EXHIBIT 13

                 PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 2001

Financial Summary*
<Table>
<Caption>
                                                                                           Years Ended December 31,
                                                                                           ------------------------
                                                                  2001           2000            1999          1998            1997
                                                                  ----           ----            ----          ----            ----
                                                                              (Dollars in thousands, except per share data)
Financial Condition
<S>                                                              <C>            <C>            <C>            <C>            <C>
     Securities .........................................        $16,924        $17,893        $17,554        $16,300        $16,136
     Allowance for loan losses ..........................            274            254            259            265            272
     Net loans ..........................................         31,537         30,514         29,260         28,850         31,614
     Premises and equipment - net .......................          1,445            811            874            716            760
     Total assets .......................................         57,192         51,928         52,340         56,921         52,909
     Noninterest bearing deposits .......................          4,288          3,126          3,084          3,962          3,890
     Interest bearing deposits ..........................         40,665         36,290         37,774         41,645         38,078
     Total deposits .....................................         44,953         39,416         40,858         45,607         41,968
     Long-term debt .....................................          4,000          4,000          4,000          4,000          4,000
     Total liabilities ..................................         49,356         44,265         45,178         49,999         46,368
     Total shareholders' equity .........................          7,836          7,663          7,162          6,922          6,541

Results of Operations
     Interest income ....................................        $ 3,927        $ 4,282        $ 4,226        $ 4,302        $ 4,222
     Interest expense ...................................          1,563          1,597          1,619          1,815          1,847
                                                                 -------        -------        -------        -------        -------
     Net interest income ................................          2,364          2,685          2,607          2,487          2,375
     Provision for loan losses ..........................             34             47              -              -              5
                                                                 -------        -------        -------        -------        -------
     Net interest income after provision ................          2,330          2,638          2,607          2,487          2,370
     Other income .......................................            543            493            476            411            341
     Other expenses .....................................          1,743          1,696          1,571          1,508          1,375
                                                                 -------        -------        -------        -------        -------
     Income before income taxes .........................          1,130          1,435          1,512          1,390          1,336
     Income tax expense .................................            353            457            493            459            433
                                                                 -------        -------        -------        -------        -------
     Net income .........................................        $   777        $   978        $ 1,019        $   931        $   903
                                                                 =======        =======        =======        =======        =======

Per Share Data
     Net income .........................................        $  0.76        $  0.96        $  1.00        $  0.92        $  0.89
     Cash dividends declared ............................           0.75           0.70           0.60           0.50           0.50
     Period end book value ..............................           7.72           7.53           7.06           6.85           6.47
</Table>

*  Clover Community  Bankshares,  Inc. became the bank holding company of Clover
   Community Bank  effective June 5, 1998 as part of a corporate  reorganization
   which  was  accounted  for  as  if  it  were  a   pooling-of-interests.   The
   consolidated  financial statements and related information for the year ended
   December  31, 1998 are  presented  as if the  reorganization  had occurred on
   January 1, 1998.  The financial  statements and related  information  for the
   year ended  December  31,  1997 are the same as was  reported  previously  by
   Clover Community Bank.



                                        1
<Page>


Market for Common Stock and Dividends

         Although a limited number of shares of common stock of Clover Community
Bankshares,  Inc. (the  "Company") are traded from time to time on an individual
basis,  no  established  trading  market has  developed  and none is expected to
develop  in the near  future.  The  common  stock is not  traded  on the  NASDAQ
National  Market  System,  nor are there any market makers known to  management.
During 2001,  management was aware of a few  transactions in which the Company's
common stock  traded in a price range from $20.00 to $25.00 per share.  However,
management has not ascertained  that these  transactions are the result of arm's
length  negotiations  between the parties,  and because of the limited number of
shares  involved,  these prices may not be indicative of the market value of the
common stock.  Shareholders may purchase additional common shares in the Company
by reinvesting  their cash dividends under the Company's  dividend  reinvestment
plan that was placed in  operation  in 1999.  Under the plan,  3,708,  6,118 and
4,778 newly issued shares were purchased by  shareholders in 2001, 2000 and 1999
at prices of $30.46,  $28.32 and $27.56,  respectively,  in accordance  with the
plan's pricing formula.  In 2001, 2000 and 1999, 5,284,  3,180 and 1,702 shares,
respectively,  of the Company's  common stock were  repurchased,  primarily from
eleemosynary  organizations,  and  retired.  The  average  prices for such share
repurchases  and  retirements  in 2001,  2000 and 1999 were  $25.38,  $27.09 and
$30.25,  respectively.  These prices were set at the discretion of the Company's
Board of  Directors.  Prices  established  for the  issuance of shares under the
dividend  reinvestment  plan and for  repurchases  may not be  indicative of the
market value of the common stock.

         As of February 28, 2002, there were approximately 694 holders of record
of the Company's  common stock,  excluding  individual  participants in security
position listings.

         The Company has paid an annual cash  dividend  since 1991.  In 2001 and
2000, the Company  declared and paid cash dividends to  shareholders of $.75 and
$.70 per share, respectively.

         The Board of Directors considers such factors as adequacy of capital to
support future growth,  regulatory capital  requirements,  maximum legal lending
limits  based on  capital  levels  and  profitability  in making  its  decisions
regarding  cash  dividends.  The  Company's  ability  to  declare  and pay  cash
dividends is largely  dependent upon the successful  operation of the subsidiary
Bank and its  ability  to pay cash  dividends  to the  Company.  South  Carolina
banking  regulations  restrict the amount of cash  dividends that can be paid by
the Bank to the  Company.  Any of the Bank's  cash  dividends  to the Company in
excess of the current  year's  earnings are subject to the prior approval of the
South Carolina Commissioner of Banking. In addition,  dividends paid by the Bank
to the Company,  or by the Company to its  shareholders,  would be prohibited if
the effect  thereof  would  cause the  capital of the Bank or the  Company to be
reduced below minimum capital requirements.


Management's Discussion and Analysis

         This discussion is intended to assist in understanding the consolidated
financial  condition and results of operations of Clover  Community  Bankshares,
Inc. and its wholly-owned subsidiary,  Clover Community Bank (the "Bank"), which
are  collectively  referred  to as the  "Company".  This  information  should be
reviewed in conjunction with the consolidated  financial  statements and related
notes contained elsewhere in this report.

Forward Looking Statements

         Statements  included in Management's  Discussion and Analysis which are
not  historical  in nature are  intended  to be, and are  hereby  identified  as
"forward looking statements" for purposes of the safe harbor provided by Section
21E of the  Securities  Exchange Act of 1934, as amended.  The Company  cautions
readers that forward looking  statements,  including without  limitation,  those
relating to future business  prospects,  revenues,  working capital,  liquidity,
capital  needs,  interest  costs,  and income,  are subject to certain risks and
uncertainties  that could cause actual results to differ  materially  from those
indicated in the forward looking  statements,  due to several  important factors
herein  identified,  among others,  and other risks and factors  identified from
time to time in the  Company's  reports filed with the  Securities  and Exchange
Commission.

                                       2
<Page>

Earnings Performance

2001 Compared with 2000

         The Company recorded net income of $777,000 for the year ended December
31,  2001,  a decrease of  $201,000,  or 20.6%,  from net income of $978,000 for
2000.  Net  income  per share for 2001 was  $.76,  compared  with $.96 for 2000.
Return on average  assets and return on average  equity  were 1.41% and  10.21%,
respectively, for 2001, and 1.85% and 13.62%, respectively, for 2000.

         Throughout  2001, the Board of Governors of the Federal  Reserve System
cut its discount and federal  funds target rates  significantly  in an effort to
stimulate  economic  activity.  The  frequency  and  amounts  of such  rate cuts
accelerated  following the terrorist attacks of September 11, 2001.  Significant
decreases in the yields on a bank's interest earning assets can result from such
macroeconomic  factors either  directly or  indirectly.  Yields on variable rate
loans, investment securities,  and federal funds sold can be expected to decline
rapidly.  Older mortgage and other loans with higher fixed interest rates become
subject to increased  prepayment  risk as borrowers can either  refinance  their
loans or  negotiate  for  lower  interest  rates.  Higher  yielding  fixed  rate
investment  securities are also more likely to be called for early redemption by
issuers.

         Fixed rate time deposits with higher  interest  rates  generally can be
repriced at lower rates in response to falling yields on interest earning assets
only as contractual  maturities are reached.  Rates paid on savings and interest
bearing  transaction  accounts are more indirectly affected by changes in market
rates  of  interest,   depending  to  a  degree  on  an  institution's   funding
requirements  and competitive  posture.  Interest rates paid on variable rate or
short-term  borrowings,  and variable  rate time  deposits can be adjusted  more
quickly in response to a falling interest rate environment.  Rates paid on fixed
rate  long-term   borrowings  can  be  adjusted   indirectly  by  prepayment  or
refinancing.

         The decrease in the Company's  net income for 2001  resulted  primarily
from lower net interest  income.  As market interest rates were falling in 2001,
interest  income  on loans  was  significantly  decreased  due to the  immediate
reduction  of yields  associated  with  variable  rate  loans,  which  comprised
approximately half of the loan portfolio. Prepayments and lower rates negotiated
by borrowers on existing fixed rate loans  decreased  interest  income from that
source also.  Early calls of investments in higher  yielding  taxable fixed rate
securities  resulted in substantially lower interest income as well. At the same
time, the Bank's interest expense  decreased only slightly.  Decreased  interest
expense resulting from lower interest rates paid on variable rate long-term debt
and interest bearing  transaction and savings deposit accounts was substantially
offset by increased  interest  expense on fixed-rate  time deposits.  During the
last half of 2000 and  continuing  into the first  quarter  of 2001,  management
offered  highter  interest rates for longer maturity fixed rate time deposits in
order to increase  total  deposits and  liquidity.  For  example,  approximately
$3,000,000 of new 24 month maturity time deposits were acquired during that time
paying the above  market  fixed rate of 7.00%.  The  Company  has  approximately
$5,000,000  or 21% of total time  deposits  outstanding  as of December 31, 2001
paying fixed rates substantially  higher than current market rates being offered
as of that  date  for time  deposits  with  similar  remaining  maturities.  The
majority of these time deposits  will mature  during the fourth  quarter of 2002
and first  quarter of 2003;  therefore,  these time  deposits can be expected to
continue to have a negative effect on net interest income  throughout  2002. See
also  the   discussions   under  "Net  Interest   Income"  and  "Interest   Rate
Sensitivity".

         Other noninterest  income increased in 2001 primarily because of higher
service  charges applied to deposit  account  activity.  This increase more than
offset the  increase in  noninterest  operating  expenses in 2001.  Income taxes
decreased by $104,000  because of the Company's  reduced net income before taxes
and higher amounts of non-taxable investment income.

         Comprehensive  income for 2001, 2000 and 1999 was $957,000,  $1,123,000
and  $780,000,  respectively.   Accounting  principles  generally  require  that
recognized  revenue,  expenses,  gains and  losses be  included  in net  income.
Comprehensive  income for the Company is correlated directly to the effects that
changing  market  rates of  interest  have on the fair  values of the  Company's
holdings of available-for-sale  securities.  The resulting changes in unrealized
holding gains and losses on such securities are reported as a separate component
of  shareholders'   equity.   Such  items,  along  with  net  income,   comprise
comprehensive income.

                                       3
<Page>

2000 Compared with 1999

         The Company recorded net income of $978,000 for the year ended December
31,  2000, a decrease of $41,000,  or 4.0%,  from net income of  $1,019,000  for
1999.  Net  income  per share for 2000 was $.96,  compared  with $1.00 for 1999.
Return on average  assets and return on average  equity  were 1.85% and  13.62%,
respectively, for 2000, and 1.80% and 14.73%, respectively, for 1999.

         The decrease in net income for 2000 resulted from higher provisions for
loan losses and other noninterest  overhead  expenses.  During 2000, the Company
charged to expense  $47,000 to provide for loan losses.  No provisions were made
for loan losses in 1999.  Non-interest  expenses totaled $1,696,000 for 2000, an
increase  of  $125,000,  or 8.0% over the 1999  amount.  Salaries  and  employee
benefits  expenses  increased by $70,000 due to normal salary increases  granted
from  time-to-time  and  increased  costs  of  providing  health  insurance  for
employees.  Occupancy and furniture and equipment  expenses increased by $25,000
in 2000.  Costs directly  associated  with the Company's Year 2000  Preparedness
Program were  insignificant in 2000 and 1999, and there have been no significant
problems within the Company, nor among its suppliers or customers, caused by the
date change to the year 2000.


Net Interest Income

         Net  interest  income is the  amount  of  interest  earned on  interest
earning assets (loans, securities,  interest bearing deposits in other banks and
federal  funds sold),  less the interest  expense  incurred on interest  bearing
liabilities (primarily interest bearing deposits and long-term debt), and is the
principal source of the Company's  earnings.  Net interest income is affected by
the level of interest rates,  the volume and mix of interest  earning assets and
interest bearing liabilities, and the relative funding of the assets.

         For analysis purposes,  interest income from tax-exempt  investments is
adjusted  to an amount  that would have to be earned on taxable  investments  to
produce the same after-tax yields.  This adjusted amount is referred to as fully
taxable equivalent ("FTE") interest income.

         FTE net interest income was  $2,474,000,  $2,784,000 and $2,699,000 for
2001,  2000,  and 1999,  respectively.  During  2001,  FTE  interest  income was
$4,037,000,  a decrease  of $344,000 or 7.9% from the  $4,381,000  reported  for
2000. Falling interest rates in 2001 primarily were responsible for this change.
Interest  expense was only $34,000 less in 2001 than in 2000 because  reductions
in interest expense  associated with the Company's  variable rate long-term debt
and its interest bearing transaction and savings deposits were largely offset by
increased  interest  expense on time  deposits.  The combined rate paid on total
average  interest  bearing  deposits was  unchanged  from 2000 to 2001 at 3.57%,
while the overall FTE yield on average interest earning assets was down 95 basis
points to 7.82%. The discussion under "Earnings Performance" above describes the
factors producing this result.

         For 2001,  the average  interest rate spread dropped 73 basis points to
4.18% and the net yield on average interest earning assets decreased by 79 basis
points to 4.79%.

         In 2000,  FTE net  interest  income  increased  over  the  1999  amount
primarily  because of higher rates earned on interest  earning  assets and lower
average  amounts of  interest  bearing  liabilities.  The earning  assets  yield
increased by 69 basis  points in 2000 to 8.77%.  Interest  expense  decreased in
2000  primarily  due to a $3,540,000  reduction  in the average  amounts of such
liabilities outstanding.



                                       4
<Page>


                  The table,  "Average Balances,  Yields and Rates",  provides a
detailed analysis of the effective yields and rates on the categories of average
interest  earning assets and interest  bearing  liabilities  for the years ended
December 31, 2001, 2000 and 1999.

                       Average Balances, Yields and Rates

<Table>
<Caption>
                                                                              Years ended December 31,
                                                                              ------------------------
                                                             2001                       2000                       1999
                                                             ----                       ----                       ----
                                                         FTE Interest               FTE Interest                 FTE Interest
                                            Average    Income/  Yields/    Average    Income/  Yields/  Average     Income/  Yields/
                                          Balances(1)  Expense   Rates    Balances(1) Expense   Rates   Balances(1) Expense   Rates
                                          -----------  -------   -----    ----------- -------   -----   ----------- -------   -----
                                                                                 (Dollars in thousands)
Assets
<S>                                           <C>       <C>       <C>       <C>      <C>       <C>       <C>      <C>          <C>
Interest-bearing deposits in other banks .    $     46  $     2   4.35%     $    63  $     3   4.76%     $   268  $    20      7.46%
Securities ...............................
  Taxable ................................      12,318      713   5.79%      13,597      917   6.74%      12,537      796      6.35%
  Tax-exempt (2) .........................       4,350      330   7.59%       4,044      292   7.22%       3,884      270      6.95%
                                              --------  -------             -------  -------             -------  -------
        Total securities .................      16,668    1,043   6.26%      17,641    1,209   6.85%      16,421    1,066      6.49%
Other investments ........................         250       16   6.40%         250       19   7.60%         295       26      8.81%
Federal funds sold .......................       3,676      124   3.37%       2,384      152   6.38%       7,323      356      4.86%
Loans (3) ................................      30,997    2,852   9.20%      29,590    2,998  10.13%      29,159    2,850      9.77%
                                              --------  -------             -------  -------             -------  -------
        Total interest earning assets ....      51,637    4,037   7.82%      49,928    4,381   8.77%      53,466    4,318      8.08%
Cash and due from banks ..................       1,960                        1,842                        1,967
Allowance for loan losses ................        (270)                        (253)                        (263)
Premises and equipment ...................         837                          856                          687
Other assets .............................         881                          430                          613
                                              --------                      -------                      -------
        Total assets .....................    $ 55,045                      $52,803                      $56,470
                                              ========                      =======                      =======

Liabilities and shareholders' equity
Interest bearing deposits
     Interest bearing transaction accounts    $ 13,359  $   139   1.04%     $13,559  $   193   1.42%     $14,658  $   232      1.58%
     Savings .............................       2,891       37   1.28%       2,561       44   1.72%       2,682       46      1.72%
     Time deposits $100M and over ........       5,161      250   4.84%       4,102      192   4.68%       4,389      201      4.58%
     Other time deposits .................      17,437      960   5.51%      17,161      904   5.27%      19,213      926      4.82%
                                              --------  -------             -------  -------             -------  -------
        Total interest bearing
          deposits .......................      38,848    1,386   3.57%      37,383    1,333   3.57%      40,942    1,405      3.43%
Federal funds purchased ..................          84        5   5.95%          22        1   4.55%           3        -      0.00%
Long-term debt ...........................       4,000      172   4.30%       4,000      263   6.58%       4,000      214      5.35%
                                              --------  -------             -------  -------             -------  -------
        Total interest bearing
          liabilities ....................      42,932    1,563   3.64%      41,405    1,597   3.86%      44,945    1,619      3.60%
Noninterest bearing demand deposits ......       3,984                        3,875                        4,209
Other liabilities ........................         520                          345                          398
Shareholders' equity .....................       7,609                        7,178                        6,918
                                              --------                      -------                      -------
        Total liabilities and shareholders'
         equity ..........................    $ 55,045                      $52,803                      $56,470
                                              ========                      =======                      ======
Interest rate spread  (4) ................                        4.18%                        4.91%                           4.48%
Net interest income and net yield
     on earning assets  (5) ..............              $ 2,474   4.79%              $ 2,784   5.58%              $ 2,699      5.05%
Interest free funds supporting earning
     assets  (6) .........................     $ 8,705                      $ 8,523                      $ 8,521

</Table>
-----------------------------
(1)  Average balances are computed on a daily basis.
(2)  Computed on a fully  taxable  equivalent  basis using a federal  income tax
     rate of 34%.
(3)  Nonaccruing  loans are included in the average loan  balances and income on
     such loans is recognized on a cash basis.
(4)  Total  interest  earning  assets  yield  less the  total  interest  bearing
     liabilities rate.
(5)  Net interest income divided by total interest earning assets.
(6)  Total interest earning assets less total interest bearing liabilities.

                                       5
<Page>

The table, "Volume and Rate Variance Analysis", provides a summary of changes in
net interest income resulting from changes in volumes of interest earning assets
and interest bearing  liabilities,  and the rates earned and paid on such assets
and liabilities.

      Volume and Rate Variance Analysis

<Table>
<Caption>
                                                                  2001 Compared with 2000              2000 Compared with 1999
                                                                  -----------------------              -----------------------
                                                              Volume(1)   Rate(1)      Total       Volume(1)     Rate(1)      Total
                                                              ---------   -------      -----       ---------     -------      -----
                                                                                        (Dollars in thousands)

<S>                                                          <C>          <C>          <C>          <C>          <C>          <C>
Interest-bearing deposits in other banks .............       $  (1)       $   -        $  (1)       $ (12)       $  (5)       $ (17)
Taxable securities ...................................         (81)        (123)        (204)          69           52          121
Tax-exempt securities (2) ............................          23           15           38           11           11           22
Other investments ....................................           -           (3)          (3)          (3)          (4)          (7)
Federal funds sold ...................................          62          (90)         (28)        (291)          87         (204)
Loans ................................................         138         (284)        (146)          43          105          148
                                                             -----        -----        -----        -----        -----        -----
           Total interest income .....................         141         (485)        (344)        (183)         246           63
                                                             -----        -----        -----        -----        -----        -----
Interest bearing deposits
    Interest bearing transaction accounts ............          (3)         (51)         (54)         (17)         (22)         (39)
    Savings ..........................................           5          (12)          (7)          (2)           -           (2)
    Time deposits $100M and over .....................          51            7           58          (13)           4           (9)
    Other time deposits ..............................          15           41           56         (104)          82          (22)
Federal funds purchased ..............................           4            -            4            -            1            1
Long-term debt .......................................           -          (91)         (91)           -           49           49
                                                             -----        -----        -----        -----        -----        -----
           Total interest expense ....................          72         (106)         (34)        (136)         114          (22)
                                                             -----        -----        -----        -----        -----        -----
           Net interest income .......................       $  69        $(379)       $(310)       $ (47)       $ 132        $  85
                                                             =====        =====        =====        =====        =====        =====
</Table>
--------------------------------
(1)  The  rate/volume  variance  for  each  category  has  been  allocated  on a
     consistent  basis between rate and volume  variance based on the percentage
     of rate or volume variance to the sum of the two absolute variances, except
     in categories having balances in only one period. In such cases, the entire
     variance is attributed to volume differences.
(2)  Computed on a fully  taxable  equivalent  basis using a federal  income tax
     rate of 34%.

         In an effort to improve  asset/liability  management  and  improve  net
interest  income in 2002 and future years,  the Company  engaged an  experienced
consultant in the fourth  quarter of 2001 to advise  management and the Board of
Directors in this vital area.  Throughout 2002,  management will closely monitor
the Company's interest  sensitivity position and intends to take appropriate and
timely actions to promote stable growth in net interest income.

         Management  currently  expects  that  interest  rates  will  move  in a
narrower range in 2002 than in 2001. Management has not presently identified any
factors  that would cause  interest  rates to increase or decrease  sharply in a
short  time  period.  However,  dramatic  changes  in  interest  rates  that can
significantly affect the Company, either positively or negatively,  are possible
as seen in 2001.  Any  significant  changes in net interest  income for 2002 are
currently  expected  to be the  result of changes  in the  volumes  of  interest
earning  assets  and  liabilities.  Management  expects to  continue  to use its
marketing  strategies to attempt to increase the Company's market share for both
deposits and quality loans within its service  area.  These  strategies  include
plans  to open a new  branch  office  in the  Lake  Wylie  area of York  County,
offering  competitive interest rates, and continuing the Company's commitment to
providing outstanding customer service.


                                       6
<Page>

Interest Rate Sensitivity

         Interest  rate  sensitivity  measures  the timing and  magnitude of the
repricing  of  assets  compared  with the  repricing  of  liabilities  and is an
important  part of  asset/liability  management.  The objective of interest rate
sensitivity  management is to generate stable growth in net interest income, and
to  control  the risks  associated  with  interest  rate  movements.  Management
constantly  monitors interest rate risk exposures and the expected interest rate
environment so that timely adjustments in interest rate sensitivity can be made.

         The  table,  "Interest  Sensitivity  Analysis",  indicates  that,  on a
cumulative basis through twelve months, rate sensitive liabilities exceeded rate
sensitive assets, resulting in a liability sensitive position at the end of 2001
of  $15,657,000,  and a cumulative  gap ratio of .63.  When  interest  sensitive
assets exceed interest sensitive liabilities for a specific repricing "horizon",
a positive interest  sensitivity gap results.  The gap is negative when interest
sensitive  liabilities  exceed interest sensitive assets, as was the case at the
end of 2001  with  respect  to the  one-year  time  horizon.  For a bank  with a
negative gap,  falling  interest  rates  ordinarily  would be expected to have a
positive  effect on net  interest  income and rising rates  ordinarily  would be
expected to have the opposite  effect.  However,  in a rapidly falling  interest
rate environment,  such as experienced in 2001, net interest income can decrease
despite a negative  interest  sensitivity  gap. This occurs because  debtors can
obtain lower interest rate financing by prepaying,  refinancing or renegotiating
their existing,  higher fixed-rate mortgage and other loans. Similarly,  issuers
of federal and local  government  securities  can exercise early call options to
prepay or refinance their debt securities at lower rates.

         A mismatch in the size of the  interest  rate changes that are possible
for certain  interest  sensitive assets and liabilities can also have a negative
effect on net interest margins in a rapidly falling  interest rate  environment.
For example,  the Company is  relatively  constrained  in its ability to reprice
interest  bearing  transaction  accounts and savings  accounts.  Although  these
deposits are interest  sensitive in the earliest period shown in the table,  the
rates paid cannot  decrease  below  zero.  Yields on  interest  earning  assets,
however, are generally  established at interest rates in excess of the Company's
cost to acquire  funds,  and may  therefore  decrease  further  before  they are
similarly constrained.

         The table reflects the balances of interest earning assets and interest
bearing liabilities at the earlier of their repricing or maturity dates. Amounts
of fixed rate loans are reflected at the loans' final maturity  dates.  Variable
rate loans are  reflected at the earlier of their  contractual  maturity date or
the date at which the  loans may be  repriced  contractually.  Interest  bearing
deposits in other banks and debt securities are reflected at the earlier of each
instrument's  ultimate maturity or contractual  repricing date. Interest bearing
liabilities with no contractual  maturity,  such as interest bearing transaction
accounts and savings deposits,  are reflected in the earliest repricing interval
due to contractual  arrangements  which give  management the opportunity to vary
the rates paid on these deposits within a thirty-day or shorter period. However,
the  Company is under no  obligation  to vary the rates  paid on those  deposits
within any given period. Fixed rate time deposits,  principally  certificates of
deposit, are reflected at their contractual  maturity dates.  Variable rate time
deposits,  principally  individual  retirement  accounts,  are  reflected at the
earlier of their next repricing or maturity dates.



                                       7
<Page>

                          Interest Sensitivity Analysis

<Table>
<Caption>
                                                                                            December 31, 2001
                                                                                            -----------------
                                                                   Within            4-12        Over 1-5      Over 5
                                                                  3 Months          Months         Years        Years         Total
                                                                  --------          ------         -----        -----         -----
                                                                                         (Dollars in thousands)
Interest earning assets
<S>                                                               <C>            <C>            <C>           <C>           <C>
     Interest-bearing deposits in other banks ..............      $     10       $      -       $      -      $      -      $     10
     Federal funds sold ....................................         5,086              -              -             -         5,086
     Securities available-for-sale .........................         7,154            358          1,700         7,712        16,924
     Other investments .....................................           250              -              -             -           250
     Loans (1) .............................................        12,580          1,328         12,715         5,188        31,811
                                                                  --------       --------       --------      --------      --------
            Total interest earning assets ..................        25,080          1,686       $ 14,415      $ 12,900      $ 54,081
                                                                  --------       --------       ========      ========      ========

Interest bearing liabilities
     Interest bearing deposits
        Interest bearing transaction accounts ..............      $ 13,894       $      -       $      -      $      -      $ 13,894
        Savings ............................................         2,812              -              -             -         2,812
        Time deposits $100M and over .......................         1,515          4,500            714             -         6,729
        Other time deposits ................................         5,983          9,719          1,528             -        17,230
     Long-term debt ........................................         4,000              -              -             -         4,000
                                                                  --------       --------       --------      --------      --------
            Total interest bearing liabilities .............        28,204         14,219       $  2,242      $      -      $ 44,665
                                                                  --------       --------       ========      ========      ========

Interest sensitivity gap ...................................      $ (3,124)      $(12,533)
Cumulative interest sensitivity gap ........................      $ (3,124)      $(15,657)
Gap ratio ..................................................          0.89          0.12
Cumulative gap ratio .......................................          0.89          0.63
</Table>
_____________________
(1)  Loans are net of net deferred loan fees of $31,000

Provision for Loan Losses

         The  provision  for  loan  losses  is  charged  to  earnings  based  on
management's  continuing review and evaluation of the loan portfolio and general
economic conditions.  Management provided $34,000 and $47,000 for loan losses in
2001 and  2000,  respectively.  These  provisions  resulted  primarily  from net
charge-offs  of $14,000 and $52,000,  respectively,  and  increased  loan volume
experienced  during those years.  No provision  for loan losses was made in 1999
due mainly to little growth in loan volume,  low net loan  charge-offs,  and low
levels of nonperforming and potential problem loans in that period.

         There were no impaired or nonperforming  loans as of December 31, 2001.
Identified  potential problem loans at that date totaled $74,000.  The allowance
for loan losses as a  percentage  of total  loans at year-end  was .86% for 2001
compared with .83% at the end of 2000.  See "Impaired  Loans" and "Allowance for
Loan Losses" for a discussion of the factors management  considers in its review
of the adequacy of the allowance and provision for loan losses.

Other Income

         Noninterest  income for 2001 was  $543,000,  an  increase of $50,000 or
10.1% over the 2000  amount of  $493,000.  The  increase in 2001  primarily  was
attributable  to  increased  amounts  of  service  charges  and other fee income
derived from deposit  accounts.  Management  revised its service  charge pricing
schedules in the first quarter of 2001 to more closely align those fees with the
levels of service provided to the Company's customers.

         Further  increases  in  deposit  service  charges  and  other  fees are
expected to be generated from a new automatic overdraft protection product which
is expected to be  implemented  in the first  quarter of 2002.  Management  will
continue to review and adjust  when  necessary  the  current  pricing of all fee
based services.  Opportunities to expand  noninterest fee income on both new and
existing services will also be explored.


                                       8
<Page>

         Noninterest  income  for 2000  increased  by  $17,000  over the  amount
recorded for 1999. This increase was also primarily caused by increased  deposit
service charges.

Other Expenses

         Noninterest  expenses  for  2001  increased  by  $47,000  or  2.8%,  to
$1,743,000.  This increase is attributable to a number of factors. Net occupancy
expense increased $32,000 mainly because of a major maintenance and refurbishing
of the interior of the Company's  banking office facility.  Advertising  expense
was up  $7,000  due to  increased  advertising  efforts.  Professional  services
increased  $33,000,  which  includes  additional  external  auditing  procedures
performed  after the  resignation  of the Company's  former  president and chief
executive  officer in 2001. The Board of Directors  requested  these  additional
auditing  procedures as a matter of ordinary prudence after the departure of the
Company's  principal  executive  officer.  The auditors'  findings  disclosed no
irregularities.  This increase also includes  engaging an outside  consultant to
assess the Bank's  lending,  deposit,  and other  policies  and  practices  on a
routine basis to advise  management  and the Board of Directors as to continuing
compliance with various banking regulations. Other expense in 2001 also includes
a $40,000 payment to the Company's former president and chief executive  officer
pursuant  to a  settlement  agreement  associated  with his  resignation.  These
increases in 2001 were  substantially  offset by a $54,000 reduction in salaries
and employee benefits.  This reduction is largely  attributable to the departure
of the former president and chief executive  officer.  The Company's senior vice
president was promoted to become the new president and chief executive  officer,
and a new executive vice president and chief operating  officer was subsequently
hired. Consequently,  the reduction in salaries and employee benefits in 2001 is
unlikely to be repeated in 2002. Also,  furniture and equipment expense for 2001
was lower by $30,000 because of a significant reduction in depreciation expense.
A substantial portion of the Company's equipment became fully depreciated during
2001.

         Noninterest  expenses  for 2000  totaled  $1,696,000,  an  increase  of
$125,000 or 8.0% over the 1999 amount.  Salaries and employee benefits increased
by $70,000 or 8.1% due mainly to normal salary  adjustments  and higher costs of
employee health  insurance.  Net occupancy and furniture and equipment  expenses
increased by $25,000 or 8.9% due to increased amounts of depreciation related to
acquisition of data  processing  equipment  required to enhance and maintain the
Company's  technological  capabilities.  Other  expenses  for 2000  increased by
$31,000 or 7.2%.  Expenses associated with the Bank's ATM/debit and credit cards
increased by $15,000 and $4,000 in 2000 and 1999, respectively. During 2000, the
Company incurred significant start-up expenses when it entered an agreement with
a new card services provider.  In addition,  fees paid for professional services
increased  by  $12,000  or 18.2%  in 2000 due  primarily  to the  Company's  due
diligence efforts related to a proposed  acquisition of a non-banking  financial
services  company.  All negotiations  between the parties  ultimately  ceased in
2000.

         Noninterest  overhead  expenses  for  2002  are  expected  to  increase
significantly, particularly in the last half of the year, as compared with 2001.
This is due in large part to the planned  construction and opening of the Bank's
first  branch  office on a de novo basis in the Lake Wylie area of York  County,
South Carolina.  In addition to the expenses  related to the hiring and training
of new employees needed for that office,  depreciation and maintenance  expenses
will increase on the new  building,  equipment,  furniture  and fixtures.  Other
categories of expense will also be expected to increase such as advertising  and
public  relations,  data  processing,  stationery,  printing,  postage,  etc. In
general, expenses associated with the start-up of the new branch can be expected
to have an overall negative effect on net income in the near term.

         Management  also  believes that  continued  investment in technology is
essential to allow for the expansion of products and services  necessary to keep
the Company  competitive  in its market.  Accordingly,  the Company  continually
upgrades  its computer  hardware  and software  systems so that a high degree of
customer service and operational efficiency can be maintained.

         Increases  in  noninterest  expenses  are  closely  monitored  and cost
control will continue to be emphasized by management  where possible in order to
achieve profitability objectives as well as attain the Company's goals of growth
and outstanding customer service.

Income Taxes

         For 2001,  federal and state income tax expenses  decreased to $353,000
from  $457,000 in 2000 and $493,000 in 1999.  The decrease in income tax expense
for 2001 is due to lower  before tax income  and higher  amounts of  non-taxable
municipal  investment  income. The effective income tax rate (income tax expense
divided by income before  income taxes) was 31.2% for 2001,  compared with 31.8%
and 32.6% for 2000 and 1999, respectively.

                                       9
<Page>

Securities

         The following table summarizes the carrying value amounts of securities
held by the Company at each of the dates indicated.

                        Securities Portfolio Composition

                                                          December 31,
                                                          ------------
                                                 2001         2000       1999
                                                 ----         ----       ----
                                              Available-  Available-  Available-
                                               for-Sale     for-Sale   for-Sale
                                               --------     --------   --------
                                                     (Dollars in thousands)

U. S. Government agencies ...............      $ 3,187      $ 7,282      $ 6,803
State, county and municipal .............        4,356        4,238        4,327
Mortgage-backed securities ..............        9,381        6,373        6,424
                                               -------      -------      -------
     Total ..............................      $16,924      $17,893      $17,554
                                               =======      =======      =======


         On an ongoing basis,  management  assigns securities upon purchase into
one of the categories  designated by Statement of Financial Accounting Standards
No.  115  (trading,  available-for-sale  or  held-to-maturity)  based on intent,
taking into  consideration  other factors including  expectations for changes in
market  rates  of  interest,   liquidity   needs,   asset/liability   management
strategies, and capital requirements.  The Company has never held securities for
trading  purposes.  During 2001, 2000 and 1999,  there have been no transfers of
available-for-sale or held-to-maturity securities to other categories.

         At  December  31,  2001,  the  Company  had  no  concentrated   amounts
representing  10% or  more of  equity  capital  in the  debt  securities  of any
individual state, county or municipal issuer.


         The following table presents  maturities and weighted average yields of
securities at December 31, 2001.

                   Securities Portfolio Maturities and Yields

<Table>
<Caption>
                                                                         December 31, 2001
                                                                         -----------------
                                                          After                After
                                                        One Year             Five Years
                                     Within              Through              Through               After
                                    One Year            Five Years           Ten Years             Ten Years             Total
                                    --------            ----------           ---------             ---------             -----
                                 Amount   Yield      Amount    Yield      Amount    Yield       Amount   Yield      Amount     Yield
                                 ------   -----      ------    -----      ------    -----       ------   -----      ------     -----
                                 (Dollars in thousands)
Available-for-sale
<S>                              <C>      <C>       <C>         <C>        <C>       <C>      <C>       <C>      <C>           <C>
U. S. Government agencies        $   -    0.00%     $   381     2.45%      $ 2,064   7.21%    $   742   2.43%    $  3,187      5.53%
State, county and municipal(1)     285    6.57%       1,700     7.53%        1,247   8.14%      1,124   6.70%       4,356      7.43%
Mortgage-backed securities(2)        -    0.00%           -     0.00%        2,055   3.62%      7,326   5.02%       9,381      4.71%
                                 -----              -------                -------            -------            --------
        Total                    $ 285    6.57%     $ 2,081     6.60%      $ 5,366   6.05%    $ 9,192   5.02%    $ 16,924      5.57%
                                 =====              =======                =======            =======            ========
</Table>
------------------------
(1)  Computed on a fully  taxable  equivalent  basis using a federal  income tax
     rate of 34%.
(2)  Maturity  categories  based  upon  final  stated  maturity  dates.  Average
     maturity  is  substantially  shorter  because  of  the  monthly  return  of
     principal on certain securities.


                                       10
<Page>

Loan Portfolio

         Management believes the loan portfolio is adequately diversified. There
are no  significant  concentrations  of loans in any  particular  individuals or
industry or group of related individuals or industries, and there are no foreign
loans.

         The amounts of loans  outstanding  at December 31, 2001,  2000 and 1999
are shown in the following  table  according to type of loan, and the percentage
of each category to total loans:

                           Loan Portfolio Composition

<Table>
<Caption>
                                                                                 December 31,
                                                                                 ------------
                                                               2001                         2000                       1999
                                                               ----                         ----                       ----
                                                      Amount           %           Amount          %          Amount          %
                                                      ------           ---         ------          ---        ------          ----
                                                                             (Dollars in thousands)

<S>                                                  <C>              <C>        <C>             <C>         <C>             <C>
Commercial and industrial ...................        $12,331          38.7%      $ 8,502          27.6%      $ 5,822          19.7%
Real estate - construction ..................          2,576           8.1%        4,422          14.4%        4,993          16.9%
Real estate - mortgage
     Farmland ...............................            105           0.4%          108            .3%          105            .4%
     1-4 family residential .................         10,257          32.2%        9,913          32.2%       10,558          35.7%
     Nonfarm, nonresidential ................          1,922           6.0%        3,111          10.1%        4,101          13.9%
Consumer installment ........................          4,652          14.6%        4,731          15.4%        3,954          13.4%
                                                     -------         -----       -------         -----       -------         -----
                     Total loans ............        $31,843         100.0%      $30,787         100.0%      $29,533         100.0%
                                                     =======         =====       =======         =====       =======         =====
</Table>

         A certain degree of risk taking is inherent in the extension of credit.
Management has established loan and credit policies designed to control both the
types and  amounts of risks  assumed and to  ultimately  minimize  losses.  Such
policies include limitations on  loan-to-collateral  values for various types of
collateral,  requirements for appraisals of real estate collateral, problem loan
management  practices and collection  procedures,  and nonaccrual and charge-off
guidelines.

         Commercial  and  industrial  loans  primarily  represent  loans made to
businesses,  and may be made on either a secured  or an  unsecured  basis.  When
taken,  collateral  consists of liens on  receivables,  equipment,  inventories,
furniture and fixtures.  Unsecured business loans are generally  short-term with
emphasis on  repayment  strengths  and low  debt-to-worth  ratios.  During 2001,
commercial and industrial  loans increased  $3,829,000 or 45.0% after increasing
$2,680,000  or 46.0% in 2000.  This  category  accounted for the majority of the
increase  in total loans in 2001 and 2000 as the  Company  responded  to greater
demand in the local market. Commercial lending involves significant risk because
repayment usually depends on the cash flows generated by a borrower's  business,
and the debt service capacity of a business can deteriorate because of downturns
in national and local economic conditions. In 2001 and 1999, no commercial loans
were charged off as compared with $46,000  charged off in 2000. To control risk,
more  in-depth  initial  and  continuing  financial  analysis  of  a  commercial
borrower's cash flows and other financial information is generally required.

         Real estate  construction  loans  generally  consist of  financing  the
construction  of 1-4 family  dwellings  and some  nonfarm,  nonresidential  real
estate. Usually,  loan-to-cost ratios are limited to 75% and permanent financing
commitments are usually  required prior to the advancement of loan proceeds.  In
2001, this category of loans decreased  $1,846,000 or 41.7%.  The volume of real
estate  construction  loans can vary significantly in any given period depending
on building activity in the local market.

         Loans secured by real estate mortgages comprised approximately 39%, 43%
and 50% of the  Company's  loan  portfolio  at the end of 2001,  2000 and  1999,
respectively.  Real estate  mortgage  loans of all types  decreased  by $848,000
during 2001 after  declining  by  $1,632,000  and  $1,745,000  in 2000 and 1999,
respectively.  The reductions are attributable primarily to the "buyer's market"
in  mortgage  lending  rates  which has  existed in recent  years.  The  Company
purposely has not  originated  long-term  fixed-rate  mortgage  loans at the low
rates  then  prevailing,  opting  instead  to  lend  for  these  purposes  using
instruments  with  fixed-rate  terms  not  exceeding  five  years.  The  Company
continually   reevaluates  its  strategies   with  regard  to   mortgage-lending
activities.  Residential  real estate loans  consist  mainly of first and second
mortgages on single family homes. Loan-to-value ratios for these instruments are
generally limited to 80%. Nonfarm,  nonresidential loans are secured by business
and commercial  properties with  loan-to-value  ratios generally limited to 75%.
The  repayment of both  residential  and business real estate loans is dependent
primarily  on the income and cash flows of the  borrowers,  with the real estate
serving as a secondary or liquidation source of repayment.

                                       11
<Page>

Maturity Distribution of Loans

         The  following  table  sets  forth  the  maturity  distribution  of the
Company's  loans,  by type,  as of  December  31,  2001,  as well as the type of
interest requirement on such loans.

<Table>
<Caption>
                                                                                            December 31, 2001
                                                                                            -----------------
                                                                          One Year          One to         Five Years
                                                                          or Less         Five Years        or More           Total
                                                                          -------         ----------        -------           -----
                                                                                          (Dollars in thousands)

<S>                                                                          <C>             <C>             <C>             <C>
Commercial and industrial ..........................................         $ 4,247         $ 5,417         $ 2,667         $12,331
Real estate - construction .........................................           1,281           1,191             104           2,576
Real estate - mortgage .............................................             844           6,328           5,112          12,284
Consumer installment ...............................................           1,997           2,451             204           4,652
                                                                             -------         -------         -------         -------
              Total loans ..........................................         $ 8,369         $15,387         $ 8,087         $31,843
                                                                             =======         =======         =======         =======


Predetermined rate, maturity greater than one year .................                         $12,715         $ 5,217         $17,932
                                                                                             =======         =======         =======

Variable rate or maturity within one year ..........................         $ 8,369         $ 2,672         $ 2,870         $13,911
                                                                             =======         =======         =======         =======
</Table>

Impaired Loans

         Impaired loans are those loans on which,  based on current  information
and  events,  it is  probable  that the  Company  will be unable to collect  all
amounts due  according to the  contractual  terms of the loan  agreement.  Loans
which management has identified as impaired  generally are nonperforming  loans.
Nonperforming  loans include nonaccrual loans or loans which are 90 days or more
delinquent as to principal or interest  payments.  Following is a summary of the
Company's impaired loans:

     Nonaccrual and Past Due Loans

                                                              December 31,
                                                              ------------
                                                       2001      2000      1999
                                                       ----      ----      ----
                                                         (Dollars in thousands)

Nonaccrual loans ................................      $  -       $ -       $ 8
Accruing loans 90 days or more past due .........         -         1         2
                                                       ----       ---       ---
              Total .............................      $  -       $ 1       $10
                                                       ====       ===       ===

Percent of total loans ..........................      0.0%       0.0%      0.0%


         When an  impaired  loan is 90 days or more past due as to  interest  or
principal or there is serious doubt as to ultimate  collectibility,  the accrual
of interest income is generally  discontinued.  Previously  accrued  interest on
loans placed in a nonaccrual  status is reversed  against  current  income,  and
subsequent interest income is recognized on a cash basis when received. When the
collectibility  of a  significant  amount  of  principal  is in  serious  doubt,
collections  are credited  first to the  remaining  principal  balance on a cost
recovery  basis.  An impaired  nonaccrual loan is not returned to accrual status
unless  principal and interest are current and the borrower has demonstrated the
ability to continue  making  payments as agreed.  The effects of interest income
accrued and  collected on impaired  loans were  immaterial  to the  consolidated
financial statements for 2001, 2000 and 1999.

         As of December 31, 2001,  there were no commitments to lend  additional
funds to debtors owing amounts on impaired loans.

                                       12
<Page>

Potential Problem Loans

         Management  has  identified  and maintains a list of potential  problem
loans.  These are loans that are not included in impaired  loans  (nonaccrual or
past due 90 days or more and still  accruing).  A loan is added to the potential
problem list when management  becomes aware of information about possible credit
problems of borrowers  that causes doubts as to the ability of such borrowers to
comply  with the  current  loan  repayment  terms.  The  total  amount  of loans
outstanding  at December  31, 2001  determined  by  management  to be  potential
problem loans was $74,000. This amount does not represent  management's estimate
of potential losses since a portion of such loans is secured by various types of
collateral.

Allowance for Loan Losses

         The  allowance  for loan  losses  is  increased  by direct  charges  to
operating  expense.  Losses on loans are charged  against the  allowance  in the
period in which  management  has determined it is more likely than not that such
loans have become uncollectible.  Recoveries of previously charged off loans are
credited  to the  allowance.  The  table,  "Summary  of Loan  Loss  Experience",
summarizes loan balances at the end of each period indicated,  averages for each
period, changes in the allowance arising from charge-offs and recoveries by loan
category, and additions to the allowance which have been charged to expense.

         In reviewing the adequacy of the allowance for loan losses at each year
end,  management took into  consideration the historical loan losses experienced
by the Company,  current economic conditions affecting the borrowers' ability to
repay, the volume of loans, the trends in delinquent, nonaccruing, and potential
problem loans, and the quality of collateral securing  nonperforming and problem
loans. After charging off all known losses,  management  considers the allowance
for loan losses  adequate to cover its  estimate of possible  future loan losses
inherent in the loan portfolio as of December 31, 2001.

         In  calculating  the amount  required in the allowance for loan losses,
management  applies a  consistent  methodology  that is updated  quarterly.  The
methodology  utilizes a loan risk grading  system and  detailed  loan reviews to
assess credit risks and the overall  quality of the loan  portfolio,  as well as
other  off-balance-sheet  credit  risks  such as loan  commitments  and  standby
letters of credit. Also, the calculation provides for management's assessment of
trends in national and local economic  conditions  that might affect the general
quality of the loan portfolio.

                                       13
<Page>

                         Summary of Loan Loss Experience

<Table>
<Caption>
                                                                                          Years Ended December 31,
                                                                                          ------------------------
                                                                          2001         2000        1999         1998         1997
                                                                          ----         ----        ----         ----         ----
                                                                                           (Dollars in thousands)

<S>                                                                     <C>          <C>          <C>          <C>          <C>
Total loans outstanding at end of period ..........................     $31,811      $30,768      $29,519      $29,115      $31,886
Average amount of loans outstanding ...............................      30,997       29,590       29,159       30,499       31,033

Balance of allowance for loan losses - beginning ..................     $   254      $   259      $   265      $   272      $   270
                                                                        -------      -------      -------      -------      -------
Loans charged off
     Commercial and industrial ....................................           -           46            -            -            4
     Consumer installment .........................................          15            7            9            9            6
                                                                        -------      -------      -------      -------      -------
           Total charge-offs ......................................          15           53            9            9           10
                                                                        -------      -------      -------      -------      -------
Recoveries of loans previously charged off
     Commercial and industrial ....................................           -            -            -            -            4
     Consumer installment .........................................           1            1            3            2            3
                                                                        -------      -------      -------      -------      -------
           Total recoveries .......................................           1            1            3            2            7
                                                                        -------      -------      -------      -------      -------
Net charge-offs ...................................................          14           52            6            7            3
                                                                        -------      -------      -------      -------      -------
Additions to allowance charged to expense .........................          34           47            -            -            5
                                                                        -------      -------      -------      -------      -------
Balance of allowance for loan losses - ending .....................     $   274      $   254      $   259      $   265      $   272
                                                                        =======      =======      =======      =======      =======

Ratios
     Net charge-offs to average loans .............................        0.05%        0.18%        0.02%        0.02%        0.01%
     Net charge-offs to loans at end of period ....................        0.04%        0.17%        0.02%        0.02%        0.01%
     Allowance for loan losses to average loans ...................        0.88%        0.86%        0.89%        0.87%        0.88%
     Allowance for loan losses to loans at end of period ..........        0.86%        0.83%        0.88%        0.91%        0.85%
     Net charge-offs to allowance for loan losses .................        5.11%       20.47%        2.32%        2.64%        1.10%
     Net charge-offs to provision for loan losses .................       41.18%      110.64%          NA           NA        60.00%
</Table>

         The following  table  presents the allocation of the allowance for loan
losses at the end of each of the last three years,  compared with the percent of
loans in the applicable categories to total loans.

                     Allocation of Allowance for Loan Losses

<Table>
<Caption>
                                                                                          December 31,
                                                                                          ------------
                                                                    2001                     2000                      1999
                                                                    ----                     ----                      ----
                                                                         % of                       % of                      % of
                                                             Amount     Loans      Amount           Loans       Amount        Loans
                                                             ------     -----      ------           -----       ------        -----
                                                                                  (Dollars in thousands)

<S>                                                          <C>        <C>          <C>            <C>          <C>          <C>
Commercial and industrial ......................             $ 44        38.7%       $ 64            27.6%       $ 58          19.7%
Real estate - construction .....................                9         8.1%         33            14.4%         37          16.9%
Real estate - mortgage .........................               53        38.6%         98            42.6%        111          50.0%
Consumer installment ...........................               18        14.6%         32            15.4%         47          13.4%
Unallocated ....................................              150         0.0%         27             0.0%          6           0.0%
                                                             ----       -----        ----           -----        ----         -----
          Total ................................             $274       100.0%       $254           100.0%       $259         100.0%
                                                             ====       =====        ====           =====        ====         =====
</Table>

                                       14
<Page>

Deposits

         The average amounts and percentage  composition of deposits held by the
Company for each of the past three years are summarized below:

                                Average Deposits

<Table>
<Caption>
                                                                                     Years Ended December 31,
                                                                                     ------------------------
                                                                    2001                        2000                    1999
                                                                    ----                        ----                    ----
                                                           Amount           %        Amount          %          Amount          %
                                                           ------           -        ------          -          ------          -
                                                                                      (Dollars in thousands)

<S>                                                       <C>             <C>       <C>             <C>       <C>            <C>
Noninterest bearing demand ........................       $ 3,984          9.3%     $ 3,875          9.4%     $ 4,209          9.3%
Interest bearing transaction accounts .............        13,359         31.2%      13,559         32.9%      14,658         32.5%
Savings ...........................................         2,891          6.8%       2,561          6.2%       2,682          5.9%
Time deposits $100M and over ......................         5,161         12.0%       4,102          9.9%       4,389          9.7%
Other time ........................................        17,437         40.7%      17,161         41.6%      19,213         42.6%
                                                          -------        -----      -------        -----      -------        -----
             Total deposits .......................       $42,832        100.0%     $41,258        100.0%     $45,151        100.0%
                                                          =======        =====      =======        =====      =======        =====
</Table>

         As of December  31, 2001,  there were  $6,729,000  in time  deposits of
$100,000 or more with  approximately  $1,261,000  maturing  within three months,
$1,825,000 maturing over three through six months,  $2,675,000 maturing over six
through  twelve  months  and  $968,000  maturing  after one year.  Average  time
deposits $100,000 and over comprised approximately 12% of total average deposits
during 2001 and  approximately  10% of total  average  deposits  during 2000 and
1999.  The  majority  of time  deposits  $100,000  and  over are  acquired  from
customers  within the Company's local market area.  Such deposits  generally are
acquired  in the  normal  course of  business.  The  Company  does not  purchase
brokered  deposits.  While most of the large time  deposits  are  acquired  from
customers with standing banking relationships,  it is a common industry practice
not to consider these types of deposits as core deposits because their retention
can be expected to be heavily  influenced by rates  offered,  and therefore such
deposits have the characteristics of shorter-term purchased funds. Time deposits
$100,000 and over involve the maintenance of an appropriate matching of maturity
distribution and a diversification of sources to achieve an appropriate level of
liquidity.

         Total deposits as of December 31, 2001 were $5,537,000,  or 14.0%, more
than the level  reported as of December 31, 2000.  Management  believes that the
majority of the increase in deposits was  attributable to its ability to compete
successfully  for  deposits in the local  service  area  through  its  marketing
efforts,  offers of  attractive  interest  rates for  deposit  accounts  and its
reputation for excellent customer service.


Return on Equity and Assets

         The following  table shows the return on assets (net income  divided by
average total assets),  return on equity (net income divided by average equity),
dividend  payout ratio  (dividends  declared per share divided by net income per
share),  and equity to assets ratio  (average  equity  divided by average  total
assets) for each period indicated.

                                              Years Ended December 31,
                                              ------------------------
                                          2001          2000           1999
                                          ----          ----           ----

          Return on assets ..........     1.41%          1.85%          1.80%
          Return on equity ..........    10.21%         13.62%         14.73%
          Dividend payout ratio .....    98.68%         72.92%         60.00%
          Equity to assets ratio ....    13.82%         13.59%         12.25%

Liquidity

         Liquidity is the ability to meet current and future obligations through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals  in the most timely and  economical


                                       15
<Page>

manner. Some liquidity is ensured by maintaining assets which may be immediately
converted  into cash at minimal cost  (amounts due from banks and federal  funds
sold).  However,  the most  manageable  sources of  liquidity  are  composed  of
liabilities, with the primary focus of liquidity management being on the ability
to obtain  deposits  within the  Company's  market area.  Core  deposits  (total
deposits,  less time deposits of $100,000 and over) provide a relatively  stable
funding base,  and the average of these  deposits  represented  68.4% of average
total assets during 2001 compared with 70.4% during 2000, and 72.2% during 1999.

         The  banking  subsidiary  had  available  at  the  end of  2001  unused
short-term  lines of credit to purchase up to  $3,075,000  of federal funds from
unrelated  correspondent  institutions.  In addition,  the Bank has  outstanding
long-term  debt of  $4,000,000  from the Federal  Home Loan Bank of Atlanta (the
"FHLB") used to fund earning assets with longer  maturities.  In connection with
this long-term debt, the Bank has a further undrawn  long-term debt availability
from the FHLB of approximately $1,914,000.

          Asset liquidity is provided from several  sources,  including  amounts
due  from  banks  and  federal   funds  sold.   Available-for-sale   securities,
particularly  those  maturing  within one year,  provide a  secondary  source of
liquidity. In addition, funds from maturing loans are a source of liquidity. The
availability  of asset  liquidity  provided by federal  funds sold  increased by
$5,086,000 at the end of 2001.  This increase was caused by the  acquisition  of
deposit liabilities during 2001 in amounts exceeding the Company's funding needs
for  long-term  assets  such as  loans  and  investment  securities.  Management
influences  the  acquisition  of  deposits  by  varying  the rates paid for such
liabilities,  and by its  practices  with  regard to service  charges  and other
associated fees.

         Clover   Community   Bankshares,   Inc.'s  ability  to  meet  its  cash
obligations  or to pay any possible  future cash  dividends to  shareholders  is
dependent  primarily on the successful  operation of the subsidiary bank and its
ability  to  pay  cash  dividends  to the  parent  company.  Any of the  banking
subsidiary's cash dividends in an amount exceeding current year-to-date earnings
are subject to the prior approval of the South Carolina  Commissioner of Banking
and are generally  allowable  only from its undivided  profits.  At December 31,
2001, the banking  subsidiary's  available undivided profits totaled $3,625,000.
Under Federal Reserve Board  regulations,  the amounts of loans or advances from
the banking subsidiary to the parent company are also restricted.

         Management  believes  that the  overall  liquidity  sources of both the
Company and its banking subsidiary are adequate to meet their operating needs.

Capital Resources

         Shareholders' equity increased by $173,000 and $501,000 during 2001 and
2000,  respectively.  During 2001, net income increased  shareholders' equity by
$777,000,   cash  dividends  decreased  shareholders'  equity  by  $763,000  and
unrealized gains on available-for-sale securities increased shareholders' equity
by $180,000.  Net sales and repurchases of the Company's  common stock decreased
shareholders'  equity by  $21,000.  The Company in 1999  established  a dividend
reinvestment  program to provide  shareholders  with the opportunity to reinvest
automatically all or a portion of their cash dividends into additional shares of
the  Company's  common stock.  Reinvestment  of dividends in 2001 resulted in an
increase of $113,000 in  shareholders'  equity.  Also during  1999,  the Company
initiated a limited program to redeem shares of its stock held by not-for-profit
organizations.  During 2001, repurchases and retirements of common stock reduced
shareholders' equity by $134,000.

         During 2000,  net income  increased  shareholders'  equity by $978,000,
cash dividends decreased  shareholders'  equity by $709,000 and unrealized gains
on available-for-sale  securities increased stockholders equity by $145,000. Net
sales and repurchases common of stock increased stockholders' equity by $87,000.
Reinvested dividends and repurchases and retirements of common stock during 2000
totaled $173,000 and $86,000, respectively.

         The Company and its banking  subsidiary  are each subject to regulatory
risk-based  capital  adequacy  standards.  Under these  standards,  bank holding
companies and banks are required to maintain  certain  minimum ratios of capital
to  risk-weighted  assets and average total assets.  Under the provisions of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),  federal
bank  regulatory  authorities  are  required  to  implement  prescribed  "prompt
corrective  actions" upon the deterioration of the capital position of a bank or
bank holding company. If the capital position of an affected institution were to
fall below certain levels,  increasingly stringent regulatory corrective actions
are  mandated.   Unrealized  holding  gains  and  losses  on  available-for-sale
securities are generally excluded for purposes of calculating regulatory capital
ratios.  However,  the extent of any unrealized  appreciation or depreciation on
securities  will continue to be a factor that regulatory  examiners  consider in
their overall assessment of capital adequacy.

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy  require both the Company and Clover Community Bank to maintain minimum
amounts and ratios set forth in the table below of Total and Tier 1 Capital,  as
defined in the regulation,  to risk weighted assets,  as defined,  and of Tier 1
Capital, as defined, to average assets, as defined.  Management believes,  as of

                                       16
<Page>

December 31, 2001 and 2000, that the Company and Clover  Community Bank exceeded
all capital adequacy minimum requirements to which they were subject.

         To be categorized as well capitalized, the Company and Clover Community
Bank must maintain  minimum  Total  risk-based,  Tier 1  risk-based,  and Tier 1
leverage ratios as set forth in the table below. The federal regulators may also
categorize the Company or Clover  Community  Bank as less than well  capitalized
based on subjective  criteria.  Management knows of no conditions or events that
would cause the Company or Clover  Community Bank to be categorized as less than
well capitalized.

<Table>
<Caption>
                                                                                               Minimum for          Minimum to be
                                                                             Actual          Capital Adequacy     Well Capitalized
                                                                             ------          ----------------     ----------------
                                                                      Amount       Ratio    Amount       Ratio   Amount     Ratio
                                                                      ------       -----    ------       -----   ------     -----
December 31, 2001                                                                        (Dollars in thousands)
      The Company
<S>                                                                   <C>          <C>      <C>          <C>     <C>          <C>
          Total Capital to risk weighted assets ................      $7,901       21.0%    $3,008       8.0%    $3,760       10.0%
          Tier 1 Capital to risk weighted assets ...............      $7,626       20.3%    $1,504       4.0%    $2,256        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $7,626       13.3%    $1,725       3.0%    $2,874        5.0%
      Clover Community Bank
          Total Capital to risk weighted assets ................      $7,234       19.2%    $3,008       8.0%    $3,760       10.0%
          Tier 1 Capital to risk weighted assets ...............      $6,959       18.5%    $1,504       4.0%    $2,256        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $6,959       12.1%    $1,725       3.0%    $2,874        5.0%

December 31, 2000
      The Company
          Total Capital to risk weighted assets ................      $7,887       23.5%    $2,684       8.0%    $3,355       10.0%
          Tier 1 Capital to risk weighted assets ...............      $7,633       22.8%    $1,342       4.0%    $2,013        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $7,633       14.7%    $1,561       3.0%    $2,602        5.0%
      Clover Community Bank
          Total Capital to risk weighted assets ................      $7,289       21.7%    $2,684       8.0%    $3,355       10.0%
          Tier 1 Capital to risk weighted assets ...............      $7,035       21.0%    $1,342       4.0%    $2,013        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $7,035       13.5%    $1,561       3.0%    $2,602        5.0%
</Table>

Inflation

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

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

Impact of Recent Accounting Changes

         FASB  ("Financial  Accounting  Standards  Board")  Statement  No.  133,
"Accounting for Derivative  Instruments and Hedging Activities," as subsequently
amended  by FASB  Statements  No.  137 and 138,  addresses  the  accounting  and
financial reporting for derivative instruments, including derivative instruments
embedded in other contracts and hedging  activities.  The Statement requires the
recognition  of all  derivatives  as either assets or liabilities in the balance
sheet and the  measurement  of these  instruments at fair value.  Also,  hedging
relationships  are required to be accounted for and disclosed in accordance with
the Statement.  The Statement,  as amended,  is required to be effective for all
fiscal  quarters of all fiscal  years  beginning  after June 15,  2000,  without
restatement of financial  statements of prior  periods.  The Company has adopted
the  provisions of the Statement  effective  with the fiscal  quarter  beginning
January  1,  2001.  However,  the  adoption  of this  Statement  has not had any
material adverse or beneficial effect on the consolidated  financial position or
results of operations of the Company.

                                       17
<Page>

         FASB Statement No. 141, "Business  Combinations,"  addresses accounting
and  reporting  for  business   combinations  and  supersedes  APB  ("Accounting
Principles  Board") Opinion No. 16, "Business  Combinations," and FASB Statement
No. 38, "Accounting for Preacquisition  Contingencies of Purchased Enterprises."
All business combinations within the scope of this Statement are to be accounted
for using the purchase method,  with use of the  pooling-of-interests  method no
longer  permitted.  The  provisions  of the  Statement  apply  to  all  business
combinations initiated after June 30, 2001, as well as all business combinations
accounted  for using the purchase  method for which the date of  acquisition  is
July 1, 2001, or later.  The adoption of this  Statement in 2001 has not had any
material adverse or beneficial effect on the consolidated  financial position or
results of operations of the Company.

         FASB  Statement  No.  142,  "Goodwill  and  Other  Intangible  Assets,"
addresses  financial  accounting  and reporting for acquired  goodwill and other
intangible assets and supersedes APB No. 17, "Intangible Assets." This statement
changes  the  accounting  for  goodwill  from  an  amortization   method  to  an
impairment-only  approach.  The  provisions of this Statement are required to be
applied  beginning  with fiscal years  beginning  after  December 15, 2001.  The
adoption  of this  Statement  as of January 1, 2002 is not  expected to have any
material adverse or beneficial effect on the consolidated  financial position or
results of operations of the Company.

         FASB Statement No. 143, "Accounting for Asset Retirement  Obligations,"
addresses financial accounting and reporting for obligations associated with the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  The  Statement  requires  recording the fair value of a liability for an
asset  retirement  obligation in the period in which it is incurred,  along with
increasing  the carrying  amount and  depreciation  of the related  asset.  This
statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning after June 15, 2002, with earlier application encouraged. The adoption
of this  Statement  as of January 1, 2003 is not  expected to have any  material
adverse or beneficial effect on the consolidated  financial  position or results
of operations of the Company.

         FASB Statement No. 144,  "Accounting  for the Impairment or Disposal of
Long-Lived  Assets,"  addresses  financial  accounting  and  reporting  for  the
impairment or disposal of long-lived  assets.  This  Statement  supersedes  FASB
Statement No. 121 and the accounting and reporting  provisions of APB No. 30 for
the disposal of a segment of a business,  as previously defined in that Opinion.
The provisions of this Statement are effective for financial  statements  issued
for fiscal years  beginning  after December 15, 2001, and interim periods within
those fiscal  years,  with early  application  encouraged.  The adoption of this
Statement as of January 1, 2002 is not expected to have any material  adverse or
beneficial  effect  on  the  consolidated   financial  position  or  results  of
operations of the Company.

         FASB Technical  Bulletin No. 01-1 defers until 2002  application of the
isolation  standards of FASB  Statement  No. 140 as applied to banks and certain
other financial institutions.  FASB Statement No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities,"  provides
accounting  and  reporting  standards  for  transfers  of  financial  assets and
extinguishments  of liabilities  based on a financial  components  approach that
focuses on retention or surrender of control of such assets or liabilities.  The
Statement  also requires the  reclassification  of financial  assets  pledged as
collateral  under certain  circumstances.  FASB  Statement 140 was effective for
transfers and servicing of financial  assets and  extinguishment  of liabilities
occurring   after  March  31,  2001,   and   effective   for   recognition   and
reclassification  of collateral and for disclosures  relating to  securitization
transactions and collateral for fiscal years ending after December 31, 2000. The
adoption  of FASB  Statement  No. 140 in 2001 and the  deferral  allowed by FASB
Technical  Bulletin No. 01-01 have not had any  material  adverse or  beneficial
effect on the  consolidated  financial  position or results of operations of the
Company.


                                       18
<Page>

Independent Auditors' Report




The Shareholders and Board of Directors
    of Clover Community Bankshares, Inc.

         We have audited the accompanying  consolidated  balance sheet of Clover
Community Bankshares,  Inc. and subsidiary as of December 31, 2001 and 2000, and
the related consolidated  statements of income, changes in shareholders' equity,
and cash flows for each of the three  years in the  period  ended  December  31,
2001.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the consolidated financial position of Clover
Community Bankshares,  Inc. and subsidiary as of December 31, 2001 and 2000, and
the consolidated  results of their operations and their  consolidated cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.



                                        s/Donald G. Jones and Company, P.A.

Donald G. Jones and Company, P.A.
Certified Public Accountants
Columbia, South Carolina
January 24, 2002




                                       19
<Page>

Consolidated Balance Sheet
Clover Community Bankshares, Inc.

<Table>
<Caption>
                                                                                                               December 31,
                                                                                                               ------------
                                                                                                        2001                   2000
                                                                                                        ----                   ----
Assets
<S>                                                                                                <C>                   <C>
     Cash and due from banks (Note B) ..................................................           $ 1,458,095           $ 1,668,386
     Interest-bearing deposits in other banks ..........................................                10,091                40,447
     Federal funds sold ................................................................             5,086,000                     -
     Securities available-for-sale (Note C) ............................................            16,924,339            17,892,816
     Other investments (Note D) ........................................................               250,000               250,000
     Loans, net of allowance for loan losses of $274,347 in 2001
       and $253,967 in 2000 (Note E) ...................................................            31,537,321            30,514,188
     Premises and equipment - net (Note F) .............................................             1,444,970               811,492
     Accrued interest receivable .......................................................               264,873               410,247
     Other assets ......................................................................               216,614               340,706
                                                                                                   -----------           -----------

            Total assets ...............................................................           $57,192,303           $51,928,282
                                                                                                   ===========           ===========

Liabilities
     Deposits (Note G)
         Noninterest bearing ...........................................................           $ 4,287,824           $ 3,125,584
         Interest bearing ..............................................................            40,665,302            36,290,416
                                                                                                   -----------           -----------
            Total deposits .............................................................            44,953,126            39,416,000
     Federal funds purchased ...........................................................                     -               470,000
     Long-term debt (Note H) ...........................................................             4,000,000             4,000,000
     Accrued interest payable ..........................................................               376,087               378,485
     Other liabilities .................................................................                26,660                   957
                                                                                                   -----------           -----------
            Total liabilities ..........................................................            49,355,873            44,265,442
                                                                                                   -----------           -----------

Commitments and contingent liabilities (Note M)

Shareholders' equity (Note I)
     Common stock - par value $.01, 10,000,000 shares authorized;
         issued and outstanding - 1,015,458 shares for 2001 and
         1,017,034 shares for 2000 .....................................................                10,154                10,170
     Capital surplus ...................................................................             3,456,396             3,477,515
     Retained earnings .................................................................             4,159,474             4,145,591
     Accumulated other comprehensive income ............................................               210,406                29,564
                                                                                                   -----------           -----------
            Total shareholders' equity .................................................             7,836,430             7,662,840
                                                                                                   -----------           -----------

            Total liabilities and shareholders' equity .................................           $57,192,303           $51,928,282
                                                                                                   ===========           ===========
</Table>












See accompanying notes to consolidated financial statements.



                                       20
<Page>

Consolidated Statement of Income
Clover Community Bankshares, Inc.

<Table>
<Caption>
                                                                                             Years Ended December 31,
                                                                                             ------------------------
                                                                                 2001                   2000                   1999
                                                                                 ----                   ----                   ----
Interest income
<S>                                                                           <C>                   <C>                   <C>
     Loans, including fees .......................................            $2,851,774            $2,998,296            $2,849,542
     Interest-bearing deposits in other banks ....................                 2,209                 3,477                19,523
     Securities
         Taxable .................................................               713,476               916,692               796,151
         Tax-exempt ..............................................               218,952               192,893               178,334
     Federal funds sold ..........................................               123,994               152,240               356,433
     Other investments ...........................................                16,405                18,518                25,576
                                                                              ----------            ----------            ----------
            Total interest income ................................             3,926,810             4,282,116             4,225,559
                                                                              ----------            ----------            ----------

Interest expense
     Time deposits $100,000 and over .............................               250,041               192,230               201,113
     Other deposits ..............................................             1,136,314             1,140,137             1,204,309
     Federal funds purchased .....................................                 4,885                 1,156                   161
     Long-term debt ..............................................               171,572               263,366               213,458
                                                                              ----------            ----------            ----------
            Total interest expense ...............................             1,562,812             1,596,889             1,619,041
                                                                              ----------            ----------            ----------

Net interest income ..............................................             2,363,998             2,685,227             2,606,518
Provision for loan losses (Note E) ...............................                33,500                46,700                     -
                                                                              ----------            ----------            ----------
Net interest income after provision ..............................             2,330,498             2,638,527             2,606,518
                                                                              ----------            ----------            ----------

Other income
     Service charges on deposit accounts .........................               469,189               417,873               400,383
     Credit life insurance commissions ...........................                12,581                16,650                16,723
     Other income ................................................                61,264                58,455                59,045
                                                                              ----------            ----------            ----------
            Total other income ...................................               543,034               492,978               476,151
                                                                              ----------            ----------            ----------

Other expenses (Notes J and L)
     Salaries and employee benefits ..............................               874,794               929,218               859,406
     Net occupancy expense .......................................               102,284                70,588                63,647
     Furniture and equipment expense .............................               204,999               235,450               217,801
     Other expense ...............................................               561,177               461,022               429,592
                                                                              ----------            ----------            ----------
            Total other expenses .................................             1,743,254             1,696,278             1,570,446
                                                                              ----------            ----------            ----------

Income before income taxes .......................................             1,130,278             1,435,227             1,512,223
Income tax expense (Note K) ......................................               353,621               456,972               492,907
                                                                              ----------            ----------            ----------
Net income .......................................................            $  776,657            $  978,255            $1,019,316
                                                                              ==========            ==========            ==========

Per share
     Average shares outstanding ..................................             1,017,386             1,017,645             1,014,655
     Net income ..................................................            $     0.76            $     0.96            $     1.00
</Table>






See accompanying notes to consolidated financial statements.



                                       21
<Page>


Consolidated Statement of Changes in Shareholders' Equity
Clover Community Bankshares, Inc.


<Table>
<Caption>
                                                     Common Stock
                                                     -------------                                      Accumulated
                                                Number of                   Capital        Retained  Other Comprehensive
                                                 Shares         Amount      Surplus        Earnings      Income (Loss)        Total
                                                 ------         ------      -------        --------      -------------        -----

<S>                                            <C>          <C>            <C>            <C>            <C>            <C>
Balance, January 1, 1999 .................     1,011,020    $    10,110    $ 3,323,861    $ 3,464,499    $   123,528    $ 6,921,998

Comprehensive income:
     Net income ..........................             -              -              -      1,019,316              -      1,019,316
     Change in unrealized holding gains
       and losses on available-for-sale
       securities, net of income tax effects           -              -              -              -       (239,064)      (239,064)
                                                                                                                        -----------
         Total comprehensive income ......             -              -              -              -              -        780,252
                                                                                                                        -----------
Cash dividends declared - $.60 per share .             -              -              -       (606,612)             -       (606,612)
Sales of common stock under dividend
     reinvestment plan, net of plan
     expenses of $13,580 (Note I) ........         4,778             48        118,043              -              -        118,091
Repurchase and retirement of common stock         (1,702)           (17)       (51,468)             -              -        (51,485)
                                             -----------    -----------    -----------    -----------    -----------    -----------
Balance, December 31, 1999 ...............     1,014,096         10,141      3,390,436      3,877,203       (115,536)     7,162,244

Comprehensive income:
     Net income ..........................             -              -              -        978,255              -        978,255
     Change in unrealized holding gains
       and losses on available-for-sale
       securities, net of income tax effects           -              -              -              -        145,100        145,100
                                                                                                                        -----------
         Total comprehensive income ......             -              -              -              -              -      1,123,355
                                                                                                                        -----------
Cash dividends declared - $.70 per share .             -              -              -       (709,867)             -       (709,867)
Sales of common stock under dividend
     reinvestment plan (Note I) ..........         6,118             61        173,181              -              -        173,242
Repurchase and retirement of common stock         (3,180)           (32)       (86,102)             -              -        (86,134)
                                             -----------    -----------    -----------    -----------    -----------    -----------
Balance, December 31, 2000 ...............     1,017,034         10,170      3,477,515      4,145,591         29,564      7,662,840

Comprehensive income:
     Net income ..........................             -              -              -        776,657              -        776,657
     Change in unrealized holding gains
       and losses on available-for-sale
       securities, net of income tax effects           -              -              -              -        180,842        180,842
                                                                                                                        -----------
         Total comprehensive income ......             -              -              -              -              -        957,499
                                                                                                                        -----------
Cash dividends declared - $.75 per share .             -              -              -       (762,774)             -       (762,774)
Sales of common stock under dividend
     reinvestment plan (Note I) ..........         3,708             37        112,915              -              -        112,952
Repurchase and retirement of common stock         (5,284)           (53)      (134,034)             -              -       (134,087)
                                             -----------    -----------    -----------    -----------    -----------    -----------
Balance, December 31, 2001 ...............     1,015,458    $    10,154    $ 3,456,396    $ 4,159,474    $   210,406    $ 7,836,430
                                             ===========    ===========    ===========    ===========    ===========    ===========
</Table>











See accompanying notes to consolidated financial statements.


                                       22
<Page>

Consolidated Statement of Cash Flows
Clover Community Bankshares, Inc.

<Table>
<Caption>
                                                                                                 Years Ended December 31,
                                                                                                 ------------------------
                                                                                         2001              2000             1999
                                                                                         ----              ----             ----
Operating activities
<S>                                                                                 <C>               <C>               <C>
     Net income ..............................................................      $   776,657       $   978,255       $ 1,019,316
     Adjustments to reconcile net income to net
         cash provided by operating activities
            Provision for loan losses ........................................           33,500            46,700                 -
            Depreciation .....................................................           94,613           134,115           121,198
            Deferred income taxes ............................................          (72,403)          (22,719)           77,119
            Securities accretion and premium amortization ....................            3,890             3,094           (28,426)
            Amortization of net loan fees and costs ..........................          (37,591)          (23,680)          (13,163)
            Gain on disposal of fixed assets .................................           (6,844)                -                 -
            Decrease (increase) in interest receivable .......................          145,374           (48,784)          (45,224)
            (Decrease) increase in interest payable ..........................           (2,398)           59,036           (73,195)
            Decrease (increase) in prepaid expenses
                and other assets .............................................          101,911           (33,091)          (55,435)
            Increase in other liabilities and accrued expenses ...............            9,854               189               768
                                                                                    -----------       -----------       -----------
                Net cash provided by operating activities ....................        1,046,563         1,093,115         1,002,958
                                                                                    -----------       -----------       -----------

Investing activities
     Net decrease in interest-bearing deposits in other banks ................                -                 -           294,000
     Purchases of available-for-sale securities ..............................       (4,347,611)       (1,526,980)       (7,508,873)
     Maturities of available-for-sale securities .............................        5,594,324         1,411,894         5,909,764
     Proceeds from sales of other investments ................................                -                 -           127,400
     Net increase in loans made to customers .................................       (1,014,653)       (1,294,441)         (421,865)
     Purchases of premises and equipment .....................................         (774,552)          (71,228)         (279,945)
     Proceeds from sale of equipment .........................................           53,305                 -                 -
     Proceeds from sale of other assets ......................................            4,760            18,276            14,500
                                                                                    -----------       -----------       -----------
                Net cash used by investing activities ........................         (484,427)       (1,462,479)       (1,865,019)
                                                                                    -----------       -----------       -----------

Financing activities
     Net increase (decrease) in demand deposits, interest
         bearing transaction accounts and savings accounts ...................        2,508,046           153,365        (2,037,802)
     Net increase (decrease) in certificates of deposit and other
         time deposits .......................................................        3,029,080        (1,594,889)       (2,711,309)
     (Decrease) increase in federal funds purchased ..........................         (470,000)          470,000                 -
     Proceeds from long-term debt ............................................                -         4,000,000                 -
     Repayment of long-term debt .............................................                -        (4,000,000)                -
     Sales of common stock under dividend reinvestment plan,
         net of plan expenses in 1999 (Note I) ...............................          112,952           173,242           118,091
     Repurchase and retirement of common stock ...............................         (134,087)          (86,134)          (51,485)
     Cash dividends paid .....................................................         (762,774)         (709,867)         (606,612)
                                                                                    -----------       -----------       -----------
                Net cash provided (used) by financing activities .............        4,283,217        (1,594,283)       (5,289,117)
                                                                                    -----------       -----------       -----------
Increase (decrease) in cash and cash equivalents .............................        4,845,353        (1,963,647)       (6,151,178)
Cash and cash equivalents, beginning .........................................        1,708,833         3,672,480         9,823,658
                                                                                    -----------       -----------       -----------
Cash and cash equivalents, ending ............................................      $ 6,554,186       $ 1,708,833       $ 3,672,480
                                                                                    ===========       ===========       ===========
</Table>



See accompanying notes to consolidated financial statements.




                                       23
<Page>


Notes to Consolidated Financial Statements
Clover Community Bankshares, Inc.


NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization.  Clover Community Bankshares, Inc. (the "Company"), a bank holding
company,  and its wholly-owned  subsidiary,  Clover Community Bank (the "Bank"),
are  engaged  in  providing  domestic  commercial  banking  services  from their
headquarters office in Clover,  South Carolina.  The Company is a South Carolina
corporation and its banking subsidiary is a state chartered commercial bank with
its deposits insured by the Federal Deposit Insurance  Corporation (the "FDIC").
Therefore,  the Company and its bank subsidiary  operate under the  supervision,
rules and  regulations  of the Federal  Reserve  Board,  FDIC and South Carolina
State Board of Financial  Institutions.  The holding company was incorporated on
March  4,  1998  and  Clover  Community  Bank was  organized  in 1986 and  first
commenced commercial operations on October 1, 1987.

The  subsidiary,  Clover  Community  Bank, is a  community-oriented  institution
offering a full range of  traditional  banking  services,  with the exception of
trust  services.  Substantially  all of its  loans are made to  individuals  and
businesses  within  the  Clover  area  of York  County,  South  Carolina.  Also,
substantially  all of its deposits are acquired within its local market area and
no brokered deposits are accepted.

Principles  of  Consolidation  and  Basis  of  Presentation.   The  consolidated
financial  statements include the accounts of the parent company and its banking
subsidiary  after  elimination  of all  significant  intercompany  balances  and
transactions.  The  accounting  and  reporting  policies  of the Company and its
subsidiary are in conformity with generally accepted  accounting  principles and
general practices within the banking industry.

Accounting  Estimates.  In preparing  financial  statements in  conformity  with
generally  accepted  accounting  principles,  management  is  required  to  make
estimates  and  assumptions  that affect the  reported  amounts of revenues  and
expenses during the reporting period.  Actual results could differ significantly
from those estimates.  Material  estimates that are particularly  susceptible to
significant change in the near-term relate to the determination of the allowance
for loan losses.  In connection with the determination of the allowance for loan
losses, management has identified specific loans as well as adopting a policy of
providing amounts for loan valuation  purposes which are not identified with any
specific loans but are derived from actual loss experience  ratios,  loan types,
loan volume,  economic  conditions and industry  standards.  Management believes
that the allowance for loan losses is adequate.  While management uses available
information to recognize losses on loans,  future additions to the allowance may
be necessary based on changes in economic  conditions.  In addition,  regulatory
agencies, as an integral part of their examination process,  periodically review
the banking  subsidiary's  allowance for loan losses.  Such agencies may require
the  recognition of additions to the allowance  based on their  judgments  about
information available to them at the time of their examination.

Securities. Equity securities that have readily determinable fair values and all
debt  securities  are  classified  generally at the time of purchase into one of
three  categories:   held-to-maturity,   trading  or  available-for-sale.   Debt
securities  which the  Company  has the  positive  intent and ability to hold to
ultimate  maturity are  classified  as  held-to-maturity  and  accounted  for at
amortized  cost.  Debt and equity  securities that are bought and held primarily
for sale in the near term are  classified as trading and are accounted for on an
estimated fair value basis,  with unrealized  gains and losses included in other
income. However, the Company has never held any securities for trading purposes.
Securities not classified as either  held-to-maturity  or trading are classified
as available-for-sale and are accounted for at estimated fair value.  Unrealized
holding  gains and losses on  available-for-sale  securities  are excluded  from
earnings and recorded as other  comprehensive  income,  net of applicable income
tax effects. Dividend and interest income, including amortization of any premium
or accretion of discount arising at acquisition, is included in earnings for all
three  categories of securities.  Realized gains and losses on all categories of
securities are included in other operating  income,  based on the amortized cost
of the specific security on a trade date basis.

Other Investments.  Other investments consist of restricted securities which are
carried  at  cost.  Management   periodically  evaluates  these  securities  for
impairment,  with any appropriate downward valuation adjustments being made when
necessary.

Loans and Interest Income.  Loans are carried at principal amounts  outstanding,
increased  or reduced by  deferred  net loan costs or fees.  Interest  income on
loans is recognized  using the interest method based upon the principal  amounts
outstanding.  Loan  origination  and  commitment  fees and  certain  direct loan
origination costs (principally  salaries and employee benefits) are deferred and
amortized as an adjustment of the related loan's yield. Generally, these amounts
are amortized over the contractual life of the related loans or commitments.

                                       24
<Page>

A loan is considered  to be impaired  when, in  management's  judgment  based on
current  information and events, it is probable that the obligation's  principal
or interest will not be collectible in accordance with the terms of the original
loan agreement.  Impaired loans,  when not material,  are carried in the balance
sheet at a value not to exceed their  observable  market price or the fair value
of the collateral if the repayment of the loan is expected to be provided solely
by the underlying  collateral.  The carrying value of any material impaired loan
is measured based on the present value of expected future cash flows  discounted
at the loan's effective  interest rate,  which is the contractual  interest rate
adjusted for any deferred  loan fees or costs,  premium or discount  existing at
the inception or acquisition of the loan. Generally,  the accrual of interest is
discontinued on impaired loans and any previously accrued interest on such loans
is reversed against current income. Any subsequent interest income is recognized
on a cash basis when received unless  collectibility of a significant  amount of
principal is in serious doubt. In such cases,  collections are credited first to
the remaining  principal  balance on a cost recovery  basis. An impaired loan is
not returned to accrual status unless principal and interest are current and the
borrower has demonstrated the ability to continue making payments as agreed.

Allowance  for Loan Losses.  An allowance for possible loan losses is maintained
at a level deemed  appropriate by management to provide adequately for known and
inherent risks in the loan  portfolio.  When  management  determines that a loan
will not perform  substantially  as agreed, a review of the loan is initiated to
ascertain whether it is more likely than not that a loss has occurred.  If it is
determined  that a loss is likely,  the estimated  amount of the loss is charged
off and deducted from the allowance.  The provision for possible loan losses and
recoveries  on  loans  previously  charged  off  are  added  to  the  allowance.
Determining  the amount and adequacy of the allowance  for loan losses  involves
estimating  uncertain  future events and their effects based on judgment applied
to currently known facts and circumstances.  Changes in the estimated  allowance
for loan losses necessitated as new events occur or more information is obtained
are accounted for as changes in accounting estimates in the accounting period in
which the change occurs.

Management  considers the Company's  historical  loan loss  experience,  current
national and local  economic  conditions  affecting  the  borrowers'  ability to
repay,  the volume of loans,  the trends in  delinquent,  impaired and potential
problem loans,  and the amount and quality of collateral  securing such loans in
reviewing  the adequacy of the  allowance for loan losses.  In  calculating  its
estimate, management applies a consistent methodology that is updated quarterly.
The calculation  involves applying various estimated  percentage  factors to the
loan  portfolio  categorized  by purpose and type of underlying  collateral  and
utilizing  assessed  risk grades from the Company's  ongoing  system of detailed
loan  reviews.  For some loans,  particularly  those  identified  as impaired or
potential  problem,  specific  allocations  are  made  in the  calculation.  The
methodology also includes  assessing the risk associated with  off-balance-sheet
extensions of credit such as loan commitments and standby letters of credit.

Premises  and  Equipment.  Premises  and  equipment  are  stated  at cost,  less
accumulated   depreciation.   The   provision  for   depreciation   is  computed
predominantly  using  the  straight-line   method.  Rates  of  depreciation  are
generally based on the following estimated useful lives:  building - 31.5 years;
furniture  and  equipment - 5 to 7 years.  The cost of assets sold or  otherwise
disposed of, and the related  allowance for  depreciation is eliminated from the
accounts and the  resulting  gains or losses are  reflected in the  consolidated
income  statement.  Maintenance  and repairs  are charged to current  expense as
incurred and the costs of major renewals and improvements are capitalized.

Other Real  Estate.  Other real  estate  includes  properties  acquired  through
foreclosure or acceptance of a deed in lieu of foreclosure. Other real estate is
initially recorded at the lower of cost or the estimated fair market value, less
estimated  selling  costs.  Loan losses  arising  from the  acquisition  of such
property are charged to the allowance  for loan losses.  An allowance for losses
on  other  real  estate  is  maintained   for  subsequent   downward   valuation
adjustments.  Gains or  losses  on  other  real  estate  sold,  writedowns  from
subsequent  reevaluation  and other holding costs are charged to other operating
expense as incurred.

Advertising.  The Company  expenses  advertising and promotion costs as they are
incurred.

Retirement Plan. The Company has a salary reduction profit sharing plan pursuant
to Section 401(k) of the Internal  Revenue Code as more fully  described in Note
L. The Company does not sponsor any postretirement or postemployment benefits.

Deferred  Income  Taxes.  The Company uses an asset and  liability  approach for
financial accounting and reporting of deferred income taxes. Deferred tax assets
and  liabilities  are determined  based on the difference  between the financial
statement  and income tax bases of assets and  liabilities  as  measured  by the
currently  enacted  tax rates  which are  assumed  will be in effect  when these
differences reverse. If it is more likely than not that some portion or all of a
deferred tax asset will not be realized,  a valuation  allowance is  recognized.
Deferred  income tax expense or credit is the result of changes in deferred  tax
assets and liabilities.

                                       25
<Page>

Earnings Per Share. Net income per share is calculated by dividing net income by
the weighted average number of shares of the Company's common stock  outstanding
during the period.  The Company has no dilutive  potential common shares,  stock
options or warrants outstanding.

Comprehensive  Income.  Comprehensive  income consists of net income or loss for
the current period and other comprehensive income, defined as income,  expenses,
gains and  losses  that  bypass  the  consolidated  statement  of income and are
reported directly in a separate  component of shareholders'  equity. The Company
classifies  and  reports  items of other  comprehensive  income or loss by their
nature, reports total comprehensive income or loss in the consolidated statement
of changes in  shareholders'  equity,  and displays the  accumulated  balance of
other  comprehensive  income  or loss  separately  in the  shareholders'  equity
section of the consolidated balance sheet.

The components of other comprehensive income or loss and related tax effects are
as follows:
<Table>
<Caption>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                    2001                2000               1999
                                                                                    ----                ----               ----
<S>                                                                             <C>                  <C>                  <C>
Change in unrealized holding gains and
       losses on available-for-sale securities .....................            $ 282,126            $ 226,364            $(372,955)
Income tax expense (benefit) on other
     comprehensive income (loss) ...................................              101,284               81,264             (133,891)
                                                                                ---------            ---------            ---------
         Net-of-tax amount .........................................            $ 180,842            $ 145,100            $(239,064)
                                                                                =========            =========            =========
</Table>

Consolidated  Statement of Cash Flows. The consolidated  statement of cash flows
reports  net  cash  provided  or  used by  operating,  investing  and  financing
activities and the net effect of those flows on cash and cash equivalents.  Cash
equivalents  include  amounts due from banks,  federal funds sold and securities
purchased under agreements to resell.

During  2001,  2000 and 1999,  interest  paid on deposits  and other  borrowings
amounted to $1,565,210,  $1,537,853  and  $1,692,236,  respectively.  Income tax
payments of  $330,000,  $568,500 and  $422,800  were made during 2001,  2000 and
1999, respectively.  In 2000 and 1999, non-cash transfers of $9,149 and $25,086,
respectively,  were made from loans to other assets for the repossession of loan
collateral.  During 2001, 2000 and 1999, noncash valuation  adjustments totaling
$282,126,  $226,364  and  $372,955  were made which  increased,  increased,  and
decreased,  respectively,  the carrying amount of available-for-sale securities.
In 2001,  accumulated other comprehensive  income increased $180,842 and related
net deferred  income tax assets or  liabilities  changed by  $101,284;  in 2000,
accumulated  other  comprehensive  income  increased  $145,100  and  related net
deferred  income tax assets or  liabilities  changed by  $81,264;  and, in 1999,
accumulated  other  comprehensive  income  decreased  $239,064  and  related net
deferred income tax assets or liabilities changed by $133,891.

Fair Value Estimates. Fair value  estimates are made at a specific point in time
based on relevant  market  information  about the  financial  instrument.  These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the  Company's  entire  holdings of a particular  financial
instrument. Because no active trading market exists for a significant portion of
the  Company's  financial  instruments,   fair  value  estimates  are  based  on
management's  judgments  regarding  future  expected  loss  experience,  current
economic conditions, risk characteristics of various financial instruments,  and
other   factors.   These   estimates  are   subjective  in  nature  and  involve
uncertainties  and  matters of  significant  judgment  and  therefore  cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.

Fair value  estimates are based on existing on and  off-balance-sheet  financial
instruments  without  attempting  to estimate  the value of  anticipated  future
business  and the  value of  assets  and  liabilities  that  are not  considered
financial   instruments.   Significant  assets  and  liabilities  that  are  not
considered  financial assets or liabilities  include net deferred tax assets and
premises and equipment. In addition, the income tax ramifications related to the
realization of unrealized gains and losses can have a significant effect on fair
value estimates and have not been considered in the estimates.

For cash and due from banks,  interest-bearing  deposits in other banks, federal
funds sold, other  investments,  federal funds  purchased,  and accrued interest
receivable and payable, the carrying amount approximates estimated fair value.

NOTE B - CASH AND DUE FROM BANKS

Banks are  generally  required by regulation to maintain an average cash reserve
balance  based on a  percentage  of  deposits.  The average  amounts of the cash
reserve balances at December 31, 2001 and 2000, were approximately  $216,000 and
$224,000, respectively.

                                       26
<Page>

NOTE C - SECURITIES

The aggregate amortized cost and estimated fair values of securities, as well as
gross unrealized gains and losses of securities were as follows:
<Table>
<Caption>
                                                                       December 31,
                                                                       ------------
                                               2001                                                    2000
                                               ----                                                    ----
                                        Gross        Gross                                      Gross        Gross
                                      Unrealized   Unrealized   Estimated                     Unrealized  Unrealized   Estimated
                         Amortized     Holding      Holding        Fair         Amortized      Holding      Holding       Fair
                           Cost         Gains        Losses       Value           Cost         Gains        Losses       Value
                           ----         -----        ------       -----           ----         -----        ------       -----
Available-for-sale
<S>                  <C>           <C>           <C>           <C>           <C>           <C>           <C>           <C>
 U.S. Government
     agencies ....   $ 3,122,733   $    66,040   $     1,119   $ 3,187,654   $ 7,329,060   $    23,281   $    70,246   $ 7,282,095
 State, county and
     municipal ...     4,259,767       114,367        18,338     4,355,796     4,171,924        65,537             -     4,237,461
 Mortgage-backed
     securities ..     9,213,592       195,931        28,634     9,380,889     6,345,713       155,676       128,129     6,373,260
                     -----------   -----------   -----------   -----------   -----------   -----------   -----------   -----------
       Total .....   $16,596,092   $   376,338   $    48,091   $16,924,339   $17,846,697   $   244,494   $   198,375   $17,892,816
                     ===========   ===========   ===========   ===========   ===========   ===========   ===========   ===========
</Table>

The  amortized  cost and  estimated  fair  value of  securities  by  contractual
maturity are shown below:

<Table>
<Caption>
                                                                                            December 31,
                                                                             2001                                 2000
                                                                             ----                                 ----
                                                                  Amortized         Estimated          Amortized         Estimated
                                                                     Cost           Fair Value            Cost           Fair Value
                                                                     ----           ----------            ----           ----------
Available-for-sale
<S>                                                             <C>                <C>                <C>                <C>
     Due in one year or less ...........................        $   280,000        $   285,332        $   325,097        $   325,302
     Due after one through five years ..................          2,032,979          2,081,016          3,529,226          3,516,642
     Due after five through ten years ..................          3,202,404          3,310,828          6,375,412          6,404,975
     Due after ten years ...............................          1,867,117          1,866,274          1,271,249          1,272,637
                                                                -----------        -----------        -----------        -----------
                                                                  7,382,500          7,543,450         11,500,984         11,519,556
     Mortgage-backed securities ........................          9,213,592          9,380,889          6,345,713          6,373,260
                                                                -----------        -----------        -----------        -----------
         Total .........................................        $16,596,092        $16,924,339        $17,846,697        $17,892,816
                                                                ===========        ===========        ===========        ===========
</Table>

The fair value of U.S. Treasury and U.S.  Government agencies debt securities is
estimated based on published closing quotations. The fair value of state, county
and municipal  securities is generally not available from published  quotations;
consequently,  their fair value  estimates are based on matrix pricing or quoted
market prices of similar  instruments  adjusted for credit  quality  differences
between the quoted  instruments and the securities being valued.  Fair value for
mortgage-backed securities is estimated primarily using dealers' quotes.

There were no transfers to other categories of available-for-sale  securities in
2001, 2000 and 1999.

At December 31, 2001 and 2000,  securities  with a carrying amount of $1,401,149
and  $1,714,382,  respectively,  were  pledged as  collateral  to secure  public
deposits.

As of December 31, 2001 and 2000, concentrations in investments in state, county
and municipal  obligations  secured by or payable from the same taxing authority
or revenue  source that  exceeded  ten percent of  shareholders'  equity were as
follows:
<Table>
<Caption>
                                                                                          December 31,
                                                                                          ------------
                                                                               2001                            2000
                                                                               ----                            ----
                                                                      Amortized      Estimated        Amortized      Estimated
                                                                         Cost        Fair Value          Cost       Fair Value
                                                                         ----        ----------          ----       ----------

<S>                                                                    <C>             <C>             <C>            <C>
Town of Clover, S.C. (Not rated) .........................             $     -         $     -         $820,000       $820,000
</Table>

                                       27
<Page>

NOTE D - OTHER INVESTMENTS

Other investments consisted of:

                                                                December 31,
                                                            2001          2000
                                                            ----          ----

Federal Home Loan Bank stock .....................       $200,000       $200,000
Community Financial Services, Inc. stock .........         50,000         50,000
                                                         --------       --------
              Total ..............................       $250,000       $250,000
                                                         ========       ========


NOTE E - LOANS

Loans consisted of the following:

<Table>
<Caption>
                                                                                       December 31,
                                                                                       ------------
                                                                       2001                                    2000
                                                                       ----                                    ----
                                                          Carrying            Estimated              Carrying            Estimated
                                                           Amount             Fair Value              Amount             Fair Value
                                                           ------             ----------              ------             ----------

<S>                                                    <C>                   <C>                  <C>                   <C>
Commercial and industrial ....................         $ 12,330,639          $ 12,322,917         $  8,502,147          $  8,353,209
Real estate- construction ....................            2,575,577             2,561,414            4,422,181             4,334,487
Real estate - mortgage .......................           12,284,506            12,436,847           13,131,338            12,745,441
Consumer installment .........................            4,652,396             4,479,747            4,731,355             4,672,042
                                                       ------------          ------------         ------------          ------------
         Total ...............................           31,843,118            31,800,925           30,787,021            30,105,179
Less
     Allowance for loan losses ...............             (274,347)                    -             (253,967)                    -
     Deferred net loan fees ..................              (31,450)                    -              (18,866)                    -
                                                       ------------          ------------         ------------          ------------
         Loans - net .........................         $ 31,537,321          $ 31,800,925         $ 30,514,188          $ 30,105,179
                                                       ============          ============         ============          ============
</Table>

Fair  values  are  estimated  for  loan   categories   with  similar   financial
characteristics.  Within each category, the fair value of loans is calculated by
discounting  estimated cash flows through the estimated maturity using estimated
market discount rates that reflect the credit and interest rate risk inherent in
the loan. For certain  categories of loans, such as variable rate loans,  credit
card receivables,  and other lines of credit, the carrying amount,  adjusted for
credit  risk,  is a  reasonable  estimate  of fair  value  because  there  is no
contractual maturity or because the Company has the ability to reprice the loans
as interest rate changes  occur.  Since the discount  rates are based on current
loan rates offered as well as management's estimates,  the fair values presented
may not necessarily be indicative of the value negotiated in an actual sale.

Loans which  management has identified as impaired  generally are  nonperforming
loans.  Nonperforming  loans include nonaccrual loans or loans which are 90 days
or more delinquent as to principal or interest payments.  Following is a summary
of activity regarding the Company's impaired loans:

                                                                   December 31,
                                                                   ------------
                                                                 2001       2000
                                                                 ----       ----
Investment in impaired loans
     Nonaccrual ............................................   $     -   $    10
     Accruing 90 days and over past due ....................         -       619
                                                               -------   -------
         Total .............................................   $     -   $   629
                                                               =======   =======

Average total investment in impaired loans during the year .   $ 4,250   $14,157
Allowance for loan losses on impaired loans ................         -         -


The average  total  investment in impaired  loans during 1999 was $3,500.  There
were no outstanding commitments at December 31, 2001 to lend additional funds to
debtors owing amounts on impaired loans.

                                       28
<Page>

As of December 31, 2001 and 2000,  there were no significant  concentrations  of
credit risk in any single  borrower or groups of borrowers.  The Company's  loan
portfolio   consists  primarily  of  extensions  of  credit  to  businesses  and
individuals in its market area within York County,  South Carolina.  The economy
of this area is diversified  and does not depend on any one industry or group of
related industries.  Management has established loan policies and practices that
include set  limitations  on  loan-to-collateral  value for  different  types of
collateral,  requirements  for  appraisals,  obtaining and  maintaining  current
credit and financial information on certain borrowers, and credit approvals.

Transactions in the allowance for loan losses are summarized below:

                                                  Years Ended December 31,
                                                  ------------------------
                                            2001           2000           1999
                                            ----           ----           ----

Balance at January 1 ..............     $ 253,967      $ 258,762      $ 265,149
Provision charged to expense ......        33,500         46,700              -
Recoveries ........................         1,297            872          2,365
Charge-offs .......................       (14,417)       (52,367)        (8,752)
                                        ---------      ---------      ---------
Balance at December 31 ............     $ 274,347      $ 253,967      $ 258,762
                                        =========      =========      =========


Certain  officers  and  directors  of the  Company  and  its  subsidiary,  their
immediate  families and business interests were loan customers of, and had other
transactions  with the  banking  subsidiary  in the normal  course of  business.
Related party loans are made on substantially the same terms, including interest
rates  and  collateral,   as  those   prevailing  at  the  time  for  comparable
transactions  with unrelated parties and do not involve more than normal risk of
collectibility.  The aggregate  dollar amount of these loans was  $3,301,290 and
$2,420,100 at December 31, 2001 and 2000, respectively.  During 2001, $2,837,567
of new loans were made and repayments totaled $1,956,377.


                                       29
<Page>

NOTE F - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

                                                             December 31,
                                                             ------------
                                                         2001             2000
                                                         ----             ----

Land .........................................       $  978,822       $  322,949
Buildings and land improvements ..............          600,041          600,041
Furniture and equipment ......................        1,006,888        1,076,206
                                                     ----------       ----------
     Total ...................................        2,585,751        1,999,196
Accumulated depreciation .....................        1,140,781        1,187,704
                                                     ----------       ----------
          Premises and equipment - net .......       $1,444,970       $  811,492
                                                     ==========       ==========


Depreciation  expense for the years ended  December 31, 2001,  2000 and 1999 was
$94,613, $134,115 and $121,198, respectively.

Clover  Community  Bank has applied for and received  permission  from the South
Carolina State Board of Financial Institutions and the Federal Deposit Insurance
Corporation  to  establish  a  branch  office  in Lake  Wylie,  South  Carolina.
Management  expects to open for business at this  location  sometime in the last
half of 2002.  In 2001,  a parcel of land for the new office was  acquired  at a
cost of $655,873.  At December  31, 2001,  no  construction  contracts  had been
entered  into;  however,  it is expected  that the  additional  expenditures  to
construct a building and acquire  necessary  furniture and equipment  will be in
the range of $750,000 to $850,000.


NOTE G - DEPOSITS

A summary of deposits follows:

<Table>
<Caption>
                                                                                            December 31,
                                                                                            ------------
                                                                              2001                                2000
                                                                              ----                                ----
                                                                  Carrying          Estimated          Carrying           Estimated
                                                                   Amount          Fair Value           Amount            Fair Value
                                                                   ------          ----------           ------            ----------

<S>                                                             <C>                <C>                <C>                <C>
Noninterest bearing demand .............................        $ 4,287,824        $ 4,287,824        $ 3,125,584        $ 3,125,584
Interest bearing transaction accounts ..................         13,893,808         13,893,808         12,600,193         12,600,193
Savings ................................................          2,812,056          2,812,056          2,759,865          2,759,865
Time deposits $100,000 and over ........................          6,729,660          6,750,661          4,126,342          4,147,529
Other time deposits ....................................         17,229,778         17,253,837         16,804,016         16,829,363
                                                                -----------        -----------        -----------        -----------
     Total deposits ....................................        $44,953,126        $44,998,186        $39,416,000        $39,462,534
                                                                ===========        ===========        ===========        ===========
</Table>


The fair value of deposits with no stated maturity  (noninterest bearing demand,
interest  bearing  transaction  accounts  and  savings)  is equal to the  amount
payable on demand,  or carrying  amount,  as of December 31, 2001 and 2000.  The
fair  value of time  deposits  is  estimated  based on the  discounted  value of
contractual  cash  flows.  The  discount  rates were  estimated  using the rates
currently  offered as of  December,  31, 2001 and 2000,  for deposits of similar
remaining maturities.

At December 31, 2001, the scheduled maturities of time deposits were as follows:

                    Year                                             Amount
                    ----                                             ------

                     2002                                       $ 19,761,183
                     2003                                          4,151,255
                     2004                                             19,000
                     2005                                              3,000
                     2006 and thereafter                              25,000


                                       30
<Page>

NOTE H - LONG-TERM DEBT

Long-term  debt at December 31, 2001 and 2000  consisted  of a  $4,000,000  note
issued by the Bank to the Federal Home Loan Bank of Atlanta (the "FHLB").

<Table>
<Caption>
                                                                                             December 31,
                                                                                             ------------
                                                                               2001                             2000
                                                                               ----                             ----
                                                                   Carrying          Estimated         Carrying          Estimated
                                                                    Amount          Fair Value          Amount           Fair Value
                                                                    ------          ----------          ------           ----------
Floating rate notes issued to the Federal Home
     Loan Bank of Atlanta
<S>                                                               <C>               <C>              <C>                  <C>
         Due November 28, 2003 .........................          $4,000,000        $4,000,000       $   4,000,000        $4,000,000

         Interest rate at period end ...................                2.02%                -                6.71%                -
</Table>


The note is secured by a lien on all of the Bank's 1-4 family  residential first
lien mortgage loans which had a carrying value of approximately $7,885,000 as of
December 31, 2001.  The Bank has an additional  long-term debt  availability  of
approximately  $1,914,000  from the FHLB that had not been drawn at December 31,
2001.

The fair value of the variable rate  long-term debt is estimated at the carrying
amount because the interest rate associated with such debt reprices  immediately
with changes in the lender's  program rate,  and  management is not aware of any
significant change in the credit risk associated with the debt.


NOTE I - SHAREHOLDERS' EQUITY

Restrictions  on  Subsidiary  Dividends,   Loans  or  Advances.  South  Carolina
regulations restrict the amount of dividends that banks can pay to shareholders.
Any of the Bank's  dividends to the parent  company in an amount  exceeding  the
amount of the current  year's  earnings are subject to the prior approval of the
South Carolina Commissioner of Banking and are generally allowable only from its
undivided profits. In addition, dividends paid by the Bank to the parent company
would be prohibited if the effect  thereof would cause the Bank's  capital to be
reduced below applicable minimum capital requirements. At December 31, 2001, the
Bank's  undivided  profits  totaled  $3,624,753.  Under  Federal  Reserve  Board
regulations, the amounts of loans or advances from the banking subsidiary to the
parent company are also restricted.

Accumulated  Other  Comprehensive  Income.  As of  December  31,  2001 and 2000,
accumulated other comprehensive  income included as an increase in shareholders'
equity  in  the  accompanying   consolidated  balance  sheet  consisted  of  the
accumulated   changes   in  the   unrealized   holding   gains  and   losses  on
available-for-sale securities, net of income tax effects.

Dividend  Reinvestment  Plan. As of February 4, 1999, the Company registered and
reserved  50,000  shares of its  authorized  but unissued  common stock for sale
through its Dividend  Reinvestment  Plan (the "Plan").  Under the Plan, which is
open only to residents of South Carolina,  shareholders may purchase  additional
shares by  foregoing  the  payment  in cash of cash  dividends  declared  by the
Company and instead accepting  additional shares of common stock. Such shares of
additional  stock are issued at a price determined in accordance with the plan's
pricing  formula.  There are no provisions for other  periodic  stock  purchases
under the Plan.  Shares  issued  under the Plan are newly issued  shares.  As of
December 31, 2001, a total of 14,604 shares had been issued,  with 35,396 of the
reserved shares available for future issuance.

Regulatory Capital.  All bank holding companies and banks are subject to various
regulatory  capital  requirements  administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory, and
possibly  additional  discretionary,  actions by regulators that, if undertaken,
could have a direct  material  effect on the  Company's  consolidated  financial
statements.  Under capital adequacy guidelines and the regulatory  framework for
prompt  corrective  action,  bank holding companies and banks must meet specific
capital  guidelines  that  involve   quantitative   measures  of  their  assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting  practices.  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 the Company and its banking  subsidiary to maintain  minimum amounts and
ratios set forth in the table  below of Total and Tier 1 Capital,  as defined in
the regulations,  to risk weighted assets, as defined, and of Tier 1 Capital, as
defined, to average assets, as defined.  Management believes, as of December 31,


                                       31
<Page>

2001 and 2000,  that the Company and its  subsidiary  bank  exceeded all capital
adequacy minimum requirements.

As of December 31, 2001, the most recent  notification from the FDIC categorized
Clover  Community Bank as well  capitalized  under the regulatory  framework for
prompt corrective action. To be categorized as well capitalized, the Company and
its  banking   subsidiary  must  maintain  minimum  Total  risk-based,   Tier  1
risk-based,  and Tier 1 leverage ratios as set forth in the table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed Clover  Community  Bank's  category.  The Company's and Clover Community
Bank's actual capital amounts and ratios are also presented in the table.

<Table>
<Caption>
                                                                                               Minimum for        Minimum to be
                                                                             Actual         Capital Adequacy     Well Capitalized
                                                                             ------         ----------------     ----------------
                                                                      Amount       Ratio    Amount      Ratio    Amount       Ratio
                                                                      ------       -----    ------      -----    ------       -----
December 31, 2001                                                                         (Dollars in thousands)
<S>                                                                   <C>          <C>      <C>          <C>     <C>          <C>
      The Company
          Total Capital to risk weighted assets ................      $7,901       21.0%    $3,008       8.0%    $3,760       10.0%
          Tier 1 Capital to risk weighted assets ...............      $7,626       20.3%    $1,504       4.0%    $2,256        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $7,626       13.3%    $1,725       3.0%    $2,874        5.0%
      Clover Community Bank
          Total Capital to risk weighted assets ................      $7,234       19.2%    $3,008       8.0%    $3,760       10.0%
          Tier 1 Capital to risk weighted assets ...............      $6,959       18.5%    $1,504       4.0%    $2,256        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $6,959       12.1%    $1,725       3.0%    $2,874        5.0%

December 31, 2000
      The Company
          Total Capital to risk weighted assets ................      $7,887       23.5%    $2,684       8.0%    $3,355       10.0%
          Tier 1 Capital to risk weighted assets ...............      $7,633       22.8%    $1,342       4.0%    $2,013        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $7,633       14.7%    $1,561       3.0%    $2,602        5.0%
      Clover Community Bank
          Total Capital to risk weighted assets ................      $7,289       21.7%    $2,684       8.0%    $3,355       10.0%
          Tier 1 Capital to risk weighted assets ...............      $7,035       21.0%    $1,342       4.0%    $2,013        6.0%
          Tier 1 Capital to average assets (leverage) ..........      $7,035       13.5%    $1,561       3.0%    $2,602        5.0%
</Table>



NOTE J - OTHER EXPENSES

Other expenses are summarized below:

<Table>
<Caption>
                                                                                              Years Ended December 31,
                                                                                              ------------------------
                                                                                2001                   2000                   1999
                                                                                ----                   ----                   ----

<S>                                                                         <C>                    <C>                    <C>
Salaries and employee benefits ................................             $  874,794             $  929,218             $  859,406
Net occupancy expense .........................................                102,284                 70,588                 63,647
Furniture and equipment expense ...............................                204,999                235,450                217,801
Other expense
     Stationery, printing and postage .........................                111,345                106,267                110,717
     Telephone ................................................                 17,498                 17,311                 16,662
     Advertising ..............................................                 14,571                  7,208                  9,082
     Professional services ....................................                111,379                 78,248                 65,699
     Insurance ................................................                 11,025                 10,841                 10,840
     FDIC insurance assessment ................................                  7,841                  8,826                  5,312
     Directors' fees ..........................................                 45,600                 38,800                 33,600
     Data processing expenses .................................                 55,984                 50,427                 58,104
     ATM/Debit card expenses ..................................                 53,653                 47,481                 32,877
     Other ....................................................                132,281                 95,613                 86,699
                                                                            ----------             ----------             ----------
         Total ................................................             $1,743,254             $1,696,278             $1,570,446
                                                                            ==========             ==========             ==========
</Table>

                                       32
<Page>

NOTE K - INCOME TAXES

Income tax expense consisted of:

<Table>
<Caption>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                  2001                   2000                1999
                                                                                  ----                   ----                ----
Current
<S>                                                                            <C>                   <C>                   <C>
     Federal ......................................................            $ 385,279             $ 433,802             $ 375,584
     State ........................................................               40,745                45,889                40,204
                                                                               ---------             ---------             ---------
               Total current ......................................              426,024               479,691               415,788
                                                                               ---------             ---------             ---------
Deferred
     Federal ......................................................              (73,959)              (20,896)               70,932
     State ........................................................                1,556                (1,823)                6,187
                                                                               ---------             ---------             ---------
               Total deferred .....................................              (72,403)              (22,719)               77,119
                                                                               ---------             ---------             ---------
               Total income tax expense ...........................            $ 353,621             $ 456,972             $ 492,907
                                                                               =========             =========             =========
</Table>


Income before income taxes presented in the consolidated statement of income for
the years ended December 31, 2001, 2000 and 1999 included no foreign  component.
A  reconciliation  between  the income tax  expense  and the amount  computed by
applying  the  federal  statutory  rate of 34% to  income  before  income  taxes
follows:

<Table>
<Caption>
                                                                                            Years Ended December 31,
                                                                                            ------------------------
                                                                               2001                   2000                   1999
                                                                               ----                   ----                   ----

<S>                                                                         <C>                    <C>                    <C>
Tax expense at statutory rate .................................             $ 384,294              $ 487,977              $ 514,156
State income tax, net of federal
     income tax benefit .......................................                23,259                 29,084                 30,618
Tax-exempt interest income ....................................               (72,449)               (65,002)               (60,542)
Non-deductible interest expense to
     carry tax-exempt instruments .............................                 8,722                  8,470                  8,111
Other, net ....................................................                 9,795                 (3,557)                   564
                                                                            ---------              ---------              ---------
               Total ..........................................             $ 353,621              $ 456,972              $ 492,907
                                                                            =========              =========              =========
</Table>


                                       33
<Page>

Deferred tax assets and liabilities  included in the consolidated  balance sheet
consisted of the following:

<Table>
<Caption>
                                                                                                            December 31,
                                                                                                            ------------
                                                                                                    2001                   2000
                                                                                                    ----                   ----
Deferred tax assets
<S>                                                                                              <C>                       <C>
     Allowance for loan losses ..................................................                $  66,795                 $  65,304
     Net deferred loan fees .....................................................                   10,385                     6,773
     Accrued interest payable ...................................................                  135,015                   135,876
                                                                                                 ---------                 ---------
               Gross deferred tax assets ........................................                  212,195                   207,953
     Valuation allowance ........................................................                        -                         -
                                                                                                 ---------                 ---------
               Total ............................................................                  212,195                   207,953
                                                                                                 ---------                 ---------

Deferred tax liabilities
     Accrued interest receivable ................................................                   28,081                   126,836
     Prepaid expenses ...........................................................                   72,922                    43,397
     Accelerated depreciation ...................................................                    5,770                     4,518
     Unrealized holding gains and losses on
       available-for-sale securities ............................................                  117,841                    16,557
     Other ......................................................................                    3,430                     3,612
                                                                                                 ---------                 ---------
               Gross deferred tax liabilities ...................................                  228,044                   194,920
                                                                                                 ---------                 ---------
Net deferred income tax (liabilities) assets ....................................                $ (15,849)                $  13,033
                                                                                                 =========                 =========
</Table>


A portion of the change in net  deferred  tax assets or  liabilities  related to
unrealized holding gains and losses on available-for-sale  securities is charged
or credited directly to other comprehensive income. The balance of the change in
net deferred  tax assets is charged or credited to income tax expense.  In 2001,
2000 and 1999,  $101,284  was  charged,  $81,264 was  charged,  and $133,891 was
credited to other comprehensive  income,  respectively.  In 2001, 2000 and 1999,
$72,403 was credited,  $22,719 was  credited,  and $77,119 was charged to income
tax expense, respectively.

Management  believes that the Company will fully realize the deferred tax assets
as of December 31, 2001 and 2000 based on refundable income taxes available from
carryback years, as well as estimates of future taxable income.


NOTE L - RETIREMENT PLAN

 In  1993,  the  Company   established  the  Clover  Community  Bank  Employees'
Retirement  Savings Plan (the "Plan") for the exclusive  benefit of all eligible
employees and their beneficiaries.  Employees are eligible to participate in the
Plan after  attaining age 21 and  completing  twelve months of service,  and are
credited with at least 1000 hours of service during the eligibility  computation
period.  Employees  are allowed to defer their  salary up to the maximum  dollar
amount  determined by federal  government  laws and  regulations  each year. The
Company  matches $.50 for each dollar  contributed  by the employees up to 6% of
their total pay.  The Board of  Directors  can also elect to make  discretionary
contributions.  Employees  are  fully  vested  in  both  the  matching  and  any
discretionary   contributions   after  six  years  of  service.   The   employer
contributions to the plan for 2001, 2000 and 1999 totaled  $17,104,  $18,552 and
$16,475, respectively.


NOTE M - COMMITMENTS AND CONTINGENCIES

Commitments  to Extend  Credit.  In the normal  course of business,  the banking
subsidiary is party to financial instruments with off-balance-sheet  risk. These
financial  instruments  include commitments to extend credit and standby letters
of credit,  and have elements of credit risk in excess of the amount  recognized
in the balance sheet. The exposure to credit loss in the event of nonperformance
by the other  parties to the financial  instruments  for  commitments  to extend
credit and standby letters of credit is represented by the contractual  notional
amount  of those  instruments.  Generally,  the same  credit  policies  used for
on-balance-sheet  instruments,  such  as  loans,  are  used  in  extending  loan
commitments and standby letters of credit.


                                       34
<Page>

Following are the off-balance-sheet financial instruments whose contract amounts
represent credit risk:

                                                              December 31,
                                                              ------------
                                                            2001         2000
                                                            ----         ----

Loan commitments .................................     $5,955,910     $6,216,642
Commitment to purchase when-issued security ......        500,000              -
Standby letters of credit ........................              -         31,575


Loan commitments involve agreements to lend to a customer as long as there is no
violation of any condition  established in the contract.  Commitments  generally
have  fixed  expiration  dates or other  termination  clauses  and some  involve
payment of a fee. Many of the  commitments  are expected to expire without being
fully  drawn;  therefore,   the  total  amount  of  loan  commitments  does  not
necessarily represent future cash requirements. Each customer's creditworthiness
is evaluated on a case-by-case basis. The amount of collateral obtained, if any,
upon  extension  of credit is based on  management's  credit  evaluation  of the
borrower. Collateral held varies but may include commercial and residential real
properties, accounts receivable, inventory and equipment.

Standby  letters  of  credit  are  conditional   commitments  to  guarantee  the
performance of a customer to a third party.  The credit risk involved in issuing
standby  letters  of  credit  is the  same  as  that  involved  in  making  loan
commitments to customers.

The estimated fair values of  off-balance-sheet  financial  instruments  such as
loan  commitments  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  counterparties'  creditworthiness.  The vast
majority  of the  banking  subsidiary's  loan  commitments  do not  involve  the
charging of a fee,  and fees  associated  with  outstanding  standby  letters of
credit are not  material.  Therefore,  as of  December  31,  2001 and 2000,  the
estimated  fair  values  of these  off-balance-sheet  financial  instruments  is
nominal.  For loan  commitments  and standby  letters of credit,  the  committed
interest rates are either variable or approximate current interest rates offered
for similar  commitments.  Management is not aware of any significant  change in
the credit risk associated with these commitments.

As of December 31, 2001, the banking subsidiary had committed to purchase at par
for $500,000 an  obligation of the Federal Home Loan Banks which was expected to
be issued on January 10, 2002.  The  commitment was entered into on December 17,
2001,  and the fair value of the commitment as of December 31, 2001 is estimated
to be the same as the commitment amount.

Short-term  Borrowing Availability. At December 31, 2001, the banking subsidiary
had unused  short-term  lines of credit to purchase up to  $3,075,000 in federal
funds from correspondent financial institutions. One line for $2,300,000 expires
October  1,  2002;  however,  all  lenders  reserve  the right to  withdraw  the
accommodations at any time.

Litigation.  The Company and its  subsidiary  were not involved as defendants in
any  litigation at December 31, 2001.  Management is not aware of any pending or
threatened litigation,  or unasserted claims or assessments that are expected to
result in losses,  if any, that would be material to the consolidated  financial
statements.


                                       35
<Page>

NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS

Following  is summary  information  on the  estimated  fair  value of  financial
instruments,  cross  referenced  to the location in the  consolidated  financial
statements and notes where more detailed information can be obtained:

<Table>
<Caption>
                                                                                             December 31,
                                                                                             ------------
                                                                               2001                                2000
                                                                               ----                                ----
                                                                    Carrying         Estimated          Carrying         Estimated
                                                                     Amount         Fair Value           Amount         Fair Value
                                                                    of Assets        of Assets          of Assets        of Assets
                                                                  (Liabilities)    (Liabilities)      (Liabilities)    (Liabilities)
                                                                  -------------    -------------      -------------    -------------

<S>                                                              <C>               <C>               <C>               <C>
Cash and due from banks (Note A) ...........................     $  1,458,095      $  1,458,095      $  1,668,386      $  1,668,386
Interest-bearing deposits in other banks (Note A) ..........           10,091            10,091            40,447            40,447
Federal funds sold (Note A) ................................        5,086,000         5,086,000                 -                 -
Securities (Note C) ........................................       16,924,339        16,924,339        17,892,816        17,892,816
Other investments (Notes A and D) ..........................          250,000           250,000           250,000           250,000
Loans (Note E) .............................................       31,537,321        31,800,925        30,514,188        30,105,179
Accrued interest receivable (Note A) .......................          264,873           264,873           410,247           410,247
Deposits (Note G) ..........................................      (44,953,126)      (44,998,186)      (39,416,000)      (39,462,534)
Federal funds purchased (Note A) ...........................                -                 -          (470,000)         (470,000)
Long-term debt (Note H) ....................................       (4,000,000)       (4,000,000)       (4,000,000)       (4,000,000)
Accrued interest payable (Note A) ..........................         (376,087)         (376,087)         (378,485)         (378,485)
Loan commitments (Note M) ..................................                -        (5,955,910)                -        (6,216,642)
Commitment to purchase when-issued security (Note M) .......                -          (500,000)                -                 -
Standby letters of credit (Note M) .........................                -                 -                 -           (31,575)
</Table>

NOTE O - ACCOUNTING CHANGES

Accounting for Derivative  Instruments and Hedging Activities.  FASB ("Financial
Accounting  Standards  Board")  Statement No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities," as subsequently amended by FASB Statements
No. 137 and 138, addresses the accounting and financial reporting for derivative
instruments,  including  derivative  instruments embedded in other contracts and
hedging activities. The Statement requires the recognition of all derivatives as
either assets or liabilities  in the balance sheet and the  measurement of these
instruments  at fair  value.  Also,  hedging  relationships  are  required to be
accounted for and disclosed  accordance  with the Statement.  The Statement,  as
amended, is required to be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000,  without  restatement of financial  statements of
prior periods. The Company has adopted the provisions of the Statement effective
with the fiscal quarter beginning January 1, 2001. However, the adoption of this
Statement  has  not  had  any  material  adverse  or  beneficial  effect  on the
consolidated financial position or results of operations of the Company.

Business  Combinations.   FASB  Statement  No.  141,  "Business   Combinations,"
addresses accounting and reporting for business  combinations and supersedes APB
("Accounting  Principles  Board") Opinion No. 16, "Business  Combinations,"  and
FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased
Enterprises." All business  combinations  within the scope of this Statement are
to  be   accounted   for   using   the   purchase   method,   with  use  of  the
pooling-of-interests method no longer permitted. The provisions of the Statement
apply to all business combinations initiated after June 30, 2001, as well as all
business combinations accounted for using the purchase method for which the date
of acquisition is July 1, 2001, or later. The adoption of this Statement in 2001
has not had any  material  adverse  or  beneficial  effect  on the  consolidated
financial position or results of operations of the Company.

Goodwill and Other  Intangibles.  FASB  Statement  No. 142,  "Goodwill and Other
Intangible  Assets," addresses  financial  accounting and reporting for acquired
goodwill and other  intangible  assets and  supersedes  APB No. 17,  "Intangible
Assets." This statement changes the accounting for goodwill from an amortization
method to an  impairment-only  approach.  The  provisions of this  Statement are
required to be applied  beginning with fiscal years beginning after December 15,
2001.  The  adoption of this  Statement as of January 1, 2002 is not expected to
have any material  adverse or beneficial  effect on the  consolidated  financial
position or results of operations of the Company.

                                       36
<Page>

Accounting for Asset Retirement. Obligations FASB Statement No. 143, "Accounting
for Asset Retirement  Obligations," addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The Statement requires recording the fair
value of a liability for an asset  retirement  obligation in the period in which
it is incurred,  along with increasing the carrying  amount and  depreciation of
the related asset.  This statement is effective for financial  statements issued
for  fiscal  years  beginning  after June 15,  2002,  with  earlier  application
encouraged. The adoption of this Statement as of January 1, 2003 is not expected
to have any material adverse or beneficial effect on the consolidated  financial
position or results of operations of the Company.

Accounting for the Impairment or Disposal of Long-Lived  Assets.  FASB Statement
No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets,"
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived  assets.  This  Statement  supersedes  FASB Statement No. 121 and the
accounting and reporting  provisions of APB No. 30 for the disposal of a segment
of a business,  as previously  defined in that Opinion.  The  provisions of this
Statement  are  effective  for  financial  statements  issued for  fiscal  years
beginning  after  December 15,  2001,  and interim  periods  within those fiscal
years, with early application  encouraged.  The adoption of this Statement as of
January 1, 2002 is not  expected  to have any  material  adverse  or  beneficial
effect on the  consolidated  financial  position or results of operations of the
Company.

Isolation of Transferred  Financial  Assets.  FASB  Technical  Bulletin No. 01-1
defers until 2002  application of the isolation  standards of FASB Statement No.
140 as applied to banks and certain other financial institutions. FASB Statement
No. 140,  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishments of Liabilities," provides accounting and reporting standards for
transfers of financial  assets and  extinguishments  of  liabilities  based on a
financial  components approach that focuses on retention or surrender of control
of such assets or liabilities.  The Statement also requires the reclassification
of financial  assets  pledged as collateral  under certain  circumstances.  FASB
Statement 140 was effective for transfers and servicing of financial  assets and
extinguishment of liabilities  occurring after March 31, 2001, and effective for
recognition and  reclassification of collateral and for disclosures  relating to
securitization  transactions  and  collateral  for  fiscal  years  ending  after
December  31,  2000.  The  adoption  of FASB  Statement  No. 140 in 2001 and the
deferral allowed by FASB Technical  Bulletin No. 01-01 have not had any material
adverse or beneficial effect on the consolidated  financial  position or results
of operations of the Company.

NOTE P - CLOVER COMMUNITY BANKSHARES, INC. (PARENT COMPANY ONLY)

<Table>
<Caption>
                                                                                                             December 31,
                                                                                                             ------------
                                                                                                      2001                   2000
                                                                                                      ----                   ----
Condensed Balance Sheet
     Assets
<S>                                                                                               <C>                     <C>
         Cash ......................................................................              $  662,095              $  590,451
         Investment in banking subsidiary ..........................................               7,169,129               7,064,299
         Other assets ..............................................................                   5,206                   8,090
                                                                                                  ----------              ----------
            Total assets ...........................................................              $7,836,430              $7,662,840
                                                                                                  ==========              ==========
     Liabilities
         Other liabilities .........................................................              $        -              $        -
     Shareholders' equity ..........................................................               7,836,430               7,662,840
                                                                                                  ----------              ----------
            Total liabilities and shareholders' equity .............................              $7,836,430              $7,662,840
                                                                                                  ==========              ==========
</Table>


                                       37
<Page>

<Table>
<Caption>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                        2001              2000               1999
                                                                                        ----              ----               ----
Condensed Statement of Income
     Income
<S>                                                                                 <C>               <C>               <C>
         Dividends received from banking subsidiary ..........................      $   862,775       $   709,867       $   606,612
         Interest income .....................................................            7,740             6,483            10,833
                                                                                    -----------       -----------       -----------
            Total income .....................................................          870,515           716,350           617,445
                                                                                    -----------       -----------       -----------
     Expenses
         Other expenses ......................................................           23,052            20,554            20,558
                                                                                    -----------       -----------       -----------
            Total expenses ...................................................           23,052            20,554            20,558
                                                                                    -----------       -----------       -----------
     Income before income taxes and equity in
         undistributed earnings of banking subsidiary ........................          847,463           695,796           596,887
     Income tax expense (credit) .............................................           (5,206)           (4,784)           (3,306)
     Equity in undistributed earnings
         of banking subsidiary ...............................................          (76,012)          277,675           419,123
                                                                                    -----------       -----------       -----------
     Net income ..............................................................      $   776,657       $   978,255       $ 1,019,316
                                                                                    ===========       ===========       ===========

<Caption>
                                                                                                Years Ended December 31,
                                                                                                ------------------------
                                                                                        2001              2000               1999
                                                                                        ----              ----               ----

Condensed Statement of Cash Flows
     Operating activities
<S>                                                                                 <C>               <C>               <C>
         Net income ..........................................................      $   776,657       $   978,255       $ 1,019,316
            Adjustments to reconcile net income to net
                cash provided by operating activities
                    Equity in undistributed earnings
                      of banking subsidiary ..................................           76,012          (277,675)         (419,123)
                    Decrease (increase) in other assets ......................            2,884            (4,783)             (419)
                                                                                    -----------       -----------       -----------
                         Net cash provided by operating activities ...........          855,553           695,797           599,774
                                                                                    -----------       -----------       -----------
     Investing activities
         Proceeds from transfer of land to banking subsidiary ................                -           221,020                 -
         Purchase of land ....................................................                -                 -          (221,020)
                                                                                    -----------       -----------       -----------
                         Net cash provided (used) by
                           investing activities ..............................                -           221,020          (221,020)
                                                                                    -----------       -----------       -----------
     Financing activities
         Sales of common stock under dividend reinvestment
              plan, net ......................................................          112,952           173,242           118,091
         Repurchase and retirement of common stock ...........................         (134,087)          (86,134)          (51,485)
         Cash dividends paid .................................................         (762,774)         (709,867)         (606,612)
                                                                                    -----------       -----------       -----------
                         Net cash used by financing activities ...............         (783,909)         (622,759)         (540,006)
                                                                                    -----------       -----------       -----------
     Increase (decrease) in cash and cash equivalents ........................           71,644           294,058          (161,252)
     Cash and cash equivalents, beginning ....................................          590,451           296,393           457,645
                                                                                    -----------       -----------       -----------
     Cash and cash equivalents, ending .......................................      $   662,095       $   590,451       $   296,393
                                                                                    ===========       ===========       ===========
</Table>


                                       38