------------  --------------- ---------------

BALANCE, DECEMBER 31, 2001                     158,000       1,580        1,617,920     2,096,274          (21,387)      3,694,387
                                                                                                                     ---------------

    Net income                                                                            321,229                          321,229
    Other comprehensive income, net of
       income taxes of $45,367:
       Unrealized gain on securities
           available for sale                                                                                88,065         88,065
                                                                                                                     ---------------
       Comprehensive income                                                                                                409,294
    Cash dividend, $1.00 per share                                                      (158,000)                         (158,000)
                                            -----------  -----------  -------------- -------------  --------------- ---------------

BALANCE, DECEMBER 31, 2002                     158,000    $  1,580      $ 1,617,920   $ 2,259,503        $   66,678   $  3,945,681
                                            ===========  ===========  ==============  =============  =============== ===============


</TABLE>





The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      -27-


<PAGE>
<TABLE>
<CAPTION>

                                          DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                         For the years ended December 31,
                                                                        ---------------------------------------------------------
                                                                              2002                2001                2000
                                                                        -----------------  -------------------  -----------------
OPERATING ACTIVITIES
<S>                                                                         <C>                  <C>                <C>
     Net income                                                             $   321,229          $   250,448        $   343,196
     Adjustments to reconcile net income to
        net cash provided by operating activities
        Depreciation                                                             75,845               70,598             60,889
        Amortization and accretion                                               16,172                5,161                356
        Provision for loan losses                                                70,000               59,992            111,213
        Loss on sale of premises and equipment                                        -                4,057                  -
        Deferred income taxes                                                    22,000               36,000            (12,865)
        Changes in assets and liabilities:
          (Increase) decrease in accrued interest receivable                    (28,725)             167,667            (22,986)
          Decrease (increase) in other assets                                    94,108              (60,611)           (24,825)
          Increase (decrease) in other liabilities                               (1,102)             (40,729)             4,103
                                                                        -----------------  -------------------  -----------------
            Cash provided by operating activities                               569,527              492,583            459,081
                                                                        -----------------  -------------------  -----------------

INVESTING ACTIVITIES
     Decrease (increase) in federal funds sold                                1,127,000              907,000         (2,460,000)
     Proceeds from maturities of investment securities
        held to maturity                                                         75,000                    -            300,000
     Proceeds from maturities of investment securities
        available for sale                                                    7,963,135            6,686,060            921,283
     Purchase of investment securities available for sale                    (6,122,031)          (9,642,485)          (300,000)
     Net (increase) decrease in loans                                        (1,454,561)          (1,406,085)            92,354
     Proceeds from sale of premises and equipment                                     -                7,384                  -
     Purchases of premises and equipment                                        (15,039)            (270,372)           (21,680)
                                                                        -----------------  -------------------  -----------------
            Cash provided by (used for) investing activities                  1,573,504           (3,718,498)        (1,468,043)
                                                                        -----------------  -------------------  -----------------

FINANCING ACTIVITIES
     Dividends paid                                                            (158,000)            (158,000)          (126,400)
     Increase (decrease) in deposits                                         (1,155,583)           2,609,031            815,610
                                                                        -----------------  -------------------  -----------------
            Cash provided by (used for) financing activities                 (1,313,583)           2,451,031            689,210
                                                                        -----------------  -------------------  -----------------

                                                                                829,448             (774,884)          (319,752)
            Increase (decrease) in cash and due from banks

CASH AND DUE FROM BANKS, BEGINNING OF YEAR                                      314,713            1,089,597          1,409,349
                                                                        -----------------  -------------------  -----------------

                                                                           $  1,144,161           $  314,713       $  1,089,597
CASH AND DUE FROM BANKS, END OF YEAR
                                                                        =================  ===================  =================

SUPPLEMENTAL DISCLOSURES
     Cash paid for:
        Interest                                                            $   510,806          $   825,097        $   719,539
                                                                        =================  ===================  =================

                                                                            $     7,799          $   175,967        $   129,320
        Income taxes
                                                                        =================  ===================  =================




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

                                      -28-


<PAGE>

                DARLINGTON COUNTY BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

    PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS
      Darlington County Bancshares, Inc. (the "Company") was organized in July
      1999 for the purpose of being the holding company for Darlington County
      Bank (the "Bank"). On July 1, 1999, pursuant to a Plan of Exchange
      approved by the stockholders, all of the outstanding shares of common
      stock of the Bank were exchanged for shares of common stock of the
      Company. The Company presently engages in no other business than that of
      owning the Bank, has no employees and operates as one business segment.
      The Company is subject to regulation by the Federal Reserve Board. The
      consolidated financial statements include the accounts of the Company and
      the Bank with all intercompany balances and transactions having been
      eliminated.

      The Bank operates under a state charter and provides full banking services
      to its customers. The Bank is subject to regulation by the South Carolina
      State Board of Financial Institutions and the Federal Deposit Insurance
      Corporation. The Bank makes commercial and personal loans to individuals
      and small businesses located primarily in the South Carolina midlands
      region. The Bank has a diversified loan portfolio and the borrowers'
      ability to repay their loans is not dependent upon any specific economic
      sector.

    USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
      The preparation of consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosure of contingent
      assets and liabilities as of the dates of the balance sheets and the
      statements of income for the periods covered. Actual results could differ
      from those estimates.

    CASH AND CASH EQUIVALENTS
      For purposes of the statement of cash flows, cash and cash equivalents are
      defined as those amounts included in the balance sheet caption "Cash and
      Due from Banks." Cash and cash equivalents have an original maturity of
      three months or less.

    INVESTMENT SECURITIES
      The Bank accounts for investment securities in accordance with Statement
      of Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
      Investments in Debt and Equity Securities." Debt securities are classified
      upon purchase as available for sale, held to maturity or trading. Such
      assets classified as available for sale are carried at fair value.
      Unrealized gains or losses are reported as a component of stockholders'
      equity, accumulated other comprehensive loss, net of deferred income
      taxes. Securities classified as held to maturity are carried at cost,
      adjusted for the amortization of premiums and the accretion of discounts.
      In order to qualify as held to maturity, the Bank must have the ability
      and intent to hold the securities to maturity. Trading securities are
      carried at market value. The Bank has no trading securities. Gains or
      losses on disposition of securities are based on the difference between
      the net proceeds and the adjusted carrying amount of the securities sold,
      using the specific identification method.

    LOANS
      Interest on loans is accrued into income based upon the interest method.
      Loan origination and commitment fees and direct loan origination costs are
      deferred and amortized over the contractual life of the related loans or
      commitments as an adjustment of the related loan yields.
                                                                     (Continued)


                                      -29-


<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

    ALLOWANCE FOR LOAN LOSSES
      The allowance for loan losses is based on management's ongoing evaluation
      of the loan portfolio and reflects an amount that, in management's
      opinion, is adequate to absorb losses in the existing portfolio. In
      evaluating the portfolio, management takes into consideration numerous
      factors, including current economic conditions, prior loan loss
      experience, the composition of the loan portfolio, and management's
      estimate of anticipated credit losses. Loans are charged against the
      allowance at such time as they are determined to be losses. Subsequent
      recoveries are credited to the allowance. Management considers the
      year-end allowance appropriate and adequate to cover possible losses in
      the loan portfolio; however, management's judgment is based upon a number
      of assumptions about future events, which are believed to be reasonable,
      but which may or may not prove valid. Thus, there can be no assurance that
      charge-offs in future periods will not exceed the allowance for loan
      losses or that additional increases in the allowance for loan losses will
      not be required. Allowances for loan losses are subject to review by
      various regulatory authorities and may be subject to adjustment upon their
      examination.

    ACCOUNTING FOR IMPAIRED LOANS
      The Bank accounts for impaired loans in accordance with SFAS No. 114,
      "Accounting by Creditors for Impairment of a Loan". This standard requires
      that all creditors value loans at the loan's fair value if it is probable
      that the creditor will be unable to collect all amounts due according to
      the terms of the loan agreement. Fair value may be determined based upon
      the present value of expected cash flows, market price of the loan, if
      available, or value of the underlying collateral. Expected cash flows are
      required to be discounted at the loan's effective interest rate. SFAS No.
      114 was amended by SFAS No. 118 to allow a creditor to use existing
      methods for recognizing interest income on an impaired loan and by
      requiring additional disclosures about how a creditor recognizes interest
      income on an impaired loan. When the ultimate collectibility of an
      impaired loan's principal is in doubt, wholly or partially, all cash
      receipts are applied to principal. When this doubt does not exist, cash
      receipts are applied under the contractual terms of the loan agreement.
      Once the recorded principal balance has been reduced to zero, future cash
      receipts are applied to interest income, to the extent that any interest
      has been foregone. Further cash receipts are recorded as recoveries of any
      amounts previously charged off.

      A loan is also considered impaired if its terms are modified in a troubled
      debt restructuring. For these accruing impaired loans, cash receipts are
      typically applied to principal and interest receivable in accordance with
      the terms of the restructured loan agreement.

    PREMISES AND EQUIPMENT
      Premises and equipment are stated at cost less accumulated depreciation
      and amortization. Depreciation and amortization are computed over the
      estimated useful lives of the assets using the straight-line method.
      Additions to premises and equipment and major replacements or improvements
      are capitalized at cost. Maintenance, repairs and minor replacements are
      expensed when incurred. Gains and losses on routine dispositions are
      reflected in current operations.

    NON-PERFORMING ASSETS
      Loans are placed in a non-accrual status when, in the opinion of
      management, the collection of additional interest is questionable.
      Thereafter, no interest is taken into income unless received in cash or
      until such time as the borrower demonstrates the ability to pay principal
      and interest.
                                                                     (Continued)

                                      -30-

<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

    FORECLOSED REAL ESTATE
      Foreclosed real estate is stated at the lower of cost or estimated fair
      value less estimated costs to sell. Any accrued interest on the related
      loan at the date of acquisition is charged to operations. Costs relating
      to the development and improvement of property are capitalized to the
      extent that such costs do not exceed the estimated fair value less selling
      costs of the property, whereas those relating to holding the property are
      charged to expense.

    INCOME TAXES
      The Company accounts for income taxes under SFAS No. 109, "Accounting for
      Income Taxes." Certain items of income and expense for financial reporting
      (principally provision for loan losses and depreciation) are recognized
      differently for income tax purposes. Provisions for deferred taxes are
      made in recognition of such temporary differences.

    NET INCOME PER SHARE
      Net income per share is computed on the basis of the weighted average
      number of common shares outstanding, 158,000 shares in 2002, 2001 and
      2000. The Company has no instruments which are dilutive; therefore, only
      basic net income per share of common stock is presented.

    RECENTLY ISSUED ACCOUNTING STANDARDS
        The following is a summary of recent authoritative pronouncements that
        affect accounting, reporting, and disclosure of financial information by
        the Company:

        In June 2001, the Financial Accounting Standards Board (FASB) issued
        SFAS No. 143, "Accounting for Asset Retirement Obligations". This
        statement requires companies to record the fair value of an asset
        retirement obligation as a liability in the period in which it incurs a
        legal obligation associated with the retirement of tangible long-lived
        assets that result from the acquisition, construction development and/or
        normal use of assets. A corresponding asset (which is depreciated over
        the life of the asset) must also be recorded. The provisions of SFAS No.
        143 were adopted by the Company on January 1, 2003 with no impact on
        financial position and results of operations.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
        Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
        Technical Corrections". This statement rescinds SFAS No. 4, "Reporting
        Gains and Losses from Extinguishments of Debt", and SFAS No. 64,
        "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements".
        This statement also rescinds SFAS No. 44, "Accounting for Intangible
        Assets of Motor Carriers" and amends SFAS No. 13, "Accounting for
        Leases". This new statement requires gains and losses from
        extinguishment of debt to be classified as an extraordinary item only if
        they meet the criteria of APB Opinion NO. 30, "Reporting the Results of
        Operations-Reporting the Effects of Disposal of a Segment of Business,
        and Extraordinary, Unusual and Infrequently Occurring Events and
        Transactions", which will distinguish transactions that are part of an
        entity's recurring operations from those that are unusual or infrequent
        or that meet the criteria for classification as an extraordinary item.
        The adoption of the provision of SFAS No. 145 had no impact on the
        Company's financial position or results of operations.
                                                                     (Continued)


                                      -31-
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued

       In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
       Associated with Exit or Disposal Activities", which addresses financial
       accounting and reporting for costs associated with exit or disposal
       activities and nullifies Emerging Issues Task Force (EITF) Issue No.
       94-3, "Liability Recognition for Certain Employee Termination Benefits
       and Other Costs to Exit an Activity (including Certain Costs Incurred in
       a Restructuring)". This statement applies to costs associated with
       specific exit activities and requires a liability for a cost associated
       with an exit or disposal activity to be recognized and measured initially
       at its fair value in the period in which the liability is incurred. A
       liability for a cost associated with an exit or disposal activity is
       incurred when the definition of a liability is met. The provisions of
       this statement are effective for exit or disposal activities that are
       initiated after December 31, 2002. The provisions of this statement were
       adopted by the Company on January 1, 2003 with no impact on financial
       position or results of operations.

       In October 2002, the FASB issued SFAS No. 147, "Accounting for Certain
       Financial Institutions - an amendment of FASB Statements No. 72 and 144
       and FASB Interpretation No. 9", which brings all business combinations
       involving financial institutions, except mutual financial institutions,
       into the scope of SFAS No. 141, "Business Combinations". This statement
       requires that all acquisitions of financial institutions that meet the
       definition of a business, including acquisitions of part of a financial
       institution that meet the definition of a business, must be accounted for
       in accordance with SFAS No. 141 and the related intangibles accounted for
       in accordance with SFAS No. 142. SFAS No. 147 removes such acquisitions
       form the scope of SFAS No. 72, "Accounting for Certain Acquisitions of
       Banking or Thrift Institutions". SFAS No. 147 also amends SFAS No. 144 to
       include in its scope long-term customer relationship intangibles of
       financial institutions. SFAS No. 147 was effective upon issuance and had
       no impact on the Company's financial statements.

       In December 2002, the FASB issued SFAS No. 148 "Accounting for
       Stock-Based Compensation - Transaction and Disclosure - an amendment of
       FASB Statement No. 123". This statement amends SFAS No. 123, "Accounting
       for Stock-Based Compensation", to provide alternative methods of
       transition for a voluntary change to the fair value based method of
       accounting for stock-based employee compensation. In addition, this
       statement amends the disclosure requirements of Statement No. 123 to
       require prominent disclosures in both annual and interim financial
       statements about the method of accounting for stock-based employee
       compensation and the effect of the method used on reported results. The
       Company adopted this standard effective December 31, 2002 and has
       included the required disclosures in the footnotes to the financials. The
       Company has not elected the fair value treatment of stock-based
       compensation and the adoption of this standard had no impact on its
       financial position.

       Other accounting standards that have been issued or proposed by the FASB
       or other standards-setting bodies that do not require adoption until a
       future date are not expected to have a material impact on the
       consolidated financial statements upon adoption.

    RECLASSIFICATIONS
      Certain previously reported amounts have been reclassified to conform to
      the current year presentation. Such changes had no effect on previously
      reported net income or stockholders' equity.
                                                                     (Continued)


                                      -32-


<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, Continued


    RISKS AND UNCERTAINTIES
      In the normal course of its business, the Company encounters two
      significant types of risk: economic and regulatory. There are three main
      components of economic risk: interest rate risk, credit risk and market
      risk. The Company is subject to interest rate risk to the degree that its
      interest-bearing liabilities mature or reprice at different speeds, or on
      different bases, than its interest earning assets.

      Credit risk is the risk of default on the Company's loan portfolio that
      results from the borrowers' inability or unwillingness to make
      contractually required payments. Credit risk also applies to investment
      securities should the issuer of the security be unable to make principal
      and interest payments. Market risk reflects changes in the value of
      collateral underlying loans receivable, the valuation of real estate held
      by the Company and the valuation of investment securities.

      The Company is subject to the regulations of various government agencies.
      These regulations can and do change significantly from period to period.
      The Company also undergoes periodic examinations by the regulatory
      agencies, which may subject it to further changes with respect to asset
      valuations, amounts of required loss allowances and operating restrictions
      resulting from the regulators' judgements based on information available
      to them at the time of their examination.

      In preparing the financial statements, management is required to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities as of the
      dates of the balance sheets and revenues and expenses for the periods
      covered. Actual results could differ significantly from those estimates
      and assumptions.



NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS

          The Bank is required to maintain average reserve balances either at
the Bank or on deposit with the Federal Reserve Bank. The average amounts of
these reserve balances for the years ended December 31, 2002 and 2001 were
approximately $191,000 and $259,000, respectively.























                                      -33-
<PAGE>

NOTE 3 - INVESTMENT SECURITIES

          The amortized cost and approximate fair value of investment
securities, including maturities, are summarized as follows at December 31:
<TABLE>
<CAPTION>
                                                                                         2002
                                                          -------------------------------------------------------------------
                                                                                     Gross unrealized
                                                             Amortized      --------------------------------      Fair
                                                                cost             gains           losses           Value
                                                          ----------------- ---------------- --------------- ----------------

AVAILABLE FOR SALE
<S>                                                           <C>           <C>                   <C>            <C>
   Federal Agencies
     One to five years                                        $  2,595,000  $       27,266         $      -      $ 2,622,266
                                                          ----------------- ---------------- --------------- ----------------

   Mortgage backed
     Less than one year                                            368,524            7,640               -          376,164
     Five to ten years                                           1,487,534           15,792               -        1,503,326
     After ten years                                             1,364,048           38,769               -        1,402,817
                                                          ----------------- ---------------- --------------- ----------------

                                                                 3,220,106           62,201               -        3,282,307
                                                          ----------------- ---------------- --------------- ----------------

Total available for sale                                      $  5,815,106       $   89,467        $      -      $ 5,904,573
                                                          ================= ================ =============== ================

HELD TO MATURITY
----------------
   State, county and municipal
     Less than one year                                        $    80,364       $    1,069        $      -       $   81,433
     One to five years                                              86,411            3,941               -           90,352
     Five to ten years                                             474,279            7,492               -          481,771
                                                          ----------------- ---------------- --------------- ----------------

Total held to maturity                                    $           641,054    $   12,502        $      -       $  653,556
                                                          ================= ================ =============== ================


                                                                                         2001
                                                          -------------------------------------------------------------------
                                                                                   Gross unrealized
                                                             Amortized      --------------------------------      Fair
                                                                cost             gains           losses           Value
                                                          ----------------- ---------------- --------------- ----------------

AVAILABLE FOR SALE
   Federal Agencies
     One to five years                                        $  5,000,000       $    1,875      $   22,370      $ 4,979,505
                                                          ----------------- ---------------- --------------- ----------------

   Mortgage backed
     One to five years                                             659,746            6,765               -          666,511
     After ten years                                             2,010,885            5,599          24,274        1,992,210
                                                          ----------------- ---------------- --------------- ----------------

                                                                 2,670,631           12,364          24,274        2,658,721
                                                          ----------------- ---------------- --------------- ----------------

Total available for sale                                      $  7,670,631       $   14,239      $   46,644      $ 7,638,226
                                                          ================= ================ =============== ================

HELD TO MATURITY
----------------
   State, county and municipal
     Less than one year                                        $    75,360        $     773        $      -       $   76,133
     One to five years                                             168,924            5,535               -          174,459
     Five to ten years                                             473,520                -           7,387          466,133
                                                          ----------------- ---------------- --------------- ----------------

Total held to maturity                                         $   717,804       $    6,308      $    7,387       $  716,725
                                                          ================= ================ =============== ================

</TABLE>
                                                                     (Continued)

                                      -34-
<PAGE>

NOTE 3 - INVESTMENT SECURITIES, (Continued)

          For purposes of the maturity table, mortgage-backed securities, which
are not due at a single maturity date, have been allocated over maturity
groupings based on an average maturity life computation of the underlying
collateral. The mortgage-backed securities may mature earlier than their average
maturity lives because of principal prepayments.

          Investment securities with an aggregate amortized cost of
approximately $1,200,000 ($1,205,188 fair value) at December 31, 2002 and
$1,162,225 ($1,168,885 fair value) at December 31, 2001, were pledged to secure
public deposits and for other purposes. Fair value of investment securities is
determined using quoted market prices.

NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES

          Following is a summary of loans by major classification:
<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                       --------------------------------------
                                                                                              2002                2001
                                                                                       -------------------  -----------------

<S>                                                                                         <C>                 <C>
Real estate - mortgage                                                                      $   8,714,000       $  7,954,000
Real estate - construction                                                                        732,000            611,000
Commercial and industrial                                                                       3,797,000          3,477,000
Loans to individuals for household, family and other consumer expenditures                      4,001,000          4,090,000
Agriculture                                                                                     1,034,000            833,000
All other loans, including overdrafts                                                             718,541            629,083
Deferred loan origination costs                                                                    18,478             18,455
                                                                                       -------------------  -----------------

                                                                                           $   19,015,019       $ 17,612,538
                                                                                       ===================  =================
</TABLE>

           Changes in the allowance for loan losses are summarized as follows
for the years ended December 31,:
<TABLE>
<CAPTION>

                                                                      2002                  2001                2000
                                                                -------------------  -------------------  -------------------

<S>                                                             <C>                      <C>                   <C>
Balance, beginning of year                                      $        187,808         $   252,219           $    208,642
Recoveries of loans previously charged against
    the allowance                                                            786             118,465                 17,666
Provision for loan losses                                                 70,000              59,992                111,213
Loans charged against the allowance                                      (52,866)           (242,868)               (85,302)
                                                                -------------------  -------------------  -------------------

Balance, end of year                                            $        205,728         $   187,808           $    252,219
                                                                ===================  ===================  ===================
</TABLE>


               At December 31, 2002 and 2001, non-accrual loans totaled
approximately $58,800 and $15,900, respectively. The gross interest income which
would have been recorded under the original terms of the non-accrual loans
amounted to $3,900 in 2002, $1,364 in 2001, and $174,341 in 2000. No interest
was recorded on nonaccrual loans in 2002, 2001 and 2000. As of December 31, 2002
and 2001 the Bank had no impaired loans.



                                      -35-
<PAGE>

NOTE 5 - PREMISES AND EQUIPMENT

           Premises and equipment at December 31 is summarized as follows:
<TABLE>
<CAPTION>


                                                                                         2002               2001
                                                                                    ----------------   ---------------

<S>                                                                                    <C>                <C>
Land and buildings                                                                     $    965,625       $   965,625
Furniture, fixtures and equipment                                                           768,585           753,547
                                                                                    ----------------   ---------------

                                                                                          1,734,210         1,719,172
Less accumulated depreciation and amortization                                              731,632           655,788
                                                                                    ----------------   ---------------

                                                                                       $  1,002,578       $ 1,063,384
                                                                                    ================   ===============
</TABLE>


           Depreciation and amortization of bank premises and equipment charged
to operating expense totaled $75,845 in 2002, $70,598 in 2001, and $60,889 in
2000.



NOTE 6 - DEPOSITS

           At December 31, 2002 and 2001, certificates of deposit of $100,000 or
more totaled approximately $773,000 and $1,822,000, respectively. Interest
expense on these deposits was $30,448 in 2002, $80,153 in 2001, and $105,302 in
2000.

           At December 31, 2002, the scheduled maturities of certificates of
deposit are as follows:

                  2003                                   $ 6,131,748
                  2004                                       200,253
                  2005 and thereafter                         12,673
                                                    -----------------

                                                         $ 6,344,674
                                                    =================


NOTE 7 - UNUSED LINES OF CREDIT

           At December 31, 2002, the Bank has an unused short-term line of
credit to purchase Federal funds from an unrelated bank totaling $2,500,000.
This line of credit is available on a one to fourteen day basis for general
corporate purposes of the Bank. The lender has reserved the right to withdraw
this line at its option.




                                                                     (Continued)
                                      -36-
<PAGE>

NOTE 8 - INCOME TAXES

           The following summary of the provision for income taxes includes tax
deferrals which arise from temporary differences in the recognition of certain
items of revenue and expense for tax and financial reporting purposes for the
years ended December 31,:

<TABLE>
<CAPTION>
                                                                      2002                  2001                2000
                                                                -------------------  -------------------  -------------------
Income taxes currently payable
<S>                                                                  <C>                   <C>                 <C>
    Federal                                                          $    121,278          $    63,400         $    119,460
    State                                                                  15,336                9,700               10,250
                                                                -------------------  -------------------  -------------------

                                                                          136,614               73,100              129,710
                                                                -------------------  -------------------  -------------------

Tax consequences of differences
    Loan losses                                                             2,358               13,448              (14,816)
    Depreciation                                                           11,360                9,968               (1,344)
    Other                                                                     948               12,584                 3,295
                                                                -------------------  -------------------  -------------------

                                                                           14,666               36,000              (12,865)
                                                                -------------------  -------------------  -------------------

      Provision                                                       $   151,280         $    109,100          $    116,845
                                                                ===================  ===================  ===================

</TABLE>

           The income tax effect of cumulative temporary differences at December
31, are as follows:

<TABLE>
<CAPTION>
                                                           DEFERRED TAX ASSET (LIABILITY)
                                                     --------------------------------------------
                                                            2002                    2001
                                                     --------------------    --------------------

<S>                                                         <C>                     <C>
Allowance for loan losses                                   $    69,948             $    72,306
Accumulated depreciation                                        (55,833)                (44,473)
Unrealized loss on investment securities                        (28,664)                 12,478
Other, net                                                      (14,016)                (13,068)
                                                     --------------------    --------------------

                                                           $    (28,565)            $    27,243
                                                     ====================    ====================

</TABLE>

           The net deferred tax asset (liability) is reported in the category of
other assets in the balance sheets at December 31, 2002 and 2001.

           The provision for income taxes is reconciled to the amount of income
tax computed at the federal statutory rate on income before income taxes for the
years ended December 31, as follows:

<TABLE>
<CAPTION>
                                                      2002                          2001                          2000
                                           ----------------------------  ---------------------------  -----------------------------
                                              AMOUNT            %           AMOUNT           %            AMOUNT            %

<S>                                        <C>                 <C>        <C>                <C>        <C>                <C>
Tax expense at statutory rate              $    159,700        33.8%      $  122,246         34.0%      $  156,414         34.0%
Increase (decrease) in taxes resulting from:
   Tax exempt interest                           (9,700)      (2.05)         (15,600)        (4.32)        (17,221)        (3.7)
   State bank tax (net of federal benefit)       10,200        2.16           10,000          2.77           9,201          2.0
   Other - net                                   (8,920)      (1.89)          (7,546)        (2.21)        (31,549)        (6.9)
                                           --------------   -----------  --------------  -----------  ---------------  ------------

       Tax provision                           $151,280         32.02%    $  109,100         30.24%     $  116,845         25.4%
                                           ==============   ===========  ==============  ===========  ===============  ============
</TABLE>



                                      -37-
<PAGE>

NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK
          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 include available credit on credit lines
and commitments to extend credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the statements of financial position. The contract amounts of these instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on balance sheet
instruments.

                                                           Contract
                                                            amount


                                                      --------------------
     Financial instruments whose contract amounts
     represent credit risk at December 31, 2002:

         Commitments to extend credit                    $   3,511,000
                                                      ====================

          Of these commitments to extend credit, $2,684,000 are at variable
rates and $827,000 are at fixed rates.

          Commitments to extend credit are agreements to lend as long as there
is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation.

NOTE 10 - CARRYING AMOUNTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

            SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value information, whether or not
recognized in the balance sheets, when it is practical to estimate the fair
value. SFAS No. 107 defines a financial instrument as cash, evidence of an
ownership interest in an entity, or contractual obligations which require the
exchange of cash or other financial instruments. Certain items are specifically
excluded from the disclosure requirements, including the Company's common stock,
premises and equipment, accrued interest receivable and payable and other assets
and liabilities.

            For cash and due from banks, Federal funds sold, and other
investments, the carrying value is a reasonable estimate of fair value.

            For investment securities held to maturity and available for sale,
fair value is based on available quoted market prices or quoted market prices
for similar securities if a quoted market price is not available.

            The fair value of loans is estimated based upon discounted future
cash flows at the weighted average rates in the portfolio compared to discounted
future cash flows using discount rates comparable to rates currently offered for
such loans.

            The fair value of deposits is estimated by discounting the amounts
payable at the rates currently offered for deposits of similar account types.

                                                                     (Continued)
                                      -38-

<PAGE>

NOTE 10 - CARRYING AMOUNTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS, Continued

            The carrying amounts and fair values of the Company's financial
instruments are as follows:

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                    -------------------------------------------------------------------------
                                                                  2002                                 2001
                                                    -----------------------------------  ------------------------------------
                                                      CARRYING                              CARRYING
                                                       AMOUNT           FAIR VALUE           AMOUNT           FAIR VALUE
                                                    ----------------   ----------------  -----------------  -----------------
Financial assets:
<S>                                                     <C>               <C>                  <C>               <C>
   Cash and due from banks                              $  1,144,161      $  1,144,161         $   314,713       $   314,713
   Federal funds sold                                      2,386,000         2,386,000           3,513,000         3,513,000
   Investment securities held to maturity                    641,054           653,556             717,804           716,725
   Investment securities available for sale                5,904,573         5,904,573           7,638,226         7,638,226
   Other investments                                          50,405            50,405              50,405            50,405
   Loans, gross                                           19,015,019        19,082,901          17,612,538        17,657,064

Financial liabilities:
   Deposits                                             $ 26,203,529      $ 26,218,041       $  27,359,112     $  27,444,529
</TABLE>


            The Company had $3,511,000 of off-balance sheet financial
commitments, which are commitments to originate loans and unused lines of
credit. Since these obligations are based on current market rates, the carrying
amount is considered to be a reasonable estimate of fair value.

            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 the Company's entire holdings of a particular financial
instrument. Because no active market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, current
interest rates and prepayment trends, 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 any of these assumptions used in
calculating fair value would also significantly affect the estimates. Further,
the fair value estimates were calculated as of December 31, 2002 and 2001.
Changes in market interest rates and prepayment assumptions could significantly
change the fair value. Therefore, management believes that the foregoing
information is of limited value and has no basis for determining whether the
fair value presented would be indicative of the value which could be negotiated
during an actual sale.

            Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Company has significant assets and
liabilities that are not considered financial assets or liabilities including
deposit franchise value, deferred tax assets and liabilities and premises and
equipment. In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in any of these estimates.


NOTE 11 - RESTRICTIONS ON DIVIDENDS

            The ability of the Company to pay cash dividends is dependent upon
receiving cash in the form of dividends from the Bank. Banking regulations
restrict the amount of dividends that can be paid by the Bank and require
approval of the State Board of Financial Institutions.

                                      -39-
<PAGE>

NOTE 12 - TRANSACTIONS WITH DIRECTORS, OFFICERS AND ASSOCIATES

            Directors and officers of the Company and associates of such persons
are customers of and had transactions with the Bank in the ordinary course of
business. Additional transactions may be expected to take place in the future.
Also, included in the loan transactions are outstanding loans and commitments,
all of which were made on comparable terms, including interest rates and
collateral, as those prevailing at the time for other customers of the Bank, and
did not involve more than normal risk of collectibility or present other
unfavorable features. Total loans to all officers and directors, including
immediate family and business interests, at December 31, 2002 and 2001, were
$933,807 and $738,310, respectively. During 2002, $392,475 in new loans were
made to this group and repayments of $196,978 were received. Deposits by
directors, officers and their related interests, as of December 31, 2002 and
2001, approximated $916,348 and $1,418,150, respectively.

NOTE 13 - RETIREMENT PLAN

            The Bank sponsors Simplified Employee Pension (SEP) individual
retirement accounts for all officers and employees meeting certain age and
service requirements. Contributions are at the discretion of and determined
annually by the Board of Directors and are not to exceed the maximum amount
deductible under the applicable section of the Internal Revenue Code. Included
in expenses are contributions to the retirement plan of $24,936, $26,000, and
$19,191 for the years ended December 31, 2002, 2001 and 2000, respectively.

NOTE 14 - REGULATORY MATTERS

            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 (set forth in
the table below) of total and Tier I capital to risk-weighted assets, and of
Tier I capital to average assets. Management believes, as of December 31, 2002,
that the Bank meets all capital adequacy requirements to which it is subject.

            As of December 31, 2002, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. There are no conditions or events since that
notification that management believes have changed the institution's category.
The Bank's actual capital amounts and ratios and minimum regulatory amounts and
ratios are presented as follows:


                                                                     (Continued)
                                      -40-
<PAGE>

NOTE 14 - REGULATORY MATTERS, (Continued)
<TABLE>
<CAPTION>

                                                                                                              TO BE WELL
                                                                                                           CAPITALIZED UNDER
                                                                                  FOR CAPITAL              PROMPT CORRECTIVE
                                                                               ADEQUACY PURPOSES           ACTION PROVISIONS
                                                                          --------------------------- ---------------------------
                                                      ACTUAL                        MINIMUM                     MINIMUM
                                            ----------------------------  --------------------------- ---------------------------
                                                AMOUNT         RATIO        AMOUNT         RATIO         AMOUNT         RATIO
                                            --------------- ------------  ------------ -------------- -------------  ------------

As of December 31, 2002
<S>                                              <C>            <C>          <C>               <C>         <C>           <C>
   Total capital (to risk weighted assets)       $   4,062      19.7%        $  1,653          8.0%        $  2,067      10.0%
   Tier 1 capital (to risk weighted assets)          3,857      18.7              827          4.0            1,240       6.0
   Tier 1 capital (to average assets)                3,857      12.5            1,233          4.0            1,541       5.0

As of December 31, 2001
   Total capital (to risk weighted assets)       $   3,904      19.6%        $  1,592          8.0%        $  1,989      10.0%
   Tier 1 capital (to risk weighted assets)          3,716      18.7              796          4.0            1,194       6.0
   Tier 1 capital (to average assets)                3,716      11.6            1,286          4.0            1,608       5.0
</TABLE>


NOTE 15 - PARENT COMPANY FINANCIAL INFORMATION

   Following is condensed financial information of Darlington County Bancshares,
Inc. (parent company only):


<TABLE>
<CAPTION>

                            CONDENSED BALANCE SHEETS

                                                                DECEMBER 31,
                                                  -----------------------------------------
                                                         2002                  2001
                                                  -------------------   -------------------
ASSETS
<S>                                                    <C>                    <C>
     Investment in Bank subsidiary                     $   3,945,681          $  3,694,387
                                                  ===================   ===================

STOCKHOLDERS' EQUITY                                   $   3,945,681          $  3,694,387
                                                  ===================   ===================
</TABLE>


                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                      FOR THE YEARS ENDED
                                                                          DECEMBER 31,
                                                            -----------------------------------------
                                                                   2002                  2001
                                                            -------------------   -------------------

<S>                                                               <C>                    <C>
DIVIDEND FROM BANK SUBSIDIARY BEFORE EQUITY IN

     UNDISTRIBUTED NET INCOME OF BANK SUBSIDIARY                  $    158,000           $   158,000

EQUITY IN UNDISTRIBUTED NET INCOME OF
     BANK SUBSIDIARY                                                   163,229                92,448
                                                            -------------------   -------------------

         Net income                                               $    321,229           $   250,448
                                                            ===================   ===================

</TABLE>

                                                                     (Continued)
                                      -41-
<PAGE>

NOTE 15 - PARENT COMPANY FINANCIAL INFORMATION, (Continued)


<TABLE>
<CAPTION>
                       CONDENSED STATEMENTS OF CASH FLOWS

                                                                                              FOR THE YEARS ENDED
                                                                                                  DECEMBER 31,
                                                                                    -----------------------------------------
                                                                                           2002                  2001
                                                                                    -------------------   -------------------
<S>                                                                                      <C>                    <C>
OPERATING ACTIVITIES
     Net income                                                                          $    321,229           $   250,448
     Adjustments to reconcile net income to net cash
         provided by operating activities
        Equity in undistributed net income of Bank subsidiary                                (163,229)              (92,448)
                                                                                    -------------------   -------------------

         Net cash provided by operating activities                                            158,000               158,000

FINANCING ACTIVITY
     Dividends paid                                                                          (158,000)             (158,000)

CASH AND DUE FROM BANKS, BEGINNING OF YEAR                                                          -                     -
                                                                                    -------------------   -------------------

CASH AND DUE FROM BANKS, END OF YEAR                                                       $        -             $       -
                                                                                    ===================   ===================


</TABLE>



















                                      -42-
<PAGE>

ITEM 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTS AND FINANCIAL DISCLOSURE

There has been no occurrence requiring a response to this item.

ITEM 9.        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
               PERSONS COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The information set forth under the captions "ELECTION OF DIRECTORS" and
"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" and the introduction
and first subsection under the caption "EXECUTIVE OFFICERS" in the Proxy
Statement for the 2003 Annual Meeting of Shareholders (the "Proxy Statement"),
which was filed within 120 days of the Bank's fiscal year end, is incorporated
herein by reference.





















                                      -43-
<PAGE>

ITEM 10.       EXECUTIVE COMPENSATION

The information set forth under the captions "COMPENSATION OF DIRECTORS" and
"SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION" in the Proxy Statement is
incorporated herein by reference.

ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

The information set forth under the caption "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy Statement is incorporated herein
by reference.

ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" in the Proxy Statement is incorporated herein by reference.
































                                      -44-

<PAGE>

ITEM 13.       EXHIBITS AND REPORTS ON FORM 8-K

(A)       Exhibits

               21    Subsidiaries
               99.1  Certificate  of The Chief  Executive  Officer  pursuant  to
                     Section 906 of the Sarbanes-Oxley Act of 2002
               99.2  Certificate of  The  Chief  Financial  Officer  pursuant to
                     Section 906 of the Sarbanes-Oxley Act of 2002

(B)       Reports

               None

ITEM 14.       CONTROLS AND PROCEDURES

(a) Based on their evaluation of the issuer's disclosure controls and procedures
(as defined in 17 C.F.R. Sections 240.13a-14(c) as of a date within 90 days
prior to the filing of this annual report, the Company's chief executive officer
and chief financial officer concluded that the effectiveness of such controls
and procedures was adequate.

(b) There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.



SIGNATURES

In accordance with Section 13 of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


              DARLINGTON COUNTY BANCSHARES, INC.
                      Name of Bank



By:  /s/ W. B. McCown, III                Date: April 9, 2003
     ----------------------------------         ---------------------------
     W. B. McCown, III, President and Chief Executive Officer
    (Principal Executive Officer)



By:  /s/ Henry M. Funderburk, III         Date: April 9, 2003
     ----------------------------------         ---------------------------
     Henry M. Funderburk, III
     Executive Vice President
     Darlington County Bank
     Functioning as Chief Financial Officer
     of the Company


                                      -45-

<PAGE>


SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>

                                      SIGNATURE                                   TITLE                 DATE


<S>                                                               <C>                           <C>

                                                                  Chairman of the Board
--------------------------------------------------------------
R. E. Goodson, Sr.


/s/ Hubert C. Baker                                               Director                      April 9, 2003
--------------------------------------------------------------
Hubert C. Baker


/s/ W. Edwin Dargan                                               Director                      April 9, 2003
--------------------------------------------------------------
W. Edwin Dargan


                                                                  Director
--------------------------------------------------------------
Raymond Galloway


/s/ Charles G. Howard                                             Director                      April 9, 2003
--------------------------------------------------------------
Charles G. Howard


/s/ Albert L. James, III                                          Director                      April 9, 2003
--------------------------------------------------------------
Albert L. James, III


/s/ G. Clyde Scott                                                Director                      April 9, 2003
--------------------------------------------------------------
G. Clyde Scott


/s/ Eugene A. Vaughan                                             Director                      April 9, 2003
--------------------------------------------------------------
Eugene A. Vaughan


/s/ W. B. McCown, III                                             President and Chief           April 9, 2003
--------------------------------------------------------------
W. B. McCown, III Executive Officer



/s/ Henry M. Funderburk                                           Executive Vice President      April 9, 2003
--------------------------------------------------------------    Darlington County Bank
Henry M. Funderburk, III                                          Functining as the CFO
                                                                  of the Company


</TABLE>

                                      -46-


<PAGE>


I, W. B. McCown, III, certify that:

1.       I have reviewed this annual report on Form 10-KSB of Darlington County
         Bancshares, Inc.:

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report.

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date:

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

a)       All significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

b)       Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in controls or in
         other factors that could significantly affect internal controls
         subsequent to the date of our most recent evaluation, including any
         corrective actions with regard to significant deficiencies and material
         weaknesses.



By:  /s/ W. B. McCown, III                        Date: April 9 2003
     ---------------------------------------           -----------------------
     W. B. McCown, III, President and Chief Executive Officer







                                      -47-

<PAGE>


I, Henry M. Funderburk, III, certify that:

1.     I have reviewed this annual report on Form 10-KSB of Darlington County
       Bancshares, Inc.:

2.     Based on my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the registrant as of, and for, the periods presented in this
       annual report.

4.     The registrant's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
       have:

          a)   Designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   Evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   Presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date:

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent functions):

a)     All significant deficiencies in the design or operation of internal
       controls which could adversely affect the registrant's ability to record,
       process, summarize and report financial data and have identified for the
       registrant's auditors any material weaknesses in internal controls; and

b)     Any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       controls; and

6.     The registrant's other certifying officers and I have indicated in this
       annual report whether there were significant changes in controls or in
       other factors that could significantly affect internal controls
       subsequent to the date of our most recent evaluation, including any
       corrective actions with regard to significant deficiencies and material
       weaknesses.




By:  /s/ Henry M. Funderburk, III                 Date: April 9, 2003
     ---------------------------------------           -----------------------
     Henry M. Funderburk, III
     Executive Vice President
     Darlington County Bank
     Functioning as Chief Financial Officer
     of the Company



                                      -48-