EXHIBIT 13





First Citizens Bancorporation

of South Carolina, Inc.



2002 Annual Report







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Nature of Business

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First Citizens Bancorporation of South Carolina, Inc. (Bancorporation), is a three-bank financial holding company
headquartered in Columbia, South Carolina, with assets of $3.79 billion at December 31, 2002. Its primary subsidiaries are First-Citizens Bank and Trust Company of South Carolina (Bank), The Exchange Bank of South Carolina, Inc.
(Exchange) and Citizens Bank (Citizens). The Bank provides a broad range of banking services through 145 offices in 97 communities throughout South Carolina. Exchange provides banking services through four branches in
Williamsburg and Georgetown counties in South Carolina and Citizens provides banking services through two branches in Warren and McDuffie counties in Georgia. The Banks subsidiary is Wateree Life Insurance Company of South Carolina, a credit
life insurance company. First Citizens Bank is used in marketing the Bank.



First Citizens Bancorporation of South Carolina, Inc.

P. O. Box 29

1230 Main Street

Columbia, South Carolina 29202



Annual Meeting

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The Annual Meeting of Stockholders of Bancorporation will be held at 2:30 p.m. on Wednesday, April
30, 2003 at 1225 Lady Street, Columbia, South Carolina.



Contents

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|Market and Dividend Information Regarding Common and Preferred Stock |  | 1 
|-------------------------------------------------------------------- |  | --
|Financial Highlights                                                 |  | 2 
|To Our Stockholders                                                  |  | 3 
|Managements Discussion and Analysis                                 |  | 4 
|Report of Management                                                 |  | 27
|Report of Independent Accountants                                    |  | 28
|Consolidated Financial Statements                                    |  | 29
|Official Organization Section                                        |  | 54



Market
and Dividend Information Regarding Common and Preferred Stock

---



Bancorporations voting common stock is traded in the over-the-counter market on the OTC Bulletin Board under the trading symbol
FCBN. However, the trading market for the stock is not active.



There is no public trading market for Bancorporations non-voting common stock or for any class of its preferred stock. All trading activity for that stock is in privately negotiated transactions.



The following table lists the high and low
closing prices for Bancorporations voting common stock, and the cash dividends declared on that stock, for each quarterly period during 2002 and 2001. All prices are as reported on the OTC Bulletin Board and reflect interdealer prices, without
retail mark-up, mark-down or commission, and those prices may not represent actual transactions.



|            |  | 2002 |        | 2001
|----------- |  | ---- | ------ | ----
|            |  | High |        | Low 
|1st quarter |  | $    | 320.00 |     
|2nd quarter |  |      | 378.00 |     
|3rd quarter |  |      | 400.00 |     
|4th quarter |  |      | 390.00 |     



1



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The
approximate numbers of record holders of Bancorporations voting common stock and non-voting common stock at December 31, 2002 were 989 and 4, respectively. Holders of the voting and non-voting common stock of Bancorporation are entitled to
such dividends as may be declared from time to time by the Board of Directors from funds legally available. Bancorporations Board of Directors approved a $.25 quarterly dividend on its voting common stock for all four quarters of 2002.
Bancorporation was able to maintain its risk-based capital ratios through the retention of earnings, adjusted for the aforementioned dividends and repurchases of capital stock. Certain regulatory requirements restrict the payment of dividends and
extensions of credit from banking subsidiaries to bank holding companies. These restrictions have not historically affected Bancorporations ability to meet its obligations. Restrictions relating to capital requirements and dividends are
discussed on page 18 of Managements Discussion and Analysis and in Note 13 Stockholders Equity of Notes to Consolidated Financial Statements.



Financial Highlights

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|                                                     |  | 2002                                              |           |   | 2001 |   |           | Percent change | 
|---------------------------------------------------- |  | ------------------------------------------------- | --------- | - | ---- | - | --------- | -------------- | 
|                                                     |  | (Dollars in thousands, except for per share data) |          
|Earnings:                                            |  |                                                   |           |   |      |   |           |                | 
|Net income                                           |  | $                                                 | 39,048    |   |      | $ | 33,876    |                | 
|Net income per common share                          |  |                                                   | 42.38     |   |      |   | 36.11     |                | 
|Book value per common share                          |  |                                                   | 329.67    |   |      |   | 289.12    |                | 
|Year-end balances:                                   |  |                                                   |           |   |      |   |           |                | 
|Total assets                                         |  | $                                                 | 3,787,876 |   |      | $ | 3,574,680 |                | 
|Investment securities                                |  |                                                   | 915,870   |   |      |   | 899,755   |                | 
|Loans                                                |  |                                                   | 2,415,396 |   |      |   | 2,262,283 |                | 
|Deposits                                             |  |                                                   | 3,276,008 |   |      |   | 3,014,954 |                | 
|Stockholders equity                                 |  |                                                   | 303,584   |   |      |   | 270,915   |                | 
|Average balances:                                    |  |                                                   |           |   |      |   |           |                | 
|Total assets                                         |  | $                                                 | 3,681,119 |   |      | $ | 3,459,909 |                | 
|Investment securities                                |  |                                                   | 927,944   |   |      |   | 819,334   |                | 
|Loans                                                |  |                                                   | 2,307,716 |   |      |   | 2,160,604 |                | 
|Deposits                                             |  |                                                   | 3,120,497 |   |      |   | 2,875,976 |                | 
|Stockholders equity                                 |  |                                                   | 289,958   |   |      |   | 255,836   |                | 
|Financial ratios:                                    |  |                                                   |           |   |      |   |           |                | 
|Return on average assets                             |  |                                                   | 1.06      | % |      |   | .98       | %              | 
|Return on average stockholders equity               |  |                                                   | 13.47     |   |      |   | 13.24     |                | 
|Average stockholders equity to average total assets |  |                                                   | 7.88      |   |      |   | 7.39      |                | 
|Share data (as of and for the year ended):           |  |                                                   |           |   |      |   |           |                | 
|Common shares outstanding                            |  |                                                   | 911,244   |   |      |   | 925,949   |                | 
|Weighted average common shares outstanding           |  |                                                   | 917,426   |   |      |   | 933,480   |                | 
|Preferred shares outstanding                         |  |                                                   | 65,462    |   |      |   | 66,132    |                | 
|Preferred dividends paid                             |  |                                                   | 165       |   |      |   | 166       |                | 
|Common dividends paid                                |  |                                                   | 897       |   |      |   | 898       |                | 



2



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To Our Shareholders:



First Citizens Bancorporation had another outstanding
financial year in 2002. While improving our financial strength, we were also able to grow our franchise in South Carolina and expand into the state of Georgia.



Net income increased 15.27% to $39.05 million, representing an increase in net income per share from $36.11 in 2001 to $42.38 in 2002. The
improvement in net income was primarily due to increased net interest and noninterest income.



Loans grew 6.77% to $2.42 billion, while deposits grew 8.66% to $3.28 billion. Total assets grew 5.96% to $3.79 billion. This growth stemmed from continued advances in our sales culture.



Our plans for expansion continued with new construction and
acquisitions. In South Carolina, we acquired offices in Timmonsville and Dillon and opened three de novo officesone in Myrtle Beach and two in Greenville. Also, we relocated the Columbia Rosewood office, the Pageland office, and the Dunbarton
office in Barnwell.



We began our expansion into
Georgia by acquiring Citizens Bank, with two full-service offices in Warrenton and Thomson, Georgia. Also this year, First Citizens signed a definitive agreement to acquire First Banks, Inc., a two-bank holding company with banking headquarters in
Carnesville and Toccoa, Georgia. When this acquisition is complete, First Citizens will gain five additional offices in eastern Georgiabringing our total to seven offices in five counties.



Inspired by our commitment to offer customers the very best in
banking services, we nurtured several new programs this year, including enhancements to online banking and the expansion of Saturday banking to thirty additional offices. Both of these services are designed to provide busy customers an added measure
of convenience and flexibility for their banking needs.



The most far-reaching service innovation this year was the development of our branch automation system which, when fully implemented, will provide platform associates everything they must have to serve customers needs with
urgency. When implementation is complete, our fully integrated loan, deposit, and teller system will be unique among our competitors.



As we continue to enjoy our current successes, we are diligently planning for the future. As always, the best interests of our
shareholders, customers, employee associates, and the communities we serve will be the yardstick by which we measure our success.



Thank you for your support.



LOGO

Jim B. Apple

Chairman and Chief Executive Officer



3



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Managements Discussion and Analysis of Financial Condition and Results of Operations

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The discussion and other data presented below analyze major factors and trends regarding the financial condition and results of operations of First Citizens Bancorporation of South Carolina, Inc.
(Bancorporation) and its principal subsidiaries, First-Citizens Bank and Trust Company of South Carolina (the Bank), The Exchange Bank of South Carolina, Inc. (Exchange), and Citizens Bank (Citizens).
Bancorporation is a three-bank financial holding company headquartered in Columbia, South Carolina. The Bank provides commercial banking and related financial products and services throughout South Carolina. Exchange provides banking services
principally in Williamsburg and Georgetown counties in South Carolina. Citizens provides banking services principally in Warren and McDuffie counties in Georgia.



Effective October 1, 2002, Bancorporation acquired Citizens to form a three-bank financial holding company.
Total assets of $ 47.9 million at December 31, 2002 are included in the consolidated financial statements related to this acquisition.



The following discussion may contain statements that could be deemed forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act, which statements are inherently subject to risks and uncertainties. Forward-looking statements are statements that include projections, predictions, expectations or
beliefs about future events or results or otherwise are not statements of historical fact. Such statements are often characterized by the use of the qualifying words (and their derivatives) such as expect, believe,
estimate, plan, project, anticipate, or other statements concerning opinions or judgments of Bancorporation and its management about future events. Factors that could influence the accuracy of such
forward-looking statements include, but are not limited to, the financial success or changing strategies of Bancorporations customers, actions of government regulators, the level of market interest rates, and general economic conditions.



The Banks deposits are insured by the
Federal Deposit Insurance Corporation (FDIC) to the extent permitted by law. The FDIC and the South Carolina State Board of Financial Institutions have regulatory responsibilities for the Bank and Exchange. The FDIC and the Georgia
Department of Banking and Finance have regulatory responsibilities for Citizens. Bancorporation is subject to regulation as a financial holding company by the Board of Governors of the Federal Reserve System and its voting common stock is registered
with the Securities and Exchange Commission.



Reference should be made to the accompanying detailed historical information presented elsewhere in this report.



RESULTS OF OPERATIONS



Summary (Dollars in thousands)



Net income for the year ended December 31, 2002, totaled $39,048, or $42.38 per common share. Net income for 2001 was $33,876, or $36.11
per common share.



The primary factors affecting
the increase in net income were a $14,290 or 11.65% increase in net interest income after provision for loan losses, and a $3,032 or 6.14% increase in noninterest income. These favorable changes were partially offset by a $7,612 or 6.24% increase in
noninterest expense, and a $4,538 or 28.14% increase in the provision for income taxes.



The increase in net income of $6,287 from 2000 to 2001 was primarily due to a $19,924 or 17.90% increase in net interest income, and a $12,311 or 33.22% increase in noninterest income. These favorable
changes were partially offset by a $976 or 12.80% increase in the provision for loan losses, a $23,299 or 23.60% increase in noninterest expense, and a $1,673 or 11.58% increase in the provision for income taxes.



Return on average stockholders equity and average assets
are key measures of earnings performance. Return on average stockholders equity was 13.47%, 13.24% and 12.95% in 2002, 2001 and 2000, respectively. Return on average assets was 1.06%, .98%, and .94% in 2002, 2001 and 2000, respectively.



Table 1 provides a summary of the statements of
income, financial condition and selected ratios for the last five years. A more detailed analysis of each component of Bancorporations net income is included under the appropriate captions which follow.



4



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Table 1

SUMMARY OF OPERATIONS



|                                                            |  | As of and for the year ended December 31,         |           |   | Five Year Compound Growth Rate |  
|----------------------------------------------------------- |  | ------------------------------------------------- | --------- | - | ------------------------------ | -
|                                                            |  | 2002                                              |           |   | 2001                           |  
|                                                            |  | (dollars in thousands, except for per share data) |          
|INCOME STATEMENT DATA:                                      |  |                                                   |           |   |                                |  
|Interest income                                             |  | $                                                 | 208,838   |   |                                | $
|Interest expense                                            |  |                                                   | 61,826    |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Net interest income                                         |  |                                                   | 147,012   |   |                                |  
|Provision for loan losses                                   |  |                                                   | 10,068    |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Net interest income after provision for loan losses         |  |                                                   | 136,944   |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Service charges and fees                                    |  |                                                   | 51,943    |   |                                |  
|Investment securities gains                                 |  |                                                   | 462       |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Total noninterest income                                    |  |                                                   | 52,405    |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Salaries and employee benefits                              |  |                                                   | 63,769    |   |                                |  
|Other expense                                               |  |                                                   | 65,868    |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Total noninterest expense                                   |  |                                                   | 129,637   |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Income before income taxes                                  |  |                                                   | 59,712    |   |                                |  
|Income tax expense                                          |  |                                                   | 20,664    |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Net income                                                  |  | $                                                 | 39,048    |   |                                | $
|                                                            |  |                                                   |           |   |                                |  
|PER SHARE DATA:                                             |  |                                                   |           |   |                                |  
|Net income per common share                                 |  | $                                                 | 42.38     |   |                                | $
|                                                            |  |                                                   |           |   |                                |  
|Book value per common share                                 |  | $                                                 | 329.67    |   |                                | $
|                                                            |  |                                                   |           |   |                                |  
|Weighted average common shares outstanding                  |  |                                                   | 917,426   |   |                                |  
|                                                            |  |                                                   |           |   |                                |  
|Dividends per common share                                  |  | $                                                 | 1.00      |   |                                | $
|                                                           
|SELECTED RATIOS:                                            |  |                                                   |           |   |                                |  
|Return on average assets                                    |  |                                                   | 1.06      | % |                                |  
|Return on average stockholders equity                      |  |                                                   | 13.47     |   |                                |  
|Return on average common stockholders equity               |  |                                                   | 13.62     |   |                                |  
|Yield on average interest-earning assets (tax equivalent)   |  |                                                   | 4.38      |   |                                |  
|Average loans to average deposits                           |  |                                                   | 73.95     |   |                                |  
|Net loan losses to average loans                            |  |                                                   | .33       |   |                                |  
|Nonperforming loans to total loans                          |  |                                                   | .22       |   |                                |  
|Allowance for loan losses to total loans                    |  |                                                   | 1.79      |   |                                |  
|Allowance for loan losses to nonperforming loans            |  |                                                   | 832.15    |   |                                |  
|Average stockholders equity to average total assets        |  |                                                   | 7.88      |   |                                |  
|Average common stockholders equity to average total assets |  |                                                   | 7.79      |   |                                |  
|Total risk-based capital ratio                              |  |                                                   | 13.01     |   |                                |  
|Tier 1 risk-based capital ratio                             |  |                                                   | 11.76     |   |                                |  
|Tier 1 leverage ratio                                       |  |                                                   | 7.91      |   |                                |  
|                                                           
|SELECTED AVERAGE BALANCES:                                  |  |                                                   |           |   |                                |  
|Total assets                                                |  | $                                                 | 3,681,119 |   |                                | $
|Interest-earning assets                                     |  |                                                   | 3,381,013 |   |                                |  
|Investment securities                                       |  |                                                   | 927,944   |   |                                |  
|Loans                                                       |  |                                                   | 2,307,716 |   |                                |  
|Deposits                                                    |  |                                                   | 3,120,497 |   |                                |  
|Noninterest-bearing deposits                                |  |                                                   | 540,516   |   |                                |  
|Interest-bearing deposits                                   |  |                                                   | 2,579,981 |   |                                |  
|Interest-bearing liabilities                                |  |                                                   | 2,822,876 |   |                                |  
|Long-term debt                                              |  |                                                   | 51,368    |   |                                |  
|Stockholders equity                                        |  |                                                   | 289,958   |   |                                |  
|                                                           
|SELECTED ACTUAL BALANCES:                                   |  |                                                   |           |   |                                |  
|Total assets                                                |  | $                                                 | 3,787,876 |   |                                | $
|Interest-earning assets                                     |  |                                                   | 3,452,892 |   |                                |  
|Investment securities                                       |  |                                                   | 915,870   |   |                                |  
|Loans                                                       |  |                                                   | 2,415,396 |   |                                |  
|Deposits                                                    |  |                                                   | 3,276,008 |   |                                |  
|Noninterest-bearing deposits                                |  |                                                   | 575,632   |   |                                |  
|Interest-bearing deposits                                   |  |                                                   | 2,700,376 |   |                                |  
|Interest-bearing liabilities                                |  |                                                   | 2,883,875 |   |                                |  
|Long-term debt                                              |  |                                                   | 52,139    |   |                                |  
|Stockholders equity                                        |  |                                                   | 303,584   |   |                                |  



5



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Net interest income
(Dollars in thousands)



Net interest income
represents the principal source of earnings for Bancorporation. Net interest income is the amount by which interest income exceeds interest expense and is the primary measure used to evaluate the efficient management of interest-earning assets and
interest-bearing liabilities.



Table 2 compares
average balance sheet items and analyzes net interest income on a tax equivalent basis for the years ended December 31, 2002, 2001 and 2000.



Table 2:  COMPARATIVE AVERAGE BALANCE SHEETS



|                                              |  | As of and for the year ended December 31, |          
|--------------------------------------------- |  | ----------------------------------------- | ---------
|                                              |  | 2002                                      |          
|                                              |  | Average Balance                           |          
|                                              |  | (dollars in thousands)                    |          
|Interest-earning assets:                      |  |                                           |          
|Loans2                                        |  | $                                         | 2,307,716
|Investment securities:                        |  |                                           |          
|Taxable                                       |  |                                           | 915,434  
|Non-taxable                                   |  |                                           | 12,510   
|Federal funds sold                            |  |                                           | 145,353  
|                                              |  |                                           |          
|Total interest-earning assets                 |  |                                           | 3,381,013
|                                              |  |                                           |          
|Noninterest-earning assets:                   |  |                                           |          
|Cash and due from banks                       |  |                                           | 137,769  
|Premises and equipment                        |  |                                           | 104,157  
|Other, less allowance for loan losses         |  |                                           | 58,180   
|                                              |  |                                           |          
|Total noninterest-earning assets              |  |                                           | 300,106  
|                                              |  |                                           |          
|Total assets                                  |  | $                                         | 3,681,119
|                                              |  |                                           |          
|Interest-bearing liabilities:                 |  |                                           |          
|Deposits                                      |  | $                                         | 2,579,981
|Short-term borrowings                         |  |                                           | 191,527  
|Long-term debt                                |  |                                           | 51,368   
|                                              |  |                                           |          
|Total interest-bearing liabilities            |  |                                           | 2,822,876
|                                              |  |                                           |          
|Net interest spread                           |  |                                           |          
|                                              |  |                                           |          
|Noninterest-bearing liabilities:              |  |                                           |          
|Demand deposits                               |  |                                           | 540,516  
|Other liabilities                             |  |                                           | 27,769   
|                                              |  |                                           |          
|Total noninterest-bearing liabilities         |  |                                           | 568,285  
|Stockholders equity                          |  |                                           | 289,958  
|                                              |  |                                           |          
|Total liabilities and stockholders equity    |  | $                                         | 3,681,119
|                                              |  |                                           |          
|Net interest income                           |  |                                           |          
|                                              |  |                                           |          
|Interest income to average earning assets     |  |                                           |          
|                                             
|Interest expense to average earning assets    |  |                                           |          
|                                              |  |                                           |          
|Net interest income to average earning assets |  |                                           |          
|                                              |  |                                           |          

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|1 |  | Non-taxable interest income has been adjusted to a taxable equivalent rate using the federal income tax rate of 35%.
|- |  | --------------------------------------------------------------------------------------------------------------------

|2 |  | Nonaccrual loans are included in the average loan balances. Income on such loans is generally recognized on a cash basis.
|- |  | -------------------------------------------------------------------------------------------------------------------------





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Net interest income on a tax equivalent basis increased $15,598 or 11.77% from $132,529 in
2001 to $148,127 in 2002. The increase was primarily attributable to a reduction in interest expense as the cost of average interest-bearing liabilities declined from 3.74% in 2001 to 2.19% in 2002. Net interest margin to average interest earning
assets increased from 4.19% in 2001 to 4.38% in 2002. Interest income on a tax equivalent basis decreased by $23,484 or 10.06% in 2002, primarily due to a decrease in yield on average interest-earning assets from 7.37% in 2001 to 6.21 % in 2002.
Average interest-earning assets were $3,381,013 or 91.85% of average assets in 2002, compared with $3,166,389 or 91.52% of average assets in 2001. Interest expense decreased by $39,082 or 38.73% in 2002 primarily due to a decrease in the cost of
average interest-bearing deposits from 3.68% in 2001 to 2.12% in 2002.



The net interest spread increased by .39% due to a decrease in the cost of average interest-bearing liabilities from 3.74% in 2001 to 2.19% in 2002, offset by a decrease in the yield on average interest-earning assets from
7.37% in 2001 to 6.21% in 2002.



The yield on
average interest-earning assets decreased due to the following factors: (1) a decrease in the yield on average loans from 8.41% in 2001 to 7.33% in 2002 and (2) a decrease in the yields on average investment securities (from 5.36% in 2001 to 4.13%
in 2002) and average federal funds sold (from 4.17% in 2001 to 1.65% in 2002). Yields on average interest-earning assets declined as rates on newly funded loans and investments that were prepaid, refinanced, matured or called away declined
significantly.



The cost of average
interest-bearing liabilities decreased due to the following factors: (1) a decrease in the rate paid on average interest-bearing deposits from 3.68% in 2001 to 2.12% in 2002 and (2) a decrease in the rate paid on short-term borrowings (repurchase
agreements) from 3.48% in 2001 to 1.51% in 2002.



Decreases in rates paid on interest-bearing deposits were due to the low interest-rate environment experienced in 2002. Short-term borrowings are mostly comprised of repurchase agreements tied to a floating index. The index decreased
during a majority of 2002, causing the rate paid on average short-term borrowings to decrease.



In 2002, Bancorporation experienced its first full year of significant improvement in net interest margin to average interest-earning assets as a result of recent interest rate cuts by the Federal
Reserve; however, the current trend is declining (note that net interest income increased 11.77% from 2001 to 2002 compared to 17.52% from 2000 to 2001). This declining trend has occurred as yields on average interest-earning assets are declining at
a faster rate than the cost of average interest-bearing liabilities. This has occurred as deposit rates (particularly on non-maturity deposits such as NOW, savings, and money market accounts) have reached historical lows having little room for
further rate cuts. At the same time, rates on interest-earning assets added to replace assets that prepaid, matured or were called away have fallen significantly.



Net interest income on a tax equivalent basis for 2001 increased $19,756 or 17.52% from 2000. The increase
was primarily attributable to an increase in the volume of interest-earning assets which was offset by a decrease in net interest margin. The net interest margin decreased 1 basis point from 4.20% in 2000 to 4.19% in 2001. Average interest-earning
assets increased 17.97% to $3,166,389 or 91.52% of average total assets in 2001, compared with $2,683,993 or 91.63% in 2000. Interest expense increased $2,417 or 2.45% in 2001 primarily due to a $423,695 or 18.65% increase in interest-bearing
liabilities.



7



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Table 3 shows
the impact of balance sheet changes which occurred during 2002 and 2001, and the changes in yields and rates.



Table 3

TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS



|                                         |  | 2002                   |         | 2001 |                | 2000    |  | 2002 compared to 2001   |         |  | 2001 compared to 2000 |            
|---------------------------------------- |  | ---------------------- | ------- | ---- | -------------- | ------- |  | ----------------------- | ------- |  | --------------------- | -----------
|                                         |  |                        |         |      | Change due to1 |         |  | Net Increase (Decrease) |         |  | Change due to1        |            
|                                         |  |                        |         |      | Yield/ Rate    |         |  | Volume                  |         |  |                       | Yield/ Rate
|                                         |  | (dollars in thousands) |        
|Interest income2:                        |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Loans3                                   |  | $                      | 169,231 |      | $              | 181,761 |  | $                       | 169,352 |  | $                     | (23,313    
|Investment securities:                   |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Taxable                                  |  |                        | 37,393  |      |                | 42,425  |  |                         | 37,052  |  |                       | (9,707     
|Non-taxable                              |  |                        | 932     |      |                | 1,483   |  |                         | 2,168   |  |                       | (106       
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Total investment securities              |  |                        | 38,325  |      |                | 43,908  |  |                         | 39,220  |  |                       | (9,813     
|Federal funds sold                       |  |                        | 2,397   |      |                | 7,768   |  |                         | 2,692   |  |                       | (4,693     
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Total interest-earning assets            |  | $                      | 209,953 |      | $              | 233,437 |  | $                       | 211,264 |  | $                     | (37,819    
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Interest expense:                        |  |                        |         |      |                |         |  |                         |         |  |                       |            
|NOW accounts                             |  | $                      | 9,483   |      | $              | 16,559  |  | $                       | 9,924   |  | $                     | (8,369     
|Market rate savings                      |  |                        | 3,233   |      |                | 6,900   |  |                         | 9,331   |  |                       | (3,867     
|Time deposits less than $100 thousand    |  |                        | 33,511  |      |                | 55,314  |  |                         | 46,064  |  |                       | (22,084    
|Time deposits in excess of $100 thousand |  |                        | 8,401   |      |                | 9,173   |  |                         | 9,348   |  |                       | (1,315     
|Other                                    |  |                        | 94      |      |                | 223     |  |                         | 305     |  |                       | (133       
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Total deposits                           |  | $                      | 54,722  |      | $              | 88,169  |  | $                       | 74,972  |  | $                     | (35,768    
|Short-term borrowings                    |  |                        | 2,883   |      |                | 8,540   |  |                         | 19,320  |  |                       | (4,839     
|Long-term debt                           |  |                        | 4,221   |      |                | 4,199   |  |                         | 4,199   |  |                       | (11        
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Total interest-bearing liabilities       |  | $                      | 61,826  |      | $              | 100,908 |  | $                       | 98,491  |  | $                     | (40,618    
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            
|Net interest income                      |  | $                      | 148,127 |      | $              | 132,529 |  | $                       | 112,773 |  | $                     | 2,799      
|                                         |  |                        |         |      |                |         |  |                         |         |  |                       |            

---

|1 |  | Rate-volume changes have been allocated to each category based on the percentage of each to the total change.
|- |  | -------------------------------------------------------------------------------------------------------------

|2 |  | Non-taxable interest income has been adjusted to a taxable equivalent rate using the federal income tax rate of 35%.
|- |  | --------------------------------------------------------------------------------------------------------------------

|3 |  | Balances of nonaccrual loans and related cash basis income have been included for computational purposes.
|- |  | ---------------------------------------------------------------------------------------------------------



8



---



Noninterest income (Dollars
in thousands)



Table 4 provides a comparison
for the various components of noninterest income for the years ended December 31, 2002, 2001 and 2000 for Bancorporation.



Table 4

NONINTEREST INCOME



|                                              |  | For the year ended December 31,
|--------------------------------------------- |  | -------------------------------
|                                              |  | 2002                           
|                                              |  | (dollars in thousands)         
|Service charges on deposit accounts           |  | $                              
|Commission and fees from fiduciary activities |  |                                
|Mortgage income                               |  |                                
|Bankcard discount and fees                    |  |                                
|Insurance premiums earned                     |  |                                
|Gain on sale of investment securities         |  |                                
|Other                                         |  |                                
|                                              |  |                                
|Total                                         |  | $                              
|                                              |  |                                

---

NMNot Meaningful



Noninterest income increased by $3,032 or by 6.14% between
2001 and 2002. The majority of the increase was in service charges on deposit accounts, mortgage income and commission and fees from fiduciary activities. The increase in noninterest income was offset by a $4,485 decline in gain on sale of
investment securities. The equity securities gains in 2001 were primarily the result of Bancorporations sale of certain of its equity securities donated to First Citizens Foundation to make charitable contributions. Adjusted for the equity
securities gains in 2002 and 2001, noninterest income increased by $7,517 or by 16.92%.



Service charges on deposit accounts increased primarily due to deposit growth during the year and an increase in fees effective in 2001. The most significant increase in service charges during the year
was in non-sufficient funds (NSF) fees which accounted for $2,960 of the $4,490 increase. Commission and fees from fiduciary activities increased primarily due to a $482 increase in trust income. Mortgage income increased due to
increases in the gain on sale of mortgage loans and servicing income of $1,145 and $507, respectively.



Noninterest income increased by $12,311 or by 33.22% between 2000 and 2001. The majority of the increase was in service charges on deposit
accounts and mortgage income. As discussed above, 2001 included nonrecurring equity securities gains. Adjusted for equity securities gains in 2001 and 2000, noninterest income increased by $7,395 or by 19.97%.



Between 2000 and 2001, service charges on deposit accounts
increased due to deposit growth, an increase in fees charged and the acquisition of seven and four branches from unrelated financial institutions in December 2000 and July 2001, respectively. The acquired branches contributed to $1,085 of the $4,582
increase in service charges. The most significant increase in service charges during the year was in NSF fees, which accounted for $2,896 of the $4,582 increase. Mortgage income increased due to increases in the gain on sale of mortgage loans and
servicing income of $1,688 and $104, respectively.



9



---



NONINTEREST EXPENSE
(Dollars in thousands)



Table 5 provides a
comparison of the various components of noninterest expense for the years ended December 31, 2002, 2001 and 2000 for Bancorporation.



Table 5

NONINTEREST EXPENSE



|                                |  | For the year ended December 31,
|------------------------------- |  | -------------------------------
|                                |  | 2002                           
|                                |  | (dollars in thousands)         
|Salaries and employee benefits  |  | $                              
|Net occupancy expense           |  |                                
|Furniture and equipment expense |  |                                
|Amortization expense            |  |                                
|Bankcard processing fees        |  |                                
|Data processing expense         |  |                                
|Donations                       |  |                                
|Other                           |  |                                
|                                |  |                                
|Total                           |  | $                              
|                                |  |                                



Noninterest expense increased by $7,612 or by 6.24% between 2001 and 2002. The majority of the increase is due to salaries and employee benefits, net occupancy expense and data processing expense, offset by a decline in donations
expense. As discussed in the noninterest income section under Table 4, Bancorporation donated certain of its equity securities in 2001 to First Citizens Foundation resulting in $3,792 of the $4,278 in donations expense in 2001. Adjusted for the
donations to First Citizens Foundation in 2001, noninterest expense increased by $11,404 or 9.65% between 2001 and 2002 and by $19,507 or 19.76% between 2000 and 2001.



Salaries and employee benefits increased between 2001 and 2002 due to an increase in the number of employees,
merit increases, an increase in insurance costs, and an increase in pension costs. Insurance and pension costs contributed to $1,875 and $823 of the increase, respectively. The remainder of the increase is primarily due to the addition of personnel
throughout the year and merit increases.



Net
occupancy expense has primarily increased in 2002 due to a $468 increase in depreciation expense associated with an increase in bank premises and reduced property rental income of $285. The remainder of the increase is due to on-going expenses
related to additional bank premises. The increase in net occupancy expense between 2000 and 2001 was due to similar factors and to the aforementioned purchase of seven and four branches in December 2000 and July 2001, respectively.



Amortization expense increased primarily due to $1,716 of
impairment recorded on Bancorporations mortgage servicing rights during 2002. The effect on amortization was partially offset by a decline in amortization expense of $1,689 related to the run-off of core deposit intangibles on former branch
acquisitions. The increase in amortization expense between 2000 and 2001 was primarily due to $3,927 in amortization expense related to the core deposit intangibles on the aforementioned purchase of 11 branches and other former branch acquisitions
and $137 of impairment recorded on mortgage servicing rights.



During 2002, data processing expense increased due to the ongoing growth realized in the number of loan and deposit accounts processed by Bancorporations third party processor. Bancorporation experienced an increase between
2000 and 2001 for the same reason.



10



---



INCOME TAXES (Dollars in
thousands)



Total income tax expense
included in the Consolidated Statements of Income was $20,664, $16,126 and $14,453 for the years ended December 31, 2002, 2001 and 2000, respectively. The effective tax rate in those years was 34.6%, 32.3% and 34.4%, respectively.



Income taxes computed at the statutory rate are reduced
primarily by the interest earned on state and municipal debt securities and obligations (which are exempt from federal taxes) and other items permanently included or excluded from taxable income.



FINANCIAL CONDITION



INVESTMENT SECURITIES (Dollars in thousands)



As of December 31, 2002, the investment portfolio totaled
$915,870, compared to $899,755 as of December 31, 2001. Bancorporation continues to invest primarily in short-term U.S. Government obligations, thereby minimizing credit, interest rate and liquidity risk. The portfolio was comprised of 94.59% and
95.13% U.S. Government obligations at December 31, 2002 and 2001, respectively. The remainder of the investment portfolio principally consists of municipal notes, bonds and equity securities.



Average investment securities as a percentage of average
earning assets increased from 25.88% as of December 31, 2001, to 27.45% as of December 31, 2002, with the increase occurring primarily in investments in U. S. Government obligations. Investment securities remain the second largest component of
interest-earning assets.



The weighted average
maturity of U.S. Government obligations held in the portfolio was 12.5 months at December 31, 2002, as compared to 15.6 months at December 31, 2001. The weighted average maturity of State and Political obligations held in the portfolio was 34.1
months at December 31, 2002, as compared to 31.6 months at December 31, 2001. The amortized cost and estimated fair value of debt securities at December 31, 2002 and 2001 are shown in Table 6.



Investment securities available-for-sale are held for expected
liquidity requirements and asset/liability management. Such securities, recorded at fair value, were $881,327 or 96.23% of the total investment portfolio at December 31, 2002, compared with $876,446 or 97.41% at December 31, 2001. The unrealized
gain on investment securities available-for-sale was $30,019 and $30,160 at December 31, 2002 and 2001, respectively.



Investment securities held-to-maturity recorded at amortized cost totaled $34,543 or 3.77% of the total investment portfolio at December
31, 2002, compared to $23,309 or 2.59% at December 31, 2001. The estimated fair value of such securities exceeded their amortized cost by $725 and $420 at December 31, 2002 and December 31, 2001, respectively.



11



---



Table 6

INVESTMENT SECURITIES



|                                                  |  | 2002                   |         |                      | 2001 |                           | 2000
|------------------------------------------------- |  | ---------------------- | ------- | -------------------- | ---- | ------------------------- | ----
|                                                  |  | Amortized Cost         |         | Estimated Fair Value |      | Taxable Equivalent Yield* |     
|                                                  |  | (dollars in thousands)
|Held-to-maturity:                                 |  |                        |         |                      |      |                           |     
|U. S. government obligations:                     |  |                        |         |                      |      |                           |     
|Within one year                                   |  | $                      | 5,231   |                      | $    | 5,273                     |     
|One to five years                                 |  |                        | 6,255   |                      |      | 6,336                     |     
|Five to ten years                                 |  |                        | 6,497   |                      |      | 6,538                     |     
|Over ten years                                    |  |                        | 2,248   |                      |      | 2,303                     |     
|                                                  |  |                        |         |                      |      |                           |     
|Total                                             |  |                        | 20,231  |                      |      | 20,450                    |     
|                                                  |  |                        |         |                      |      |                           |     
|Obligations of states and political subdivisions: |  |                        |         |                      |      |                           |     
|Within one year                                   |  |                        | 2,495   |                      |      | 2,512                     |     
|One to five years                                 |  |                        | 9,184   |                      |      | 9,606                     |     
|Five to ten years                                 |  |                        | 365     |                      |      | 401                       |     
|Over ten years                                    |  |                        |        |                      |      |                          |     
|                                                  |  |                        |         |                      |      |                           |     
|Total                                             |  |                        | 12,044  |                      |      | 12,519                    |     
|                                                  |  |                        |         |                      |      |                           |     
|Other securities:                                 |  |                        |         |                      |      |                           |     
|Within one year                                   |  |                        |        |                      |      |                          |     
|One to five years                                 |  |                        | 11      |                      |      | 12                        |     
|Five to ten years                                 |  |                        | 10      |                      |      | 11                        |     
|Over ten years                                    |  |                        | 2,247   |                      |      | 2,276                     |     
|                                                  |  |                        |         |                      |      |                           |     
|Total                                             |  |                        | 2,268   |                      |      | 2,299                     |     
|                                                  |  |                        |         |                      |      |                           |     
|Total held-to-maturity                            |  |                        | 34,543  |                      |      | 35,268                    |     
|                                                  |  |                        |         |                      |      |                           |     
|Available-for-sale:                               |  |                        |         |                      |      |                           |     
|U. S. government obligations:                     |  |                        |         |                      |      |                           |     
|Within one year                                   |  |                        | 416,855 |                      |      | 422,018                   |     
|One to five years                                 |  |                        | 416,605 |                      |      | 424,028                   |     
|                                                  |  |                        |         |                      |      |                           |     
|Total                                             |  |                        | 833,460 |                      |      | 846,046                   |     
|                                                  |  |                        |         |                      |      |                           |     
|Obligations of states and political subdivisions: |  |                        |         |                      |      |                           |     
|Five to ten years                                 |  |                        | 113     |                      |      | 118                       |     
|Over ten years                                    |  |                        | 243     |                      |      | 254                       |     
|                                                  |  |                        |         |                      |      |                           |     
|Total                                             |  |                        | 356     |                      |      | 372                       |     
|                                                  |  |                        |         |                      |      |                           |     
|Other securities:                                 |  |                        |         |                      |      |                           |     
|Five to ten years                                 |  |                        | 4,636   |                      |      | 4,815                     |     
|Over ten years                                    |  |                        | 2,701   |                      |      | 2,779                     |     
|                                                  |  |                        |         |                      |      |                           |     
|Total                                             |  |                        | 7,337   |                      |      | 7,594                     |     
|                                                  |  |                        |         |                      |      |                           |     
|Marketable equity securities                      |  |                        | 10,155  |                      |      | 27,315                    |     
|                                                  |  |                        |         |                      |      |                           |     
|Total available-for-sale                          |  |                        | 851,308 |                      |      | 881,327                   |     
|                                                  |  |                        |         |                      |      |                           |     
|Total portfolio                                   |  | $                      | 885,851 |                      | $    | 916,595                   |     
|                                                  |  |                        |         |                      |      |                           |     

---

|* |  | Taxable equivalent yield was calculated using the incremental statutory federal income tax rate of 35%.
|- |  | -------------------------------------------------------------------------------------------------------

NMNot meaningful



12



---



LOANS (Dollars in
thousands)



Loans comprise the largest
portion of earning assets of Bancorporation, with average loans accounting for 68.26% and 68.24% of average earning assets as of December 31, 2002 and 2001, respectively. Gross loans increased $153,113 or 6.77% to $2,415,396 as of December 31, 2002,
from $2,262,283 as of December 31, 2001. Most of the increase in loans was attributable to an increase in loans secured by 1-4 family residential properties, which increased $55,630 or 5.68%, followed by loans to individuals which increased $42,806
or 8.49%. The composition of the loan portfolio at December 31 for the last five years is presented in Table 7.



Bancorporation desires to make business loans for productive purposes where the business has adequate capital and management expertise to
succeed. Consumer loans are granted for many purposes, provided that underwriting criteria are met. The ability and willingness of the borrower to repay debt are the primary factors considered in granting credit. Repayment ability is established by
review of past and future cash flow coverage for businesses and debt-to-income ratio for consumers. The willingness of the borrower to repay debt is reviewed through trade credit for businesses and credit bureau reports and other traditional methods
for consumers. Collateral guarantees, loan-to-value ratios and loan terms are based on industry and/or regulatory standards depending on loan purpose and the composition of collateral provided.



Table 7

LOAN PORTFOLIO COMPOSITION



|                                                                           |  | December 31,           |          
|-------------------------------------------------------------------------- |  | ---------------------- | ---------
|                                                                           |  | 2002                   |          
|                                                                           |  | Amount                 |          
|                                                                           |  | (dollars in thousands) |          
|Real estate-construction                                                   |  | $                      | 91,186   
|Real estate-mortgage                                                       |  |                        | 1,035,427
|Real estate-commercial                                                     |  |                        | 441,070  
|Loans for purchasing and carrying securities                               |  |                        | 640      
|Loans to farmers                                                           |  |                        | 10,800   
|Commercial and industrial loans                                            |  |                        | 224,079  
|Loans to individuals for household, family and other personal
expenditures |  |                        | 546,947  
|Other loans                                                                |  |                        | 65,247   
|                                                                           |  |                        |          
|Total loans                                                                |  | $                      | 2,415,396
|                                                                           |  |                        |          



Table 8

SELECTED LOAN MATURITIES AND INTEREST RATE SENSITIVITY



|                                            |  | December 31, 2002     
|------------------------------------------- |  | ----------------------
|                                            |  | Total                 
|                                            |  | (Dollars in thousands)
|Type of Loan:                               |  |                       
|Real estate-construction                    |  | $                     
|Commercial, financial and agricultural      |  |                       
|Real estate, individual and other           |  |                       
|                                            |  |                       
|Total                                       |  | $                     
|                                            |  |                       
|Rate Sensitivity for Loans (over one year): |  |                       
|Fixed interest rates                        |  | $                     
|Floating or adjustable interest rates       |  |                       
|                                            |  |                       
|Total                                       |  | $                     
|                                            |  |                       



13



---



ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)



An analysis of
activity in the allowance for loan losses as of December 31 for the past five years is presented in Table 9. The allowance for loan losses is maintained through charges to the provision for loan losses. Loan charge-offs and recoveries are charged or
credited directly to the allowance for loan losses.



It is the policy of Bancorporation to maintain an allowance for loan losses which is adequate to absorb probable losses inherent in the loan portfolio. Management believes that the provision taken in 2002 was appropriate to provide
an allowance for loan losses which considers the past experience of charge-offs, the level of past due and nonaccrual loans, the size and mix of the loan portfolio, credit classifications and general economic conditions in Bancorporations
market areas.



Table 9

ALLOWANCE FOR LOAN LOSSES



|                                       |  | As of December 31,    
|-------------------------------------- |  | ----------------------
|                                       |  | 2002                  
|                                       |  | (dollars in thousands)
|Beginning allowance for loan losses    |  | $                     
|Charge-offs:                           |  |                       
|Commercial, financial and agricultural |  |                       
|Real estatemortgage                   |  |                       
|Installment loans to individuals       |  |                       
|All other loans                        |  |                       
|                                       |  |                       
|Total charge-offs                      |  |                       
|                                       |  |                       
|Recoveries:                            |  |                       
|Commercial, financial and agricultural |  |                       
|Real estatemortgage                   |  |                       
|Installment loans to individuals       |  |                       
|All other loans                        |  |                       
|                                       |  |                       
|Total recoveries                       |  |                       
|                                       |  |                       
|Net charge-offs                        |  |                       
|Provision for loan losses              |  |                       
|Reserves related to acquisitions       |  |                       
|                                       |  |                       
|Ending allowance for loan losses       |  | $                     
|                                       |  |                       



Bancorporation manages credit risk through a variety of methods including credit scoring, establishing loan type parameters and underwriting standards. In addition, credit management is centralized using a standardized system of
controls and subjecting the portfolio to detailed credit reviews by individuals independent of the lending function.



The allowance for loan losses as a percent of gross loans was 1.79% and 1.78% at December 31, 2002 and December 31, 2001, respectively.



Net charge-offs for the year ended December 31,
2002, totaled $7,568, or .33% of average loans, an increase of $2,227 from $5,341 or .25% of average loans in 2001. Recoveries represented .07% of average loans for the year ended December 31, 2002, versus .06% for the year ended December 31, 2001.



The increase in the provision for loan losses
during 2002 was primarily attributable to an increase in net-chargeoffs and managements assessment of potential losses inherent in the loan portfolio. Provision for loan losses taken during 2002 was not attributable to individual loans for
which management believed specific accruals were necessary at December 31, 2002.



In its allowance methodology, Bancorporation considers a range of potential losses inherent in the loan portfolio. The range is established by estimating the allowance for loan losses under several
different methods including peer analysis, historical loss analysis, collateral stratification, industry stratification, industry standards and geographic stratification. In determining the relevance of the range, qualitative factors such as micro
and macro economic conditions and trends in



14



---

portfolio composition are considered. At December 31, 2002, Bancorporations allowance for loan losses of $43,305 fell within the range
indicated by the methods listed above.



Table 10
presents an allocation of the allowance for loan losses by different loan categories. The amounts allocated are not necessarily indicative of actual amounts which will be charged to any particular category. The total allowance is available to absorb
potential losses in any category of loans.



Table 10

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES



|                                       |  | December 31,           |       
|-------------------------------------- |  | ---------------------- | ------
|                                       |  | 2002                   |       
|                                       |  | Amount                 |       
|                                       |  | (dollars in thousands) |       
|Real estate-construction               |  | $                      | 1,564 
|Real estate-mortgage                   |  |                        | 25,290
|Installment loans to Individuals       |  |                        | 9,366 
|Commercial, financial and agricultural |  |                        | 5,151 
|Unallocated                            |  |                        | 1,934 
|                                       |  |                        |       
|Total                                  |  | $                      | 43,305
|                                       |  |                        |       



Table 11

ANALYSIS OF ASSET QUALITY



|                                       |  | 2002                   |       |                  | 2001   |   |        | 2000 |                  |  | 1999   |        |  | 1998             |      
|-------------------------------------- |  | ---------------------- | ----- | ---------------- | ------ | - | ------ | ---- | ---------------- |  | ------ | ------ |  | ---------------- | -----
|                                       |  | Amount                 |       | Percent of Loans |        |   | Amount |      | Percent of Loans |  |        | Amount |  | Percent of Loans |      
|                                       |  | (dollars in thousands) |      
|Nonperforming assets:                  |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Nonaccrual loans                       |  | $                      | 5,204 |                  | .22    |   |        | $    | 5,138            |  | .23    |        |  | $                | 5,288
|Restructured loans                     |  |                        |      |                  |       |   |        |      |                 |  |       |        |  |                  |     
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Total nonperforming loans              |  |                        | 5,204 |                  | .22    |   |        |      | 5,138            |  | .23    |        |  |                  | 5,288
|Other real estate owned                |  |                        | 1,019 |                  | .04    |   |        |      | 720              |  | .03    |        |  |                  | 223  
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Total nonperforming assets             |  | $                      | 6,223 |                  | .26    |   |        | $    | 5,858            |  | .26    |        |  | $                | 5,511
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Accruing loans 90 days past due        |  | $                      | 5,965 |                  | .25    |   |        | $    | 3,935            |  | .17    |        |  | $                | 3,613
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Nonperforming assets by type:          |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Commercial, financial and agricultural |  | $                      | 1,410 |                  | .06    |   |        | $    | 1,388            |  | .06    |        |  | $                | 867  
|Consumer                               |  |                        | 13    |                  | .00    |   |        |      | 117              |  | .01    |        |  |                  | 45   
|Real estate                            |  |                        | 3,601 |                  | .15    |   |        |      | 3,496            |  | .15    |        |  |                  | 4,349
|Other                                  |  |                        | 180   |                  | .01    |   |        |      | 137              |  | .01    |        |  |                  | 27   
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Total nonperforming loans              |  |                        | 5,204 |                  | .22    |   |        |      | 5,138            |  | .23    |        |  |                  | 5,288
|Other real estate owned                |  |                        | 1,019 |                  | .04    |   |        |      | 720              |  | .03    |        |  |                  | 223  
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Total nonperforming assets             |  | $                      | 6,223 |                  | .26    |   |        | $    | 5,858            |  | .26    |        |  | $                | 5,511
|                                       |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Asset quality ratios:                  |  |                        |       |                  |        |   |        |      |                  |  |        |        |  |                  |      
|Reserve to year-end loans              |  |                        |       |                  | 1.79   | % |        |      |                  |  | 1.78   | %      |  |                  |      
|Net chargeoffs to average loans        |  |                        |       |                  | .33    |   |        |      |                  |  | .25    |        |  |                  |      
|Coverage ratio                         |  |                        |       |                  | 832.15 |   |        |      |                  |  | 783.55 |        |  |                  |      





15



---

Any loans classified by the Bank or regulatory examiners as loss, doubtful, substandard,
or special mention that have not been disclosed hereunder or under the Loans or Asset Quality narrative discussions do not (1) represent or result from trends or uncertainties that management expects will materially impact
future operating results, liquidity, or capital resources, or (2) represent material credits as to which management is aware of any information that causes serious doubt as to the ability of such borrowers to comply with the loan repayment terms.



Interest income related to nonaccrual and
restructured loans that would have been recognized if such loans were current in accordance with their original contractual terms did not differ materially from the amounts actually recognized.



Based upon an ongoing assessment of risk elements in the
portfolio and factors affecting credit quality, it is managements opinion that there are currently no significant unidentified potential credit problems. However, factors affecting a borrowers repayment ability may vary due to changing
economic conditions and other factors that may affect loan quality.



INTANGIBLE ASSETS (Dollars in thousands)



Intangible assets consist of core deposit intangibles and mortgage servicing rights. As of December 31, 2002, intangible assets totaled $45,478, representing a $2,632 net decrease from $48,110 as of December 31, 2001. This decrease
was due to the runoff of core deposit intangibles on former branch acquisitions partially offset by an increase in mortgage servicing rights in 2002. For the year ended December 31, 2002, amortization expense related to intangible assets increased
by $401, or 3.80%. The increase in amortization expense is primarily due to a $2,090 increase in amortization of mortgage servicing rights of which $1,716 related to impairment of mortgage servicing rights. This increase was offset by a decline in
amortization expense related to core deposit intangibles which ran off from former branch acquisitions.



FUNDING SOURCES (Dollars in thousands)



Bancorporations primary source of funds is its deposit base. Average deposits increased 8.50% to $3,120,497 as of December 31, 2002, from $2,875,976 as of December 31, 2001. The increase in
average deposits is due to three factors: (1) internal deposit growth, (2) the acquisition of Citizens Bank effective October 1, 2002 where total deposits of $39,918 were acquired and (3) the acquisition of two branches from unrelated financial
institutions where total deposits of $15,672 were acquired in 2002. Total deposits increased 8.66%, or $261,054, to $3,276,008 as of December 31, 2002, from $3,014,954 as of December 31, 2001.



Core deposits finance loan and investment activities. Core
deposits are defined as demand deposits, savings, NOW, money market accounts and certificates of deposit under $100 thousand. As of December 31, 2002, $3,016,049 or 92.06% of total deposits of $3,276,008 were considered core deposits. As of December
31, 2001, $2,782,268 or 92.28% of total deposits of $3,014,954 were considered core deposits.



Purchased funds, which consist of time deposits over $100 thousand and short-term borrowings, are another source of funds. As of December 31, 2002, time deposits over $100 thousand increased $27,273 or
by 11.72% to $259,959 compared to $232,686 as of December 31, 2001. Short-term borrowings, which consist of securities sold under agreements to repurchase, averaged $191,527 in 2002 compared to $245,690 in 2001, a decrease of 22.05%. There were no
federal funds purchased during 2001 or 2002.



On March 24, 1998, Bancorporation, through FCB/SC Capital Trust I issued $50,000 of 8.25% capital securities due on March 15, 2028. The balance of the securities can be prepaid, subject to possible regulatory approval, in
whole or part at any time on or after March 15, 2008. The capital securities qualify for inclusion in Tier I capital for regulatory capital adequacy purposes.



16



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Tables 12-15
provide additional information regarding major funding sources.



Table 12

SOURCES AND USES OF FUNDS



|                              |  | December 31,           |          
|----------------------------- |  | ---------------------- | ---------
|                              |  | 2002                   |          
|                              |  | Average Balance        |          
|                              |  | (dollars in thousands) |          
|Composition of sources:       |  |                        |          
|Demand deposits               |  | $                      | 540,516  
|NOW accounts                  |  |                        | 1,004,088
|Money market accounts         |  |                        | 327,778  
|Time deposits                 |  |                        | 1,248,115
|Short-term borrowings         |  |                        | 191,527  
|Long-term borrowings          |  |                        | 1,368    
|Trust preferred               |  |                        | 50,000   
|Other liabilities             |  |                        | 27,769   
|Stockholders equity          |  |                        | 289,958  
|                              |  |                        |          
|Total sources                 |  | $                      | 3,681,119
|                              |  |                        |          
|Composition of uses:          |  |                        |          
|Loans                         |  | $                      | 2,307,716
|Investment securities         |  |                        | 927,944  
|Other earning assets          |  |                        | 145,353  
|                              |  |                        |          
|Total interest-earning assets |  |                        | 3,381,013
|Noninterest-earning assets    |  |                        | 300,106  
|                              |  |                        |          
|Total uses                    |  | $                      | 3,681,119
|                              |  |                        |          



Table 13

TIME DEPOSITS OF $100 THOUSAND AND OVER



|                                |  | December 31,           |        
|------------------------------- |  | ---------------------- | -------
|                                |  | 2002                   |        
|                                |  | (dollars in thousands) |        
|3 months or less                |  | $                      | 75,987 
|Over 3 months through 6 months  |  |                        | 48,302 
|Over 6 months through 12 months |  |                        | 89,179 
|Over 12 months                  |  |                        | 46,491 
|                                |  |                        |        
|Total                           |  | $                      | 259,959
|                                |  |                        |        
|Percent of total deposits       |  |                        | 7.94   



17



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Table 14

DEPOSIT ANALYSIS



|                                        |  | As of and for the year ended December 31, |          
|--------------------------------------- |  | ----------------------------------------- | ---------
|                                        |  | 2002                                      |          
|                                        |  | Average Balance                           |          
|                                        |  | (dollars in thousands)                    |          
|Demand deposits                         |  | $                                         | 540,516  
|NOW accounts                            |  |                                           | 1,004,088
|Market rate savings                     |  |                                           | 327,778  
|Regular and premium savings             |  |                                           | 13,328   
|Time deposits of $100 thousand and over |  |                                           | 241,037  
|Other time deposits                     |  |                                           | 993,750  
|                                        |  |                                           |          
|Total                                   |  | $                                         | 3,120,497
|                                        |  |                                           |          



Table 15

FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE ANALYSIS



|                                               |  | 2002                   |         | 2001         |      | 2000  
|---------------------------------------------- |  | ---------------------- | ------- | ------------ | ---- | ------
|                                               |  | Amount                 |         | Average Rate |      | Amount
|                                               |  | (dollars in thousands)
|At year-end*:                                  |  |                        |         |              |      |       
|Securities sold under agreements to repurchase |  | $                      | 130,360 |              | NA   |       
|                                               |  |                        |         |              |      |       
|Average for the year:                          |  |                        |         |              |      |       
|Federal funds purchased                        |  | $                      |        |              | NA   |       
|Securities sold under agreements to repurchase |  |                        | 191,527 |              | 1.51 |       
|                                               |  |                        |         |              |      |       
|Total                                          |  | $                      | 191,527 |              | 1.51 |       
|                                               |  |                        |         |              |      |       
|Maximum month-end balance:                     |  |                        |         |              |      |       
|Federal funds purchased                        |  | $                      |        |              |      |       
|Securities sold under agreements to repurchase |  |                        | 207,370 |              |      |       

---

|* |  | There were no federal funds purchased at year-end in the reported years.
|- |  | ------------------------------------------------------------------------

|** |  | In February 2001, $226,096 of securities sold under agreements to repurchase were reclassified to deposits.
|-- |  | -----------------------------------------------------------------------------------------------------------



CAPITAL RESOURCES (Dollars in thousands)



The Federal Reserve Board and the Federal Deposit Insurance
Corporation have issued risk-based capital guidelines for United States banking corporations. The objective of these guidelines is to provide a uniform capital measurement that is more sensitive to variations in risk profiles of banking
corporations.



Regulatory agencies define capital
as Tier I, consisting of stockholders equity less ineligible intangible assets, and Tier II, consisting of Tier I capital plus the allowable portion of the allowance for loan losses and certain long-term debt. Capital adequacy is measured by
comparing both capital levels to Bancorporations risk-adjusted assets and off-balance sheet items. Regulatory requirements presently specify that Tier I capital should exclude the market appreciation or depreciation of securities
available-for-sale arising from valuation adjustments. In addition to these capital ratios, regulatory agencies have established a Tier I leverage ratio which measures Tier I capital to average assets less ineligible intangible assets.



Regulatory guidelines require a minimum of total capital to
risk-adjusted assets ratio of 8 percent with at least 50 percent consisting of tangible common stockholders equity and a minimum Tier I leverage ratio of 3 percent. Banks



18



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which meet or exceed a Tier I ratio of 6 percent, a total capital ratio of 10 percent and a Tier I leverage ratio of 5 percent are considered
well-capitalized by regulatory standards.



Bancorporation maintains a strong level of capital as a margin of safety for its depositors and stockholders, as well as to provide for future growth.



The Board of Directors each year authorizes management to repurchase outstanding shares of its capital stock.
Purchases are subject to various conditions, including price and volume limitations (including, in the case of repurchases of Bancorporations voting common stock, an annual limit of up to 5% of outstanding shares), and compliance with
applicable South Carolina law. Pursuant to similar authority during 2002 and 2001, Bancorporation repurchased an aggregate of 14,705 and 10,339 shares, respectively, of its outstanding voting common stock, for an aggregate price of $5,192 and
$2,965, respectively. With respect to other classes of Bancorporations capital stock, repurchases during 2002 and 2001 totaled 670 shares and 318 shares, respectively, for an aggregate price of $31 and $19, respectively. Repurchases of shares
during both periods has an immaterial impact on Bancorporations capital.



Bancorporations Tier 1 capital ratio at December 31, 2002 was 11.76% compared to 11.33% at December 31, 2001. The total risk-based capital ratio was 13.01% at December 31, 2002 compared to 12.59%
at December 31, 2001. Both of these measures exceed the regulatory minimums of 4.00% for Tier 1 and 8.00% for total risk-based capital. Based on the guidelines above, Bancorporation is well-capitalized. Refer to Note 18 Capital Matters
in the Notes to the Consolidated Financial Statements for further analysis of risk-based requirements.



Table 16

CAPITAL ADEQUACY



|                                  |  | December 31,                                  |        
|--------------------------------- |  | --------------------------------------------- | -------
|                                  |  | 2002                                          |        
|                                  |  | (dollars in thousands, except per share data) |        
|Stockholders equity:             |  |                                               |        
|Year-end                          |  | $                                             | 303,584
|Average                           |  |                                               | 289,958
|Book value per common share       |  |                                               | 329.67 
|Average stockholders equity to:  |  |                                               |        
|Average assets                    |  |                                               | 7.88   
|Average deposits                  |  |                                               | 9.29   
|Average loans                     |  |                                               | 12.56  
|Risk-based capital ratios:        |  |                                               |        
|Tier 1 capital ratio              |  |                                               | 11.76  
|Total risk-based capital ratio    |  |                                               | 13.01  
|Tier 1 leverage ratio             |  |                                               | 7.91   
|Internal capital generation:      |  |                                               |        
|Return on average equity          |  |                                               | 13.47  
|Earnings retention rate           |  |                                               | 97.35  
|Dividend payout ratio             |  |                                               | 2.65   
|Internal capital generation rate* |  |                                               | 13.11  

---

|* |  | Return on Average Equity x Earnings Retention Rate
|- |  | --------------------------------------------------



ASSET/LIABILITY MANAGEMENT



The role of Bancorporations Asset/Liability Management Committee (ALCO) is to monitor Bancorporations
liquidity position and exposure to interest rate risk. Asset/liability management is the process by which Bancorporation monitors and attempts to control the mix and maturities of its assets and liabilities in order to maximize net interest income.
The functions of asset/liability management are to ensure adequate liquidity and to maintain an appropriate balance between interest-sensitive assets and liabilities.



19



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LIQUIDITY (Dollars in
thousands)



Liquidity involves the ability
to meet cash flow requirements which arise primarily from withdrawal of deposits, extensions of credit, payment of operating expenses and repayment of purchased funds. Funds are provided primarily through earnings from operations, expansion of the
deposit base, the maturity of investment assets and repayment of loans.



Bancorporation has historically maintained strong liquidity through increases in core deposits and management of investment maturities. Core deposits were $3,016,049, or 92.06% of total deposits as of December 31, 2002, up
from $2,782,268, or 92.28% of total deposits as of December 31, 2001. The weighted average maturity of U.S. Government obligations, which make up 94.59% of the investment portfolio as of December 31, 2002, was 12.5 months as compared to 15.6 months
at December 31, 2001.



INTEREST RATE RISK (Dollars in
thousands)



Management of interest rate risk
involves maintaining an appropriate balance between interest-sensitive assets and interest-sensitive liabilities (interest rate sensitivity gap) and reducing Bancorporations risk of major changes in net interest income in periods of rapidly
changing interest rates. A negative gap (interest-sensitive liabilities greater than interest-sensitive assets) in periods when interest rates are declining will tend to increase net interest income. Conversely, a negative gap in periods when
interest rates are rising will tend to reduce net interest income. The net cumulative gap position reflects Bancorporations sensitivity to interest rate changes over time. This calculation is a static measure and is not a prediction of net
interest income. Gap analysis is the simplest representation of Bancorporations interest rate sensitivity. It does not reveal the impact of factors such as administered rates (e.g., the prime lending rate), pricing strategies on its consumer
and business deposits, and changes in the balance sheet mix.



The objective of the asset/liability management process is to manage and control the sensitivity of Bancorporations income to changes in market interest rates. This process is under the direction of the ALCO, comprised of
senior bank executives. The ALCO seeks to maximize earnings while ensuring that the risks to those earnings from adverse movements in interest rates are kept within specified limits deemed acceptable by Bancorporation. Accordingly, the ALCO conducts
comprehensive simulations of net interest income under a variety of market interest rate scenarios. These simulations provide the ALCO with an estimate of earnings at risk given changes in interest rates. While the ALCO sees the opportunities and
benefits of utilizing derivative financial instruments such as interest rate swaps and caps and floors to improve net interest income, the ALCO has elected not to use such instruments given their risk.



20



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As indicated
in Table 17, the twelve-month cumulative gap, representing the total net assets and liabilities that are projected to reprice over the next twelve months, was asset sensitive in the amount of $39.8 million at December 31, 2002. This positive
position remained within the acceptable parameters of plus or minus 20% at 360 days, as listed in Bancorporations Statement of Funds Policy. This Statement is guided by asset quality, liquidity and earnings, and describes Bancorporations
policy with respect to sources and uses of funds, dividends and limitations on interbank liabilities. The responsibility for funds management resides with the Chief Financial Officer with overall guidance provided by the Chairman and Chief Executive
Officer. Management continues to seek ways to balance the gap position and reduce exposure to interest rate fluctuations.



Table 17

INTEREST RATE-SENSITIVITY
ANALYSIS



|                                         |  | As of December 31, 2002
|---------------------------------------- |  | -----------------------
|                                         |  | 0-3 Months Sensitive   
|                                         |  | (dollars in thousands) 
|Interest-earning assets:                 |  |                        
|Loans                                    |  | $                      
|Federal funds sold                       |  |                        
|Investment securities                    |  |                        
|                                         |  |                        
|Total interest-earning assets            |  | $                      
|                                         |  |                        
|Interest-bearing liabilities:            |  |                        
|Savings and core time deposits           |  | $                      
|Time deposits of $100 thousand and over  |  |                        
|Short-term borrowings                    |  |                        
|Long-term debt                           |  |                        
|                                         |  |                        
|Total interest-bearing liabilities       |  | $                      
|                                         |  |                        
|Percent of total interest-earning assets |  |                        
|Interest-sensitivity gap                 |  |                        
|                                         |  |                        
|Cumulative interest-sensitive gap        |  | $                      
|                                         |  |                        
|Percent of total interest-earning assets |  |                        
|                                         |  |                        



MARKET RATE RISK



In January 1997, the Securities and
Exchange Commission adopted new rules that require more comprehensive disclosures of accounting policies for derivatives as well as enhanced quantitative and qualitative disclosures of market risk. The market risk disclosures must be presented for
most financial instruments, which must be classified into two portfolios: financial instruments entered into for trading purposes and all other financial instruments (non-trading purposes). Bancorporation holds no derivative financial instruments
and does not maintain a trading portfolio.



21



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Table 18
summarizes the expected maturities and weighted average effective yields and interest rates associated with Bancorporations financial instruments. Cash and cash equivalents, federal funds sold, federal funds purchased and securities sold under
agreements to repurchase are excluded from Table 18 as their respective carrying values approximate their fair values. These financial instruments generally expose Bancorporation to insignificant market risk as they have either no stated maturities
or an average maturity of less than 30 days and carry interest rates that approximate market rates. Refer to Note 17 Disclosure of Fair Value of Financial Instruments in the Notes to the Consolidated Financial Statements for
further information on the fair value of financial instruments.



Table 18

MARKET RISK DISCLOSURE



|                                 |  | Expected Maturities    |           |   | Estimated Fair Value Year-end 2002
|-------------------------------- |  | ---------------------- | --------- | - | ----------------------------------
|                                 |  | 2003                   |           |   | 2004                              
|                                 |  | (dollars in thousands)
|Financial Assets:                |  |                        |           |   |                                   
|Loans                            |  |                        |           |   |                                   
|Fixed Rate:                      |  |                        |           |   |                                   
|Book value                       |  | $                      | 513,556   |   |                                   
|Weighted average effective yield |  |                        | 7.40      | % |                                   
|Variable Rate:                   |  |                        |           |   |                                   
|Book value                       |  | $                      | 224,280   |   |                                   
|Weighted average effective yield |  |                        | 5.02      | % |                                   
|Securities held-to-maturity:     |  |                        |           |   |                                   
|Book value                       |  | $                      | 7,726     |   |                                   
|Weighted average effective yield |  |                        | 4.22      | % |                                   
|Securities available-for-sale:   |  |                        |           |   |                                   
|Book value                       |  | $                      | 422,018   |   |                                   
|Weighted average effective yield |  |                        | 3.90      | % |                                   
|Financial Liabilities:           |  |                        |           |   |                                   
|NOW Accounts:                    |  |                        |           |   |                                   
|Book value                       |  | $                      | 264,528   |   |                                   
|Weighted average effective yield |  |                        | 0.65      | % |                                   
|Market rate savings:             |  |                        |           |   |                                   
|Book Value                       |  | $                      | 110,736   |   |                                   
|Weighted average effective yield |  |                        | 0.66      | % |                                   
|Regular and premium savings:     |  |                        |           |   |                                   
|Book value                       |  | $                      | 5,340     |   |                                   
|Weighted average effective yield |  |                        | 0.52      | % |                                   
|Time deposits:                   |  |                        |           |   |                                   
|Book value                       |  | $                      | 1,011,973 |   |                                   
|Weighted average effective yield |  |                        | 2.79      | % |                                   
|Long-term debt:                  |  |                        |           |   |                                   
|Book value                       |  | $                      |          |   |                                   
|Weighted average effective yield |  |                        |          |   |                                   



ACCOUNTING AND
REGULATORY MATTERS (Dollars in thousands)



In July 2001, the Financial Accounting Standards Board (the FASB) issued Statements of Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141) and No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142). SFAS 141 requires all business combinations initiated after September 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer
amortized, but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no
maximum life). The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after September 30, 2001. Bancorporation adopted SFAS No. 142 effective January 1, 2002, the impact of which was not material.



In June of 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This Statement amends SFAS No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies. SFAS No. 143 applies to all entities and addresses financial accounting
and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs will be accounted for consistently, resulting in comparability



22



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among financial statements of different entities. This Statement is effective for financial statements issued for fiscal years beginning
after June 15, 2002. Bancorporation will adopt SFAS No. 143 on January 1, 2003. The adoption of this Statement is not expected to have a material impact on Bancorporations financial position or results of operations.



SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, was issued during the third quarter of 2001. SFAS No. 144 supersedes both SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which previously governed
impairment of long-lived assets, and the portions of APB Opinion No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Usual and Infrequently Occurring Events and
Transactions, which addressed the disposal of a business segment. This Statement improves financial reporting by requiring one accounting model be used for long-lived assets to be disposed of by sale and by broadening the presentation of
discontinued operations to include more disposal transactions. Bancorporation adopted SFAS No. 144 effective January 1, 2002, and it did not have a material impact on Bancorporations financial position or results of operations.



In May of 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 as of April 2002. This Statement rescinds Statements No. 4 and 64, Reporting Gains and Losses from Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements, respectively, and restricts the classification of early extinguishment of debt as an extraordinary item to the provisions of APB Opinion No. 30, Reporting the Results of OperationsReporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequent Occurring Events and Transactions. The Statement also rescinds Statement No, 44, Accounting for Intangible Assets of Motor Carriers, which is
no longer necessary because the transition to the provisions of the Motor Carrier Act of 1980 is complete. The Statement also amends Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting
for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Finally, the Statement makes various technical corrections to existing
pronouncements, which are not considered substantive.



The provisions of this Statement relating to the rescission of Statement No. 4 and 64 are effective for fiscal years beginning after May 15, 2002. Additionally, there is retroactive application for any gain or loss on extinguishment
of debt that was classified as extraordinary in a prior period that does not meet the criteria in Opinion No. 30, requiring reclassification of the gain or loss with the exception of the rescission of Statement No. 4 and 64, which will eliminate the
extraordinary treatment for extinguishment of debt, will be adopted January 1, 2003. Bancorporation does not expect the remaining provisions of this Statement to have a material impact on Bancorporation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. SFAS No. 146 provides guidance on the recognition and measurement of liabilities for costs associated with exit or disposal activities. SFAS No. 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The adoption of this Statement is not expected to have a material impact on Bancorporations financial position or results of operations.



In June 2002, the FASB issued SFAS No. 147, Acquisitions
of Certain Financial Institutions, an amendment of FASB Statements No. 72 and 144 and Interpretation No. 9. Except for transactions between two or more mutual enterprises, this Statement removes financial institutions from the scope of both
Statement No. 72 and Interpretation 9 and requires that those transactions be accounting for in accordance with SFAS No. 141 and 142. Additionally, this Statement amends SFAS No. 144 to include in its scope long-term customer-relationship intangible
assets of financial institutions. Bancorporation adopted the Statement effective October 1, 2002, and it did not have a material impact on Bancorporations financial position or results of operations.



In November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The Interpretation elaborates on the disclosures to be made by a guarantor in its financial statements under
certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of
the Interpretation are effective and were adopted by Bancorporation as of December 31, 2002, and require disclosure of the nature of the guarantee, the maximum



23



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potential amount of future payments that the guarantor could be required to make under the guarantee, and the current amount of the
liability, if any, for the guarantors obligations under the guarantee. Please refer to Note 15 for disclosures with respect to Bancorporations guarantees. The recognition requirements of the interpretation were effective beginning
January 1, 2003. Management does not anticipate that the implementation of the recognition requirements of the Interpretation will have a significant effect on Bancorporations consolidated financial position or consolidated results of
operations.



SARBANES-OXLEY ACT OF 2002



On July 30, 2002, the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act) was signed into law. The Sarbanes-Oxley Act represents a comprehensive revision of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all
companies with equity or debt securities registered under the Securities Exchange Act of 1934. In particular, the Sarbanes-Oxley Act establishes: (i) new requirements for audit committees, including independence, expertise, and responsibilities;
(ii) additional responsibilities regarding financial statements for the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) new standards for auditors and regulation of audits; (iv) increased disclosure and reporting
obligations for the reporting company and their directors and executive officers; and (v) new and increased civil and criminal penalties for violation of the securities laws. Many of the provisions became effective immediately while other provisions
become effective over a period of 30 to 270 days and are subject to rulemaking by the Securities and Exchange Commission. Although Bancorporation anticipates that it will incur additional expense in complying with the provisions of the
Sarbanes-Oxley Act and the resulting regulations, Bancorporation does not expect that such compliance will have a material impact on Bancorporation results of operations or financial condition.



CRITICAL ACCOUNTING POLICIES



The accounting and reporting policies of Bancorporation and
its subsidiaries are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. Bancorporations financial position and results of operations are affected by
managements application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of
these policies could result in material changes in Bancorporations consolidated financial position and/or consolidated results of operations. The more critical accounting and reporting policies include Bancorporations accounting for
securities, loans and leases, the allowance for loan and lease losses, valuation of mortgage servicing rights, mergers and acquisitions and income taxes. Bancorporations accounting policies are fundamental to understanding Managements
Discussion and Analysis of Financial Condition and Results of Operations. Accordingly, Bancorporations significant accounting policies are discussed in detail in Bancorporations 2002 Annual Report on Form 10-K filed with the Securities
and Exchange Commission.



The following is a
summary of Bancorporations more subjective and complex accounting policies.



The allowance for loan losses is established and maintained at levels management deems adequate to cover losses inherent in the portfolio as of the balance sheet date and is based on managements
evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are determined by analyzing historical loan losses, current trends in delinquencies and charge-offs, the opinions of our
regulators, changes in the size and composition of the loan portfolio and peer group information. Also included in managements estimates for loan losses are considerations with respect to the impact of economic events, the outcome of which is
uncertain. These events may include, but are not limited to, fluctuations in overall interest rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific
geographical areas in which Bancorporation conducts business.



Bancorporation has a mortgage loan-servicing portfolio and has capitalized the associated servicing rights. Mortgage servicing rights represent the present value of the future servicing fees arising from the right to service loans in
the portfolio. The most critical accounting policy associated with mortgage servicing is the methodology used to determine the fair value of capitalized mortgage servicing rights, which requires the development of a number of estimates, including
anticipated principal amortization and prepayments of principal. The value of capitalized mortgage servicing rights is significantly affected by interest rates available in the marketplace, which influence mortgage loan prepayment speeds and



24



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the payment performance of the underlying loans. In general, during periods of declining interest rates, the value of mortgage servicing
assets declines due to increasing prepayments attributable to increased mortgage refinance activity. Conversely, during periods of rising interest rates, the value of servicing assets generally increases due to reduced refinance activity.
Bancorporation amortizes mortgage servicing rights over the period of estimated net servicing income based on projections of the amount and timing of future cash flows. The amount and timing of servicing asset amortization is adjusted periodically
based on actual results and updated projections.



Bancorporation offers pension benefits to employees. The calculations of obligations and related expenses under the plans require the use of actuarial valuation methods and assumptions. Actuarial valuations and the determination of
future market values of plan assets are subject to management judgment and may differ significantly if different assumptions are used.



Bancorporations growth in business and profitability over the past several years has been enhanced significantly by mergers and
acquisitions. Bancorporations acquisitions have historically been accounted for using the purchase business combination method of accounting. The purchase method of accounting requires Bancorporation to record the assets acquired and
liabilities assumed at their fair value, which in many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. These estimates
also include the establishment of various reserves based on planned facilities dispositions and employee benefit related considerations, among other acquisition-related items. In addition, purchase acquisitions typically result in goodwill or other
intangible assets, which are subject to ongoing periodic impairment tests based on the fair value of net assets acquired compared to the carrying value of goodwill and other intangibles. Furthermore, the determination of which intangible assets have
finite lives is subjective, as well as the determination of the amortization period for such intangible assets.



The determination of Bancorporations overall income tax provision is complex and requires careful analysis. As part of the
Bancorporations overall business strategy, Bancorporation may enter into business transactions that require management to consider tax laws and regulations that apply to the specific facts and circumstances under consideration. This analysis
includes evaluating the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments as they affect Bancorporations overall tax position.



25



---



SELECTED UNAUDITED
QUARTERLY FINANCIAL DATA



|                            |  | First Quarter                                 |         |   | Second Quarter |  
|--------------------------- |  | --------------------------------------------- | ------- | - | -------------- | -
|                            |  | 2002                                          |         |   | 2001           |  
|                            |  | (Dollars in thousands, except per share data) |        
|Interest income and fees    |  | $                                             | 53,057  |   |                | $
|Interest expense            |  |                                               | (17,236 | ) |                |  
|                            |  |                                               |         |   |                |  
|Net interest income         |  |                                               | 35,821  |   |                |  
|Provision for loan losses   |  |                                               | (889    | ) |                |  
|Noninterest income          |  |                                               | 11,345  |   |                |  
|Noninterest expense         |  |                                               | (29,481 | ) |                |  
|                            |  |                                               |         |   |                |  
|Income before income taxes  |  |                                               | 16,796  |   |                |  
|Income tax expense          |  |                                               | (5,627  | ) |                |  
|                            |  |                                               |         |   |                |  
|Net income                  |  | $                                             | 11,169  |   |                | $
|                            |  |                                               |         |   |                |  
|Net income per common share |  | $                                             | 12.07   |   |                | $
|                            |  |                                               |         |   |                |  



|                            |  | Third Quarter |         |   | Fourth Quarter |  
|--------------------------- |  | ------------- | ------- | - | -------------- | -
|                            |  | 2002          |         |   | 2001           |  
|Interest income and fees    |  | $             | 52,042  |   |                | $
|Interest expense            |  |               | (14,874 | ) |                |  
|                            |  |               |         |   |                |  
|Net interest income         |  |               | 37,168  |   |                |  
|Provision for loan losses   |  |               | (3,518  | ) |                |  
|Noninterest income          |  |               | 14,074  |   |                |  
|Noninterest expense         |  |               | (33,635 | ) |                |  
|                            |  |               |         |   |                |  
|Income before income taxes  |  |               | 14,089  |   |                |  
|Income tax expense          |  |               | (4,720  | ) |                |  
|                            |  |               |         |   |                |  
|Net income                  |  | $             | 9,369   |   |                | $
|                            |  |               |         |   |                |  
|Net income per common share |  | $             | 10.19   |   |                | $
|                            |  |               |         |   |                |  



26



---



REPORT OF MANAGEMENT



Management of First-Citizens Bank and Trust
Company of South Carolina (the Bank) is responsible for establishing and maintaining effective internal control over financial reporting presented in conformity with both accounting principles generally accepted in the United States
(GAAP) and Federal Financial Institution Examination Council instructions for Consolidated Reports of Condition and Income (Call Report Instructions). The Bank maintains a structure of internal control over financial
reporting, including the safeguarding of assets against unauthorized acquisition, use or disposition, which is designed to provide reasonable assurance to the Banks management and Board of Directors regarding the preparation of reliable
published financial statements and such asset safeguarding. The Banks internal control contains monitoring mechanisms, and actions are taken to correct deficiencies identified.



There are inherent limitations in the effectiveness of any internal control, including the possibility of
human error and the circumvention or overriding of control. Accordingly, even effective internal control can provide only reasonable assurance with respect to consolidated financial statement preparation. Further, because of changes in conditions,
the effectiveness of internal control may vary over time.



Management assessed the Banks internal control over financial reporting presented in conformity with both GAAP and Call Report Instructions as of December 31, 2002. This assessment was based on criteria for effective internal
control over financial reporting described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission. Based on this assessment, management believes that, as of December 31, 2002,
the Banks internal control over financial reporting presented in conformity with both GAAP and Call Report Instructions including the safeguarding of assets against unauthorized acquisition, use or disposition, met those criteria and provided
an effective internal control.



Management is
also responsible for compliance with federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders designated by FDIC as safety and soundness laws and regulations.



Management assessed its compliance with designated laws and
regulations relating to safety and soundness. Based on the assessment, management believes that the Bank complied, in all significant respects, with the designated laws and regulations of safety and soundness for year ended December 31, 2002.



Management of the Bank is responsible for
preparing its annual consolidated financial statements. These consolidated financial results are included by management of First Citizens Bancorporation of South Carolina, Inc. in the audited financial statements of the consolidated holding company
as of December 31, 2002 and the year then ended.



Management is responsible for the preparation, integrity and fair presentation of its published consolidated financial statements as of December 31, 2002, and the year then ended. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and, as such, include amounts, some of which are based on judgments and estimates of management.



27



---

REPORT OF INDEPENDENT ACCOUNTANTS

LOGO



TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

FIRST CITIZENS BANCORPORATION OF SOUTH
CAROLINA, INC.



In our opinion, the
accompanying consolidated statements of condition and the related consolidated statements of income, of changes in stockholders equity and comprehensive income and of cash flows present fairly, in all material respects, the financial position
of First Citizens Bancorporation of South Carolina, Inc. and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity
with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Bancorporations management; our responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



LOGO

Atlanta, Georgia

January 28, 2003



28



---





CONSOLIDATED STATEMENTS OF CONDITION



|                                                                                                                |  | December 31,                             |          
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------
|                                                                                                                |  | 2002                                     |          
|                                                                                                                |  | (dollars in thousands, except par value) |          
|ASSETS                                                                                                          |  |                                          |          
|Cash and due from banks                                                                                         |  | $                                        | 165,747  
|Federal funds sold                                                                                              |  |                                          | 121,626  
|Investment securities:                                                                                          |  |                                          |          
|Held-to-maturity, at amortized cost (fair value of $35,268 in 2002 and $23,729 in
2001)                         |  |                                          | 34,543   
|Available-for-sale, at fair value                                                                               |  |                                          | 881,327  
|                                                                                                                |  |                                          |          
|Total investment securities                                                                                     |  |                                          | 915,870  
|                                                                                                                |  |                                          |          
|Gross loans                                                                                                     |  |                                          | 2,415,396
|Less: Allowance for loan losses                                                                                 |  |                                          | (43,305  
|                                                                                                                |  |                                          |          
|Net loans                                                                                                       |  |                                          | 2,372,091
|                                                                                                                |  |                                          |          
|Premises and equipment, net                                                                                     |  |                                          | 110,472  
|Interest receivable                                                                                             |  |                                          | 17,696   
|Intangible assets                                                                                               |  |                                          | 45,478   
|Other assets                                                                                                    |  |                                          | 38,896   
|                                                                                                                |  |                                          |          
|Total assets                                                                                                    |  | $                                        | 3,787,876
|                                                                                                                |  |                                          |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                            |  |                                          |          
|Liabilities                                                                                                     |  |                                          |          
|Deposits:                                                                                                       |  |                                          |          
|Demand                                                                                                          |  | $                                        | 575,632  
|Time and savings                                                                                                |  |                                          | 2,700,376
|                                                                                                                |  |                                          |          
|Total deposits                                                                                                  |  |                                          | 3,276,008
|Securities sold under agreements to repurchase                                                                  |  |                                          | 130,360  
|Long-term debt                                                                                                  |  |                                          | 52,139   
|Other liabilities                                                                                               |  |                                          | 25,785   
|                                                                                                                |  |                                          |          
|Total liabilities                                                                                               |  |                                          | 3,484,292
|                                                                                                                |  |                                          |          
|Commitments and contingencies (Note 15 )                                                                        |  |                                          |         
|Stockholders equity                                                                                            |  |                                          |          
|Preferred stock                                                                                                 |  |                                          | 3,173    
|Non-voting common stock$5.00 par value, authorized 1,000,000; issued and
outstanding in 2002 and 200136,409   |  |                                          | 182      
|Voting common stock$5.00 par value, authorized 2,000,000; issued and outstanding
2002874,835 and 2001889,540 |  |                                          | 4,374    
|Surplus                                                                                                         |  |                                          | 65,081   
|Undivided profits                                                                                               |  |                                          | 211,264  
|Accumulated other comprehensive income, net of taxes                                                            |  |                                          | 19,510   
|                                                                                                                |  |                                          |          
|Total stockholders equity                                                                                      |  |                                          | 303,584  
|                                                                                                                |  |                                          |          
|Total liabilities and stockholders equity                                                                      |  | $                                        | 3,787,876
|                                                                                                                |  |                                          |          



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



29



---



|CONSOLIDATED STATEMENTS OF INCOME                           
|------------------------------------------------------------
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|INTEREST INCOME:                                            
|Interest and fees on loans                                  
|Interest on investment securities:                          
|Taxable                                                     
|Non-taxable                                                 
|Federal funds sold                                          
|                                                            
|Total interest income                                       
|                                                            
|INTEREST EXPENSE:                                           
|Interest on deposits                                        
|Interest on short-term borrowings                           
|Interest on long-term debt                                  
|                                                            
|Total interest expense                                      
|                                                            
|Net interest income                                         
|Provision for loan losses                                   
|                                                            
|Net interest income after provision for loan losses         
|                                                            
|NONINTEREST INCOME:                                         
|Service charges on deposits                                 
|Commissions and fees from fiduciary activities              
|Mortgage income                                             
|Bankcard discount and fees                                  
|Insurance premiums                                          
|Gain on sale of investment securities                       
|Other                                                       
|                                                            
|Total noninterest income                                    
|                                                            
|NONINTEREST EXPENSE:                                        
|Salaries and employee benefits                              
|Net occupancy expense                                       
|Furniture and equipment expense                             
|Amortization expense                                        
|Bankcard processing fees                                    
|Data processing fees                                        
|Donations                                                   
|Other                                                       
|                                                            
|Total noninterest expense                                   
|                                                            
|Income before income tax expense                            
|Income tax expense                                          
|                                                            
|Net income                                                  
|                                                            
|Net income per common sharebasic and diluted               
|                                                            
|Weighted average common shares outstandingbasic and diluted
|                                                            



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



30



---



CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME



|                                                                                              |  | Preferred Stock        |       |   | Non- Voting Common Stock |   | Voting Common Stock |  |   | Surplus |   | Undivided Profits |   |        | Accumulated Other Comprehensive Income (Loss) |   |         | Total Stock- holders Equity | 
|--------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | - | ------------------------ | - | ------------------- |  | - | ------- | - | ----------------- | - | ------ | --------------------------------------------- | - | ------- | ---------------------------- | 
|                                                                                              |  | (dollars in thousands) |      
|Balance at December 31, 1999                                                                  |  | $                      | 3,282 |   |                          | $ | 182                 |  | $ | 4,531   |   |                   | $ | 65,081 |                                               | $ | 123,328 |                              | 
|Comprehensive income:                                                                         |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Net income                                                                                    |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | 27,589  |                              | 
|Change in unrealized gain on investment securities available-for-sale, net of taxes of
$4,599 |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Total comprehensive income                                                                    |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Reacquired preferred stock                                                                    |  |                        | (63   | ) |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (10     | )                            | 
|Reacquired voting common stock                                                                |  |                        |       |   |                          |   |                     |  |   | (32     | ) |                   |   |        |                                               |   | (1,561  | )                            | 
|Common stock dividends                                                                        |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (675    | )                            | 
|Preferred stock dividends                                                                     |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (169    | )                            | 
|                                                                                              |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Balance at December 31, 2000                                                                  |  |                        | 3,219 |   |                          |   | 182                 |  |   | 4,499   |   |                   |   | 65,081 |                                               |   | 148,502 |                              | 
|Comprehensive income:                                                                         |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Net income                                                                                    |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | 33,876  |                              | 
|Change in unrealized gain on investment securities available-for-sale, net of taxes of
$3,981 |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Total comprehensive income                                                                    |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Reacquired preferred stock                                                                    |  |                        | (18   | ) |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (1      | )                            | 
|Reacquired voting common stock                                                                |  |                        |       |   |                          |   |                     |  |   | (51     | ) |                   |   |        |                                               |   | (2,914  | )                            | 
|Common stock dividends                                                                        |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (898    | )                            | 
|Preferred stock dividends                                                                     |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (166    | )                            | 
|                                                                                              |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Balance at December 31, 2001                                                                  |  |                        | 3,201 |   |                          |   | 182                 |  |   | 4,448   |   |                   |   | 65,081 |                                               |   | 178,399 |                              | 
|Comprehensive income:                                                                         |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Net income                                                                                    |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | 39,048  |                              | 
|Change in unrealized gain on investment securities available-for-sale, net of benefit of
$51  |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Total comprehensive income                                                                    |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Reacquired preferred stock                                                                    |  |                        | (28   | ) |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (3      | )                            | 
|Reacquired voting common stock.                                                               |  |                        |       |   |                          |   |                     |  |   | (74     | ) |                   |   |        |                                               |   | (5,118  | )                            | 
|Common stock dividends.                                                                       |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (897    | )                            | 
|Preferred stock dividends                                                                     |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   | (165    | )                            | 
|                                                                                              |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 
|Balance at December 31, 2002                                                                  |  | $                      | 3,173 |   |                          | $ | 182                 |  | $ | 4,374   |   |                   | $ | 65,081 |                                               | $ | 211,264 |                              | 
|                                                                                              |  |                        |       |   |                          |   |                     |  |   |         |   |                   |   |        |                                               |   |         |                              | 



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



31



---



CONSOLIDATED STATEMENTS OF
CASH FLOWS



|                                                                                                  |  | Year ended December 31, |         
|------------------------------------------------------------------------------------------------- |  | ----------------------- | --------
|                                                                                                  |  | 2002                    |         
|                                                                                                  |  | (dollars in thousands)  |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                             |  |                         |         
|Net income                                                                                        |  | $                       | 39,048  
|Adjustments to reconcile net income to net cash provided by operating
activities:                 |  |                         |         
|Provision for loan losses                                                                         |  |                         | 10,068  
|Depreciation and amortization                                                                     |  |                         | 19,067  
|Amortization (accretion) of investment securities                                                 |  |                         | 1,112   
|Deferred income tax benefit                                                                       |  |                         | (724    
|Loss (gain) on sales of premises and equipment                                                    |  |                         | 49      
|Decrease (increase) in interest receivable                                                        |  |                         | 2,559   
|(Decrease) increase in interest payable                                                           |  |                         | (2,222  
|Origination of mortgage loans held-for-sale                                                       |  |                         | (332,121
|Proceeds from sales of mortgage loans held-for-sale                                               |  |                         | 360,446 
|Gain on sales of mortgage loans held-for-sale                                                     |  |                         | (3,048  
|Gain on call or sale of investment securities                                                     |  |                         | (462    
|(Increase) decrease in other assets                                                               |  |                         | (3,972  
|Increase (decrease) in other liabilities                                                          |  |                         | 4,173   
|                                                                                                  |  |                         |         
|Net cash provided by operating activities                                                         |  |                         | 93,973  
|                                                                                                 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                             |  |                         |         
|Net increase in loans                                                                             |  |                         | (166,905
|Calls, maturities and prepayments of investment securities
held-to-maturity                       |  |                         | 6,295   
|Purchases of investment securities held-to-maturity                                               |  |                         | (7,745  
|Calls, maturities and prepayments of investment securities
available-for-sale                     |  |                         | 468,720 
|Purchases of securities available-for-sale                                                        |  |                         | (473,156
|Proceeds from sales of premises and equipment                                                     |  |                         | 94      
|Purchases of premises and equipment                                                               |  |                         | (19,501 
|Increase in other real estate owned                                                               |  |                         | (299    
|Increase in intangible assets                                                                     |  |                         | (5,132  
|Purchase of institutions, net of cash acquired                                                    |  |                         | 19,615  
|                                                                                                  |  |                         |         
|Net cash used by investing activities                                                             |  |                         | (178,014
|                                                                                                 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                             |  |                         |         
|Net increase in deposits                                                                          |  |                         | 205,464 
|(Decrease) increase in federal funds purchased and securities sold under agreements to
repurchase |  |                         | (83,663 
|Cash dividends paid                                                                               |  |                         | (1,062  
|Cash paid to reacquire preferred stock                                                            |  |                         | (31     
|Cash paid to reacquire common stock                                                               |  |                         | (5,192  
|                                                                                                  |  |                         |         
|Net cash provided by financing activities                                                         |  |                         | 115,516 
|                                                                                                  |  |                         |         
|Net increase in cash and due from banks                                                           |  |                         | 31,475  
|Cash and cash equivalents due from banks at beginning of year                                     |  |                         | 255,898 
|                                                                                                  |  |                         |         
|Cash and cash equivalents due from banks at end of year                                           |  | $                       | 287,373 
|                                                                                                  |  |                         |         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                |  |                         |         
|Interest paid                                                                                     |  | $                       | 64,048  
|                                                                                                  |  |                         |         
|Income taxes paid                                                                                 |  | $                       | 23,745  
|                                                                                                  |  |                         |         
|SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:                                         |  |                         |         
|Subordinated notes were issued for the stock of Citizens for $1,176.                              |  |                         |         



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



32



---

FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES (Bancorporation)

FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. (Parent)

FIRST-CITIZENS BANK AND TRUST COMPANY OF SOUTH CAROLINA AND SUBSIDIARY (Bank)

THE
EXCHANGE BANK OF SOUTH CAROLINA, INC. (Exchange)

CITIZENS BANK (Citizens)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(Dollars in thousands)





Nature of Operations:



First Citizens Bancorporation of South Carolina, Inc. (Bancorporation) is a three-bank financial holding company whose principal subsidiaries are First-Citizens Bank and Trust Company of South Carolina (First
Citizens or the Bank), The Exchange Bank of South Carolina, Inc. (Exchange), and Citizens Bank (Citizens) which was purchased effective October 1, 2002. First Citizens is chartered under the laws of South
Carolina to engage in general banking business.



Founded in 1964, First Citizens offers a complete array of services in commercial and retail banking through its 145 offices in 97 communities in South Carolina. The Bank provides a full range of financial services including
accepting deposits, corporate cash management, discount brokerage, IRA plans, trust services and secured and unsecured loans. Trust services provide estate planning, estate and trust administration, IRA trust and personal investment, and pension and
profit sharing administration. The Bank also originates and services mortgage loans and provides financing for small businesses.



Founded in 1932, Exchange is a community-oriented financial institution which offers a variety of financial services through its four
branches in Williamsburg and Georgetown counties in South Carolina. Exchange provides many traditional commercial and consumer banking services with its principal activities taking demand and time deposits and making secured and unsecured loans.



Founded in 1902, Citizens is a
community-oriented financial institution which offers a variety of financial services through its two branches in Warren and McDuffie counties in Georgia. Citizens provides many traditional commercial and consumer banking services with its principal
activities taking demand and time deposits and making secured and unsecured loans.



The accounting and reporting policies of Bancorporation conform to generally accepted accounting principles in all material respects.



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Principles of consolidation and basis of presentation:



The consolidated financial statements include the accounts of Bancorporation and its wholly-owned
subsidiaries: First-Citizens (and its wholly-owned subsidiary, Wateree Enterprises, Inc.), Exchange, Citizens, and FCB/SC Capital Trust I. All significant intercompany accounts and transactions have been eliminated. Assets held by the Bank in trust
or in other fiduciary capacities are not assets of the Bank and are not included in the accompanying consolidated financial statements.



Certain amounts in prior years have been reclassified to conform to the 2002 presentation. Such reclassifications had no effect on
shareholders equity or net income.



Use of estimates:



In preparing the consolidated financial
statements, management is required to make estimates based on available information which can affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the related periods. Due to the inherent
uncertainties associated with any estimation process and due to



33



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)



possible future changes in market and economic conditions, it is possible that actual future results could differ from the amounts reflected
in the consolidated financial statements.



Acquisitions
and intangible assets:



Bancorporation
accounts for its acquisitions using the purchase method of accounting. When applying purchase accounting, net assets of entities acquired in purchase transactions are recorded at fair value at the date of acquisition. The reported income of
Bancorporation includes the operations of the acquired company subsequent to acquisition. Identified intangibles from acquisitions are amortized on straight-line basis over the period benefited, primarily five to fifteen years. The recoverability of
other intangibles is evaluated if events or circumstances indicate a possible impairment and such evaluation is based on various cash flow analyses.



Investment securities:



Bancorporation defines held-to-maturity securities as debt securities, which management has the positive intent and ability to hold
to maturity. Held-to-maturity securities are stated at cost, adjusted for amortization of premiums and accretion of discounts. Available-for-sale securities are defined as equity securities and debt securities not classified as trading securities or
held-to-maturity securities. Available-for-sale securities are recorded at fair value with unrealized holding gains and losses, net of deferred taxes, and are reported as a separate component of shareholders equity as accumulated other
comprehensive income. Bancorporation determines the appropriate classification of debt securities at the time of purchase. The cost of securities is based on the specific identification method.



Loans and the allowance for loan losses:



Loans are recorded at their principal amount outstanding.
Interest is accrued and recognized in operating income based upon the principal amount outstanding. Loan origination fees and direct loan origination costs are deferred and amortized over the estimated lives of the related loans as an adjustment to
yield.



In many lending transactions, collateral
is obtained to provide an additional measure of security. Generally, the cash flow and earning power of the borrower represent the primary source of repayment and collateral is considered as an additional safeguard on an acceptable risk. The need
for collateral is determined on a case-by-case basis after considering the current and prospective credit worthiness of the borrower, terms of the lending transaction and economic conditions.



The accrual of interest is generally discontinued, except for
installment and credit card loans, when substantial doubt exists as to the collectibility of principal and interest or when a loan is 90 days past due as to interest or principal. Generally, accrual of income on installment and credit card loans is
discontinued and the loans are charged off after a delinquency of 120 days for unsecured loans and 180 days for secured loans and credit card loans.



Loans are measured for impairment when it is probable that all amounts, including principal and interest, will not be collected in
accordance with the contractual terms of the loan agreement. Bancorporation measures impairment based on discounted expected cash flows on a loan-by-loan basis.



The allowance for loan losses is managements estimate of probable inherent credit losses in the loan
portfolios at the balance sheet date. Bancorporation determines the allowance based on an ongoing evaluation. This evaluation is inherently subjective, as it requires material estimates, including the amounts and timing of cash flows expected to be
received on impaired loans. Those estimates may be susceptible to significant change. Increases to the allowance are made by charges to the provision for loan losses, which is reflected in the Consolidated Statements of Income. Loans deemed to be
uncollectible are charged against the allowance. Recoveries of previously charged-off amounts are credited to the allowance.



34



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





The allowance is the accumulation of various components that are calculated based on independent methodologies. All components of the allowance represent an estimation performed pursuant to either SFAS No. 5 or SFAS No. 114.
Managements estimate of each SFAS No. 5 component is based on certain observable data that management believes are most reflective of the underlying credit losses being estimated. This evaluation includes credit quality trends; recent loan
loss experience; collateral values; loan volumes; seasoning of the loan portfolio; the findings of internal credit quality assessments and results from external bank regulatory examinations. Specific reserves are typically provided on all impaired
commercial loans in excess of a defined threshold and are generally determined on a loan-by-loan basis based on managements evaluation of the exposure for each credit, given the current payment status of the loan and the value of any
underlying collateral.



While management uses the
best information available to establish the allowance for loan losses, future adjustments to the allowance may become necessary if conditions differ substantially from the assumptions used in making the valuations. Such adjustments to original
estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels may vary from previous estimates.



Mortgage banking activities:



Mortgage loans held-for-sale are stated at the lower of aggregate cost or market, net of discounts and
deferred loan fees and are included in loans in the Consolidated Statements of Condition. Nonrefundable deferred origination fees and costs and discount points collected at loan closing, net of commitment fees paid, are deferred and recognized at
the time of sale of the mortgage loans. Gain or loss on sales of mortgage loans is recognized based upon the difference between the selling price and the carrying amount of the mortgage loans sold. Other fees earned during the loan origination
process are also included in net gain or loss on sales of mortgage loans.



After a transfer of loans held-for-sale to a third party under a sale contract, Bancorporation recognizes the mortgage servicing rights (MSRs) it retains and derecognizes the loans held-for-sale when control has
been surrendered. Any other related financial assets and liabilities would be recognized at that point as well. Currently, all transfers of loans held-for-sale are accounted for as sales of those assets as control over those assets is surrendered to
a third party.



MSRs are included in intangible
assets in the Consolidated Statements of Condition. The amount capitalized is determined by allocating the carrying amount between the loans and MSRs based on their relative fair value. Fair value is determined using analyses of discounted
anticipated future net cash flows, considering estimates of loan prepayments, interest rates and other economic factors. Amortization of the capitalized MSRs is based on a method which approximates the proportion of current net servicing income to
the total estimated net servicing income expected to be recognized over the average remaining lives of the underlying loans. For purposes of impairment evaluation and measurement, MSRs are stratified based on predominant risk characteristics of the
underlying loans, including loan type, amortization type (fixed or adjustable), and note rate. To the extent that the carrying value of the MSRs exceeds fair value by individual stratum, a valuation allowance is established which may be adjusted in
the future as the fair value of MSRs increases or decreases. Changes in the valuation allowance are recognized as a component of amortization expense.



Premises and equipment:



Bank premises and equipment are reported at cost less accumulated depreciation. Depreciation is included in noninterest expense over the
estimated useful lives of the assets (generally twenty to thirty-nine years for buildings and improvements, and three to ten years for furniture and equipment). Leasehold improvements are capitalized and amortized to noninterest expense over the
terms of the leases or the estimated useful lives of the improvements, whichever is shorter. Depreciation and amortization are calculated using straight-line methods. Maintenance, repairs and minor improvements are included in noninterest expense as
incurred. Major improvements are capitalized. Gains or losses upon retirement or other dispositions are included in the results of operations.



35



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





Other real estate owned:



Other real estate owned consists of real property acquired through foreclosure and is recorded at the fair value of the property acquired. Subsequent to foreclosure, other real estate owned is carried at the lower of (1) original
cost, or (2) the current fair value of the property, less estimated selling costs. Subsequent to foreclosure, gains or losses on the sales or the periodic revaluation of other real estate owned are credited or charged to expense. Net costs of
maintaining and operating foreclosed properties are expensed as incurred.



Securities sold under agreements to repurchase:



Securities sold under agreements to repurchase represent overnight borrowings with the Banks customers and are secured by investment securities.



Income taxes:



Bancorporation recognizes deferred tax assets and liabilities for the expected future tax consequences of the temporary differences
between the carrying amounts and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
realized or settled.



Statement of cash flows:



For purposes of the Consolidated Statements
of Cash Flows, Bancorporation has defined cash on hand, amounts due from banks and federal funds sold as cash and cash equivalents.



Earnings per share:



Earnings per share are computed by dividing net income less preferred dividends by the weighted average number of voting and non-voting
common shares outstanding. As Bancorporation has no dilutive securities, there is no difference between basic and diluted EPS.



Segment information:



SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, requires that public entities report certain
information about operating segments in their annual financial statements and in condensed financial statements of interim periods issued to shareholders. It also requires that public entities disclose information about products and services
provided by significant segments, geographic areas and major customers, differences between the measurements used in reporting segment information and those used in the entitys general-purpose financial statements, and changes in the
measurement of segment amounts from period to period.



Operating segments are components of an entity about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources in evaluating performance.
Bancorporation has determined that its one operating segment is providing general financial services to customers located in South Carolina and two contiguous counties in Georgia. The various products are those generally offered by community banks
and the allocation of resources is based on the overall performance of the institution, versus individual branches or products.



NOTE 2ACQUISITIONS



Two branch locations were acquired during 2002 from an unrelated financial institution. Bancorporation acquired deposits of
$15,672, loans of $3,158, and other intangible assets of $1,395 in connection with this acquisition. In 2001, four branch locations were acquired from unrelated financial institutions. Bancorporation acquired deposits of $45,330, loans



36



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)



of $209 and intangible assets of $3,786 in connection with these acquisitions. These acquisitions were accounted for under the purchase
method of accounting.



Effective October 1, 2002,
Bancorporation acquired Citizens, a banking corporation located in Warrenton, Georgia. The total cost of the acquisition, recorded as a purchase, was $7,204. The breakdown of the purchase price is as follows:



|Cash                                |  | $ | 6,028
|----------------------------------- |  | - | -----
|5 year Bancorporation notes @ 7.50% |  |   | 1,056
|7 year Bancorporation notes @ 7.75% |  |   | 120  
|                                    |  |   |      
|                                    |  | $ | 7,204
|                                    |  |   |      



Goodwill
and other intangibles associated with this acquisition is $3,214 of which $1,262 is not subject to amortization.



NOTE 3CASH AND DUE FROM BANKS



The Bank is required to maintain reserve balances with the Federal Reserve, or in vault cash. As of December 31, 2002, the average required reserve balance was $47,266, compared to $39,197 as of
December 31, 2001. Of this amount, $36,970 and $33,551 was met by vault cash and $10,296 and $5,646 was held with the Federal Reserve at December 31, 2002 and 2001, respectively. As of December 31, 2002 and 2001, approximately $13,350 and $6,595,
respectively, in cash and due from bank balances was restricted as to use as compensating balances with other financial institutions.



37



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 4INVESTMENT SECURITIES



The amortized cost and the estimated fair value of investment securities held-to-maturity and available-for-sale and their respective contractual maturities at December 31, 2002 and 2001 are presented below. Actual maturities may
differ from contractual maturities or maturities shown below.



|                                                  |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Market Value
|------------------------------------------------- |  | -------------- | ------- | ---------------------- | - | ----------------------- |  | ------------
|Held-to-maturity at December 31, 2002:            |  |                |         |                        |   |                         |  |             
|U. S. government obligations:                     |  |                |         |                        |   |                         |  |             
|Within one year                                   |  | $              | 5,231   |                        | $ | 42                      |  | $           
|After one year but within five years              |  |                | 6,255   |                        |   | 81                      |  |             
|After five years but within ten years             |  |                | 6,497   |                        |   | 41                      |  |             
|After ten years                                   |  |                | 2,248   |                        |   | 55                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 20,231  |                        |   | 219                     |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Obligations of states and political subdivisions: |  |                |         |                        |   |                         |  |             
|Within one year                                   |  |                | 2,495   |                        |   | 17                      |  |             
|After one year but within five years              |  |                | 9,184   |                        |   | 422                     |  |             
|After five years but within ten years             |  |                | 365     |                        |   | 36                      |  |             
|After ten years                                   |  |                |        |                        |   |                        |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 12,044  |                        |   | 475                     |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Other securities:                                 |  |                |         |                        |   |                         |  |             
|Within one year                                   |  |                |        |                        |   |                        |  |             
|After one year but within five years              |  |                | 11      |                        |   | 1                       |  |             
|After five years but within ten years             |  |                | 10      |                        |   | 1                       |  |             
|After ten years                                   |  |                | 2,247   |                        |   | 29                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 2,268   |                        |   | 31                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total held-to-maturity at December 31, 2002       |  | $              | 34,543  |                        | $ | 725                     |  | $           
|                                                  |  |                |         |                        |   |                         |  |             
|Available-for-sale at December 31, 2002:          |  |                |         |                        |   |                         |  |             
|U. S. government obligations:                     |  |                |         |                        |   |                         |  |             
|Within one year                                   |  | $              | 416,855 |                        | $ | 5,163                   |  | $           
|After one year but within five years              |  |                | 416,605 |                        |   | 7,423                   |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 833,460 |                        |   | 12,586                  |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Obligations of states and political subdivisions: |  |                |         |                        |   |                         |  |             
|After five years but within ten years             |  |                | 113     |                        |   | 5                       |  |             
|After ten years                                   |  |                | 243     |                        |   | 11                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 356     |                        |   | 16                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Other securities:                                 |  |                |         |                        |   |                         |  |             
|After five years but within ten years             |  |                | 4,636   |                        |   | 179                     |  |             
|After ten years                                   |  |                | 2,701   |                        |   | 78                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 7,337   |                        |   | 257                     |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Marketable equity securities                      |  |                | 10,155  |                        |   | 17,164                  |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total available-for-sale at December 31, 2002     |  | $              | 851,308 |                        | $ | 30,023                  |  | $           
|                                                  |  |                |         |                        |   |                         |  |             



38



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)



|                                                  |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  | Market Value
|------------------------------------------------- |  | -------------- | ------- | ---------------------- | - | ----------------------- |  | ------------
|Held-to-maturity at December 31, 2001:            |  |                |         |                        |   |                         |  |             
|U. S. government obligations:                     |  |                |         |                        |   |                         |  |             
|Within one year                                   |  | $              | 1,750   |                        | $ | 25                      |  | $           
|After one year but within five years              |  |                | 6,200   |                        |   | 127                     |  |             
|After five years but within ten years             |  |                |        |                        |   |                        |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 7,950   |                        |   | 152                     |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Obligations of states and political subdivisions: |  |                |         |                        |   |                         |  |             
|Within one year                                   |  |                | 2,405   |                        |   | 13                      |  |             
|After one year but within five years              |  |                | 10,550  |                        |   | 221                     |  |             
|After five years but within ten years             |  |                | 609     |                        |   | 26                      |  |             
|After ten years                                   |  |                |        |                        |   |                        |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 13,564  |                        |   | 260                     |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Other securities:                                 |  |                |         |                        |   |                         |  |             
|Within one year                                   |  |                | 2       |                        |   |                        |  |             
|After one year but within five years              |  |                | 50      |                        |   |                        |  |             
|After five years but within ten years             |  |                |        |                        |   |                        |  |             
|After ten years                                   |  |                | 1,743   |                        |   | 18                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 1,795   |                        |   | 18                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total held-to-maturity at December 31, 2001       |  | $              | 23,309  |                        | $ | 430                     |  | $           
|                                                  |  |                |         |                        |   |                         |  |             
|Available-for-sale at December 31, 2001:          |  |                |         |                        |   |                         |  |             
|U. S. government obligations:                     |  |                |         |                        |   |                         |  |             
|Within one year                                   |  | $              | 302,220 |                        | $ | 6,426                   |  | $           
|After one year but within five years              |  |                | 532,563 |                        |   | 7,056                   |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 834,783 |                        |   | 13,482                  |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Other securities:                                 |  |                |         |                        |   |                         |  |             
|After five years but within ten years             |  |                | 3,292   |                        |   | 51                      |  |             
|After ten years                                   |  |                | 2,428   |                        |   |                        |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total                                             |  |                | 5,720   |                        |   | 51                      |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Marketable equity securities                      |  |                | 5,783   |                        |   | 17,356                  |  |             
|                                                  |  |                |         |                        |   |                         |  |             
|Total available-for-sale at December 31, 2001     |  | $              | 846,286 |                        | $ | 30,889                  |  | $           
|                                                  |  |                |         |                        |   |                         |  |             



Investment securities with an amortized cost of $653,929 and $704,166 at December 31, 2002 and 2001, respectively, were pledged to secure public deposits as collateral for securities sold under agreements to repurchase, and for other
purposes as required by law.



The
components of other comprehensive income or loss are summarized below for the years ended December 31:



|                                                                   |  | 2002              |      |   | 2001                     |   | 2000
|------------------------------------------------------------------ |  | ----------------- | ---- | - | ------------------------ | - | ----
|                                                                   |  | Before Tax Amount |      |   | Tax (Expense) or Benefit |   |     
|Unrealized gains (losses) arising during period                    |  | $                 | 317  |   |                          | $ | (111
|Less: reclassification adjustment for gains realized in net income |  |                   | 462  |   |                          |   | (162
|                                                                   |  |                   |      |   |                          |   |     
|Other comprehensive income                                         |  | $                 | (145 | ) |                          | $ | 51  
|                                                                   |  |                   |      |   |                          |   |     



39



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 5LOANS



Gross
loans are composed of the following:



|                                       |  | As of December 31,
|-------------------------------------- |  | ------------------
|                                       |  | 2002              
|Real estateconstruction               |  | $                 
|Real estatemortgage                   |  |                   
|Installment loans to individuals       |  |                   
|Commercial, financial and agricultural |  |                   
|                                       |  |                   
|Total                                  |  | $                 
|                                       |  |                   



NOTE 6ALLOWANCE
FOR LOAN LOSSES



Activity in the allowance
for loan losses is summarized as follows:



|                                           |  | As of December 31, |       
|------------------------------------------ |  | ------------------ | ------
|                                           |  | 2002               |       
|Balance at beginning of year               |  | $                  | 40,259
|Loans charged off                          |  |                    | (9,271
|Recoveries on loans previously charged off |  |                    | 1,703 
|Provision for loan losses                  |  |                    | 10,068
|Addition related to acquisitions           |  |                    | 546   
|                                           |  |                    |       
|Balance at end of year                     |  | $                  | 43,305
|                                           |  |                    |       



Impaired loans are loans for which it is probable that all amounts, including principal and interest, will not be collected in accordance with the contractual terms of the loan agreement. Bancorporation had specific reserves
of $895 and $150 recorded on impaired loans as of December 31, 2002 and 2001, respectively. Loans that were considered impaired under SFAS No. 114 at December 31, 2002 and 2001 held by Bancorporation, are summarized below:



|                                     |  | December 31,
|------------------------------------ |  | ------------
|                                     |  | 2002        
|Nonaccrual loans                     |  | $           
|Other real estate owned              |  |             
|                                     |  |             
|Total nonperforming assets           |  | $           
|                                     |  |             
|Loans past due 90 days or more       |  | $           
|                                    
|Average investment in impaired loans |  | $           



At
December 31, 2002 and 2001, Bancorporation did not have any loans for which terms had been modified in troubled debt restructurings. Interest income, which would have been recorded pursuant to the original terms of nonaccrual loans was minimal.



40



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 7PREMISES AND EQUIPMENT



Premises and equipment are summarized as follows:



|                                                |  | As of December 31, |        
|----------------------------------------------- |  | ------------------ | -------
|                                                |  | 2002               |        
|Land                                            |  | $                  | 39,396 
|Buildings and improvements                      |  |                    | 77,114 
|Furniture and equipment                         |  |                    | 42,227 
|Leasehold improvements                          |  |                    | 1,350  
|Construction in progress                        |  |                    | 4,793  
|                                                |  |                    |        
|Total                                           |  |                    | 164,880
|Less: Accumulated depreciation and amortization |  |                    | (54,408
|                                                |  |                    |        
|Total premises and equipment                    |  | $                  | 110,472
|                                                |  |                    |        



Provisions for depreciation included in noninterest expense were $8,105, $7,401 and $7,861 for the years ended December 31, 2002, 2001, and 2000, respectively.



Bancorporation has entered into various noncancellable operating leases for land and buildings used in its
operations. The leases expire over the next 25 years, and most contain renewal options from 1 to 25 years. Certain leases provide for periodic rate negotiation or escalation. The leases generally provide for payment of property taxes, insurance and
maintenance costs by Bancorporation. Rental expense, including month-to-month leases, reported in noninterest expense was $889, $906, and $761 for the years ended December 31, 2002, 2001, 2000, respectively. There are no contingent rentals, and the
expense was offset by sublease rental income of $730, $1,015, and $1,266 for the years ended December 31, 2002, 2001, and 2000, respectively.



At December 31, 2002 future minimum rental commitments under noncancellable operating leases that have a remaining life in excess of one
year are summarized as follows:



|2003                     |  | $ | 753  
|------------------------ |  | - | -----
|2004                     |  |   | 491  
|2005                     |  |   | 344  
|2006                     |  |   | 251  
|2007                     |  |   | 215  
|2008 and thereafter      |  |   | 435  
|                         |  |   |      
|Total minimum obligation |  | $ | 2,489
|                         |  |   |      



41



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 8GOODWILL AND OTHER INTANGIBLES



In accordance with SFAS No.142, no goodwill amortization was recorded for the year ended December 31, 2002. Goodwill amortization expense for the years ended December 31, 2001 and 2000 were $228 and $228, respectively. At
December 31, 2002, the total carrying amount of intangible assets not subject to amortization was $4,479. At December 31, 2001, the total carrying amount of goodwill was $3,216. The discontinuation of amortization of goodwill has had an immaterial
effect on Bancorporations consolidated financial statements.



Core deposit intangibles are summarized as follows:



|                               |  | As of December 31, |        
|------------------------------ |  | ------------------ | -------
|                               |  | 2002               |        
|Gross carrying value           |  | $                  | 105,669
|Less: Accumulated amortization |  |                    | (70,034
|                               |  |                    |        
|Total core deposit intangibles |  | $                  | 35,635 
|                               |  |                    |        



Amortization expense on core deposit intangibles was $8,163, $9,624 and $5,697 for the years ended December 31, 2002, 2001, and 2000, respectively.



Bancorporation projects the following aggregate amortization expense based on existing core deposit
intangibles for each of the next five years:



For the year ended December 31:

|2003 |  | $ | 7,308
|---- |  | - | -----
|2004 |  |   | 6,805
|2005 |  |   | 5,405
|2006 |  |   | 3,732
|2007 |  |   | 2,965



Mortgage servicing rights as of December 31, 2002 and December 31, 2001 was $5,365 and $4,462, respectively. The amortization expense related to mortgage servicing rights was $2,799, $709, and $724 for the years ended December
31, 2002, 2001, and 2000, respectively. Included in amortization expense is impairment on mortgage servicing rights of $1,716, $137, and $27 for the years ended December 31, 2002, 2001, and 2000, respectively.



NOTE 9DEPOSITS



Deposits and related interest expense are summarized as
follows:



|                                                   |  | Deposits December 31, |           |      | Interest Expense Year Ended December 31,
|-------------------------------------------------- |  | --------------------- | --------- | ---- | ----------------------------------------
|                                                   |  | 2002                  |           | 2001 |                                         
|Demand                                             |  | $                     | 575,632   |      | $                                       
|Savings:                                           |  |                       |           |      |                                         
|NOW accounts                                       |  |                       | 1,079,637 |      |                                         
|Market rate accounts                               |  |                       | 316,405   |      |                                         
|Other                                              |  |                       | 15,272    |      |                                         
|Time:                                              |  |                       |           |      |                                         
|Certificates of deposit in excess of $100 thousand |  |                       | 259,959   |      |                                         
|Other certificates of deposit                      |  |                       | 1,029,103 |      |                                         
|                                                   |  |                       |           |      |                                         
|Total                                              |  | $                     | 3,276,008 |      | $                                       
|                                                   |  |                       |           |      |                                         

---

|* |  | $226,096 formerly classified as securities sold under agreements to repurchase were reclassified to NOW accounts at the beginning of February 2001.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



42



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 10INCOME TAXES



The components of consolidated income tax expense (benefit) are as follows:



|                         |  | For the Year Ended December 31, |       
|------------------------ |  | ------------------------------- | ------
|                         |  | 2002                            |       
|Current:                 |  |                                 |       
|Federal                  |  | $                               | 19,606
|State                    |  |                                 | 1,781 
|                         |  |                                 |       
|                         |  |                                 | 21,387
|                         |  |                                 |       
|Deferred                 |  |                                 | (723  
|                         |  |                                 |       
|Total income tax expense |  | $                               | 20,664
|                         |  |                                 |       



The
significant components of Bancorporations deferred tax liabilities and assets recorded pursuant to SFAS No. 109, which are included in Other assets in the Consolidated Statements of Condition, are as follows:



|                                    |  | As of December 31,
|----------------------------------- |  | ------------------
|                                    |  | 2002              
|Deferred tax liabilities:           |  |                   
|Pension costs                       |  | $                 
|Mark-to-market of equity securities |  |                   
|Tax depreciation over book          |  |                   
|Other, net                          |  |                   
|                                    |  |                   
|Total deferred tax liabilities      |  |                   
|Deferred tax assets:                |  |                   
|Book depreciation over tax          |  |                   
|Allowance for loan losses           |  |                   
|Employee benefits                   |  |                   
|Amortizationintangibles            |  |                   
|Other, net                          |  |                   
|                                    |  |                   
|Total deferred tax assets           |  |                   
|                                    |  |                   
|Net deferred tax asset              |  | $                 
|                                    |  |                   



Bancorporation has no valuation allowance for deferred tax assets based on managements belief that it is more likely than not that the deferred tax assets will be realized.



Total income tax expense differs from the amount of income tax
determined by applying the U. S. statutory federal income tax rate (35%) to pretax income as a result of the following differences:



|                                                      |  | For the Year Ended December 31, |       
|----------------------------------------------------- |  | ------------------------------- | ------
|                                                      |  | 2002                            |       
|Tax expense at statutory rate                         |  | $                               | 20,899
|Increase (decrease) in taxes resulting from:          |  |                                 |       
|Non-taxable income on investments                     |  |                                 | (753  
|State income taxes, net of federal income tax benefit |  |                                 | 1,158 
|Other, net                                            |  |                                 | (640  
|                                                      |  |                                 |       
|                                                      |  | $                               | 20,664
|                                                      |  |                                 |       



43



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 11MORTGAGE SERVICING ACTIVITY



Bancorporations mortgage servicing portfolio approximated $918,680 and $780,268 at December 31, 2002 and 2001, respectively. Loans serviced for unrelated third parties are not included in the accompanying consolidated financial
statements.



Bancorporation has issued
mortgage-backed securities guaranteed by GNMA under the provisions of the National Housing Act. The issuance of these securities, and the simultaneous placement of the related mortgages in trust, have been accounted for as sales of the related
mortgages. The outstanding balances of the securities and the related mortgages held in trust of, $4,433 and $5,281 at December 31, 2002 and 2001, respectively, are not considered to be assets or liabilities of the Bancorporation and, accordingly,
are not included in the consolidated financial statements.



NOTE 12LONG-TERM DEBT



Components of long-term debt as of December 31 were as follows:



|                                                                                                                                         |  | 2002 |        | 2001
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ----
|Guaranteed Preferred Beneficial Interest in Bancorporations Junior Subordinated
Deferrable Interest Debenture 8.25%, due March 15, 2028 |  | $    | 50,000 |     
|                                                                                                                                         |  |      |        |     
|Subordinated notes payable:                                                                                                              |  |      |        |     
|7.50% maturing August 20, 2004                                                                                                           |  | $    | 90     |     
|7.50% maturing October 1, 2007                                                                                                           |  |      | 1,056  |     
|7.75% maturing August 20, 2009                                                                                                           |  |      | 873    |     
|7.75% maturing October 1, 2009                                                                                                           |  |      | 120    |     
|                                                                                                                                         |  |      |        |     
|                                                                                                                                         |  | $    | 2,139  |     
|                                                                                                                                         |  |      |        |     



A
committed unsecured revolving line of credit was established in 1997 with an unrelated financial institution and provides an interest rate indexed to the London Interbank Offered Rate (LIBOR) plus 70 basis points. This line of credit
contains certain restrictive covenants including limits on indebtedness, encumbrances, dividends and minimum net worth. Bancorporation was in compliance with the covenants at December 31, 2002 and 2001, respectively. The line of credit outstanding
which is included in other liabilities in the Consolidated Statements of Condition was $1,000 and $0 as of December 31, 2002 and 2001, respectively. The line of credit expires on December 19, 2003.



FCB/SC Capital Trust I, a statutory business trust (the
Trust) created by Bancorporation, had outstanding at December 31, 2002, $50,000 (par value $50,000) of 8.25% Capital Securities which will mature on March 15, 2028 (the Capital Securities). The principal assets of the Trust
are $51,547 of Bancorporations 8.25% Junior Subordinated Deferrable Interest Debentures which will mature on March 15, 2028. The balance of the securities can be prepaid, subject to possible regulatory approval, in whole or part at any time on
or after March 15, 2008. Additionally, the Trust has issued $1,547 of Common Securities to Bancorporation.



The Capital Securities and the Common Securities are included in Tier 1 capital for regulatory capital adequacy purposes. The obligations
of Bancorporation with respect to the issuance of the Capital Securities and the Common Securities constitute a full and unconditional guarantee by Bancorporation of the Trusts obligations with respect to the Capital Securities and Common
Securities. Subject to certain exceptions and limitations, Bancorporation may elect from time to time to defer subordinated debenture interest payments, which would result in a deferral of distribution payments on the related Capital Securities or
Common Securities.



44



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





NOTE 13STOCKHOLDERS EQUITY



Each share of voting common and preferred stock is entitled to one vote on all matters on which stockholders vote. In certain cases, South Carolina law provides for class voting of shares and for voting rights for non-voting shares.
Dividend rights of each series of preferred stock are cumulative, and upon liquidation, each preferred stockholder is entitled to payment of par value or call amount for each share owned before any distribution to holders of common stock.



Series A, B, and F preferred stock may be
redeemed by Bancorporation, at its option, at par or stated value. Series C and G preferred stock may be redeemed by Bancorporation, at its option, at a call price of $100 per share. Series E preferred stock has no par value and is considered
non-voting. Par value, number of shares authorized and outstanding, and dividends paid for each series of redeemable preferred stock at December 31, 2002 and 2001 follows:



|       |  |                                                             |    | 2002                       |        | 2001  
|------ |  | ----------------------------------------------------------- | -- | -------------------------- | ------ | ------
|Series |  | Par Value                                                   |    | Authorized And Outstanding |        | Amount
|       |  | (dollars in thousands, except per share and par value data)
|A      |  | $                                                           | 50 |                            | 7,838  |       
|B      |  |                                                             | 50 |                            | 11,810 |       
|C      |  |                                                             | 20 |                            | 5,838  |       
|E      |  |                                                             | NA |                            | 498    |       
|F      |  |                                                             | 50 |                            | 31,365 |       
|G      |  |                                                             | 50 |                            | 8,113  |       
|       |  |                                                             |    |                            |        |       
|       |  |                                                             |    |                            |        |       
|       |  |                                                             |    |                            |        |       



The Bank
and Exchange are subject to dividend limitations mandated by the South Carolina State Board of Financial Institutions. Citizens is subject to dividend limitations mandated by the Georgia Department of Banking and Finance. Bancorporations
dividends may be restricted by the requirements of the term loan agreement described in Note 12 which requires that the Bank maintain a regulatory leverage capital ratio of 4.00%. At December 31, 2002 the Banks leverage capital ratio was
7.53%.



NOTE 14EMPLOYEE BENEFITS



The Bank has a noncontributory defined benefit pension plan
(the Plan) which covers substantially all of its employees. Retirement benefits under the Plan are based on an employees length of service and highest average annual compensation for five consecutive years during the last ten years
of employment. Contributions to the Plan are based upon the projected unit credit actuarial funding method and are limited to the amounts that are currently deductible for tax reporting purposes.



45



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





The following table sets forth the Plans status at:



|                                               |  | December 31, |       
|---------------------------------------------- |  | ------------ | ------
|                                               |  | 2002         |       
|Change in benefit obligation:                  |  |              |       
|Benefit obligation at beginning of year        |  | $            | 38,195
|Service cost                                   |  |              | 1,924 
|Interest cost                                  |  |              | 2,777 
|Actuarial loss/(gain)                          |  |              | 4,430 
|Benefits paid                                  |  |              | (1,554
|                                               |  |              |       
|Benefit obligation at end of year              |  |              | 45,772
|Change in plan assets:                         |  |              |       
|Fair value of plan assets at beginning of year |  |              | 41,192
|Actual return on plan assets                   |  |              | 112   
|Employer contribution                          |  |              | 2,812 
|Benefits paid                                  |  |              | (1,554
|                                               |  |              |       
|                                              
|Fair value of plan assets at end of year       |  |              | 42,562
|                                               |  |              |       
|                                              
|Funded status                                  |  |              | (3,210
|Unrecognized prior service cost                |  |              | 83    
|Unrecognized (gain)/loss                       |  |              | 13,009
|                                               |  |              |       
|Net amount recognized                          |  | $            | 9,882 
|                                               |  |              |       
|Weighted-average assumptions:                  |  |              |       
|Discount rate                                  |  |              | 7.25  
|Expected return on plan assets                 |  |              | 8.50  
|Rate of compensation increase                  |  |              | 4.00  



The
following table details the components of pension expense recognized in Bancorporations Consolidated Statements of Income:



|                                   |  | For the Year Ended December 31, |       
|---------------------------------- |  | ------------------------------- | ------
|                                   |  | 2002                            |       
|Service costs                      |  | $                               | 1,924 
|Interest costs                     |  |                                 | 2,777 
|Expected return on plan assets     |  |                                 | (3,566
|Amortization of prior service cost |  |                                 | 183   
|Recognized net actuarial loss      |  |                                 | 176   
|                                   |  |                                 |       
|Net pension expense                |  | $                               | 1,494 
|                                   |  |                                 |       



The
employees of Citizens became participants in the Plan effective October 1, 2002 and receive service credit back to date of hire for vesting service only. These participants have no prior credit for purposes of benefit accrual.



Bancorporation has a contributory savings plan covering
full-time employees who elect to participate. Bancorporation matches 100% of the employees contribution of up to 3% of compensation and 50% of the employees contribution over 3% but not to exceed 6% of compensation. The matching funds
contributed by Bancorporation are immediately 100% vested. Matching contributions provided by Bancorporation were $1,382, $1,309, and $1,201 for the years ended December 31, 2002, 2001, and 2000, respectively, and are included in salaries and
employee benefits expense in the Consolidated Statements of Income. The Bank and Exchange contributory savings plan merged in 2001.



46



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





Bancorporation provides a supplemental retirement plan (the Supplemental Plan) for certain members of management. Benefits under the Supplemental Plan are based on a percentage of the participants 2002 salary and
will be paid evenly over a ten-year period after retirement. The present value of the payments at retirement was determined using a discount rate of 7%, and totals $4,212.



According to the Supplemental Plan, if a participant dies before retirement, death benefits will be paid to
the participants estate for a ten-year period. In the event of death following retirement, but before the ten-year period payout is complete, the beneficiary will receive the remaining payments due at the same monthly rate. If employment is
terminated, Bancorporation has no obligation under the Supplemental Plan. Bancorporation has the right to terminate the Supplemental Plan at any time.



Costs recognized under the Plan for the years ended December 31, 2002, 2001, and 2000 totaled $1,107, $537, and $522, respectively,
and are included in salaries and employee benefits in the Consolidated Statements of Income.



NOTE 15COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS WITH  OFF-BALANCE SHEET RISK



Bancorporation does not hold any derivative financial instruments. Financial instruments with off-balance sheet risk include commitments
to extend credit, standby letters of credit and commitments on mortgage loans held for resale. Generally, Bancorporation charges a fee to the customer to extend these commitments as part of its normal banking activities. These fees are initially
deferred and included in loans in the Consolidated Statements of Condition. Ultimately, such fees are recorded as an adjustment to yield over the related life of the loan or, if the commitment expires unexercised, recognized in income upon
expiration of the commitment.



A summary of the
significant financial instruments with off-balance sheet risk follows:



|                                           |  | Contract Amount at December 31,
|------------------------------------------ |  | -------------------------------
|                                           |  | 2002                           
|Commitments to extend credit               |  | $                              
|Letters of credit and financial guarantees |  |                                
|                                           |  |                                
|Total                                      |  | $                              
|                                           |  |                                



Commitments to extend credit are agreements to lend to a borrower as long as there are no violations of any conditions 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 commitments do not necessarily represent future cash requirements. Bancorporation evaluates each borrowers credit worthiness
on a case-by-case basis using the same credit policies for on-balance sheet financial instruments. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on managements credit evaluation of the borrower. The
type of collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income producing property.



Letters of credit and financial guarantees are conditional commitments issued by Bancorporation to guarantee the performance of a borrower
to a third party. The evaluations of credit worthiness, consideration of need for collateral, and credit risk involved in issuing letters of credit are essentially the same as that involved in extending loans to borrowers.



47



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





Most of Bancorporations business activity is with customers located in South Carolina. A significant economic downturn in South Carolina could have a material adverse impact on the operations of Bancorporation. As of December
31, 2002, Bancorporation had no other significant concentrations of credit risk in the loan portfolio.



Bancorporation is a defendant in litigation arising out of normal banking activities. In the opinion of management and
Bancorporations counsel, the ultimate resolution of these matters will not have a material effect on Bancorporations financial condition or results of operations.



NOTE 16RELATED PARTY TRANSACTIONS



Bancorporation has, and expects to have in the future, transactions in the ordinary course of business with
its directors, officers, principal stockholders and their associates on substantially the same terms (including interest rates and collateral on loans) as those prevailing for comparable transactions with others. However, subject to the completion
of length of service requirements and credit approval, all employees are eligible to receive reduced interest rates on extensions of credit. The transactions do not involve more than the normal risk of collectibility.



Aggregate balances and activity related to extensions of
credit to officers, directors and their associates were as follows:



|                              |  | December 31, 2002 |      
|----------------------------- |  | ----------------- | -----
|Balance at beginning of year  |  | $                 | 3,054
|New loans and additions       |  |                   | 766  
|                              |  |                   |      
|Payments and other deductions |  |                   | (427 
|                              |  |                   |      
|Balance at end of year        |  | $                 | 3,393
|                              |  |                   |      



Bancorporation has a contract with First-Citizens Bank & Trust Company, Raleigh, North Carolina (FCBNC) for the purpose of outsourcing data processing and other services to include item processing, deposits, loans,
general ledger and statement rendering functions. Total expenses incurred under this contract totaled $11,407, $10,814 and $8,007 for the years ended December 31, 2002, 2001 and 2000, respectively. The contract expired December 31, 2000 and was
renewed on January 1, 2001 with an expiration date of December 31, 2003. Bancorporation also has a correspondent banking relationship with FCBNC which also acts as an investment custodian.Fees paid for this service were minimal for the three
years ended December 31, 2002.



NOTE 17DISCLOSURE OF
FAIR VALUE OF FINANCIAL INSTRUMENTS



SFAS
No. 107, Disclosure About Fair Value of Financial Instruments extends existing fair value disclosure practices for some instruments by requiring entities to disclose the fair value of financial instruments, both assets and liabilities,
recognized and not recognized in the Consolidated Statements of Condition.



For Bancorporation, approximately 95% of its assets and liabilities are considered financial instruments, as defined in SFAS No. 107. Many of Bancorporations financial instruments, however, lack
an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. It is not the intent of Bancorporation to liquidate and therefore realize the difference between market value and carrying value
and, even if it were, there is no assurance that the estimated market values could be realized. Therefore, significant estimates and present value calculations were used by Bancorporation for the purposes of this disclosure. Such estimates involve
judgments as to economic conditions, risk characteristics and future expected loss experience of various financial instruments and other factors that cannot be determined with precision. Thus, the information presented is not particularly relevant
to predicting Bancorporations future earnings or cash flow.



48



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





Following is a description of the methods and assumptions used to estimate the fair value of each class of Bancorporations financial instruments:



Cash and short-term investments:



The carrying value is a reasonable estimation of fair value.



Investment securities:



Fair value is based upon quoted market prices, if available.
If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.



Loans:



For certain homogeneous categories of loans such as residential mortgages, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan characteristics. The fair value for other types of loans is estimated by discounting the expected future cash flows using Bancorporations current interest rates at which
loans would be made to borrowers with similar credit risk. The fair value of nonaccrual loans was estimated by discounting expected future cash flows utilizing rates of returns, adjusted for credit risk and servicing cost commensurate with a
portfolio of nonaccrual loans.



Deposits:



The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.



Federal funds purchased and securities sold under agreements to repurchase:



The carrying value is a reasonable
estimation of fair value.



Long-term debt:



Rates currently available to Bancorporation for debt with
similar terms and remaining maturities are used to estimate fair value of existing debt.



Commitments to extend credit and standby letters of credit:



The fair value of commitments and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them with the counter parties at the reporting date.



SFAS No. 107 requires entities to disclose the
fair value of off-balance-sheet financial instruments for which it is practical to estimate fair value. The fair values of commitments to extend credit and standby letters of credit are generally based upon fees charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the counter parties credit standing. The estimated fair value of the Banks off-balance sheet commitments is nominal since the committed rates approximate current
rates offered for commitments with similar rate and maturity characteristics and since the estimated credit risk associated with such commitments is not significant.



49



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





The carrying amounts and estimated fair values of Bancorporations financial instruments are as follows:



|                                                                           |  | December 31, 2002 |           | December 31, 2001   
|-------------------------------------------------------------------------- |  | ----------------- | --------- | --------------------
|                                                                           |  | Carrying Amount   |           | Estimated Fair Value
|Financial assets:                                                          |  |                   |           |                     
|Cash and federal funds sold                                                |  | $                 | 287,373   |                     
|Investment securities                                                      |  |                   | 915,870   |                     
|Loans                                                                      |  |                   | 2,415,396 |                     
|Financial liabilities:                                                     |  |                   |           |                     
|Deposits                                                                   |  |                   | 3,276,008 |                     
|Federal funds purchased and securities sold under agreements to
repurchase |  |                   | 130,360   |                     
|Long-term debt                                                             |  |                   | 52,139    |                     



NOTE 18CAPITAL
MATTERS



Bancorporation 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 Bancorporations consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Bancorporation must meet specific capital guidelines that
involve quantitative measures of Bancorporations assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Bancorporations capital amounts and classification 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 Bancorporation to maintain minimum amounts and ratios 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 Bancorporation meets all capital adequacy requirements to which it is subject.



To be categorized as well-capitalized, Bancorporation must maintain minimum Total risk-based and Tier I risk-based ratios as set forth in
the table below. As seen below, Bancorporation is considered to be a well-capitalized institution per regulatory definitions. There are no conditions or events subsequent to December 31, 2002, that management believes would change the
capital amounts and ratios presented below for Bancorporation, Bank, Exchange or Citizens.



50



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





|                                        |  | Actual                  |         |           | For Capital Adequacy Purposes |   |        | To Be Well Capitalized Under Prompt
Corrective Action Provisions |          
|--------------------------------------- |  | ----------------------- | ------- | --------- | ----------------------------- | - | ------ | ---------------------------------------------------------------- | ---------
|                                        |  | Amount                  |         | Ratio (%) |                               |   | Amount |                                                                  | Ratio (%)
|                                        |  | As of December 31, 2002 |        
|Total capital to risk weighted assets:  |  |                         |         |           |                               |   |        |                                                                  |          
|Bancorporation                          |  | $                       | 325,282 |           | 13.01                         | % |        | $                                                                | 199,966  
|Bank                                    |  |                         | 296,348 |           | 12.35                         |   |        |                                                                  | 192,008  
|Exchange                                |  |                         | 15,247  |           | 21.08                         |   |        |                                                                  | 5,787    
|Citizens                                |  |                         | 4,516   |           | 20.60                         |   |        |                                                                  | 1,754    
|Tier I capital to risk weighted assets: |  |                         |         |           |                               |   |        |                                                                  |          
|Bancorporation                          |  |                         | 293,961 |           | 11.76                         |   |        |                                                                  | 99,983   
|Bank                                    |  |                         | 266,205 |           | 11.09                         |   |        |                                                                  | 96,004   
|Exchange                                |  |                         | 14,339  |           | 19.82                         |   |        |                                                                  | 2,894    
|Citizens                                |  |                         | 4,239   |           | 19.34                         |   |        |                                                                  | 877      
|Tier I capital to average assets:       |  |                         |         |           |                               |   |        |                                                                  |          
|Bancorporation                          |  |                         | 293,961 |           | 7.91                          |   |        |                                                                  | 148,605  
|Bank                                    |  |                         | 266,205 |           | 7.53                          |   |        |                                                                  | 141,470  
|Exchange                                |  |                         | 14,339  |           | 13.98                         |   |        |                                                                  | 4,104    
|Citizens                                |  |                         | 4,239   |           | 9.50                          |   |        |                                                                  | 1,785    
|                                       
|                                        |  | As of December 31, 2001 |        
|Total capital to risk weighted assets:  |  |                         |         |           |                               |   |        |                                                                  |          
|Bancorporation                          |  | $                       | 286,212 |           | 12.59                         | % |        | $                                                                | 181,817  
|Bank                                    |  |                         | 257,215 |           | 11.70                         |   |        |                                                                  | 175,930  
|Exchange                                |  |                         | 13,501  |           | 18.13                         |   |        |                                                                  | 5,957    
|Tier I capital to risk weighted assets: |  |                         |         |           |                               |   |        |                                                                  |          
|Bancorporation                          |  |                         | 257,663 |           | 11.33                         |   |        |                                                                  | 90,908   
|Bank                                    |  |                         | 229,583 |           | 10.44                         |   |        |                                                                  | 87,965   
|Exchange                                |  |                         | 12,567  |           | 16.88                         |   |        |                                                                  | 2,979    
|Tier I capital to average assets:       |  |                         |         |           |                               |   |        |                                                                  |          
|Bancorporation                          |  |                         | 257,663 |           | 7.34                          |   |        |                                                                  | 140,421  
|Bank                                    |  |                         | 229,583 |           | 6.76                          |   |        |                                                                  | 135,868  
|Exchange                                |  |                         | 12,567  |           | 12.66                         |   |        |                                                                  | 3,972    



NOTE
19SUBSEQUENT EVENTS (UNAUDITED)



On November 14, 2002, the Bank entered into an agreement and Plan of Reorganization and Merger with First Banks, Inc. (First Banks), a two-bank holding company headquartered in Carnesville, Georgia, which is the
parent company of First Bank and Trust and The Bank of Toccoa. As of December 31, 2002, First Banks has total deposits and loans of $212,586 and $195,043, respectively. The merger is expected to be completed effective March 31, 2003.



NOTE 20BANCORPORATION (PARENT COMPANY INFORMATION ONLY)



Bancorporations principal asset is
its investments in its wholly-owned subsidiaries, the Bank, Exchange, and Citizens, and its principal source of income is dividends from the Bank. As discussed in Note 13, the Bank, Exchange, and Citizens have dividend limitations regulated by the
applicable state regulatory agencies.



51



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)





Bancorporations condensed balance sheets and the related condensed statements of income and of cash flows are as follows:



BALANCE SHEET DATA



|                                                         |  | December 31,
|-------------------------------------------------------- |  | ------------
|                                                         |  | 2002        
|Assets:                                                  |  |             
|Cash                                                     |  | $           
|Investments in the subsidiaries and associated companies |  |             
|Other assets                                             |  |             
|                                                         |  |             
|Total assets                                             |  | $           
|                                                         |  |             
|Liabilities and stockholders equity:                    |  |             
|Long term debt                                           |  | $           
|Other liabilities                                        |  |             
|Stockholders equity                                     |  |             
|                                                         |  |             
|Total liabilities and stockholders equity               |  | $           
|                                                         |  |             

INCOME STATEMENT DATA

|                                                                              |  | For the Year Ended December 31, |       
|----------------------------------------------------------------------------- |  | ------------------------------- | ------
|                                                                              |  | 2002                            |       
|Income:                                                                       |  |                                 |       
|Other                                                                         |  | $                               | 761   
|                                                                              |  |                                 |       
|                                                                              |  |                                 | 761   
|Expenses:                                                                     |  |                                 |       
|Interest                                                                      |  |                                 | 4,349 
|Other                                                                         |  |                                 | 278   
|                                                                              |  |                                 |       
|                                                                              |  |                                 | 4,627 
|Loss before equity in undistributed earnings subsidiaries and income
taxes    |  |                                 | (3,866
|Equity in undistributed earnings of the subsidiaries and associated
companies |  |                                 | 41,605
|                                                                              |  |                                 |       
|Income before income taxes                                                    |  |                                 | 37,739
|Applicable income tax benefit                                                 |  |                                 | (1,309
|                                                                              |  |                                 |       
|Net income                                                                    |  | $                               | 39,048
|                                                                              |  |                                 |       



52



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(Dollars in thousands)



CASH FLOWS DATA



|                                                                                  |  | For the Year Ended December 31, |        
|--------------------------------------------------------------------------------- |  | ------------------------------- | -------
|                                                                                  |  | 2002                            |        
|Cash flows from operating activities:                                             |  |                                 |        
|Net income                                                                        |  | $                               | 39,048 
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |                                 |        
|Equity in undistributed earnings of the subsidiaries and associated
companies     |  |                                 | (41,605
|(Increase) decrease in other assets                                               |  |                                 | (878   
|Increase (decrease) in other liabilities                                          |  |                                 | 127    
|Other, net                                                                        |  |                                 |       
|                                                                                  |  |                                 |        
|Net cash used in operating activities                                             |  |                                 | (3,308 
|                                                                                 
|Cash flows from investing activities:                                             |  |                                 |        
|Purchases of held-to-maturity and available-for-sale securities                   |  |                                 | (4,303 
|Sales and maturities held-to-maturity and available-for-sale securities           |  |                                 |       
|Payments for investments to subsidiaries                                          |  |                                 | (6,160 
|Dividends received from subsidiaries                                              |  |                                 | 9,761  
|                                                                                  |  |                                 |        
|Net cash (used in) provided by investing activities                               |  |                                 | (702   
|                                                                                 
|Cash flows from financing activities:                                             |  |                                 |        
|Proceeds from advances from subsidiaries                                          |  |                                 |       
|Proceeds from short-term borrowings                                               |  |                                 | 1,000  
|Purchase of stock                                                                 |  |                                 | (5,225 
|Cash dividends paid                                                               |  |                                 | (1,061 
|                                                                                  |  |                                 |        
|Net cash used in financing activities                                             |  |                                 | (5,286 
|                                                                                  |  |                                 |        
|Net (decrease) increase in cash                                                   |  |                                 | (9,296 
|Cash at beginning of year                                                         |  |                                 | 9,354  
|                                                                                  |  |                                 |        
|Cash at end of year                                                               |  | $                               | 58     
|                                                                                  |  |                                 |        
|                                                                                 
|Supplemental disclosure of cash flows information:                                |  |                                 |        
|Interest paid                                                                     |  | $                               | 4,199  
|                                                                                  |  |                                 |        



53



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FIRST CITIZENS BANCORPORATION BOARD OF DIRECTORS

(Directors of First Citizens Bank are identical to those of First Citizens Bancorporation)





Jim B. Apple* **

Chairman of the Board, Chief Executive Officer and President

First Citizens Bancorporation of South Carolina, Inc.

Chairman of the Board and Chief Executive Officer

First-Citizens Bank and Trust Company of South Carolina, Columbia



Richard W. Blackmon* **

Owner

Richard Blackmon Construction
Company, Lancaster



Peter M. Bristow*

Executive Vice President and Chief Operating Officer

First Citizens Bancorporation of South Carolina, Inc.

President and Chief Operating Officer

First-Citizens Bank and Trust Company of South Carolina,

Columbia



George H. Broadrick***

Retired, Charlotte, NC



Walter C. Cottingham, DVM

Cottingham
Veterinary Hospital, Kingstree



David E. Dukes***

Attorney and Managing Partner

Nelson
Mullins Riley & Scarborough, L.L.P., Columbia



William E.
Hancock, III

President

Hancock Buick Company, Columbia



Robert B. Haynes

Vice President and Secretary

C. W. Haynes and Company, Inc., Columbia



Wycliffe E. Haynes

Vice President and Treasurer

C. W. Haynes and Company, Inc., Columbia



Lewis M. Henderson***

Henderson and Associates, CPAs, Columbia



Carmen H. Ames

San Francisco, CA



Frank B. Holding* **

Vice Chairman

First Citizens Bancorporation of South Carolina, Inc.

First-Citizens Bank and Trust Company
of South Carolina, Columbia

Executive Vice Chairman

First Citizens BancShares, Inc.

First Citizens Bank and Trust Company, Smithfield, NC





Dan H. Jordan

Farmer, Nichols



Charles S. McLaurin

Vice Chairman

The Exchange Bank of South Carolina, Inc., Kingstree

Executive Vice President

First-Citizens Bank and Trust Company of South Carolina,

Columbia



N. Welch Morrisette, Jr.

Retired, Columbia



E. Perry Palmer

President

E. P. Palmer Corporation

Palmer Memorial Chapel, Columbia



William E.
Sellars*

President

C. W.
Haynes and Company, Inc., Columbia



Henry F. Sherrill*

Attorney-at-Law, Columbia



|* |  | Member of the Executive Committee, First Citizens Bancorporation and First Citizens Bank
|- |  | ----------------------------------------------------------------------------------------

|** |  | Member of the Investment Committee, First Citizens Bank
|-- |  | -------------------------------------------------------

|*** |  | Member of the Audit Committee, First Citizens Bancorporation and First Citizens Bank
|--- |  | ------------------------------------------------------------------------------------



FIRST CITIZENS BANCORPORATION

EXECUTIVE OFFICERS



Jim B. Apple

Chairman/Chief Executive Officer/President



Frank B. Holding

Vice Chairman



Peter M. Bristow

Executive Vice President/Chief Operating Officer



Craig L. Nix

Executive Vice
President/Chief Financial Officer/Treasurer



Charles D. Cook

Secretary



Jay D. Weir

Senior Vice President/Director
of Internal Audit



54