##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-K

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

For fiscal year ended December 31, 2002

Commission File Number 000-26562

VALRICO BANCORP, INC.

(Exact name of registrant as specified in its Charter)


Florida

(State or other jurisdiction of incorporation or organization)


65-0553757

(I.R.S. employer Identification No.)


1815 East State Road 60, Valrico, Florida 33594

(Address of Principal executive offices and zip code)


(813) 689-1231

(Registrants telephone number, including area code)


Securities registered under Section 12(b) of the Act:

|                    |  |                      
|------------------- |  | ---------------------
|                    |  | Name of each exchange
|Title of each Class |  | on which registered  
|                    |  |                      
|None                |  | None                 

Securities registered under Section 12(g) of the Act:

Common Stock, no par value

(Title of Class)


Indicate by checkmark whether the registrant (1) has filed all reports
required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

(1) Yes   x
     (2) No   o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

(1) Yes   o
     (2) No   o


As of December 31, 2002, there
were 308,737 shares of common stock outstanding. As of June 28,
2002 (the last business day of the registrants most recently
completed second fiscal quarter) the aggregate market value of the
Common Stock held by non-affiliates of the registrant was
approximately $4,794,350.





---

TABLE OF CONTENTS



|                                                                                                |  |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Item 1.   Business                                                                             
|ITEM 2.   Properties                                                                           
|ITEM 3.   Legal Proceedings                                                                    
|ITEM 4.   Submission Of Matters To A Vote Of Security Holders                                  
|ITEM 5.   Market For The Companys Common Stock And Related Security Holder Matters            
|ITEM 6.   Selected Financial Data                                                              
|Item 7.   Managements Discussion and Analysis of Financial Condition and Results of Operations
|ITEM 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure   
|ITEM 10. Directors And Principal Officers Of The Company                                       
|ITEM 11. Management Compensation And Transactions                                              
|ITEM 12. Security Ownership Of Certain Beneficial Owners And Management                        
|SIGNATURES                                                                                     
|Ex-99.1 CEO Certification                                                                      
|Ex-99.2 CFO Certification                                                                      



---



##### Table of Contents






Item 1.   Business

General

Valrico Bancorp, Inc (the Company) is a one-bank holding company, which was a
newly-formed corporation on May 31, 1995 with its principal place of business
in Valrico, Florida. The Company subsequently acquired all of the outstanding
common stock of Valrico State Bank (the Bank), a wholly-owned subsidiary.
All shares held by the Banks shareholders were exchanged on a one-to-one basis
for Company shares. The Companys common stock, no par value, authorized
1,000,000 shares, had 308,737 shares outstanding as of December 31, 2002.


The Company derives substantially all of its income from dividends and a lease
from the bank. The Bank and Company share the same board of directors, which
is comprised of ten individuals. Those individuals are LeVaughn Amerson, Jerry
L. Ball, C. Dennis Carlton, H. Leroy English, David A. Gee, Gregory L.
Henderson, Douglas A. Holmberg, Charles E. Jennings, Jr., J.E. McLean, III,
Justo Noriega, Jr..

Subsidiary Bank

Valrico State Bank (the Bank) was incorporated under the laws of the state of
Florida on August 29, 1988. The Bank was chartered as a Florida state bank
effective June 23, 1989 after receiving approval to organize from the Florida
Department of Banking and Finance (the Florida Department). The Bank
commenced operations on June 23, 1989. The Bank is supervised, regulated and
regularly examined by the Florida State Banking Department and the Federal
Deposit Insurance Corporation. The Bank is not currently a member of the
Federal Reserve Bank.


Description of Business

The Company, through its subsidiary bank, conducts a general commercial banking
business from its main office located at 1815 East State Road 60, Valrico,
Florida 33594-3623 and its three branch facilities located at 102 West
Robertson Street, Brandon, Florida 33511, 305 South Wheeler Street, Plant
City, Florida 33566 and 10101 Bloomingdale Ave, Riverview, Florida 33569. The
Companys primary telephone number is (813) 689-1231. Valrico is a community
located in the eastern portion of Hillsborough County, Florida, and is
approximately 14 miles east of Tampa, Florida, which is located on the west
coast of the state of Florida. While the Banks overall market area extends
throughout Hillsborough County, it expects to draw most of its business from
eastern Hillsborough County (the Brandon/Valrico/Dover/Plant City/Riverview
area) and estimates that more than 75% of its business will come from customers
whose businesses or residences are located in an area within a radius of
approximately five miles of the Banks principal offices (the Banks
Assessment Area). The Company, through its subsidiary bank, intends for the
near future, to service (with few exceptions) only residents and businesses
located in Hillsborough County, but may choose to accept some business from
outside of Hillsborough County.


The principal business of the Bank is to attract deposits from the general
public, and to invest those funds in various types of loans and other
interest-earning assets. Funds provide for the operations of the Bank through
proceeds from the sale of investments and loans, from amortization and
repayment of outstanding loans, from borrowings, and from working capital.
Earnings of the Bank depend primarily upon the difference between (1) the
interest and fees received by the Bank from loans, the securities held in its
investment portfolio, and other investments, and (2) expenses incurred by the
Bank in connection with obtaining funds for lending (including interest paid on
deposits and other borrowings) and expenses relating to day-to-day operations.

As of December 31, 2002, the Bank has been in operation for twelve and one-half
years. Management believes that there is some seasonality in its deposit base
due primarily to its agricultural relationships. The seasonality in these
deposits, however, has not been substantial to impact the core base of
deposits, therefore, management does not believe its deposit relationship is
affected. In its lending portfolio, the Bank sees a greater affect on this
seasonal business during the period from September to May reflecting larger
outstandings in the agricultural portfolio.

Branch Banking and Locations of Offices

The Banks main office is located on East State Road 60, a primary east-west
artery in the Banks Assessment Area, and 800 feet west of Valrico Road, a
primary north-south artery in the Banks Assessment Area. The Brandon branch
facility is located in the center of Brandon, the Plant City branch facility is
located in the center of Plant City, and the Jim Redman Parkway branch is
located in the eastern section of Plant City. The North Riverview Branch is
located at the intersection of US 301 and Bloomingdale Ave in the Riverview
community. The Jim Redman office was closed in 2002.


The Banks second branch was opened in 1995 in the Plant City market and the
Bank expanded in this market area with an in-store branch which opened on June
23, 1997 within a Wal-Mart Supercenter on Jim Redman Parkway. This location is
in a growing area and a very active shopping center with an estimated 50,000
plus customers per week. This Wal-Mart is one of their largest supercenters in
Florida. The bank expanded its market area with the opening of its fourth
branch on January 22, 2000 in Riverview area.

Brandon Office

The Bank received approval in January 1994 from the Federal Deposit Insurance
Corporation and the Florida Department of Banking and Finance to open a branch
located at 102 West Robertson Street, Brandon, Florida 33511. Therefore, the
Bank successfully opened its first branch on April 29, 1994, which is located
approximately one and a half miles west of the main office and located in our
current community and assessment area. The location is in the center of
Brandon, extremely convenient to many businesses and professional offices.


Plant City Office

The Bank, after receiving regulatory approval, opened its second branch on
September 15, 1995, in Plant City located at 305 South Wheeler Street (corner
of Renfro and Wheeler). The Bank purchased, from Barnett Bank, a former
Glendale Federal Bank branch, a free standing building with approximately 2,400
square feet including the land and furniture. This positioned the Bank to
better service the Plant City market in which the Bank was already servicing a
small customer base.






---



##### Table of Contents



Jim Redman Office

The Bank, after receiving regulatory approval, opened its third branch on June
23, 1997 as an in-store branch facility in the Wal-Mart Supercenter on Jim
Redman Parkway in Plant City, Florida. The Bank leases the facilities at this
site. We closed this office in late June of 2002


North Riverview Office

The Bank, after receiving regulatory approval, opened its fourth branch on
January 22, 1999, in Riverview located at 10101 Bloomingdale Ave (corner of
Bloomingdale and US 301). The Bank purchased, from Nationsbank, a free standing
building with approximately 6,000 square feet, the purchased included the land
surrounding the building.


Services

The Company, through it subsidiary, conducts substantially the same business
operations as a typical independent commercial bank with special emphasis on
retail banking. The Bank offers a wide range of consumer and commercial
banking services traditionally offered by commercial banks, such as personal
and commercial checking accounts, regular negotiable order of withdrawal
(NOW) accounts, certificates of deposits, money market accounts, savings
accounts, IRA accounts, foreign currency exchanges, credit cards, debit cards,
money orders, travelers cheques, notary service, safe deposit boxes and wire
transfers. It also offers discounted brokerage services, profit sharing
programs, 401(k)s and other similar programs. The depository services are
further complemented by direct deposit programs, night depository services, and
bank by mail also provided by the Bank.


The Bank offers a complete brokerage service through a third party which
permits its customers to buy and sell stocks and bonds and otherwise trade in
securities at a discount with full accountability of their transactions. The
Bank offers, through third parties, standard and self-directed IRA, the new
Roth and Educational IRA, qualified pension plans, SEPs, Keogh and
profit-sharing plans, including 401(k) plans, etc.

Hours

The Banks Main, Brandon and the new North Riverview offices lobby hours are
from 9:00 a.m. to 4:00 p.m., Mondays through Thursdays, 9:00 a.m. to 6:00 p.m.
on Fridays, and 9:00 a.m. to 12:00 p.m. on Saturdays. The Bank also offers
drive-up teller facilities which are open from 8:00 a.m. to 6:00 p.m., Mondays
through Fridays, and 9:00 a.m. to 12:00 p.m. on Saturdays. The Wheeler Street
branches have the same office hours, except they have no Saturday lobby hours.
The Bank does currently own four automatic teller machines (ATM) at the Plant
City, Valrico(Main), Brandon and North Riverview. It also offers ATM and
Mastermoney Debit cards to its customers, which can be used at ATM machines
which are members of the Southeast Switch, which includes HONOR Network
(Florida and other southeastern states) and CIRRUS (a worldwide network).


Operations

The Bank uses a computer system to handle all accounting and statement
processing. In addition, the Bank makes extensive use of personal computers in
its teller and lobby locations, which allows for efficient handling and
tracking of new accounts, loans and other paper intensive services, and
provides every employee of the Bank access to complete customer profiles at all
times. We have recently upgraded many of our desktop systems in order to
effectively utilize many of the newer programs available today.


Philosophy

Management of the Company believes that the emerging dominance of large
regional holding companies in the banking industry has created a need for more
locally-owned institutions with personalized banking services. The Bank was
organized as a locally-owned, locally-managed community financial institution,
owned and managed by people who are actively involved in the Banks market area
and committed to its economic growth and development. With local ownership,
management and directors, the Bank believes it can be more responsive to the
community it serves and tailor services to its customers needs rather than the
standardized services that large holding companies tend to offer. Local
ownership and operation will allow faster, more responsive and flexible
decision-making, which may not be available at the majority of financial
institutions in or near the Banks Assessment Area which are branch offices of
large regional holding company banks with headquarters located elsewhere in
Florida or in the United States.


Loans

The Bank originates a wide range of loans including, but not limited to,
commercial and consumer loans, as well as loans secured by deposit accounts and
other marketable collateral. As of December 31, 2002, commercial and consumer
loans accounted for approximately 63.2%and 10.8%, respectively, of the Banks
loan portfolio. Loans are also made to enable borrowers to purchase,
refinance, construct or improve residential or other real estate and usually
are secured by mortgages on such real estate. As of December 31, 2002,
residential real estate mortgage loans accounted for approximately 8.0% of the
Banks loan portfolio. To service the agricultural segment of the Banks
market area, the Bank employs an agricultural lender. As of December 31, 2002,
18.0% of the total loan portfolio was comprised of agricultural loans. All
loans are made in compliance with applicable Federal and state regulations.


Deposits

The primary sources of the Banks funds for lending and for other general
business purposes are the Banks capital, deposits, loan repayments, borrowings
and funds provided from operations. The Bank expects that loan repayments and
funds provided from operations will be relatively stable sources of funds,
while deposit inflows and outflows will be significantly influenced by
prevailing interest rates, money market and general economic conditions.
Generally, short-term borrowings are used to compensate for reductions in
normal sources of funds while longer-term borrowings are used to support
expanded lending activities. The Banks customers are primarily individuals,
professionals, small and medium size businesses, and citrus and agricultural
enterprises located predominantly in eastern and southern Hillsborough County,
Florida. The Banks business is not dominated by a single customer or by a few
customers. The loss of any one or more would not have a materially adverse
effect on the business of the Bank. The Bank attempts to tailor its services
to the needs of its customers since there is a heavy emphasis on retail and
service-oriented businesses in the Companys market area. Moreover, the Banks
main office location is on a major east-west artery in one of eastern
Hillsborough Countys faster






---



##### Table of Contents



growing areas in terms of the number of new residents. The exposure provided
by the site and the population growth of the area are expected to contribute to
the growth of the Company.

As of December 31, 2002, total deposits of the Bank were distributed among
demand deposits (18.1%), savings and time deposits (51.5%) and NOW and money
market deposits (30.4%). The Banks deposits are attracted primarily from
individuals, professionals, small and medium size businesses and citrus and
agricultural enterprises located predominantly in eastern Hillsborough County,
Florida. As of December 31, 2002, approximately 26.6% of the Banks total
deposits were from businesses and 73.4% were from individuals. Management of
the Bank has no reason to believe that the loss of any one or a few of its
deposit accounts would have a material adverse effect upon the operations of
the Bank or erode its deposit base.

New Business Development

The Bank continually seeks to develop new business through an ongoing program
of personal calls on both present and potential customers. As a local
independent bank, the Bank utilizes traditional local advertising media, as
well as direct mailings, telephone contacts, and brochures to promote the Bank
and develop loans and deposits. In addition, the Companys directors all have
worked and/or lived in or near eastern Hillsborough County for a number of
years. The Bank believes that this factor, coupled with the past and continued
involvement of the directors in various local community activities, will
further promote its image as a locally-oriented independent institution, which
management believes is an important factor to its targeted customer base.


Competition

The banking business in Florida in general, and in Hillsborough County in
particular, is highly competitive with respect to both loans and deposits. The
Bank competes with other commercial banks in Hillsborough County and the
surrounding area for all services customarily provided by commercial banks. In
addition, the Bank competes with savings and loan associations, finance
companies, insurance companies, money market mutual funds, credit unions, other
financial institutions and various other non-bank competitors. Many of these
competitors are larger and have greater resources, including more personnel and
a larger asset base, than the Bank and provide certain services, such as trust
services, which the Bank does not currently provide.


As of December 31, 2002, there were 13 commercial banks (including the
Companys subsidiary bank) with 33 offices and 1 savings and loan association
with 3 offices; at least 10 credit unions; and various other financial entities
as competitors in the Banks Assessment Area. The Company expects to receive
substantial competition from most of these financial institutions.

The Bank is one of only four financial institutions, which have their
headquarters in eastern Hillsborough County. The other financial institutions,
being Sunshine State Savings and Loan, Hillsboro Bank in Plant City, and
Platinum Bank in Brandon. All others are branches of institutions, which have
their headquarters in other parts of Hillsborough County or elsewhere in
Florida. Several of the institutions are actually owned by banks with
headquarters in Georgia, Alabama, North Carolina, Ohio, and New Jersey.

In order to compete with major financial institutions and others in the Banks
Assessment Area, the Bank will continue to emphasize specialized services,
local promotional activity and personal contacts by the Banks officers,
directors and employees. The Bank believes that its local ownership and
community-oriented operating philosophy and personalized banking services are
competitive factors in which it has strength.

Regulation

The Company is regulated under both State and Federal law. The Company is
regulated by the Federal Reserve Bank of Atlanta and is subject to the rules
and regulations of the Securities and Exchange Commission. The Companys
subsidiary bank is not a member of the Federal Reserve System, but is subject
to the rules and regulations of the Federal Deposit Insurance Corporation
(FDIC) which agency also insures the Banks deposits up to applicable limits.
As a state-chartered bank, the Bank is subject to the regulations of the
Florida Department. The Bank will be subject to periodic examinations by both
the FDIC and the Florida Department focusing on fund reserves, loans and loan
policy, investments, management policy and practices, and various other aspects
of the Banks operations.


Patents, Trademarks and other Intangible Assets

Neither the Company nor its subsidiary hold any patents, registered trademarks,
licenses (other than licenses which have been obtained from appropriate banking
regulatory agencies), franchises or concessions.


Business Development

Prior to the organization of the Bank, the organizers of the Bank conducted
economic and other surveys to evaluate the banking needs for the community of
Valrico and its immediate environs. The results of those surveys were used to
support the application to the Florida Department for permission to organize
the Bank and the application to the FDIC for insurance of the Banks accounts.
Since it commenced operations, officers of the Bank have engaged continually in
marketing activities, including the evaluation of development of new services,
to enable the Bank to improve its competitive position in the Banks Assessment
Area. The cost to the Bank for these marketing activities cannot be calculated
with any degree of certainty. In the fourth quarter of 1993, the Bank gathered
and reviewed new economic data for the purpose of supporting an application to
the Florida Department for permission to open a full service branch facility in
Brandon, Florida, and performed similar research in the summer of 1995 to
support an application to the Florida Department for permission to open a full
service branch in Plant City, Florida. The cost of collecting and evaluating
this information likewise cannot be determined with any degree of certainty, as
most of the information was collected from public sources and other sources
already utilized by the Company for its day-to-day evaluations. In the fourth
quarter of 1996, the Bank reviewed data submitted by International Banking
Technologies for the purpose of supporting the application for the in-store
branch in Plant City. In the fourth quarter of 1998, the Bank gathered and
reviewed new economic data for the purpose of supporting an application to the
Florida Department for permission to open a full service branch facility in
Riverview, Florida.






---



##### Table of Contents



Employees

As of December 31, 2002, the Bank employed 55 full-time employees, of which two
were executive officers, and 16 part-time employees, of which one is a bank
officer. The Banks employees are not represented by a collective bargaining
group, and the Bank considers its relations with its employees to be excellent.
The Bank also maintains training and educational programs designed to equip
employees for positions of increasing responsibility in both management and
operating positions. The Bank provides employees certain benefits customary in
the banking industry, which includes major medical insurance, group term life
insurance and normal vacation and sick leave. The Bank implemented a K-SOP
plan in 1997.





ITEM 2.   Properties

The Company, through its subsidiary, has a principal office located at 1815
East State Road 60 in Valrico, Florida, in a traditional, southern, Greek
neo-classical two-story building with 9,860 square feet. The Brandon office,
located at 102 West Robertson Street in Brandon, Florida, is in a leased 3,000
square foot end unit in a retail plaza at a major intersection in the center of
Brandon. The Plant City office is located at 305 South Wheeler Street in
facilities purchased in July 1995. The North Riverview Office, located at the
intersection of US 301 and Bloomingdale Avenue in Riverview was purchased in
October of 1998. Management believes that these properties are
suitable for the Companys current use of them.

Main Office

In January, 1997, the premises, previously leased from Roy J. and Ann M.
Winter, were purchased by Valrico Bancorp, Inc. for approximately $1,683,000.
The annual lease payments from the Bank to the Company is $204,000.


Brandon Office

The Bank leases its Brandon branch office space pursuant to an agreement dated
March 31, 1994 (the Lease) with J. Bill Noriega, Jr. (the Lessor). Mr.
Noriega currently serves as a director of the Bank. This lease expired March
31, 2001 and was renewed with a new expiration date of March 31, 2003 at an
annual rental of $42,000. The Bank has the option to renew the lease for three
additional three-year terms at rentals to be negotiated at the time of the
renewal.


Plant City Office

The Company, through its subsidiary, purchased from Barnett Bank, a former
Glendale Federal Bank branch with approximately 2,400 square feet. The
purchase included building and land located at 305 South Wheeler Street (corner
of Renfro and Wheeler). On September 15, 1995, the Bank opened its second
branch at this location.


North Riverview Office

The Company, through its subsidiary, purchased from Nationsbank, a building
with approximately 6,000 square feet. The purchase included building and land
located at 10101 Bloomingdale Avenue (corner of US 301 and Bloomingdale). On
January 22, 2000 the bank opened its fourth branch at this location.


Other Properties

The Company, through its subsidiary, owns a parcel of land for future
expansion. The partially improved property, totaling approximately one acre,
is immediately adjacent to the Companys main office property on the west side.
The site is ideally located for the development of an Operations Center when
the growth of the Company will require additional space beyond that which is
available in the existing Company facility.


During 2000, the Bank purchased three parcels of land adjacent to the main
office facility.

Lease Expense

The aggregate lease expense paid by the Bank under these leases, excluding the
Bank building lease, totaled $54,500 for the fiscal year ended December 31,
2002.





ITEM 3.   Legal Proceedings

As of the date of this Annual Report, the management of the Company has no
knowledge of any material pending legal proceedings, including proceedings
contemplated by governmental authorities, to which the Company and its
subsidiary or any of its property is subject, other than ordinary
routine litigation incidental to its business.




ITEM 4.   Submission Of Matters To A Vote Of Security Holders

There were no matters submitted to votes of the stockholders of the Company
during the last quarter of 2002




ITEM 5.   Market For The Companys Common Stock And Related Security Holder Matters

There is no trading market at the current time for the Common Stock of the
Company, and it is not expected that a trading market will develop for shares
of the Companys Common Stock in the near future. The Company is aware of 11
sale transactions that occurred during fiscal year 2002 at prices ranging from
$23.00 to $25.00 per share, exclusive of commissions. The Bank is also aware
of 7 sale transactions that occurred during fiscal year 2001 at prices ranging
from $20.00 to $25.00 per share, exclusive of commissions. As of December 31,
2002, there were 481 holders of record of the Common Stock of the Company.

Holders of Common Stock are entitled to share pro rata in the distribution of
dividends when and as declared by the Board of Directors from funds legally
available for such purpose. The Bank cannot pay dividends in any one year in
which its net income from the current year, combined with its





---



##### Table of Contents



retained net income for the preceding two years, is a loss or which would cause
the capital accounts of the Bank to fall below the minimum amount required by
law. Additionally, under certain circumstances, approval of the FDIC and the
Florida Department may be required prior to the payment of a dividend.

At the discretion of the Board of Directors of the Company and after careful
review of certain factors, such as results of operations, capital requirements,
regulatory restrictions, tax considerations and general economic conditions,
the Board declared its first dividend in September 1993 at ten cents per share
and paid said dividend on October 5, 1993. It likewise paid a similar dividend
in 1994, 1995, 1996 and 1997. In 1998 and 1999, the dividend paid increased to
twelve cents per share. In 2000, 2001 and 2002, the Company increased the
dividend to fourteen cents a share. The dividends were based on respective
year earnings and paid on October 1 of each year.




ITEM 6.   Selected Financial Data

The following table sets forth, in summary form, certain comparative financial
data of the Company for a five year period encompassing the periods ended
December 31, 1998, December 31, 1999, December 31, 2000, December 31, 2001 and
December 31, 2002. This information should be read in conjunction with the
Managements Discussion and Analysis of Financial Condition and Results of
Operations, and Other Statistical Disclosure and the audited financial
statements of the Company for the years ended December 31, 2000, 2001 and 2002,
and related notes thereto included elsewhere herein.


|                                                         |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |         | 
|-------------------------------------------------------- | ------- | - | ----------------------------------------- | ------- | ---- | - | ------- | ------- | ---- | - | ------ | ------- |  | - | ------ | ------- |  | - | ------ | ------- | 
|                                                         |         |   | As of and for the Year Ended December 31,
|                                                         |         |   |                                          
|                                                         |         |   | 2002                                      |         | 2001 |   | 2000    |         | 1999 |   | 1998  
|                                                         |         |   |                                           |         |      |   |         |         |      |   |       
|                                                         |         |   | (in Thousands, except Per Share Data)    
|INCOME STATEMENT DATA                                    |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Interest income                                          |         | $ | 6,661                                     |         |      | $ | 7,203   |         |      | $ | 7,255  |         |  | $ | 6,267  |         |  | $ | 5,543  |        
|Interest expense                                         |         |   | -2,157                                    |         |      |   | -3,208  |         |      |   | -2880  |         |  |   | -2,522 |         |  |   | -2,199 |        
|                                                         |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Net interest income                                      |         |   | 4,504                                     |         |      |   | 3,995   |         |      |   | 4,375  |         |  |   | 3,745  |         |  |   | 3,344  |        
|Provision for loan losses                                |         |   | -120                                      |         |      |   | -120    |         |      |   | -250   |         |  |   | -101   |         |  |   | -210   |        
|                                                         |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Net interest income after
provision for loan losses      |         |   | 4,384                                     |         |      |   | 3,875   |         |      |   | 4,125  |         |  |   | 3,644  |         |  |   | 3,134  |        
|Non-interest income                                      |         |   | 1,146                                     |         |      |   | 1,008   |         |      |   | 940    |         |  |   | 838    |         |  |   | 657    |        
|Non-interest expense                                     |         |   | -4,266                                    |         |      |   | -3,768  |         |      |   | -3,693 |         |  |   | -3,519 |         |  |   | -2,912 |        
|                                                         |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Income before income taxes                               |         |   | 1,264                                     |         |      |   | 1,115   |         |      |   | 1,372  |         |  |   | 963    |         |  |   | 879    |        
|Income taxes                                             |         |   | -387                                      |         |      |   | -371    |         |      |   | -438   |         |  |   | -324   |         |  |   | -318   |        
|                                                         |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Net income                                               |         | $ | 877                                       |         |      | $ | 744     |         |      | $ | 934    |         |  | $ | 639    |         |  | $ | 561    |        
|                                                         |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|PER SHARE DATA                                           |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Net income:                                              |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|                                                         | Basic   |   | $                                         | 2.86    |      |   | $       | 2.44    |      |   | $      | 3.09    |  |   | $      | 2.09    |  |   | $      | 1.88    | 
|                                                         | Diluted |   |                                           | 2.39    |      |   |         | 2.04    |      |   |        | 2.58    |  |   |        | 1.75    |  |   |        | 1.56    | 
|Cash dividends                                           |         |   | 0.14                                      |         |      |   | 0.14    |         |      |   | 0.14   |         |  |   | 0.12   |         |  |   | 0.12   |        
|Book value                                               |         |   | 27.12                                     |         |      |   | 23.41   |         |      |   | 20.71  |         |  |   | 17.42  |         |  |   | 16.00  |        
|Number of shares used in net
Average Shares Outstanding: |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|                                                         | Basic   |   |                                           | 306,780 |      |   |         | 304,531 |      |   |        | 302,138 |  |   |        | 305,565 |  |   |        | 299,221 | 
|                                                         | Diluted |   |                                           | 366,909 |      |   |         | 364,441 |      |   |        | 362,048 |  |   |        | 365,475 |  |   |        | 359,131 | 
|BALANCE SHEET DATA                                       |         |   |                                           |         |      |   |         |         |      |   |        |         |  |   |        |         |  |   |        |        
|Total assets                                             |         | $ | 114,960                                   |         |      | $ | 105,600 |         |      | $ | 95,883 |         |  | $ | 84,366 |         |  | $ | 80,685 |        
|Total investment securities                              |         |   | 22,341                                    |         |      |   | 21,946  |         |      |   | 8,852  |         |  |   | 9,134  |         |  |   | 8,832  |        
|Total net loans(1)                                       |         |   | 74,402                                    |         |      |   | 66,798  |         |      |   | 66,826 |         |  |   | 62,385 |         |  |   | 55,694 |        
|Total deposits                                           |         |   | 101,754                                   |         |      |   | 93,169  |         |      |   | 83,925 |         |  |   | 73,733 |         |  |   | 70,505 |        
|Shareholders equity                                     |         |   | 8,373                                     |         |      |   | 7,134   |         |      |   | 6,312  |         |  |   | 5,251  |         |  |   | 4,924  |        



|(1) |  | Net loans means total loans net of allowance for possible future loan
losses.
|--- |  | -----------------------------------------------------------------------------





---



##### Table of Contents






Item 7.   Managements Discussion and Analysis of Financial Condition and Results of Operations

Overview

The purpose of this discussion is to focus on significant changes in the
financial condition and results of the operations of the Company and its
subsidiary during the past three years. This discussion and analysis is
intended to supplement and highlight information contained in the accompanying
financial statements and the selected financial data presented elsewhere in
this report, and is based on the fiscal years of 2002, 2001, and 2000. The
companys fiscal year runs from January 1st through December 31st of each
respective year.

Results of Operations

The company had a net income after taxes of $,877,000 $744,000 and $934,000
during the years 2002, 2001, and 2000. This corresponds to basic earnings per
share amounts of $2.86, $2.44 and $3.09 during those three years respectively,
and diluted Earnings per share amounts of 2.39, 2.04, 2.58 for those same
years. Basic earnings per share amounts are computed based on the average
shares of common stock outstanding during the year, diluted earnings per share
amounts are computed based on the average shares of common stock and common
stock equivalents outstanding during the year.


Net Interest Income

The bank had an increase of net interest income between the years 2002 and 2001
of $509,000 or 12.74%. The bank had an increase of 16.82% during the years
2000, but had a decrease of 8.7% in 2001. The net interest income for the
three years respectfully was $4,504,000, $3,995,000 and $4,375,000. The net
interest margin is a major component of the Banks earning capacity and is the
difference or spread between interest income and interest expense. The spread
is considered positive when the Interest income exceeds the Interest expense
and negative when the expense exceeds the income, At the year ending December
31, 2002, the Bank had a positive spread of 4.40% as compared to 4.06% and
4.45% for 2001 and 2000 respectively. The Net Interest yield is calculated by
taking the net interest income and dividing it by the average earning assets.
During 2002, the Bank had a Net Interest Yield of 4.76% as compared to 2001 and
2000 yields of 4.32% and 5.13%. To the extent possible, the bank follows a
strategy to insulate the Banks interest rate spread from adverse changes in
interest rates by maintaining spreads through the adjustability of its earning
assets and interest-bearing liabilities.


Net interest income is also affected by changes in interest rates earned and
interest rates paid and by changes in the volume of interest earning assets and
interest bearing liabilities. This relationship is expressed in Table I of
this report. In 2002, the net interest income was $4,504,000, which is an
increase of $509,000 from the previous year end of $3,995,000. The net
interest income increase $129,000 over the 2000 year end amount of $4,375,000.

Interest Income

Interest income is derived from certain interest earning assets, commonly
referred to as earning assets, and primarily consist of loans, federal funds
sold, and investment securities. Federal funds sold are overnight funds, lent
to other financial institutions through our correspondent bank, Independent
Bankers Bank. The following tables reference these earning assets and their
respective interest income for the year ending December 31, 2002 and 2001.






---



##### Table of Contents



Interest Income Break Down
For Year Ending 2002
(All Dollars in Thousands)

|                                       |  |        |        |        |  |      |       |                              |  |  |      |   |  |  |        |  
|-------------------------------------- |  | ------ | ------ | ------ |  | ---- | ----- | ---------------------------- |  |  | ---- | - |  |  | ------ | -
|Category (Average for Year)            |  | Amount |        | Income |  | Rate |       | Pct. of Total Earning Assets
|                                       |  |        |        |        |  |      |       |                             
|Loans (Before Reserve for Loan Losses) |  | $      | 69,705 |        |  | $    | 5,473 |                              |  |  | 7.85 | % |  |  | 69.81  | %
|Federal Funds Sold                     |  |        | 7,589  |        |  |      | 119   |                              |  |  | 1.56 | % |  |  | 7.60   | %
|Investment Securities                  |  |        | 22,557 |        |  |      | 1,069 |                              |  |  | 4.74 | % |  |  | 22.59  | %
|                                       |  |        |        |        |  |      |       |                              |  |  |      |   |  |  |        |  
|Total Earning Assets                   |  | $      | 99,851 |        |  | $    | 6,661 |                              |  |  | 6.67 | % |  |  | 100.00 | %

Interest Income Break Down
For Year Ending 2001
(All Dollars in Thousands)

|                                       |  |        |        |        |  |      |       |                              |  |  |      |   |  |  |        |  
|-------------------------------------- |  | ------ | ------ | ------ |  | ---- | ----- | ---------------------------- |  |  | ---- | - |  |  | ------ | -
|Category (Average for Year)            |  | Amount |        | Income |  | Rate |       | Pct. of Total Earning Assets
|                                       |  |        |        |        |  |      |       |                             
|Loans (Before Reserve for Loan Losses) |  | $      | 67,291 |        |  | $    | 5,932 |                              |  |  | 8.82 | % |  |  | 72.76  | %
|Federal Funds Sold                     |  |        | 9,795  |        |  |      | 441   |                              |  |  | 4.50 | % |  |  | 10.59  | %
|Investment Securities                  |  |        | 15,399 |        |  |      | 830   |                              |  |  | 5.39 | % |  |  | 16.65  | %
|                                       |  |        |        |        |  |      |       |                              |  |  |      |   |  |  |        |  
|Total Earning Assets                   |  | $      | 92,485 |        |  | $    | 7,203 |                              |  |  | 7.79 | % |  |  | 100.00 | %

As can be seen by the Tables, there was a marked change in both rate and volume
of Earning Assets between the years 2001 and 2002.

Loan Interest decreased from $5,473,000 in 2002, down $459,000 or 7.74% from
the $5,932,000 in 2001. That was a decrease of $274,000 or 4.42% from the
$6,206,000 at year end 2000. Income from Federal Funds Sold decreased $322,000
or 73,02% from the year end amount of $441,000 in 2001, the year ending 2001
saw a decreased $73,000 or 14.20% from the $514,000 at year end 2000. Income
from Investment securities realized an increase of $239,000 with earnings of
$1,069,000 at year end 2002. This increase was 28.80% higher than the $830,000
earned at year end 2001. The $830,000 at year end 2001 was $295,000 or 55.14%
higher than the $535,000 earned for year end 2000.

Interest Expense

Interest expense is derived from the interest bearing liabilities, which
consists of Checking accounts, Now accounts, Savings Accounts, Money Market
accounts, and Certificates of Deposits (CDs), Federal Funds Sold, Repurchase
accounts and other borrowings. During the year 2002, Interest expense totaled
$2,157,000, a decrease of $1,051,000 or 32.76% from the 2001 year end total of
$3,208,000. This was in increase of 328,000 or 11.39% from the 2000 year end
total of $2,880,000. The following tables provide a break out of the two years
ending 2002 and 2001 respectively.


Interest Expense Break Down
For Year Ending 2002
(All Dollars in Thousands)

|                          |  |        |        |         |  |      |       |             |  |  |      |   |  |                       |        |  
|------------------------- |  | ------ | ------ | ------- |  | ---- | ----- | ----------- |  |  | ---- | - |  | --------------------- | ------ | -
|                          |  |        |        |         |  |      |       |             |  |  |      |   |  | Pct. of Total Costing
|Category (Avg for Year)   |  | Amount |        | Expense |  | Rate |       | Liabilities
|                          |  |        |        |         |  |      |       |            
|Transaction Accounts      |  | $      | 21,058 |         |  | $    | 183   |             |  |  | .87  | % |  |                       | 24.62  | %
|Savings Accounts          |  |        | 21,129 |         |  |      | 313   |             |  |  | 1.48 | % |  |                       | 24.70  | %
|Certificates of Deposit   |  |        | 39,018 |         |  |      | 1,430 |             |  |  | 3.66 | % |  |                       | 45.62  | %
|Federal Funds Purchased   |  |        | 352    |         |  |      | 1     |             |  |  | .28  | % |  |                       | .41    | %
|Other Borrowings          |  |        | 3,974  |         |  |      | 230   |             |  |  | 5.79 | % |  |                       | 4.65   | %
|                          |  |        |        |         |  |      |       |             |  |  |      |   |  |                       |        |  
|Total Costing Liabilities |  | $      | 85,531 |         |  | $    | 2,157 |             |  |  | 2.52 | % |  |                       | 100.00 | %

Interest Expense Break Down
For Year Ending 2001
(All Dollars in Thousands)

|                          |  |        |        |         |  |      |       |             |  |  |      |   |  |                       |        |  
|------------------------- |  | ------ | ------ | ------- |  | ---- | ----- | ----------- |  |  | ---- | - |  | --------------------- | ------ | -
|                          |  |        |        |         |  |      |       |             |  |  |      |   |  | Pct. of Total Costing
|Category (Avg for Year)   |  | Amount |        | Expense |  | Rate |       | Liabilities
|                          |  |        |        |         |  |      |       |            
|Transaction Accounts      |  | $      | 19,643 |         |  | $    | 306   |             |  |  | 1.56 | % |  |                       | 24.13  | %
|Savings Accounts          |  |        | 17,356 |         |  |      | 410   |             |  |  | 2.36 | % |  |                       | 21.32  | %
|Certificates of Deposit   |  |        | 39,853 |         |  |      | 2,221 |             |  |  | 5.57 | % |  |                       | 48.96  | %
|Federal Funds Purchased   |  |        | 505    |         |  |      | 12    |             |  |  | 2.38 | % |  |                       | .62    | %
|Other Borrowings          |  |        | 4,044  |         |  |      | 259   |             |  |  | 6.40 | % |  |                       | 4.97   | %
|                          |  |        |        |         |  |      |       |             |  |  |      |   |  |                       |        |  
|Total Costing Liabilities |  | $      | 81,401 |         |  | $    | 3,208 |             |  |  | 3.94 | % |  |                       | 100.00 | %

Non Interest Expense

The Banks non-interest expenses for the fiscal year 2002 were $4,266,000 or
approximately $356,000 average per month as compared to $3,768,000 or
approximately $314,000 average per month for 2001. Non-interest expense for
2000 was $3,693,000 or approximately $308,000 average per month. The amount of
$4,266,000 for 2002 consisted primarily of $2,248,000 in salaries and benefits,
$377,000 of occupancy expense for all its offices, equipment expenses of
$351,000 and $1,290,000 of other operating expenses. Other operating expenses
primarily consisted of marketing






---



##### Table of Contents



expense, taxes (intangible and sales), insurance (FDIC, blanket bond and
property), state assessments, professional fees (accounting, audit and legal),
office supplies, postage and delivery, service fees and amortization of
capitalized expenses.

Non Interest Income

The Banks non-interest income for fiscal year 2002 was $1,146,000. The sources
reflected in non-interest income were from service charges on deposit accounts
of $945,000 and non-deposit income of $201,000. This is an increase of
$138,000 compared to the $1,008,000 of non-interest income reported for the
twelve month period ended December 31, 2001.


Income Taxes

For 2002, net income before taxes was $1,264,000 and after taxes of $387,000,
the net income was $877,000. See Note O of Notes to Consolidated Financial
Statements. The Bank has adopted FAS109 for the accounting of Income Taxes.


Deposits

The bank experienced deposit growth during 2002, resulting in a net increase
for the fiscal year of 9.2%, as compared to the previous two years of growth of
11.0% in 2001 and 13.8% in 2000. Being the primary source for the funding of
investment and financing activities, thus the breakdown of deposits is of vital
importance to the Bank and Management. As of the end of 2002, the Banks total
deposits were $101,754,000, a $8,585,000 increase. Approximately 81.9% of the
Banks deposits are in interest-bearing accounts at the end of the current
fiscal year, which is typical in the Banks market area. Also note that
included in interest-bearing accounts are the Banks now accounts, which are
the only type of personal checking account offered by the Bank. Of this
$23,047,000, only a small percentage maintains a sufficient minimum balance to
earn interest. Non-Interest-bearing accounts made up 18.1% and NOW and Money
Market Accounts were 30.3% of total deposits compared to 29.9% and 17.4% in the
previous year respectively. In time deposits, the Bank held 51.6% in time
deposits, which comprise savings accounts and Certificates of Deposits. This
was a decrease from the approximately 55.1% the year before.


FHLB

Effective August 15, 1995, the Federal Housing Finance Board approved Valrico
State Banks membership to the Federal Home Loan Bank of Atlanta. Being a
member offers alternative funding sources for the Bank.


Loans

Loans comprise the major asset of the Bank, as of December 31, 2002 the bank
had $75,555,000 in Total Loans, the Table below breaks out the categories the
bank tracks.


|                            |  |        |        |         |  |                |        |         |  |   |        |  |  |  |        |  
|--------------------------- |  | ------ | ------ | ------- |  | -------------- | ------ | ------- |  | - | ------ |  |  |  | ------ | -
|                            |  |        |        |         |  | December 31,   |        |         |  |  
|                            |  | 2002   |        | 2001   
|                            |  |        |        |        
|                            |  |        |        |         |  | (in Thousands) |        |         |  |  
|                            |  | Amount |        | Percent |  | Amount         |        | Percent
|                            |  |        |        |         |  |                |        |        
|Commercial and Industrial   |  | $      | 54,483 |         |  |                | 72.11  | %       |  | $ | 42,907 |  |  |  | 63.23  | %
|Agricultural                |  |        | 9,199  |         |  |                | 12.18  | %       |  |   | 12,170 |  |  |  | 17.93  | %
|Real estate                 |  |        | 8,107  |         |  |                | 10.73  | %       |  |   | 5,420  |  |  |  | 7.99   | %
|Installment and other loans |  |        | 3,766  |         |  |                | 4.98   | %       |  |   | 7,363  |  |  |  | 10.85  | %
|                            |  |        |        |         |  |                |        |         |  |   |        |  |  |  |        |  
|Total loans                 |  | $      | 75,555 |         |  |                | 100.00 | %       |  | $ | 67,860 |  |  |  | 100.00 | %

Residential Real Estate

At the conclusion of the fiscal year 2002, residential (1-4 family) real estate
loans totaled $8,107,000, an increase from the previous two years amounts of
$5,420,000 and $4,336,000. The $8,107,000 at year-end represents approximately
10.7% of the total loans outstanding, and are increases from the 8.0% and
6.4%for the years ending 2001 and 2000 respectively. These real estate loans
consist primarily of intermediate term loans secured by real estate and payable
in periodic installments.


Consumer

Consumer loans consist of loans made to individuals and business for consumer
purposes. These loans represented $3,766,000 or 5.0% of the total loan
portfolio. In 2001 and 2000, these loans represented $7,363,000 and $9,579,000
or 10.9% and 14.1% of the total loan portfolio respectively.


Commercial and Industrial

The commercial and industrial loans comprised $54,483,000, $42,907,000 and
$41,217,000 and as of December 31, 2002, 2001, and 2000 respectively. The
commercial and industrial purpose loans include commercial real estate loans
that are secured by anything other that farmland or farm equipment. The
$54,483,000 at year-end represents approximately 72.11% of the total loans
outstanding, an increase from the 63.23% and 60.75% for the years ending 2001
and 2000 respectively.


Agricultural

The commercial loans that have a purpose of agriculture or are secured by any
farmland or equipment are classified as Agricultural. The agricultural loans
for the same periods were $9,199,000, $12,170,000 and $12,713,000. The
$9,199,000 at year-end represents approximately 12.2% of the total loans
outstanding, a slight decrease from the 17.9 and 18.7% for the years ending
2001 and 2000 respectively.






---



##### Table of Contents



Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management of the Bank believes that the collectibility of the
principal on such loans is unlikely. The allowance is an amount that
management of the Bank believes will be adequate to absorb losses inherent in
existing loans and commitments to extend credit, based on evaluations of the
collectibility of outstanding loans and prior loan loss experience relating to
loans and commitments to extend credit. The evaluations take into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrowers ability to pay. Subsequent
recoveries, if any, on loans charged against the allowance will be credited to
the allowance.


The Bank derives its loan loss reserve based on several methods. One is to
review the Banks historical loss percentages calculated by dividing
year-to-date charge-offs by the amount of reservable loans. Secondly, a review
of classified loans based on a specific reserve allocation method, a percentage
method, and a blended reserve based on specific and percentage methods. The
reserve allocation is based on the overall assessment of all the methods to
determine the appropriate amount to charge to the provision for loan losses.

Additionally, the Banks loan portfolio is periodically reviewed by Federal and
State regulators as a normal part of their examination process. Governmental
examination procedures require individual judgments about a borrowers ability
to repay loans, sufficiency of collateral values and the effects of changing
economic circumstances. These procedures are similar to those employed by the
Bank in determining the adequacy of the allowance for loan losses and in
classifying loans.

As a result of their examinations, regulators may propose adjustments to the
allowance for loan losses or in the loan classifications. As a practical
matter, management and Board of Directors of the Bank promptly consider and
implement those proposed adjustments.

The Bank charged to operations $120,000 for provision for loan losses in 2002
and $120,000 and $250,000, respectively, for 2001 and 2000. The amount of
$120,000 was added to the beginning balance of $978,000 for the period ended
December 31, 2001 for a total accumulated provision before net charge-offs for
the period ended December 31, 2002 of $1,098,000. The Bank charged off loans
during the fiscal year 2002 in the amount of $106,000 and reflected recoveries
of $23,000 leaving a net balance in the allowance for loan losses for the
period ended December 31, 2002 of $1,015,000, which was 1.34% of total loans
outstanding of $75,555,000.

Non Accrual Loans

Loans on which the accrual of interest has been discontinued are designated as
non-accrual loans. Accrual of interest on loans is discontinued either when
reasonable doubt exists as to the full and timely collection of interest or
principal or both, or when a loan becomes contractually past due by 90 days or
more with respect to interest or principal. When a loan is placed on
non-accrual status, all interest previously accrued but not collected is
reversed against current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the future
collection of principal is probable. Interest accruals are resumed on such
loans only when they are brought fully current with respect to interest and
principal and when, in the judgement of management, the loans are estimated to
be fully collectible as to both principal and interest. At December 31, 2002
and December 31, 2001, the Banks loans designated as non-accrual totaled
$535,000 and $530,000, respectively. The Bank has adopted FASB 114 for the
accounting of non accrual loans.


Impaired Loans

At December 31, 2002 and December 31, 2001, loans totaling $472,000 and
$240,000, respectively, had been classified as impaired. The bank has adopted
FAS114 for its accounting procedures dealing with Impaired Loans.


Investment Securities

The Banks investment portfolio at December 31, 2002 of $22,341,000(based on
securities held available for sale marked to approximate fair market value)
comprised approximately 22.59% of the Banks total earning assets, as compared
to 16.65% at December 31, 2001. The investment securities are primarily
concentrated in obligations of U. S. Government agencies, municipals and
corporations. As of December 31, 2002, the Banks investment portfolio had
8.9% adjustable rate securities.


As of December 31, 2002, the Banks investment portfolio, consisted of
$21,133,000 in AFS and $1,208,000, in HTM. The net effect to stockholders
equity as of December 31, 2001 was a net gain in reserve for securities of
$369,000.

The market value of securities fluctuates during the investment period and is
determined on the basis of market quotations. The Bank reprices its securities
on a monthly basis. The Bank invests in securities for interest income and
liquidity.

The Bank adopted FASB 115 and FAS 130 for accounting of Investments.

Earning Assets

When calculating total earning assets, the amount of $1,104,000 and $1,066,000
as of December 31, 2002 and 2001 were added to total earning assets. This
amount represents the cash surrender value of whole life insurance policies
purchased primarily to fund a deferred benefit pension plan implemented in 1993
for officers of the Bank who qualified for the program.


Non Earning Assets

Non-interest earning assets accounted for approximately 12.2% of the Companys
total assets at December 31, 2002, a decrease from the approximately 11.5% at
December 31, 2001. The total non-interest earning assets primarily consisted
of cash and funds placed on deposit in accounts with other banks. Of the total $14,005,000 of non-interest earning
assets, cash and non-interest bearing deposits totaled $9,083,000. Other
significant non-interest earning assets consisted of fixed assets and interest
receivable.






---



##### Table of Contents



Capital

A good capital position, which is vital to the continued profitability of the
Company, also promotes depositor and shareholder confidence and provides a
solid foundation for the future growth of the Bank. The Bank has provided for
its capital requirements through the retention of earnings. At December 31,
2002, the Banks Tier 1 capital position was 7.29% ($8,297,000 shareholders
equity divided by total assets of $113,798,000) and the Banks Tier 2 capital
was 8.18% determined by adding loan loss reserves of $1,015,000 to
shareholders equity of $8,297,000 and dividing by total assets of
$113,798,000). Total Tier 1 capital to total risk-weighted assets as of
December 31, 2002 was 9.60% and total capital (Tier 2) to total risk-weighted
assets was 10.78% compared to 9.34% and 10.57%, respectively, in 2001.


Interest Rate Risk

Interest rate sensitivity is a function of the re-pricing characteristics of
the Banks portfolio of assets and liabilities. These re-pricing
characteristics are the time frames within which the interest-bearing assets
and liabilities are subject to change in interest rates. The change in
interest rates can be either at replacement, re-pricing or maturity during the
life of the assets or liabilities. Interest rate sensitivity management is to
concentrate on the maturities of assets and liabilities as they re-price during
time periods of changes in market interest rates. Effective management is to
ensure that both assets and liabilities respond to changes in interest rates
within an acceptable time frame while minimizing the effect of interest rate
changes on net interest income.


The major elements used to manage interest rate risk include the mix of fixed
and variable rate assets and liabilities and the maturity pattern of assets and
liabilities. The Bank performs a monthly review of assets and liabilities that
re-price and the time bands within which the re-pricing occurs. Through such
analysis, the Bank monitors and manages its interest sensitivity gap to
minimize the effects of changing interest rates.

The interest rate sensitivity structure within the Banks balance sheet at
December 31, 2002, indicated an Asset~Liability gap ratio of 93% when
projecting out one year. In the near term, defined as 90 days, the Bank had an
Asset~Liability gap ratio of 180%. This information represents a general
indication of re-pricing characteristics over time; however, the sensitivity of
certain deposit products may vary during extreme swings in interest rates.
Since all interest rates and yields do not adjust at the same velocity, the
interest rate sensitivity gap is only a general indicator of the potential
effects of interest rate changes on net interest income.

Liquidity

Liquidity is the ability of the Bank to meet present and future financial
obligations either through the sale or maturity of existing assets or by the
acquisition of funds through asset and liability management. Management of the
Bank continually evaluates its liquidity position and seeks to achieve its
desired liquidity objectives from both assets and liabilities. Asset liquidity
is achieved through the continuous maturing of earning assets and by investing
in short-term marketable assets. Liability liquidity is available through
continued deposit growth, maturity structure and accessibility to market
sources of funds.


As of December 31, 2002, the Banks liquidity ratio was 34.51% derived by
dividing net cash, short-term, and marketable assets of $35.2 million by net
deposits of $102.0 million. The Banks dependency ratio as of December 31, 2002
was 8.15%. This ratio is determined by taking the Banks volatile liabilities
(primarily Jumbo certificates) of $12.0 million less short-term investments of
$4.2 million divided by adjusted total earning assets of $95.7 million. In
2001 and 2000, the Bank had maintained a liquidity ratio on an average of 20%
to 35%. As noted in Funding Sources above, management of the Bank believes
that the high concentration of time deposits is primarily due to customer
relationships and not the attraction of the higher than market rates typically
offered by certificates of deposits.

Regulatory Matters

On June 19, 2001, the Bank and the FDIC entered into a Memorandum of
Understanding under which the Bank would institute a corrective action program
to eliminate compliance problems at the Bank. Management believes that the
Bank is in substantial compliance with the Memorandum.


Recently Adopted Financial Accounting Standards

There have been no new Financial Accounting Standards adopted over the past
three years, having a significant effect on the companys financial position,
results of operations or cash flows.


Forward Looking Statements

This filing contains forward-looking statements that involve risks and
uncertainties, and there are certain important factors that could cause actual
results to differ materially from those anticipated. These important factors
include, but are not limited to, economic conditions (both generally and more
specifically in the Banks market), competition for customers from other
providers of financial services, government legislation and regulation which
changes from time to time and over which the Company and the Bank have no
control, changes in interest rates, the impact of the Banks growth, and other
risks detailed in the Annual Report on Form 10-K and in the Companys other
filings with the Securities and Exchange Commission, all of which are difficult
to predict and many of which are beyond the control of the Company.


(Remainder of this page intentionally left blank)





---



##### Table of Contents



TABLES TO ITEM 7.

The following tables included in this Form 10-K in response to Item 7 are
intended to be supplementary information to be read in conjunction with
managements discussion and analysis of financial condition and result of
operations.



| | Table I- Distribution of Assets, Liabilities, and
          
          stockholders Equity; Interest Rates and
          
          Interest DifferentialsTable II- Investment PortfolioTable III- Loan PortfolioTable IV- Summary of Loan Loss ExperienceTable V- DepositsTable VI- Return on Equity and AssetsTable VII- Short-Term Borrowings
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Remainder of this page intentionally left blank)





---



##### Table of Contents



Table I

Average Balances, Interest, and Yield/Rate
(Dollars in Thousands)

|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |      |      |      |  
|------------------------------------------ | ----------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------------- | ------ | ------- | ------ | ------- | ----- | ------- | ----- | ------- | ---- | ------- | ---- | ------- | ------ | ------- | ------ | ------- | ----- | ------- | ----- | ---- | ---- | ---- | ---- | ------ | ------ | ------ | ------ | ----- | ----- | ----- | ----- | ---- | ---- | ---- | ---- | -
|                                           |                               |                                                                                             |                                    |        |         |        |         |       | 2002    |       |         |      |         |      |         |        |         |        | 2001    |       |         |       |      |      |      |      |        |        | 2000   |        |       |       |      
|                                           |                               |                                                                                             |                                    |        | Average |        | Income/ |       | Average |       | Average |      | Income/ |      | Average |        | Average |        | Income/ |       | Average
|                                           |                               |                                                                                             |                                    |        | Balance |        | Expense |       | Rate    |       | Balance |      | Expense |      | Rate    |        | Balance |        | Expense |       | Rate   
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |        
|Assets:                                    |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|Earning Assets:                            |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           | Loans, Net of
unearned income |                                                                                             |                                    | 69,705 |         |        |         | 5,473 |         |       |         | 7.85 | %       |      |         | 67,511 |         |        |         | 5,932 |         |       |      | 8.79 | %    |      |        | 68,060 |        |        |       | 6,206 |       |       |      | 9.12 | %   
|                                           | Investment Securities         |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |      |     
|                                           |                               | Taxable                                                                                     |                                    |        | 18,379  |        |         |       | 877     |       |         |      | 4.77    | %    |         |        | 12,745  |        |         |       | 671     |       |      |      | 5.26 | %    |        |        | 6,291  |        |       |       | 415   |       |      |      | 6.60 | %   
|                                           |                               | Tax exempt                                                                                  |                                    |        | 4,178   |        |         |       | 192     |       |         |      | 4.60    | %    |         |        | 3,443   |        |         |       | 159     |       |      |      | 4.62 | %    |        |        | 2,504  |        |       |       | 120   |       |      |      | 4.80 | %   
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           |                               |                                                                                             | Total Investments                  |        |         | 22,557 |         |       |         | 1,069 |         |      |         | 4.74 | %       |        |         | 16,188 |         |       |         | 830   |      |      |      | 5.13 | %      |        |        | 8,795  |       |       |       | 535   |      |      |      | 6.08 | %
|                                           | Federal Funds Sold            |                                                                                             |                                    | 7,589  |         |        |         | 119   |         |       |         | 1.56 | %       |      |         | 10,976 |         |        |         | 441   |         |       |      | 4.02 | %    |      |        | 8,405  |        |        |       | 514   |       |       |      | 6.12 | %   
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           |                               | Total Earning Assets                                                                        |                                    |        | 99,851  |        |         |       | 6,661   |       |         |      | 6.67    | %    |         |        | 94,675  |        |         |       | 7,203   |       |      |      | 7.61 | %    |        |        | 85,260 |        |       |       | 7,255 |       |      |      | 8.51 | %   
|Allowance for loan losses                  |                               |                                                                                             | (1,015                             | )      |         |        |         |       |         |       |         |      |         |      | (991    | )      |         |        |         |       |         |       |      |      |      |      | (932   | )      |        |        |       |       |       |       |      |     
|Cash and Due From                          |                               |                                                                                             | 7,750                              |        |         |        |         |       |         |       |         |      |         |      | 6,636   |        |         |        |         |       |         |       |      |      |      |      | 5,542  |        |        |        |       |       |       |       |      |     
|Other Assets                               |                               |                                                                                             | 3,694                              |        |         |        |         |       |         |       |         |      |         |      | 6,277   |        |         |        |         |       |         |       |      |      |      |      | 6,071  |        |        |        |       |       |       |       |      |     
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           |                               | Total Assets                                                                                |                                    |        | 110,280 |        |         |       |         |       |         |      |         |      |         |        | 106,597 |        |         |       |         |       |      |      |      |      |        |        | 95,941 |        |       |       |       |       |      |      |      |     
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|Liabilities and Shareholders Equity        |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|Interest Bearing Liabilities               |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           | Deposits                      |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |      |     
|                                           |                               | NOW Accounts                                                                                |                                    |        | 21,058  |        |         |       | 183     |       |         |      | 0.87    | %    |         |        | 20,383  |        |         |       | 306     |       |      |      | 1.50 | %    |        |        | 17,605 |        |       |       | 291   |       |      |      | 1.65 | %   
|                                           |                               | Money Market Accounts                                                                       |                                    |        | 8,016   |        |         |       | 116     |       |         |      | 1.45    | %    |         |        | 6,764   |        |         |       | 167     |       |      |      | 2.47 | %    |        |        | 6,769  |        |       |       | 182   |       |      |      | 2.69 | %   
|                                           |                               | Savings Accounts                                                                            |                                    |        | 13,113  |        |         |       | 197     |       |         |      | 1.50    | %    |         |        | 10,881  |        |         |       | 243     |       |      |      | 2.23 | %    |        |        | 9,280  |        |       |       | 236   |       |      |      | 2.54 | %   
|                                           |                               | Time $100,000 and over                                                                      |                                    |        | 11,454  |        |         |       | 447     |       |         |      | 3.90    | %    |         |        | 12,935  |        |         |       | 751     |       |      |      | 5.81 | %    |        |        | 11,129 |        |       |       | 563   |       |      |      | 5.06 | %   
|                                           |                               | Other Time Deposits                                                                         |                                    |        | 27,563  |        |         |       | 984     |       |         |      | 3.24    | %    |         |        | 27,270  |        |         |       | 1,470   |       |      |      | 5.39 | %    |        |        | 24,497 |        |       |       | 1,290 |       |      |      | 5.27 | %   
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           |                               |                                                                                             | Total interest bearing deposits    |        |         | 81,204 |         |       |         | 1,927 |         |      |         | 2.37 | %       |        |         | 78,233 |         |       |         | 2,937 |      |      |      | 3.75 | %      |        |        | 69,280 |       |       |       | 2,562 |      |      |      | 3.70 | %
|                                           |                               | Securities sold under agreement
to repurchase, Federal funds
purchased and other borrowings |                                    |        | 4,159   |        |         |       | 230     |       |         |      | 5.53    | %    |         |        | 4,524   |        |         |       | 271     |       |      |      | 5.99 | %    |        |        | 4,568  |        |       |       | 318   |       |      |      | 6.96 | %   
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|                                           |                               |                                                                                             | Total interest bearing liabilities |        |         | 85,363 |         |       |         | 2,157 |         |      |         | 2.52 | %       |        |         | 82,757 |         |       |         | 3,208 |      |      |      | 3.75 | %      |        |        | 73,848 |       |       |       | 2,880 |      |      |      | 3.90 | %
|Demand Deposits (non interest-bearing)     |                               |                                                                                             | 16,217                             |        |         |        |         |       |         |       |         |      |         |      | 15,591  |        |         |        |         |       |         |       |      |      |      |      | 14,312 |        |        |        |       |       |       |       |      |     
|Accrued expenses and other liabilities     |                               |                                                                                             | 946                                |        |         |        |         |       |         |       |         |      |         |      | 1,355   |        |         |        |         |       |         |       |      |      |      |      | 1,721  |        |        |        |       |       |       |       |      |     
|Shareholders equity                       |                               |                                                                                             | 7,754                              |        |         |        |         |       |         |       |         |      |         |      | 6,894   |        |         |        |         |       |         |       |      |      |      |      | 6,060  |        |        |        |       |       |       |       |      |     
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|Total liabilities and shareholders equity |                               |                                                                                             | 110,280                            |        |         |        |         |       |         |       |         |      |         |      | 106,597 |        |         |        |         |       |         |       |      |      |      |      | 95,941 |        |        |        |       |       |       |       |      |     
|                                           |                               |                                                                                             |                                    |        |         |        |         |       |         |       |         |      |         |      |         |        |         |        |         |       |         |       |      |      |      |      |        |        |        |        |       |       |       |       |      |     
|Net interest income/net interest spread    |                               |                                                                                             |                                    |        |         |        | 4,504   |       |         |       | 4.08    | %    |         |      |         |        |         |        | 3,995   |       |         |       | 3.75 | %    |      |      |        |        |        |        | 4,375 |       |       |       | 4.56 | %   
|Net yield on earning assets                |                               |                                                                                             |                                    |        |         |        |         |       |         |       | 4.51    | %    |         |      |         |        |         |        |         |       |         |       | 4.22 | %    |      |      |        |        |        |        |       |       |       |       | 5.13 | %   

The following table sets forth the extent to which changes in volume and rates
of earning assets and interest-bearing liabilities affected the change in
interest income or interest expense in the indicated time periods. For each
major balance sheet category, information is provided relating to 1) changes
in volume (changes in average balance multiplied by the prior years average
interest rate), 2) changes in rate (changes in average interest rate multiplied
by the prior years average balance), and 3) the total change in interest
income/expenses. Changes attributable jointly to volume and rate have been
allocated proportionately.





---



##### Table of Contents



Volume and Rate Analysis
(Dollars in Thousands)

|                 |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |       |        |  
|---------------- | --------------------- | ---------- |  | ------ | --- | ---- |  | ------ | ------ | ------ |  | ------ | ------ | ----- |  | ----- | ----- | - |  | ---- | ---- | - |  | ----- | ------ | -
|                 |                       |            |  | Volume |     | Rate |  | Total  |        | Volume |  | Rate   |        | Total
|Interest Income  |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |      
|                 | Loans                 |            |  | 190    |     |      |  | (655   | )      |        |  | (459   | )      |       |  | (49   | )     |   |  | (223 | )    |   |  | (274  | )     
|                 | Investment Securities |            |  | 327    |     |      |  | (88    | )      |        |  | 239    |        |       |  | 449   |       |   |  | (154 | )    |   |  | 295   |       
|                 | Other Earning Assets  |            |  | (136   | )   |      |  | (187   | )      |        |  | (322   | )      |       |  | 157   |       |   |  | (230 | )    |   |  | (73   | )     
|                 |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |      
|                 |                       | Total      |  |        | 381 |      |  |        | (930   | )      |  |        | (542   | )     |  |       | 557   |   |  |      | (607 | ) |  |       | (52    | )
|Interest Expense |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |      
|                 | Deposits              |            |  | 111    |     |      |  | (1,121 | )      |        |  | (1,010 | )      |       |  | 1,050 |       |   |  | (47  | )    |   |  | 1,005 |       
|                 | Borrowings            |            |  | (22    | )   |      |  | (19    | )      |        |  | (41    | )      |       |  | 17    |       |   |  | (5   | )    |   |  | 12    |       
|                 |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |      
|                 |                       | Total      |  |        | 89  |      |  |        | (1,140 | )      |  |        | (1,051 | )     |  |       | 1,067 |   |  |      | (52  | ) |  |       | 1,017  |  
|                 |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |      
|                 |                       | Net Change |  |        | 292 |      |  |        | 210    |        |  |        | 509    |       |  |       | (510  | ) |  |      | (555 | ) |  |       | (1,069 | )
|                 |                       |            |  |        |     |      |  |        |        |        |  |        |        |       |  |       |       |   |  |      |      |   |  |      

Interest Rate Sensitivity
(Dollars in Thousands)

|                  |                                                      |                                            |  |        |        |            |  |              |        |             |  |             |        |  |  |        |        |  |  |        |       | 
|----------------- | ---------------------------------------------------- | ------------------------------------------ |  | ------ | ------ | ---------- |  | ------------ | ------ | ----------- |  | ----------- | ------ |  |  | ------ | ------ |  |  | ------ | ----- | 
|                  |                                                      |                                            |  |        |        |            |  | After Three  |        | After One   |  | After Three |        |  |  |       
|                  |                                                      |                                            |  | Within |        | Months but |  | Year but     |        | Years but   |  | After      
|                  |                                                      |                                            |  | Three  |        | Within One |  | Within Three |        | Within Five |  | Five       
|                  |                                                      |                                            |  | Months |        | Year       |  | Years        |        | Years       |  | Years      
|                  |                                                      |                                            |  |        |        |            |  |              |        |             |  |            
|December 31, 2002 |                                                      |                                            |  |        |        |            |  |              |        |             |  |             |        |  |  |        |        |  |  |       
|Assets            |                                                      |                                            |  |        |        |            |  |              |        |             |  |             |        |  |  |        |        |  |  |       
|                  | Loans                                                |                                            |  | 29,201 |        |            |  | 7,922        |        |             |  | 22,640      |        |  |  | 12,733 |        |  |  | 2,920  |      
|                  | Short term investments                               |                                            |  | 4,157  |        |            |  | 0            |        |             |  | 0           |        |  |  | 0      |        |  |  | 0      |      
|                  | Securities                                           |                                            |  | 1,960  |        |            |  | 2,900        |        |             |  | 4,947       |        |  |  | 4,922  |        |  |  | 7,028  |      
|                  |                                                      |                                            |  |        |        |            |  |              |        |             |  |             |        |  |  |        |        |  |  |       
|                  |                                                      | Total interest sensitive assets (ISA)      |  |        | 35,318 |            |  |              | 10,822 |             |  |             | 27,587 |  |  |        | 17,655 |  |  |        | 9,948 | 
|Liabilities       |                                                      |                                            |  |        |        |            |  |              |        |             |  |             |        |  |  |        |        |  |  |       
|                  | Interest bearing deposits                            |                                            |  | 15,603 |        |            |  | 31,307       |        |             |  | 19,633      |        |  |  | 16,767 |        |  |  | 0      |      
|                  | Federal funds purchased                              |                                            |  | 0      |        |            |  | 0            |        |             |  | 0           |        |  |  | 0      |        |  |  | 0      |      
|                  | Long term borrowings                                 |                                            |  | 967    |        |            |  | 0            |        |             |  | 0           |        |  |  | 0      |        |  |  | 2,000  |      
|                  | Short term borrowings                                |                                            |  | 1,192  |        |            |  | 0            |        |             |  | 0           |        |  |  | 0      |        |  |  | 0      |      
|                  |                                                      |                                            |  |        |        |            |  |              |        |             |  |             |        |  |  |        |        |  |  |       
|                  |                                                      | Total interest sensitive liabilities (ISL) |  |        | 17,762 |            |  |              | 31,307 |             |  |             | 19,633 |  |  |        | 16,767 |  |  |        | 2,000 | 
|                  | Net position os ISA minus ISL                        |                                            |  | 17,556 |        |            |  | -20,485      |        |             |  | 7,954       |        |  |  | 888    |        |  |  | 7,948  |      
|                  | Cumulative net position of ISA minus ISL             |                                            |  | 17,556 |        |            |  | -2,929       |        |             |  | 5,025       |        |  |  | 5,913  |        |  |  | 13,861 |      
|                  | Cumulative net position as a percent
of total assets |                                            |  | 15.27  | %      |            |  | -2.55        | %      |             |  | 4.37        | %      |  |  | 5.14   | %      |  |  | 11.71  | %    





---



##### Table of Contents



Table II
Investment Portfolio

(amortized cost, in thousands)


---

|                                  |                                 |                             |  |        |        |      |  |       |        |  |  |       |       | 
|--------------------------------- | ------------------------------- | --------------------------- |  | ------ | ------ | ---- |  | ----- | ------ |  |  | ----- | ----- | 
|December 31,                      |                                 | 2002                        |  | 2001   |        | 2000
|                                  |                                 |                             |  |        |        |     
|Securities to be held-to-maturity |                                 |                             |  |        |        |      |  |       |        |  |  |      
|                                  | 1.  U.S. Treasury Securities    |                             |  | 0      |        |      |  | 0     |        |  |  | 0     |      
|                                  | 2.  U.S. Government Agencies    |                             |  | 0      |        |      |  | 0     |        |  |  | 0     |      
|                                  | 3.   Mortgage-backed securities |                             |  | 193    |        |      |  | 294   |        |  |  | 1,286 |      
|                                  | 4.  Municipal                   |                             |  | 1,015  |        |      |  | 1,288 |        |  |  | 438   |      
|                                  | 5.  Other                       |                             |  | 0      |        |      |  | 0     |        |  |  | 0     |      
|                                  |                                 |                             |  |        |        |      |  |       |        |  |  |      
|                                  |                                 | Subtotal                    |  |        | 1,208  |      |  |       | 1,582  |  |  |       | 1,724 | 
|Securities available-for-sale     |                                 |                             |  |        |        |      |  |       |        |  |  |      
|                                  | 1.  U.S. Treasury Securities    |                             |  | 0      |        |      |  | 0     |        |  |  | 0     |      
|                                  | 2.  U.S. Government Agencies    |                             |  | 1,503  |        |      |  | 6,002 |        |  |  | 988   |      
|                                  | 3.  Mortgage-backed securities  |                             |  | 10,291 |        |      |  | 7,855 |        |  |  | 1,265 |      
|                                  | 4.  Municipal                   |                             |  | 3,027  |        |      |  | 3,027 |        |  |  | 3,567 |      
|                                  | 5.  Other                       |                             |  | 5,744  |        |      |  | 3,369 |        |  |  | 1,349 |      
|                                  |                                 |                             |  |        |        |      |  |       |        |  |  |      
|                                  |                                 | Subtotal                    |  |        | 20,565 |      |  |       | 20,253 |  |  |       | 7,169 | 
|                                  |                                 |                             |  |        |        |      |  |       |        |  |  |      
|                                  |                                 | Total investment securities |  |        | 21,773 |      |  |       | 21,835 |  |  |       | 8,893 | 
|                                  |                                 |                             |  |        |        |      |  |       |        |  |  |      

Investment Securities Maturity Schedule
(Dollars in Thousands)
Maturity Schedule

|                               |        |  |         |     |         |  |         |   |       |                 |        |       |       |  |      |   |  |  |   |   |  |  |      |   | 
|------------------------------ | ------ |  | ------- | --- | ------- |  | ------- | - | ----- | --------------- | ------ | ----- | ----- |  | ---- | - |  |  | - | - |  |  | ---- | - | 
|                               |        |  | In 2002 |     | In 2001 |  | In 2000
|                               |        |  |         |     |         |  |        
|                               |        |  | Amount  |     | Yield   |  | Amount  |   | Yield |                 | Amount |       | Yield
|                               |        |  |         |     |         |  |         |   |       |                 |        |       |      
|Security Type                  |        |  |         |     |         |  |         |   |       | Within One Year |        |       |       |  |      |   |  | 
|                               |        |  |        
|1.  U.S. Treasury Securities   |        |  | 0       |     |         |  | 0.00    | % |       |                 | 0      |       |       |  | 0.00 | % |  |  | 0 |   |  |  | 0.00 | %
|2.  U.S. Government Agencies   |        |  | 0       |     |         |  | 0.00    | % |       |                 | 500    |       |       |  | 6.05 | % |  |  | 0 |   |  |  | 0.00 | %
|3.  Mortgage-backed securities |        |  | 36      |     |         |  | 5.33    | % |       |                 | 0      |       |       |  | 5.51 | % |  |  | 0 |   |  |  | 0.00 | %
|4.  Municipal                  |        |  | 0       |     |         |  | 0.00    | % |       |                 | 275    |       |       |  | 4.60 | % |  |  | 7 |   |  |  | 6.91 | %
|5.  Other                      |        |  | 501     |     |         |  | 5.50    | % |       |                 | 455    |       |       |  | 6.47 | % |  |  | 0 |   |  |  | 0.00 | %
|                               |        |  |         |     |         |  |         |   |       |                 |        |       |       |  |      |   |  |  |   |   |  |  |      |  
|                               | Totals |  |         | 537 |         |  |         |   |       |                 |        | 1,230 |       |  |      |   |  |  |   | 7 |  |  |      |   | 
|                               |        |  |         |     |         |  |         |   |       |                 |        |       |       |  |      |   |  |  |   |   |  |  |      |  





---



##### Table of Contents



Table II Continued

|                               |        |  |         |       |         |                                      |         |   |       |  |        |       |       |  |      |   |  |  |       |       |  |  |      |   | 
|------------------------------ | ------ |  | ------- | ----- | ------- | ------------------------------------ | ------- | - | ----- |  | ------ | ----- | ----- |  | ---- | - |  |  | ----- | ----- |  |  | ---- | - | 
|                               |        |  | In 2002 |       | In 2001 |                                      | In 2000
|                               |        |  |         |       |         |                                      |        
|                               |        |  | Amount  |       | Yield   |                                      | Amount  |   | Yield |  | Amount |       | Yield
|                               |        |  |         |       |         |                                      |         |   |       |  |        |       |      
|Security Type                  |        |  |         |       |         | After One Year but Within Five Years |         |   |       | 
|                               |        |  |        
|1.  U.S. Treasury Securities   |        |  | 0       |       |         |                                      | 0.00    | % |       |  | 0      |       |       |  | 0.00 | % |  |  | 0     |       |  |  | 0.00 | %
|2.  U.S. Government Agencies   |        |  | 1,503   |       |         |                                      | 5.54    | % |       |  | 5,000  |       |       |  | 5.40 | % |  |  | 1,000 |       |  |  | 6.05 | %
|3.  Mortgage-backed securities |        |  | 3,158   |       |         |                                      | 3.81    | % |       |  | 127    |       |       |  | 6.19 | % |  |  | 275   |       |  |  | 4.60 | %
|4.  Municipal                  |        |  | 608     |       |         |                                      | 4.54    | % |       |  | 270    |       |       |  | 5.51 | % |  |  | 214   |       |  |  | 6.11 | %
|5.  Other                      |        |  | 1,766   |       |         |                                      | 5.80    | % |       |  | 1,538  |       |       |  | 6.03 | % |  |  | 950   |       |  |  | 6.17 | %
|                               |        |  |         |       |         |                                      |         |   |       |  |        |       |       |  |      |   |  |  |       |       |  |  |      |  
|                               | Totals |  |         | 7,035 |         |                                      |         |   |       |  |        | 6,935 |       |  |      |   |  |  |       | 2,439 |  |  |      |   | 
|                               |        |  |         |       |         |                                      |         |   |       |  |        |       |       |  |      |   |  |  |       |       |  |  |      |  

|                               |        |                                       |         |       |         |  |         |   |       |  |        |       |       |  |      |   |  |  |       |       |  |  |      |   | 
|------------------------------ | ------ | ------------------------------------- | ------- | ----- | ------- |  | ------- | - | ----- |  | ------ | ----- | ----- |  | ---- | - |  |  | ----- | ----- |  |  | ---- | - | 
|                               |        |                                       | In 2002 |       | In 2001 |  | In 2000
|                               |        |                                       | Amount  |       | Yield   |  | Amount  |   | Yield |  | Amount |       | Yield
|                               |        |                                       |         |       |         |  |         |   |       |  |        |       |      
|Security Type                  |        | After Five Years but Within Ten Years
|                               |        |                                       |        
|1.  U.S. Treasury Securities   |        |                                       | 0       |       |         |  | 0.00    | % |       |  | 0      |       |       |  | 0.00 | % |  |  | 0     |       |  |  | 0.00 | %
|2.  U.S. Government Agencies   |        |                                       | 0       |       |         |  | 0.00    | % |       |  | 502    |       |       |  | 4.00 | % |  |  | 0     |       |  |  | 0.00 | %
|3.  Mortgage-backed securities |        |                                       | 4,774   |       |         |  | 3.93    | % |       |  | 3,300  |       |       |  | 4.40 | % |  |  | 1,535 |       |  |  | 4.75 | %
|4.  Municipal                  |        |                                       | 3,189   |       |         |  | 4.56    | % |       |  | 3,526  |       |       |  | 4.75 | % |  |  | 1,367 |       |  |  | 5.88 | %
|5.  Other                      |        |                                       | 1,010   |       |         |  | 6.52    | % |       |  | 1,010  |       |       |  | 6.52 | % |  |  | 0     |       |  |  | 0.00 | %
|                               |        |                                       |         |       |         |  |         |   |       |  |        |       |       |  |      |   |  |  |       |       |  |  |      |  
|                               | Totals |                                       |         | 8,973 |         |  |         |   |       |  |        | 8,338 |       |  |      |   |  |  |       | 2,902 |  |  |      |   | 
|                               |        |                                       |         |       |         |  |         |   |       |  |        |       |       |  |      |   |  |  |       |       |  |  |      |  

|                               |        |  |         |       |         |  |         |   |       |                |        |       |       |  |      |   |  |  |       |       |  |  |      |   | 
|------------------------------ | ------ |  | ------- | ----- | ------- |  | ------- | - | ----- | -------------- | ------ | ----- | ----- |  | ---- | - |  |  | ----- | ----- |  |  | ---- | - | 
|                               |        |  | In 2002 |       | In 2001 |  | In 2000
|                               |        |  |         |       |         |  |        
|                               |        |  | Amount  |       | Yield   |  | Amount  |   | Yield |                | Amount |       | Yield
|                               |        |  |         |       |         |  |         |   |       |                |        |       |      
|Security Type                  |        |  |         |       |         |  |         |   |       | After 10 Years |        |       |       |  |      |   |  | 
|1.  U.S. Treasury Securities   |        |  | 0       |       |         |  | 0.00    | % |       |                | 0      |       |       |  | 0.00 | % |  |  | 0     |       |  |  | 0.00 | %
|2.  U.S. Government Agencies   |        |  | 0       |       |         |  | 0.00    | % |       |                | 0      |       |       |  | 0.00 | % |  |  | 0     |       |  |  | 0.00 | %
|3.  Mortgage-backed securities |        |  | 4,580   |       |         |  | 4.80    | % |       |                | 4,722  |       |       |  | 4.96 | % |  |  | 750   |       |  |  | 4.79 | %
|4.  Municipal                  |        |  | 244     |       |         |  | 5.50    | % |       |                | 244    |       |       |  | 5.50 | % |  |  | 2,422 |       |  |  | 6.39 | %
|5.  Other                      |        |  | 403     |       |         |  | 3.18    | % |       |                | 366    |       |       |  | 0.00 | % |  |  | 45    |       |  |  | 7.79 | %
|                               |        |  |         |       |         |  |         |   |       |                |        |       |       |  |      |   |  |  |       |       |  |  |      |  
|                               | Totals |  |         | 5,227 |         |  |         |   |       |                |        | 5,332 |       |  |      |   |  |  |       | 3,217 |  |  |      |   | 
|                               |        |  |         |       |         |  |         |   |       |                |        |       |       |  |      |   |  |  |       |       |  |  |      |  





---



##### Table of Contents



Table III
Loan Portfolio
(Dollars in Thousands)

|             |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |          |       |   |  |        |        |         |  |      |       |   |  | 
|------------ | -------------------------------- | ---------------------------------------------- |  | ------ | ------ | ------ |  | -------- | ----- | ------- |  | -------- | ------ | ------ |  | -------- | ----- | - |  | ------ | ------ | ------- |  | ---- | ----- | - |  | 
|December 31, |                                  | 2002                                           |  | 2001   |        | 2000  
|             |                                  |                                                |  |        |        |       
|             |                                  |                                                |  |        |        |        |  |          |       | Percent |  |          |        |        |  | Percent  |       |   |  |        |        | Percent
|             |                                  |                                                |  |        |        | Amount |  | of Total |       | Amount  |  | of Total |        | Amount |  | of Total
|             |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |         
|Loan Type    |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |          |       |   |  |        |        |         |  |     
|             | 1. Commercial                    |                                                |  | 63,682 |        |        |  | 84.3     | %     |         |  | 55,077   |        |        |  | 81.2     | %     |   |  | 53,930 |        |         |  | 79.5 | %    
|             | 2. Real Estate (1.4 family)      |                                                |  | 8,107  |        |        |  | 10.7     | %     |         |  | 5,420    |        |        |  | 8.0      | %     |   |  | 4,336  |        |         |  | 6.4  | %    
|             | 3. Installment and other         |                                                |  | 3,766  |        |        |  | 5.0      | %     |         |  | 7,363    |        |        |  | 10.8     | %     |   |  | 9,579  |        |         |  | 14.1 | %    
|             |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |          |       |   |  |        |        |         |  |      |       |   |  | 
|             |                                  | Total Loans                                    |  |        | 75,555 |        |  |          | 100.0 | %       |  |          | 67,845 |        |  |          | 100.0 | % |  |        | 67,845 |         |  |      | 100.0 | %
|             |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |          |       |   |  |        |        |         |  |      |       |   |  | 
|             | Less:  Unearned Income           |                                                |  | (138   | )      |        |  |          |       |         |  | (84      | )      |        |  |          |       |   |  | (76    | )      |         |  |      |      
|             | Less:  Allowance for loan losses |                                                |  | (1,015 | )      |        |  |          |       |         |  | (978     | )      |        |  |          |       |   |  | (943   | )      |         |  |      |      
|             |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |          |       |   |  |        |        |         |  |      |       |   |  | 
|             |                                  | Total loans less allowance and unearned income |  |        | 74,402 |        |  |          |       |         |  |          | 66,798 |        |  |          |       |   |  |        | 66,826 |         |  |      |       |  
|             |                                  |                                                |  |        |        |        |  |          |       |         |  |          |        |        |  |          |       |   |  |        |        |         |  |      |       |   |  | 

Selected Loan Maturity and Interest Rate Sensitivity Schedules
(Dollars in Thousands)

|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        |  | 
|--------------------------- | ----- | ------------------- | ------------------------------------ | ---------------- |  | ---- | ------ | ------ |  |  | ------ | ------ |  | 
|December 31,                |       | 2002Within One Year |                                      | 2001             |  | 2000
|                           
|1. Commercial               |       |                     | 22,691                               |                  |  |      | 15,016 |        |  |  | 16,312 |       
|2. Real Estate (1.4 family) |       |                     | 1,790                                |                  |  |      | 907    |        |  |  | 1,755  |       
|3. Installment and other    |       |                     | 848                                  |                  |  |      | 1,615  |        |  |  | 1,559  |       
|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        | 
|                            | Total |                     |                                      | 25,329           |  |      |        | 17,538 |  |  |        | 19,626 | 
|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        | 
|                            |       |                     |                                      |                  |  |      |       
|                            |       |                     | After One Year but Within Five Years
|                           
|1. Commercial               |       |                     | 37,806                               |                  |  |      | 35,965 |        |  |  | 33,438 |       
|2. Real Estate (1.4 family) |       |                     | 5,674                                |                  |  |      | 4,045  |        |  |  | 1,205  |       
|3. Installment and other    |       |                     | 2,709                                |                  |  |      | 5,082  |        |  |  | 7,601  |       
|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        | 
|                            | Total |                     |                                      | 46,189           |  |      |        | 45,092 |  |  |        | 42,244 | 
|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        | 
|                            |       |                     |                                      |                  |  |      |       
|                            |       |                     |                                      | After Five Years
|                           
|1. Commercial               |       |                     | 3,185                                |                  |  |      | 4,098  |        |  |  | 4,180  |       
|2. Real Estate (1.4 family) |       |                     | 643                                  |                  |  |      | 468    |        |  |  | 1,376  |       
|3. Installment and other    |       |                     | 209                                  |                  |  |      | 664    |        |  |  | 419    |       
|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        | 
|                            | Total |                     |                                      | 4,037            |  |      |        | 5,230  |  |  |        | 5.975  | 
|                            |       |                     |                                      |                  |  |      |        |        |  |  |        |        | 





---



##### Table of Contents



Table III Continued

Rate Structure for Loans Maturing Over One Year
(Dollars in thousands)

|   |  |                          |  |  |        |            |  |            |        |            |  |            |        |            |  |            |       |  |  |  |        |      |  |  |       |  |  | 
|-- |  | ------------------------ |  |  | ------ | ---------- |  | ---------- | ------ | ---------- |  | ---------- | ------ | ---------- |  | ---------- | ----- |  |  |  | ------ | ---- |  |  | ----- |  |  | 
|   |  |                          |  |  |        |            |  |            |        | With       |  |            |        |            |  | With       |       |  |  |  |        | With
|   |  |                          |  |  |        | With Pre-  |  | Floating   |        | With Pre-  |  | Floating   |        | With Pre-  |  | Floating  
|   |  |                          |  |  |        | Determined |  | or         |        | Determined |  | or         |        | Determined |  | or        
|   |  |                          |  |  |        | Interest   |  | Adjustable |        | Interest   |  | Adjustable |        | Interest   |  | Adjustable
|   |  |                          |  |  |        | Rate       |  | Rate       |        | Rate       |  | Rate       |        | Rate       |  | Rate      
|   |  |                          |  |  |        | Amount     |  | Amount     |        | Amount     |  | Amount     |        | Amount     |  | Amount    
|   |  |                          |  |  |        |            |  |            |        |            |  |            |        |            |  |           
|1. |  | Commercial               |  |  | 28,945 |            |  |            | 12,046 |            |  |            | 31,437 |            |  |            | 8,625 |  |  |  | 32,026 |      |  |  | 5,592 | 
|2. |  | Real Estate (1.4 family) |  |  | 6,317  |            |  |            | 0      |            |  |            | 4,513  |            |  |            | 0     |  |  |  | 2,581  |      |  |  | 0     | 
|3. |  | Installment and other    |  |  | 2,918  |            |  |            | 0      |            |  |            | 5,747  |            |  |            | 0     |  |  |  | 8,020  |      |  |  | 0     | 
|   |  |                          |  |  |        |            |  |            |        |            |  |            |        |            |  |            |       |  |  |  |        |      |  |  |       |  |  | 
|   |  | Total                    |  |  | 38,180 |            |  |            | 12,046 |            |  |            | 41,697 |            |  |            | 8,625 |  |  |  | 42,627 |      |  |  | 5,592 | 
|   |  |                          |  |  |        |            |  |            |        |            |  |            |        |            |  |            |       |  |  |  |        |      |  |  |       |  |  | 

(Remainder of this page intentionally left blank)





---



##### Table of Contents



Table IV
Summary of Loan Loss Experience

|                                |              |                            |                   |      |        |         |         |  |         |         |         |  |        |         | 
|------------------------------- | ------------ | -------------------------- | ----------------- | ---- | ------ | ------- | ------- |  | ------- | ------- | ------- |  | ------ | ------- | 
|Year Ended December 31,         |              | 2002                       |                   | 2001 |        | 2000   
|                                |              |                            |                   |      |        |        
|Balance at beginning of Period  |              |                            | 978,075           |      |        |         | 942,884 |  |         |         | 777,712 | 
|                                | Charge-offs: |                            |                   |      |        |         |         |  |         |         |         |  |       
|                                |              | Commercial Loans           |                   |      | 6,211  |         |         |  | 0       |         |         |  | 75,308 |        
|                                |              | Commercial Mortgages Loans |                   |      | 39,828 |         |         |  | 0       |         |         |  | 0      |        
|                                |              | Construction Loans         |                   |      | 0      |         |         |  | 0       |         |         |  | 0      |        
|                                |              | Residential Mortgage Loans |                   |      | 0      |         |         |  | 0       |         |         |  | 0      |        
|                                |              | Consumer Loans             |                   |      | 59,592 |         |         |  | 115,515 |         |         |  | 98,124 |        
|                                |              |                            |                   |      |        |         |         |  |         |         |         | 
|                                |              |                            | Total Charge-offs |      |        | 105,631 |         |  |         | 115,515 |         |  |        | 173,432 | 
|                                | Recoveries   |                            |                   |      |        |         |         |  |         |         |         |  |       
|                                |              | Commercial Loans           |                   |      | 805    |         |         |  | 19,171  |         |         |  | 49,349 |        
|                                |              | Commercial Mortgages Loans |                   |      | 0      |         |         |  | 0       |         |         |  | 0      |        
|                                |              | Construction Loans         |                   |      | 0      |         |         |  | 0       |         |         |  | 0      |        
|                                |              | Residential Mortgage Loans |                   |      | 21,687 |         |         |  | 11,535  |         |         |  | 0      |        
|                                |              | Consumer Loans             |                   |      | 0      |         |         |  | 0       |         |         |  | 39,255 |        
|                                |              |                            |                   |      |        |         |         |  |         |         |         | 
|                                |              |                            | Total Recoveries  |      |        | 22,492  |         |  |         | 30,706  |         |  |        | 88,604  | 
|                                |              |                            |                   |      |        |         |         |  |         |         |         | 
|Net Charge-offs less recoveries |              |                            | 83,139            |      |        |         | 84,809  |  |         |         | 84,828  | 
|Additions
charged to operations |              |                            | 120,000           |      |        |         | 120,000 |  |         |         | 250,000 | 
|                                |              |                            |                   |      |        |         |         |  |         |         |         | 
|Balance at end of period        |              |                            | 1,014,936         |      |        |         | 978,075 |  |         |         | 942,884 | 
|                                |              |                            |                   |      |        |         |         |  |         |         |         | 

Allocation of the allowance for loan losses

|                                        |                             |  |           |         |             |  |                     |      |             |  |         |         |                     |  |       |      |   |  |                     |         |  |  |       |      |  
|--------------------------------------- | --------------------------- |  | --------- | ------- | ----------- |  | ------------------- | ---- | ----------- |  | ------- | ------- | ------------------- |  | ----- | ---- | - |  | ------------------- | ------- |  |  | ----- | ---- | -
|                                        |                             |  | 2002      |         | 2001        |  | 2000               
|                                        |                             |  |           |         |             |  |                    
|                                        |                             |  |           |         |             |  | Percent of Loans in |      |             |  |         |         | Percent of Loans in |  |       |      |   |  | Percent of Loans in
|                                        |                             |  |           |         |             |  | Each Category to    |      |             |  |         |         | Each Category to    |  |       |      |   |  | Each Category to   
|                                        |                             |  | Amount    |         | Total Loans |  | Amount              |      | Total Loans |  | Amount  |         | Total Loans        
|                                        |                             |  |           |         |             |  |                     |      |             |  |         |         |                    
|Balance at end of period applicable to: |                             |  |           |         |             |  |                     |      |             |  |         |         |                     |  |       |      |   |  |                     |         |  |  |       |     
|                                        | Commercial and agricultural |  |           | 855,591 |             |  |                     | 84.3 | %           |  |         | 793,832 |                     |  |       | 81.2 | % |  |                     | 749,499 |  |  |       | 79.5 | %
|                                        | Real estate                 |  |           | 108,598 |             |  |                     | 10.7 | %           |  |         | 78,119  |                     |  |       | 8.0  | % |  |                     | 60,260  |  |  |       | 6.4  | %
|                                        | Installment and Others      |  |           | 50,747  |             |  |                     | 5.0  | %           |  |         | 106,124 |                     |  |       | 10.9 | % |  |                     | 133,125 |  |  |       | 14.1 | %
|                                        |                             |  |           |         |             |  |                     |      |             |  |         |         |                     |  |       |      |   |  |                     |         |  |  |       |     
|                                        |                             |  | 1,014,936 |         |             |  | 100.0               | %    |             |  | 978,075 |         |                     |  | 100.0 | %    |   |  | 942,884             |         |  |  | 100.0 | %   
|                                        |                             |  |           |         |             |  |                     |      |             |  |         |         |                     |  |       |      |   |  |                     |         |  |  |       |     





---



##### Table of Contents



Table V

Deposits
(Dollars in Thousands)

|                        |                           |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |      |      |   | 
|----------------------- | ------------------------- | ------------------------------- | -------------- | ------ | ------- | ------ | ------- | ---- | ------- | - | ------- | ------ | ------- | ------ | ------- | ---- | ---- | - |  | ------ | ------ | ------ |  | ---- | ---- | - | 
|Year Ended December 31, |                           | 2002                            |                | 2001   |         | 2000  
|                        |                           |                                 |                |        |         |       
|                        |                           |                                 |                |        | Average |        | Average |      | Average |   | Average |        | Average |        | Average
|                        |                           |                                 |                |        | Balance |        | Rate    |      | Balance |   | Rate    |        | Balance |        | Rate   
|                        |                           |                                 |                |        |         |        |         |      |         |   |         |        |         |        |        
|Deposits:               |                           |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |     
|                        | Non-interest              |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |      |     
|                        | Demand deposits           |                                 |                | 16,217 |         |        |         | 0.00 | %       |   |         | 15,591 |         |        |         | 0.00 | %    |   |  | 14,276 |        |        |  | 0.00 | %   
|                        | Interest Bearing Deposits |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |      |     
|                        |                           | NOW accounts                    |                |        | 21,058  |        |         |      | 0.87    | % |         |        | 20,383  |        |         |      | 1.50 | % |  |        | 17,605 |        |  |      | 1.65 | %
|                        |                           | Money market accounts           |                |        | 8,016   |        |         |      | 1.45    | % |         |        | 6,764   |        |         |      | 2.47 | % |  |        | 6,769  |        |  |      | 2.69 | %
|                        |                           | Savings accounts                |                |        | 13,113  |        |         |      | 1.50    | % |         |        | 10,881  |        |         |      | 2.23 | % |  |        | 9,280  |        |  |      | 2.54 | %
|                        |                           | Time, $100,000 and over         |                |        | 11,454  |        |         |      | 3.90    | % |         |        | 12,935  |        |         |      | 5.81 | % |  |        | 11.129 |        |  |      | 5.27 | %
|                        |                           | Other time Deposits             |                |        | 27,563  |        |         |      | 3.24    | % |         |        | 27,270  |        |         |      | 5.39 | % |  |        | 24,497 |        |  |      | 5.06 | %
|                        |                           |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |     
|                        |                           | Total Interest
bearing deposits |                |        | 81,204  |        |         |      | 2.37    | % |         |        | 78,233  |        |         |      | 3.75 | % |  |        | 69,280 |        |  |      | 3.70 | %
|                        |                           |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |     
|                        |                           |                                 | Total Deposits |        |         | 97,421 |         |      |         |   |         |        |         | 93,824 |         |      |      |   |  |        |        | 83,556 |  |      |      |   | 
|                        |                           |                                 |                |        |         |        |         |      |         |   |         |        |         |        |         |      |      |   |  |        |        |        |  |     

Maturities of Time Deposits over $100,000
(Dollars in Thousands)

|                          |       |      |              |        |          |      |              |       |          |  |              |       |          |  |   |   |  |  |       |       |  |  |   |   | 
|------------------------- | ----- | ---- | ------------ | ------ | -------- | ---- | ------------ | ----- | -------- |  | ------------ | ----- | -------- |  | - | - |  |  | ----- | ----- |  |  | - | - | 
|December 31,              |       | 2002 |              | 2001   |          | 2000
|                          |       |      |              |        |          |     
|                          |       |      |              |        |          |      | Other        |       |          |  |              |       | Other    |  |   |   |  |  | Other
|                          |       |      | Certificates |        | Time     |      | Certificates |       | Time     |  | Certificates |       | Time    
|                          |       |      | of Deposits  |        | Deposits |      | of Deposits  |       | Deposits |  | of Deposits  |       | Deposits
|                          |       |      |              |        |          |      |              |       |          |  |              |       |         
|Three months or less      |       |      | 3,244        |        |          |      | 346          |       |          |  | 3,396        |       |          |  | 0 |   |  |  | 3,415 |       |  |  | 0 |  
|Three through six months  |       |      | 2,180        |        |          |      | 223          |       |          |  | 1,224        |       |          |  | 0 |   |  |  | 1,646 |       |  |  | 0 |  
|Six through twelve months |       |      | 2,246        |        |          |      | 388          |       |          |  | 1,574        |       |          |  | 0 |   |  |  | 1,753 |       |  |  | 0 |  
|Over twelve Months        |       |      | 3,108        |        |          |      | 220          |       |          |  | 936          |       |          |  | 0 |   |  |  | 696   |       |  |  | 0 |  
|                          |       |      |              |        |          |      |              |       |          |  |              |       |          |  |   |   |  |  |       |       |  |  |   |  
|                          | Total |      |              | 10,778 |          |      |              | 1,187 |          |  |              | 7,130 |          |  |   | 0 |  |  |       | 8,853 |  |  |   | 0 | 
|                          |       |      |              |        |          |      |              |       |          |  |              |       |          |  |   |   |  |  |       |       |  |  |   |  





---



##### Table of Contents



Table VI
Return on Equity and Assets

|                                       |  |      |       |      |  |      |       |   |  |  |       |  
|-------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|December 31,                           |  | 2002 |       | 2001 |  | 2000
|                                       |  |      |       |      |  |     
|Return on average assets               |  |      | 0.80  | %    |  |      | 0.70  | % |  |  | 1.00  | %
|Return on average common Equity        |  |      | 11.31 | %    |  |      | 10.79 | % |  |  | 15.95 | %
|Common dividend payout ratio           |  |      | 5.42  | %    |  |      | 6.03  | % |  |  | 4.53  | %
|Average equity to average assets ratio |  |      | 7.03  | %    |  |      | 6.47  | % |  |  | 6.26  | %

Leverage Ratio Calculations

|                                  |                                                       |      |         |         |  |      |         |         |  |  |        |        |  |  | 
|--------------------------------- | ----------------------------------------------------- | ---- | ------- | ------- |  | ---- | ------- | ------- |  |  | ------ | ------ |  |  | 
|December 31,                      |                                                       | 2002 |         | 2001    |  | 2000
|                                  |                                                       |      |         |         |  |     
|Total average assets              |                                                       |      | 110,280 |         |  |      | 106,597 |         |  |  | 93,535 |       
|                                  | Less intangibles                                      |      |         | 0       |  |      |         | 0       |  |  |        | 0      | 
|                                  | Total tangible average assets                         |      |         | 110,280 |  |      |         | 106,597 |  |  |        | 93,535 | 
|Total common shareholders equity |                                                       |      | 8,373   |         |  |      | 7,134   |         |  |  | 6,312  |       
|                                  | Less intangibles                                      |      |         | 0       |  |      |         | 0       |  |  |        | 0      | 
|                                  | Total tangible period-end common
shareholders equity |      |         | 8,373   |  |      |         | 7,134   |  |  |        | 6,312  | 
|Leverage ratio                    |                                                       |      | 7.59    | %       |  |      | 6.69    | %       |  |  | 6.75   | %     

Risk-based capital ratio
(Bank Only)

|                               |  |  |       |  |  |  |       |  |  |  |       |  
|------------------------------ |  |  | ----- |  |  |  | ----- |  |  |  | ----- | -
|Tier I capital ratio           |  |  | 7.29  |  |  |  | 6.98  |  |  |  | 7.13  | %
|Total risk-based capital ratio |  |  | 10.78 |  |  |  | 10.57 |  |  |  | 10.41 | %





---



##### Table of Contents



Item 8.    Financial
Statements and Supplementary Data.

VALRICO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002

CONTENTS

|                             |                                                            |  |      |      | 
|---------------------------- | ---------------------------------------------------------- |  | ---- | ---- | 
|                             |                                                            |  | Page
|Independent Auditors Report |                                                            |  | 1    |     
|Financial Statements         |                                                            |  |      |     
|                             | Consolidated Balance Sheets                                |  |      | 2    | 
|                             | Consolidated Statements of Income                          |  |      | 3    | 
|                             | Consolidated Statements of Changes in Stockholders Equity |  |      | 4    | 
|                             | Consolidated Statements of Cash Flows                      |  |      | 5    | 
|                             | Notes to Consolidated Financial Statements                 |  |      | 6-20 | 

INDEPENDENT AUDITORS REPORT

To The Board of Directors and Stockholders
Valrico Bancorp, Inc. and Subsidiary
Valrico, Florida

We have audited the accompanying consolidated balance sheets of Valrico
Bancorp, Inc. and Subsidiary as of December 31, 2002 and 2001, and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the three years in the period ended December 31, 2002. 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 Valrico Bancorp,
Inc. and Subsidiary at December 31, 2002 and 2001, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.



| | Rex Meighen & Company, LLP
Certified Public Accountants
| | -------------------------------------------------------

Tampa, Florida
January 10, 2003





---



##### Table of Contents



VALRICO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                     |                                            |   |                |         |      |   |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | - | -------------- | ------- | ---- | - | ------- | ------- | 
|                                                                                                                                     |                                            |   | December 31,  
|                                                                                                                                     |                                            |   |               
|                                                                                                                                     |                                            |   | 2002           |         | 2001
|                                                                                                                                     |                                            |   |                |         |     
|                                                                                                                                     |                                            |   | (in thousands)
|ASSETS                                                                                                                               |                                            |   |                |         |      |   |         |        
|Cash and non-interest bearing deposits                                                                                               |                                            | $ | 9,083          |         |      | $ | 6,417   |        
|Federal funds sold                                                                                                                   |                                            |   | 4,157          |         |      |   | 3,645   |        
|Securities available-for-sale                                                                                                        |                                            |   | 21,133         |         |      |   | 20,364  |        
|Securities to be held-to-maturity                                                                                                    |                                            |   | 1,208          |         |      |   | 1,582   |        
|Loans, net                                                                                                                           |                                            |   | 74,402         |         |      |   | 66,798  |        
|Facilities, net                                                                                                                      |                                            |   | 2,906          |         |      |   | 3,231   |        
|Other real estate                                                                                                                    |                                            |   |               |         |      |   | 1,079   |        
|Accrued interest receivable                                                                                                          |                                            |   | 540            |         |      |   | 632     |        
|Other assets                                                                                                                         |                                            |   | 1,531          |         |      |   | 1,852   |        
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|Total assets                                                                                                                         |                                            | $ | 114,960        |         |      | $ | 105,600 |        
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|LIABILITIES                                                                                                                          |                                            |   |                |         |      |   |         |        
|Deposits:                                                                                                                            |                                            |   |                |         |      |   |         |        
|Demand deposits                                                                                                                      |                                            | $ | 18,444         |         |      | $ | 13,990  |        
|NOW accounts                                                                                                                         |                                            |   | 23,047         |         |      |   | 21,145  |        
|Money market accounts                                                                                                                |                                            |   | 7,833          |         |      |   | 6,698   |        
|Savings accounts                                                                                                                     |                                            |   | 14,358         |         |      |   | 11,396  |        
|Time deposits, $100,000 and over                                                                                                     |                                            |   | 10,778         |         |      |   | 12,372  |        
|Other time deposits                                                                                                                  |                                            |   | 27,294         |         |      |   | 27,568  |        
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|Total deposits                                                                                                                       |                                            |   | 101,754        |         |      |   | 93,169  |        
|Securities sold under agreements to repurchase                                                                                       |                                            |   | 222            |         |      |   | 308     |        
|Accounts payable and accrued liabilities                                                                                             |                                            |   | 674            |         |      |   | 979     |        
|Advances under line-of-credit                                                                                                        |                                            |   | 970            |         |      |   | 970     |        
|Notes payable                                                                                                                        |                                            |   | 2,967          |         |      |   | 3,040   |        
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|Total liabilities                                                                                                                    |                                            |   | 106,587        |         |      |   | 98,466  |        
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|Commitments and contingencies (Notes P and Q)                                                                                        |                                            |   |                |         |      |   |         |        
|STOCKHOLDERS EQUITY                                                                                                                 |                                            |   |                |         |      |   |         |        
|Common stock, no par value, authorized 1,000,000
shares, issued and outstanding 308,737 shares for 2002,
and 304,728 shares for 2001 |                                            |   | 309            |         |      |   | 305     |        
|Capital surplus                                                                                                                      |                                            |   | 2,625          |         |      |   | 2,526   |        
|Retained earnings                                                                                                                    |                                            |   | 5,070          |         |      |   | 4,236   |        
|Accumulated other comprehensive income                                                                                               |                                            |   | 369            |         |      |   | 67      |        
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|                                                                                                                                     | Total stockholders equity                 |   |                | 8,373   |      |   |         | 7,134   | 
|                                                                                                                                     |                                            |   |                |         |      |   |         |        
|                                                                                                                                     | Total liabilities and stockholders equity |   | $              | 114,960 |      |   | $       | 105,600 | 
|                                                                                                                                     |                                            |   |                |         |      |   |         |        

See accompanying notes to
consolidated financial statements.





---



##### Table of Contents



VALRICO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |         | 
|--------------------------------------------------- | ------------------------------ | - | ------------------------------------- | ------- | ---- | - | ----- | ------- |  | - | ----- | ------- | 
|                                                    |                                |   | Year Ended December 31,              
|                                                    |                                |   |                                      
|                                                    |                                |   | 2002                                  |         | 2001 |   | 2000 
|                                                    |                                |   |                                       |         |      |   |      
|                                                    |                                |   | (in thousands, except per share data)
|Interest Income                                     |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Interest and fees on loans                          |                                | $ | 5,473                                 |         |      | $ | 5,932 |         |  | $ | 6,206 |        
|Interest on investment securities:                  |                                |   |                                       |         |      |   |       |         |  |   |       |        
|                                                    | U. S. Government agencies      |   |                                       | 662     |      |   |       | 483     |  |   |       | 324     | 
|                                                    | State and municipal securities |   |                                       | 193     |      |   |       | 159     |  |   |       | 120     | 
|                                                    | Other                          |   |                                       | 214     |      |   |       | 188     |  |   |       | 91      | 
|Income on Federal funds sold                        |                                |   | 119                                   |         |      |   | 441   |         |  |   | 514   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Total interest income                               |                                |   | 6,661                                 |         |      |   | 7,203 |         |  |   | 7,255 |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Interest Expense                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Interest on deposits                                |                                |   | 1,926                                 |         |      |   | 2,937 |         |  |   | 2,563 |        
|Interest on short-term borrowings                   |                                |   | 113                                   |         |      |   | 72    |         |  |   | 108   |        
|Interest on long-term debt                          |                                |   | 118                                   |         |      |   | 199   |         |  |   | 209   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Total interest expense                              |                                |   | 2,157                                 |         |      |   | 3,208 |         |  |   | 2,880 |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Net interest income                                 |                                |   | 4,504                                 |         |      |   | 3,995 |         |  |   | 4,375 |        
|Provision
for Loan Losses                           |                                |   | 120                                   |         |      |   | 120   |         |  |   | 250   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Net interest income after provision for loan losses |                                |   | 4,384                                 |         |      |   | 3,875 |         |  |   | 4,125 |        
|Other Income                                        |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Service charges on deposit accounts                 |                                |   | 945                                   |         |      |   | 896   |         |  |   | 834   |        
|Miscellaneous income                                |                                |   | 201                                   |         |      |   | 112   |         |  |   | 106   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Total other income                                  |                                |   | 1,146                                 |         |      |   | 1,008 |         |  |   | 940   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Other Expenses                                      |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Salaries and employee benefits                      |                                |   | 2,248                                 |         |      |   | 2,102 |         |  |   | 2,111 |        
|Occupancy expense                                   |                                |   | 377                                   |         |      |   | 361   |         |  |   | 324   |        
|Equipment expense                                   |                                |   | 351                                   |         |      |   | 316   |         |  |   | 291   |        
|Stationery, printing and supplies                   |                                |   | 154                                   |         |      |   | 131   |         |  |   | 130   |        
|Miscellaneous expenses                              |                                |   | 1,136                                 |         |      |   | 858   |         |  |   | 837   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Total other expenses                                |                                |   | 4,266                                 |         |      |   | 3,768 |         |  |   | 3,693 |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Income
Before Income Taxes                          |                                |   | 1,264                                 |         |      |   | 1,115 |         |  |   | 1,372 |        
|Income
Taxes                                        |                                |   | 387                                   |         |      |   | 371   |         |  |   | 438   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Net
Income                                          |                                |   | 877                                   |         |      |   | 744   |         |  |   | 934   |        
|Other Comprehensive Income                          |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Unrealized gains on securities                      |                                |   | 302                                   |         |      |   | 109   |         |  |   | 102   |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Comprehensive
Income                                |                                | $ | 1,179                                 |         |      | $ | 853   |         |  | $ | 1,036 |        
|                                                    |                                |   |                                       |         |      |   |       |         |  |   |       |        
|Average Shares Outstanding:                         |                                |   |                                       |         |      |   |       |         |  |   |       |        
|                                                    | Basic                          |   |                                       | 306,780 |      |   |       | 304,531 |  |   |       | 302,138 | 
|                                                    | Diluted                        |   |                                       | 366,909 |      |   |       | 364,441 |  |   |       | 362,048 | 
|Net Income Per Common Share:                        |                                |   |                                       |         |      |   |       |         |  |   |       |        
|                                                    | Basic EPS                      |   | $                                     | 2.86    |      |   | $     | 2.44    |  |   | $     | 3.09    | 
|                                                    | Diluted EPS                    |   | $                                     | 2.39    |      |   | $     | 2.04    |  |   | $     | 2.58    | 

See accompanying notes to
consolidated financial statements.





---



##### Table of Contents



VALRICO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|-------------------------------------------------------- |  | ------------ | --- | -------------- |  | -------- | ----- | -------- |  | ------------- | ----- | ------------- |  | ----------- | ---- | ----- |  | - | ----- | -
|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  | Accumulated |      |       |  |  
|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  | Other       |      | Total
|                                                         |  |              |     |                |  | Capital  |       | Retained |  | Comprehensive |       | Stockholders'
|                                                         |  | Common Stock |     | Surplus        |  | Earnings |       | Income   |  | Equity       
|                                                         |  |              |     |                |  |          |       |          |  |              
|                                                         |  |              |     | (in thousands)
|Balance, December 31, 1999                               |  | $            | 302 |                |  | $        | 2,450 |          |  | $             | 2,643 |               |  | $           | (144 | )     |  | $ | 5,251 |  
|Net income for 2000                                      |  |              |    |                |  |          |      |          |  |               | 934   |               |  |             |     |       |  |   | 934   |  
|Other comprehensive
income, net of tax:                  |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|Net change in net
unrealized holding
gains on securities |  |              |    |                |  |          |      |          |  |               |      |               |  |             | 102  |       |  |   | 102   |  
|Stock issuance                                           |  |              | 2   |                |  |          | 65    |          |  |               |      |               |  |             |     |       |  |   | 67    |  
|Cash dividends                                           |  |              |    |                |  |          |      |          |  |               | (42   | )             |  |             |     |       |  |   | (42   | )
|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|Balance, December 31, 2000                               |  |              | 304 |                |  |          | 2,515 |          |  |               | 3,535 |               |  |             | (42  | )     |  |   | 6,312 |  
|Net income for 2001                                      |  |              |    |                |  |          |      |          |  |               | 744   |               |  |             |     |       |  |   | 744   |  
|Other comprehensive
income, net of tax:                  |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|Net change in net
unrealized holding
gains on securities |  |              |    |                |  |          |      |          |  |               |      |               |  |             | 109  |       |  |   | 109   |  
|Stock issuance                                           |  |              | 1   |                |  |          | 11    |          |  |               |      |               |  |             |     |       |  |   | 12    |  
|Cash dividends                                           |  |              |    |                |  |          |      |          |  |               | (43   | )             |  |             |     |       |  |   | (43   | )
|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|Balance, December 31, 2001                               |  |              | 305 |                |  |          | 2,526 |          |  |               | 4,236 |               |  |             | 67   |       |  |   | 7,134 |  
|Net income for 2002                                      |  |              |     |                |  |          |       |          |  |               | 877   |               |  |             |      |       |  |   | 877   |  
|Other comprehensive
income, net of tax:                  |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|Net change in net
unrealized holding
gains on securities |  |              |    |                |  |          |      |          |  |               |      |               |  |             | 302  |       |  |   | 302   |  
|Stock issuance                                           |  |              | 4   |                |  |          | 99    |          |  |               |      |               |  |             |     |       |  |   | 103   |  
|Cash dividends                                           |  |              |    |                |  |          |      |          |  |               | (43   | )             |  |             |     |       |  |   | (43   | )
|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  
|Balance, December 31, 2002                               |  | $            | 309 |                |  | $        | 2,625 |          |  | $             | 5,070 |               |  | $           | 369  |       |  | $ | 8,373 |  
|                                                         |  |              |     |                |  |          |       |          |  |               |       |               |  |             |      |       |  |   |       |  

See accompanying notes to
consolidated financial statements.





---



##### Table of Contents



VALRICO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |     |  
|--------------------------------------------------------------------------------- | -------------------------------------- | - | ----------------------- | --- | ---- | - | -------------- | --- | - | - | ------- | --- | -
|                                                                                  |                                        |   | Year Ended December 31,
|                                                                                  |                                        |   |                        
|                                                                                  |                                        |   | 2002                    |     | 2001 |   | 2000          
|                                                                                  |                                        |   |                         |     |      |   |               
|                                                                                  |                                        |   |                         |     |      |   | (in thousands) |     |   |   |        
|Cash Flows from Operating Activities                                              |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Net income                                                                        |                                        | $ | 877                     |     |      | $ | 744            |     |   | $ | 934     |    
|Adjustments to reconcile net income to net
cash provided by operating activities: |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Provision for loan losses                                                         |                                        |   | 120                     |     |      |   | 120            |     |   |   | 250     |    
|Depreciation and amortization                                                     |                                        |   | 218                     |     |      |   | 258            |     |   |   | 265     |    
|Net amortization (accretion) of investment
security premiums and discounts        |                                        |   | 108                     |     |      |   | 28             |     |   |   | 8       |    
|Deferred income taxes                                                             |                                        |   | 2                       |     |      |   | (25            | )   |   |   | (135    | )  
|Loss on disposal of facilities                                                    |                                        |   | 181                     |     |      |   |               |     |   |   |        |    
|(Increase) in assets:                                                             |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Accrued interest receivable                                                       |                                        |   | 92                      |     |      |   | (28            | )   |   |   | (24     | )  
|Other assets                                                                      |                                        |   | 164                     |     |      |   | (182           | )   |   |   | (45     | )  
|Increase (decrease) in liabilities:                                               |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Accounts payable and accrued liabilities                                          |                                        |   | (305                    | )   |      |   | 9              |     |   |   | 398     |    
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Net cash provided by operating activities                                         |                                        |   | 1,457                   |     |      |   | 924            |     |   |   | 1,651   |    
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Cash Flows from Investing Activities                                              |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Securities available-for-sale:                                                    |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Purchase of securities                                                            |                                        |   | (17,388                 | )   |      |   | (15,999        | )   |   |   |        |    
|Proceeds from maturities of securities                                            |                                        |   | 10,581                  |     |      |   | 339            |     |   |   | 281     |    
|Proceeds from sale of securities                                                  |                                        |   | 6,384                   |     |      |   | 2,505          |     |   |   |        |    
|Securities to be held to maturity:                                                |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Proceeds from maturities of securities                                            |                                        |   | 377                     |     |      |   | 142            |     |   |   | 120     |    
|Decrease (increase) in Federal funds sold                                         |                                        |   | (512                    | )   |      |   | 5,163          |     |   |   | (8,299  | )  
|Net increase in loans                                                             |                                        |   | (7,724                  | )   |      |   | (1,171         | )   |   |   | (4,716  | )  
|Purchase of facilities                                                            |                                        |   | (74                     | )   |      |   | (105           | )   |   |   | (145    | )  
|Proceeds from sale of other real estate                                           |                                        |   | 1,079                   |     |      |   |               |     |   |   | 1       |    
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Net cash used in investing activities                                             |                                        |   | (7,277                  | )   |      |   | (9,126         | )   |   |   | (12,758 | )  
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Cash Flows from Financing Activities                                              |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Net increase in deposits                                                          |                                        |   | 8,585                   |     |      |   | 9,244          |     |   |   | 10,192  |    
|Net increase (decrease) in securities sold under
agreements to repurchase         |                                        |   | (86                     | )   |      |   | (290           | )   |   |   | (74     | )  
|                                                                                  | Principal payments on long-term debt   |   |                         | (73 | )    |   |                | (68 | ) |   |         | (59 | )
|                                                                                  | Proceeds from issuance of common stock |   |                         | 103 |      |   |                | 12  |   |   |         | 67  |  
|                                                                                  | Cash dividends paid                    |   |                         | (43 | )    |   |                | (43 | ) |   |         | (42 | )
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Net cash provided by financing activities                                         |                                        |   | 8,486                   |     |      |   | 8,855          |     |   |   | 10,084  |    
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Net Increase (Decrease) in Cash                                                   |                                        |   | 2,666                   |     |      |   | 653            |     |   |   | (1,023  | )  
|Cash, Beginning of Year                                                           |                                        |   | 6,417                   |     |      |   | 5,764          |     |   |   | 6,787   |    
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Cash, End of Year                                                                 |                                        | $ | 9,083                   |     |      | $ | 6,417          |     |   | $ | 5,764   |    
|                                                                                  |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Supplemental Disclosures of Cash Flow Information                                 |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Cash paid during the year for interest                                            |                                        | $ | 2,497                   |     |      | $ | 3,111          |     |   | $ | 2,739   |    
|Cash paid during the year for income taxes                                        |                                        | $ | 354                     |     |      | $ | 381            |     |   | $ | 516     |    
|Non-Cash Transactions:                                                            |                                        |   |                         |     |      |   |                |     |   |   |         |    
|Transfers from loans to other real estate                                         |                                        | $ |                        |     |      | $ | 1,079          |     |   | $ |        |    

See accompanying notes to
consolidated financial statements.





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

Note A  Summary of Significant Accounting and Reporting Policies
General:

The consolidated financial statements include the accounts and transactions of
Valrico Bancorp, Inc. (the Company) and its wholly-owned subsidiary, Valrico
State Bank (the Bank). All significant intercompany accounts and
transactions have been eliminated in consolidation.


The Bank provides a wide range of banking services to individual and corporate
customers primarily in Hillsborough County, Florida.

The Company and the Bank are subject to regulations issued by certain
regulatory agencies and undergo periodic examinations by those agencies.

Basis of Financial Statement Presentation:

The accounting and reporting policies of the Company conform with accounting
principles generally accepted in the United States of America, and with general
practices within the banking industry. In preparing the consolidated financial
statements, management is required to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ significantly from those estimates.


Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of foreclosed assets (other real estate). Additionally, management has made
estimates in determining fair values of financial instruments.

Management believes that the allowance for losses on loans is adequate. While
management uses available information to recognize losses on loans, including
independent appraisals for significant properties, future additions to the
allowance may be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the allowance for losses on loans. Such agencies
may require the Company to recognize additions to the allowance based on their
judgments about information available to them at the time of their examination.

Investments:

Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities, sets the standard for
classification of and accounting for investments in equity securities that have
readily determinable fair values, and all investments in debt securities which
are to be classified as held-to-maturity securities, available-for-sale
securities, or trading securities.


Debt securities that an enterprise has the positive intent and ability to
hold-to-maturity are classified as held-to-maturity securities and reported at
amortized cost. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in net income. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with unrealized gains
and losses included as accumulated other comprehensive income in a separate
component of stockholders equity.

The Bank classifies its investments at the purchase date in accordance with the
above-described guidelines. Premiums or discounts on securities at the date of
purchase are being amortized or accreted, respectively, over the estimated life
of the security using a method which approximates the level yield method.
Gains and losses realized on the disposition of securities are based on the
specific identification method and are reflected in other income.

Loans:

Loans receivable are stated at the unpaid principal balance, less the allowance
for loan losses and net deferred loan origination fees and costs.


Interest on loans is accounted for on the accrual basis. Generally, the
Companys policy is to discontinue the accrual of interest on loans delinquent
over ninety days unless fully secured and in the process of collection. The
accrued and unpaid interest is reversed from current income and thereafter
interest is recognized only to the extent payments are received. A non-accrual
loan may be restored to accrual basis when interest and principal payments are
current and prospects for future recovery are no longer in doubt.

SFAS 114, Accounting by Creditors for Impairment of a Loan,sets the standard
for recognition of loan impairment and the measurement methods for certain
impaired loans and loans whose terms are modified in troubled debt
restructurings.

Under SFAS 114, a loan is impaired when it is probable that a creditor will be
unable to collect the full amount of principal and interest due according to
the contractual terms of the loan agreement. When a loan is impaired, a
creditor has a choice of ways to measure the impairment. The measurement of
impairment may be based on (1) the present value of the expected future cash
flows of the impaired loan discounted at the loans original effective interest
rate, (2) the observable market price of the impaired loan, or (3) the fair
value of the collateral of a collateral-dependent loan. Creditors may select
the measurement method on a loan-by-loan basis, except that
collateral-dependent loans for which foreclosure is probable must be measured
at the fair value of the collateral. A creditor in a troubled debt
restructuring involving a restructured loan should measure impairment by
discounting the total expected future cash flows at the loans original
effective rate of interest.

Facilities:

Facilities are stated at cost, less accumulated depreciation and amortization.
Charges to income for depreciation and amortization are computed on the
straight-line method over the assets estimated useful lives. When properties are sold or otherwise disposed of, the gain or loss resulting
from the disposition is credited or charged to income. Expenditures for
maintenance and repairs are charged against income and renewals and betterments
are capitalized.






---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

Allowance for Loan Losses:

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged-off against the allowance when
management believes that the collectibility of principal is unlikely.
Recoveries of amounts previously charged-off are credited to the allowance.
The allowance for loan losses is based on managements evaluation of various
factors including prevailing and anticipated economic conditions,
diversification and size of the loan portfolio, current financial status and
credit standing of the borrower, the status and level of non-performing assets,
past and expected loan loss experience, adequacy of collateral, specific
impaired loans and economic conditions. Allowances for impaired loans are
generally determined based on collateral values or the present value of
estimated cash flows.


Off Balance Sheet Financial Instruments:

In the ordinary course of business, the Bank has entered into off balance sheet
financial instruments consisting of commitments to extend credit and standby
letters of credit. Such financial instruments are recorded in the financial
statements when they become payable.


Stock Options:

Outstanding stock options may be valued using either the intrinsic value method
based on APB Opinion No. 25, Accounting for Stock Issued to Employees, or the
fair value method based on SFAS No. 123, Accounting for Stock-Based
Compensation. The Bank has elected to value its outstanding stock options
using the intrinsic value method. Management believes that this method is
predominately used in the banking industry.


Income Taxes:

The Bank accounts for income taxes under the asset and liability method as
prescribed in SFAS No. 109, Accounting for Income Taxes. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the year in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.


Comprehensive Income:

The Company accounts for comprehensive income in accordance with SFAS 130,
Reporting Comprehensive Income. SFAS 130 establishes standards for reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. It requires an enterprise to classify items of
other comprehensive income by their nature and to display the accumulated
balance of other comprehensive income separately in the equity section of the
Balance Sheet.


Earnings Per Share:

Basic EPS is computed by dividing net income by the weighted average shares of
common stock outstanding during the year. Diluted EPS is computed by dividing
net income by the weighted average shares of common stock and common stock
equivalents outstanding during the year.


Statement of Cash Flows:

For purposes of reporting cash flows, cash includes cash on hand and amounts on
deposit in non-interest bearing accounts with other commercial banks.


Reclassification of Accounts:

Certain items in the consolidated financial statements for prior years have
been reclassified to conform to classifications used in the current year.


Note B  Investment Securities

The amortized cost and estimated fair value of investments in securities at
December 31, 2002, are as follows:


|                                   |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |     | 
|---------------------------------- | -------------------------- | - | --------- | --- | ---------- | - | -------------- | - | ----- | - | - | - |  | - | ------ | --- | 
|                                   |                            |   |           |     |            |   | Gross          |   | Gross |   |   |   | 
|                                   |                            |   | Amortized |     | Unrealized |   | Unrealized     |   | Fair 
|                                   |                            |   | Cost      |     | Gains      |   | Losses         |   | Value
|                                   |                            |   |           |     |            |   |                |   |      
|                                   |                            |   |           |     |            |   | (in thousands) |   |       |   |  
|Securities available-for-sale:     |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |    
|U. S. Government agencies          |                            | $ | 1,503     |     |            | $ | 131            |   |       | $ |  |   |  | $ | 1,634  |    
|State and municipal                |                            |   | 3,027     |     |            |   | 117            |   |       |   |  |   |  |   | 3,144  |    
|Mortgage-backed securities         |                            |   | 10,291    |     |            |   | 126            |   |       |   |  |   |  |   | 10,417 |    
|Other                              |                            |   | 5,744     |     |            |   | 194            |   |       |   |  |   |  |   | 5,938  |    
|                                   |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |    
|                                   |                            | $ | 20,565    |     |            | $ | 568            |   |       | $ |  |   |  | $ | 21,133 |    
|                                   |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |    
|Securities to be held-to-maturity: |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |    
|                                   | Mortgage-backed securities |   | $         | 193 |            |   | $              | 6 |       |   | $ |  |  |   | $      | 199 | 
|State and municipal                |                            |   | 1,015     |     |            |   | 61             |   |       |   |  |   |  |   | 1,076  |    
|                                   |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |    
|                                   |                            | $ | 1,208     |     |            | $ | 67             |   |       | $ |  |   |  | $ | 1,275  |    
|                                   |                            |   |           |     |            |   |                |   |       |   |   |   |  |   |        |    





---



##### Table of Contents











NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002


The amortized cost and estimated fair value of investments in securities at
December 31, 2001, are as follows:

|                                   |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        |  | 
|---------------------------------- |  | - | --------- |  | ---------- | - | -------------- |  | ----- | - | -- |  |  | - | ------ |  | 
|                                   |  |   |           |  |            |   | Gross          |  | Gross |   |    |  | 
|                                   |  |   | Amortized |  | Unrealized |   | Unrealized     |  | Fair 
|                                   |  |   | Cost      |  | Gains      |   | Losses         |  | Value
|                                   |  |   |           |  |            |   |                |  |      
|                                   |  |   |           |  |            |   | (in thousands) |  |       |   |   
|Securities available-for-sale:     |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        | 
|U. S. Government agencies          |  | $ | 6,002     |  |            | $ | 72             |  |       | $ |   |  |  | $ | 6,074  | 
|State and municipal                |  |   | 3,027     |  |            |   |               |  |       |   | 43 |  |  |   | 2,984  | 
|Mortgage-backed securities         |  |   | 7,855     |  |            |   | 60             |  |       |   |   |  |  |   | 7,915  | 
|Other                              |  |   | 3,369     |  |            |   | 22             |  |       |   |   |  |  |   | 3,391  | 
|                                   |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        | 
|                                   |  | $ | 20,253    |  |            | $ | 154            |  |       | $ | 43 |  |  | $ | 20,364 | 
|                                   |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        | 
|Securities to be held-to-maturity: |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        | 
|Mortgage-backed securities         |  | $ | 294       |  |            | $ | 10             |  |       | $ |   |  |  | $ | 304    | 
|State and municipal                |  |   | 1,288     |  |            |   | 44             |  |       |   |   |  |  |   | 1,332  | 
|                                   |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        | 
|                                   |  | $ | 1,582     |  |            | $ | 54             |  |       | $ |   |  |  | $ | 1,636  | 
|                                   |  |   |           |  |            |   |                |  |       |   |    |  |  |   |        | 

The fair value of securities fluctuates during the investment period. No
provision for loss has been made in connection with the decline of fair value
below book value, because the securities are purchased for investment purposes
and the decline is not deemed to be other than temporary. The estimated fair
value of securities is determined on the basis of market quotations.
Securities with amortized cost of approximately $619,000 and $678,000, and
market values of approximately $672,000 and $706,000 were pledged to secure
repurchase agreements and deposit accounts at December 31, 2002 and 2001,
respectively.

The cost and estimated fair value of debt securities at December 31, 2002, by
contractual maturities, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

|                           |  |                    |        |                  |  |                |        |       |  |   |       |  |  |   |       | 
|-------------------------- |  | ------------------ | ------ | ---------------- |  | -------------- | ------ | ----- |  | - | ----- |  |  | - | ----- | 
|                           |  | Securities         |        | Securities to be
|                           |  | Available-for-Sale |        | Held-to-Maturity
|                           |  |                    |        |                 
|                           |  | Amortized          |        | Fair             |  | Amortized      |        | Fair 
|                           |  | Cost               |        | Value            |  | Cost           |        | Value
|                           |  |                    |        |                  |  |                |        |      
|                           |  |                    |        |                  |  | (in thousands) |        |       |  |  
|Due in one year or less    |  | $                  | 535    |                  |  | $              | 543    |       |  | $ | 2     |  |  | $ | 2     | 
|Due from one to five years |  |                    | 6,763  |                  |  |                | 7,060  |       |  |   | 271   |  |  |   | 285   | 
|Due from five to ten years |  |                    | 8,475  |                  |  |                | 8,665  |       |  |   | 499   |  |  |   | 526   | 
|Due after ten years        |  |                    | 4,792  |                  |  |                | 4,865  |       |  |   | 436   |  |  |   | 462   | 
|                           |  |                    |        |                  |  |                |        |       |  |   |       |  |  |   |       | 
|                           |  | $                  | 20,565 |                  |  | $              | 21,133 |       |  | $ | 1,208 |  |  | $ | 1,275 | 
|                           |  |                    |        |                  |  |                |        |       |  |   |       |  |  |   |       | 

Note C  Loans
The loan portfolio is classified as follows:

|                                |  |                |        |      |  |   |        |  
|------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                |  | December 31,  
|                                |  |               
|                                |  | 2002           |        | 2001
|                                |  |                |        |     
|                                |  | (in thousands)
|Commercial and agricultural     |  | $              | 63,682 |      |  | $ | 55,077 |  
|Real estate                     |  |                | 8,107  |      |  |   | 5,420  |  
|Installment and other loans     |  |                | 3,766  |      |  |   | 7,363  |  
|Total loans                     |  |                | 75,555 |      |  |   | 67,860 |  
|Less, unearned income           |  |                | (138   | )    |  |   | (84    | )
|Less, allowance for loan losses |  |                | (1,015 | )    |  |   | (978   | )
|                                |  |                |        |      |  |   |        |  
|                                |  | $              | 74,402 |      |  | $ | 66,798 |  
|                                |  |                |        |      |  |   |        |  

The following is a summary of the transactions in the allowance for loan
losses:

|                                        |  |                         |       |      |  |      |      |   |  |   |      |  
|--------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                        |  | Year Ended December 31,
|                                        |  |                        
|                                        |  | 2002                    |       | 2001 |  | 2000
|                                        |  |                         |       |      |  |     
|                                        |  | (in thousands)         
|Balance, beginning of year              |  | $                       | 978   |      |  | $    | 943  |   |  | $ | 778  |  
|Provision charged to operating expenses |  |                         | 120   |      |  |      | 120  |   |  |   | 250  |  
|Loans charged-off                       |  |                         | (106  | )    |  |      | (116 | ) |  |   | (174 | )
|Recoveries                              |  |                         | 23    |      |  |      | 31   |   |  |   | 89   |  
|                                        |  |                         |       |      |  |      |      |   |  |   |      |  
|                                        |  | $                       | 1,015 |      |  | $    | 978  |   |  | $ | 943  |  
|                                        |  |                         |       |      |  |      |      |   |  |   |      |  





---



##### Table of Contents





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002


Loans on which interest was not being accrued totaled $535,000 at December 31,
2002, and $530,000 at December 31, 2001. Had interest been accrued on these
non-accrual loans at originally contracted rates, interest income (before
income taxes) would have been increased by approximately $32,103 and $31,800
for 2002 and 2001, respectively.

A loan is considered impaired when it is probable that the Bank will be unable
to collect all amounts due according to the contractual terms of the agreement.
At December 31, 2002 and 2001, the Bank had classified loans in the amounts of
$472,000 and $240,400 as impaired loans, respectively. The allowance for loan
losses includes amounts applicable to impaired loans. These allowances are not

significant to the Banks financial statements.

Note D  Facilities
Facilities are summarized as follows:

|                                  |  |                |       |              |  |                |       |          |  |        |       |           |  |            |     | 
|--------------------------------- |  | -------------- | ----- | ------------ |  | -------------- | ----- | -------- |  | ------ | ----- | --------- |  | ---------- | --- | 
|                                  |  |                |       |              |  | Accumulated    |       |          |  |        |       | Estimated
|                                  |  |                |       |              |  | Depreciation & |       | Net Book |  | Useful
|                                  |  | Cost           |       | Amortization |  | Value          |       | Lives   
|                                  |  |                |       |              |  |                |       |         
|December 31, 2002                 |  | (in thousands)
|                                  |  |                |       |              |  |                |       |          |  |       
|Land                              |  | $              | 1,087 |              |  | $              |      |          |  | $      | 1,087 |           |  |            | N/A | 
|Building                          |  |                | 1,831 |              |  |                | 300   |          |  |        | 1,531 |           |  | 391⁄2 years 
|Leasehold improvements            |  |                | 402   |              |  |                | 329   |          |  |        | 73    |           |  | 3-15 years
|Furniture, fixtures and equipment |  |                | 1,966 |              |  |                | 1,751 |          |  |        | 215   |           |  | 2-15 years
|                                  |  |                |       |              |  |                |       |          |  |        |       |           |  |            |     | 
|                                  |  | $              | 5,286 |              |  | $              | 2,380 |          |  | $      | 2,906 |           |  |            |     | 
|                                  |  |                |       |              |  |                |       |          |  |        |       |           |  |            |     | 

|                                  |  |                |       |              |  |                |       |          |  |        |       |           |  |            |     | 
|--------------------------------- |  | -------------- | ----- | ------------ |  | -------------- | ----- | -------- |  | ------ | ----- | --------- |  | ---------- | --- | 
|                                  |  |                |       |              |  | Accumulated    |       |          |  |        |       | Estimated
|                                  |  |                |       |              |  | Depreciation & |       | Net Book |  | Useful
|                                  |  | Cost           |       | Amortization |  | Value          |       | Lives   
|                                  |  |                |       |              |  |                |       |         
|December 31, 2001                 |  | (in thousands)
|                                  |  |               
|Land                              |  | $              | 1,087 |              |  | $              |      |          |  | $      | 1,087 |           |  |            | N/A | 
|Building                          |  |                | 1,831 |              |  |                | 262   |          |  |        | 1,568 |           |  | 391⁄2 years 
|Leasehold improvements            |  |                | 617   |              |  |                | 376   |          |  |        | 241   |           |  | 3-15 years
|Furniture, fixtures and equipment |  |                | 1,926 |              |  |                | 1,592 |          |  |        | 335   |           |  | 2-15 years
|                                  |  |                |       |              |  |                |       |          |  |        |       |           |  |            |     | 
|                                  |  | $              | 5,461 |              |  | $              | 2,230 |          |  | $      | 3,231 |           |  |            |     | 
|                                  |  |                |       |              |  |                |       |          |  |        |       |           |  |            |     | 

Other expenses for the years ended December 31, 2002, 2001, and 2000, included
depreciation and amortization of facilities of $218,000, $258,000, and
$265,000, respectively.

Note E  Time Deposits
At December 31, 2002, scheduled maturities (in thousands) of time deposits are
as follows:

|                    |  |   |        |  | 
|------------------- |  | - | ------ |  | 
|2003                |  | $ | 28,932 | 
|2004                |  |   | 3,572  | 
|2005                |  |   | 2,143  | 
|2006                |  |   | 589    | 
|2007 and thereafter |  |   | 2,836  | 
|                    |  |   |        | 
|                    |  | $ | 38,072 | 
|                    |  |   |        | 

Note F  Advances under Line-of-Credit

The Company entered into an open end loan agreement with Independent Bankers
Bank of Florida which provides for maximum borrowings of $1,000,000 at the
prime interest rate, less one percent. The security for the loan agreement
consists of the Banks common stock and a security interest in other Company
assets.


At December 31, 2002, the outstanding balance was $969,950. Interest expense
was approximately $36,000, $60,000 and $92,000 for the years ended December 31,
2002, 2001 and 2000, respectively.





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002


Note G  Notes Payable

Long-term debt consists of the following:


|                                                                                                                                                                                                                                                               |  |                |       |      |  |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----- | ---- |  | - | ----- | -
|                                                                                                                                                                                                                                                               |  | December 31,  
|                                                                                                                                                                                                                                                               |  |               
|                                                                                                                                                                                                                                                               |  | 2002           |       | 2001
|                                                                                                                                                                                                                                                               |  |                |       |     
|                                                                                                                                                                                                                                                               |  | (in thousands)
|Note payable to Independent Bankers Bank of Florida, principal and
interest of $13,000 payable monthly at 8.5% for the first year and
adjustable each year based on the U. S. Treasury Note three-year
index; due on January 14, 2012. Secured by real estate |  | $              | 967   |      |  | $ | 1,040 |  
|Note payable to the Federal Home Loan Bank of Atlanta, interest payable
quarterly at 5.51%, principal due March 26, 2008. The loan is callable
as of March 26, 2003 and may be prepaid. Collateralized by mortgage
loans and Federal Home Loan Bank stock      |  |                | 2,000 |      |  |   | 2,000 |  
|                                                                                                                                                                                                                                                               |  |                |       |      |  |   |       |  
|                                                                                                                                                                                                                                                               |  |                | 2,967 |      |  |   | 3,040 |  
|Less: current portion                                                                                                                                                                                                                                          |  |                | (75   | )    |  |   | (69   | )
|                                                                                                                                                                                                                                                               |  |                |       |      |  |   |       |  
|                                                                                                                                                                                                                                                               |  | $              | 2,892 |      |  | $ | 2,971 |  
|                                                                                                                                                                                                                                                               |  |                |       |      |  |   |       |  

Estimated maturities (in thousands) on long-term debt are as follows:

|           |      |   |       |     | 
|---------- | ---- | - | ----- | --- | 
|           | 2004 |   | $     | 81  | 
|           | 2005 |   |       | 89  | 
|           | 2006 |   |       | 96  | 
|           | 2007 |   |       | 105 | 
|Thereafter |      |   | 2,521 |    
|           |      |   |       |    
|           |      | $ | 2,892 |    
|           |      |   |       |    

Interest expense was $117,819, $198,890 and $209,012 for the years ended
December 31, 2002, 2001 and 2000, respectively.

Note H  Stock Option Plan

The Company adopted the 1998 Stock Option Plan on December 15, 1998. Under the
plan, 65,000 shares of the Companys common stock have been reserved to grant
to officers, directors and other key personnel of the Bank. Option prices per
share are set by a committee of the Board of Directors at the time of the
grant, but the price cannot be less than the fair market value of the stock at
the date of the grant. The options are generally non-transferable and expire
following termination of employment with the Bank, except in the event of death
or disability.


At December 31, 1998 options for 59,910 shares had been granted with an
exercise price of $16 per share. On December 14, 2002, options for 4,703
shares were granted with an exercise price of $26 per share. All outstanding
options expire December 14, 2008. None of the options have been exercised or
expired. At December 31, 2002, options on 387 shares remain available for
grant.

The Company accounts for these options using the intrinsic value method based
on APB Opinion No 25. Under APB 25, no compensation expense is recognized in
the accompanying financial statements because the exercise price of the stock
options equals the market price of the underlying stock on the date of grant.
Pro forma information regarding net income and net income per common share is
required by SFAS 123, and has been determined as if the Company accounted for
its stock options under the fair value method of that standard. The pro forma
results do not purport to indicate the effects on reported net income for
recognizing compensation expense which is expected to occur in future years.

The Companys pro forma information is as follows:

|                                                                                                                                       |  |                                          |      |      |  |      |      |   |  |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                                                                                                                       |  | Year Ended December 31,                 
|                                                                                                                                       |  |                                         
|                                                                                                                                       |  | 2002                                     |      | 2001 |  | 2000
|                                                                                                                                       |  |                                          |      |      |  |     
|                                                                                                                                       |  | (in thousands, except per share amounts)
|Net income, as reported                                                                                                                |  | $                                        | 877  |      |  | $    | 744  |   |  | $ | 934  |  
|Deduct: Total stock-based employee compensation expense
(benefit) determined under fair value based method,
net of related tax effects |  |                                          | 25   |      |  |      | (17  | ) |  |   | (261 | )
|                                                                                                                                       |  |                                          |      |      |  |      |      |   |  |   |      |  
|Pro forma net income                                                                                                                   |  | $                                        | 902  |      |  | $    | 727  |   |  | $ | 673  |  
|                                                                                                                                       |  |                                          |      |      |  |      |      |   |  |   |      |  
|Earnings per share:                                                                                                                    |  |                                          |      |      |  |      |      |   |  |   |      |  
|Basic, as reported                                                                                                                     |  | $                                        | 2.86 |      |  | $    | 2.44 |   |  | $ | 3.09 |  
|Basic, pro forma                                                                                                                       |  | $                                        | 2.94 |      |  | $    | 2.40 |   |  | $ | 2.28 |  
|Diluted, as reported                                                                                                                   |  | $                                        | 2.39 |      |  | $    | 2.04 |   |  | $ | 2.58 |  
|Diluted, pro forma                                                                                                                     |  | $                                        | 2.46 |      |  | $    | 2.00 |   |  | $ | 1.86 |  





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Note I  Employee Benefit Plans

The Bank has an Employee Stock Ownership Plan containing Internal Revenue Code
Section 401(k) provisions. The Plan became effective January 1, 1997, and is
for the benefit of employees who have completed six months of service and
attained age 18. The Plan provides for three types of Company contributions:




| | (1) |  | Basic contributions  discretionary contribution made for all
non-highly compensated participants in order to satisfy the
non-discrimination requirements of the Internal Revenue Code.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Matching contribution  the Bank matches 25% of salary reduction
contributions up to 6% of compensation.                                                                               
|
| | (3) |  | Optional contributions  additional discretionary contribution made
by the Bank allocated to the accounts of participants on the basis of
total relative compensation.                 

Bank contributions to the Plan were $16,807 in 2002, $15,284 in 2001, and
$14,120 in 2000.

Note J  Earnings per Share

The following reconciliation details the numerators and denominators used to
calculate basic and diluted earnings per share for the respective years ended:


|                              |  |              |         |      |  |      |         |  |  |   |         | 
|----------------------------- |  | ------------ | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                              |  | December 31,
|                              |  |             
|                              |  | 2002         |         | 2001 |  | 2000
|                              |  |              |         |      |  |     
|Net income (in thousands)     |  | $            | 877     |      |  | $    | 744     |  |  | $ | 934     | 
|Average shares outstanding:   |  |              |         |      |  |      |         |  |  |   |         | 
|Basic                         |  |              | 306,780 |      |  |      | 304,531 |  |  |   | 302,138 | 
|Add: common stock equivalents |  |              | 60,129  |      |  |      | 59,910  |  |  |   | 59,910  | 
|                              |  |              |         |      |  |      |         |  |  |   |         | 
|Diluted                       |  |              | 366,909 |      |  |      | 364,441 |  |  |   | 362,048 | 
|Earnings per share            |  |              |         |      |  |      |         |  |  |   |         | 
|Basic                         |  | $            | 2.86    |      |  | $    | 2.44    |  |  | $ | 3.09    | 
|Diluted                       |  | $            | 2.39    |      |  | $    | 2.04    |  |  | $ | 2.58    | 





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Note K  Regulatory Capital Matters
The Federal Reserve Board and other bank regulatory agencies have adopted
risk-based capital guidelines for banks and bank holding companies. The main
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of banking organizations and to take
into account the different risks among banking organizations assets,
liabilities and off-balance sheet items. Bank regulatory agencies have
supplemented the risk-based capital standard with a leverage ratio for Tier I
capital to total reported assets.

Failure to meet the capital adequacy guidelines and the framework for prompt
corrective actions could initiate actions by the regulatory agencies which
could have a material effect on the financial statements.

As of December 31, 2002, the most recent notification from the FDIC, the Bank
was categorized as well-capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well-capitalized, it will have to
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as disclosed in the table below. There are no conditions or events
since the most recent notification that management believes have changed the
prompt corrective action category.

|                         |                          |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |       |  
|------------------------ | ------------------------ | -------------------------- |  | ------ | ----- | ----------------- |  | ----------------- | ----- | ------ |  | ---------------------- | ----- | ----------------------- |  |  | ---- | - |  | ---------------------- | ----- |  |  |  | ----- | -
|                         |                          |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  | To Be Well-Capitalized
|                         |                          |                            |  |        |       |                   |  |                   |       |        |  | For Capital            |       | Under Prompt Corrective
|                         |                          |                            |  | Actual |       | Adequacy Purposes |  | Action Provisions
|                         |                          |                            |  |        |       |                   |  |                  
|                         |                          |                            |  | Amount |       | Ratio             |  | 3Amount           |       | 3Ratio |  | 3Amount                |       | 3Ratio                 
|                         |                          |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                        
|                         |                          |                            |  |        |       |                   |  |                   |       |        |  | (dollars in thousands) |       |                         |  |  |      |   |  |                       
|As of December 31, 2002: |                          |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  | 
|                         | Total risk-based capital |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |      
|                         |                          | (To risk-weighted assets)  |  | $      | 9,312 |                   |  |                   | 10.78 | %      |  | $                      | 6,916 |                         |  |  | 8.00 | % |  | $                      | 8,645 |  |  |  | 10.00 | %
|                         | Tier I capital           |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |      
|                         |                          | (To risk-weighted assets)  |  | $      | 8,297 |                   |  |                   | 9.60  | %      |  | $                      | 3,458 |                         |  |  | 4.00 | % |  | $                      | 5,187 |  |  |  | 6.00  | %
|                         | Tier I capital           |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |      
|                         |                          | (To adjusted total assets) |  | $      | 8,297 |                   |  |                   | 7.29  | %      |  | $                      | 4,552 |                         |  |  | 4.00 | % |  | $                      | 5,690 |  |  |  | 5.00  | %
|As of December 31, 2001: |                          |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  | 
|                         | Total risk-based capital |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |      
|                         |                          | (To risk-weighted assets)  |  | $      | 8,440 |                   |  |                   | 10.57 | %      |  | $                      | 6,391 |                         |  |  | 8.00 | % |  | $                      | 7,998 |  |  |  | 10.00 | %
|                         | Tier I capital           |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |      
|                         |                          | (To risk-weighted assets)  |  | $      | 7,462 |                   |  |                   | 9.34  | %      |  | $                      | 3,195 |                         |  |  | 4.00 | % |  | $                      | ,793  |  |  |  | 6.00  | %
|                         | Tier I capital           |                            |  |        |       |                   |  |                   |       |        |  |                        |       |                         |  |  |      |   |  |                        |       |  |  |  |      
|                         |                          | (To adjusted total assets) |  | $      | 7,462 |                   |  |                   | 6.98  | %      |  | $                      | 4,279 |                         |  |  | 4.00 | % |  | $                      | 5,349 |  |  |  | 5.00  | %

On June 19, 2001, the Bank and the FDIC entered into a Memorandum of
Understanding under which the Bank would institute a corrective action program
to eliminate compliance problems at the Bank. Management believes that the
Bank is in substantial compliance with the Memorandum.

Note L  Operating Leases
The Bank leases one of its branch locations from a director of the Bank. This
lease expires March 31, 2003, and provides for annual rents of $42,000. The
Bank has the option to renew the lease for three additional three-year terms at
rents to be negotiated at the time of the renewal.

Note M  Deferred Compensation Agreements
The Bank entered into deferred compensation agreements with certain executive
officers. The agreements provide for a flat annual retirement benefit at the
time the employee participates in the agreement. The benefit may be increased
by a cost of living adjustment annually and is to be paid for 15 years.
Provisions under these agreements for 2002, 2001, and 2000 were $50,568,
$36,318, and $40,931, respectively.

Note N  Other Expenses
Miscellaneous expenses were as follows:

|                                 |  |                         |       |      |  |      |     |  |  |   |     | 
|-------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | --- |  |  | - | --- | 
|                                 |  | Year Ended December 31,
|                                 |  |                        
|                                 |  | 2002                    |       | 2001 |  | 2000
|                                 |  |                         |       |      |  |     
|                                 |  | (in thousands)         
|Advertising and public relations |  | $                       | 91    |      |  | $    | 73  |  |  | $ | 97  | 
|Professional fees                |  |                         | 124   |      |  |      | 74  |  |  |   | 104 | 
|Postage                          |  |                         | 83    |      |  |      | 90  |  |  |   | 80  | 
|Taxes                            |  |                         | 28    |      |  |      | 49  |  |  |   | 21  | 
|Insurance                        |  |                         | 97    |      |  |      | 65  |  |  |   | 91  | 
|Other                            |  |                         | 713   |      |  |      | 507 |  |  |   | 444 | 
|                                 |  |                         |       |      |  |      |     |  |  |   |     | 
|                                 |  | $                       | 1,136 |      |  | $    | 858 |  |  | $ | 837 | 
|                                 |  |                         |       |      |  |      |     |  |  |   |     | 





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Note O  Income Taxes
The provision for income taxes is summarized as follows:

|                               |         |                            |   |                         |     |      |     |      |     |  |      |     |     | 
|------------------------------ | ------- | -------------------------- | - | ----------------------- | --- | ---- | --- | ---- | --- |  | ---- | --- | --- | 
|                               |         |                            |   | Year Ended December 31,
|                               |         |                            |   |                        
|                               |         |                            |   | 2002                    |     | 2001 |     | 2000
|                               |         |                            |   |                         |     |      |     |     
|                               |         |                            |   | (in thousands)         
|Current income taxes:          |         |                            |   |                         |     |      |     |      |     |  |      |    
|                               | Federal |                            | $ | 320                     |     |      | $   | 338  |     |  | $    | 514 |    
|                               | State   |                            |   | 65                      |     |      |     | 58   |     |  |      | 59  |    
|                               |         |                            |   |                         |     |      |     |      |     |  |      |    
|                               |         | Total current income taxes |   |                         | 385 |      |     |      | 396 |  |      |     | 573 | 
|Deferred income taxes (credit) |         |                            | 2 |                         |     |      | (25 | )    |     |  | (135 | )  
|                               |         |                            |   |                         |     |      |     |      |     |  |      |    
|                               |         | Income tax provision       |   | $                       | 387 |      |     | $    | 371 |  |      | $   | 438 | 
|                               |         |                            |   |                         |     |      |     |      |     |  |      |    

A reconciliation of the income tax computed at the Federal statutory rate of
34% and the income tax provision shown on the statement of income follows:

|                                             |  |                         |     |      |  |      |     |   |  |   |     |  
|-------------------------------------------- |  | ----------------------- | --- | ---- |  | ---- | --- | - |  | - | --- | -
|                                             |  | Year Ended December 31,
|                                             |  |                        
|                                             |  | 2002                    |     | 2001 |  | 2000
|                                             |  |                         |     |      |  |     
|                                             |  | (in thousands)         
|Tax computed at statutory rate               |  | $                       | 430 |      |  | $    | 379 |   |  | $ | 466 |  
|Increase (decrease) resulting from:          |  |                         |     |      |  |      |     |   |  |   |     |  
|Tax exempt income                            |  |                         | (60 | )    |  |      | (18 | ) |  |   | (16 | )
|State income tax, net of Federal tax benefit |  |                         | 45  |      |  |      | 38  |   |  |   | 31  |  
|Other                                        |  |                         | (28 | )    |  |      | (28 | ) |  |   | (43 | )
|                                             |  |                         |     |      |  |      |     |   |  |   |     |  
|Income tax provision                         |  | $                       | 387 |      |  | $    | 371 |   |  | $ | 438 |  
|                                             |  |                         |     |      |  |      |     |   |  |   |     |  

The components of the deferred income tax asset included in other assets are as
follows:

|                        |  |                |      |      |  |   |     |  
|----------------------- |  | -------------- | ---- | ---- |  | - | --- | -
|                        |  | December 31,  
|                        |  |               
|                        |  | 2002           |      | 2001
|                        |  |                |      |     
|                        |  | (in thousands)
|Deferred tax liability: |  |                |      |      |  |   |     |  
|Federal                 |  | $              | (183 | )    |  | $ | (49 | )
|State                   |  |                | (31  | )    |  |   | (8  | )
|                        |  |                |      |      |  |   |     |  
|                        |  |                | (214 | )    |  |   | (57 | )
|                        |  |                |      |      |  |   |     |  
|Deferred tax asset:     |  |                |      |      |  |   |     |  
|Federal                 |  |                | 382  |      |  |   | 381 |  
|State                   |  |                | 65   |      |  |   | 65  |  
|                        |  |                |      |      |  |   |     |  
|                        |  |                | 447  |      |  |   | 446 |  
|                        |  |                |      |      |  |   |     |  
|Net deferred tax asset  |  | $              | 223  |      |  | $ | 389 |  
|                        |  |                |      |      |  |   |     |  

The tax effects of each type of significant item that gave rise to deferred
taxes are:

|                                       |  |                |      |      |  |   |     |  
|-------------------------------------- |  | -------------- | ---- | ---- |  | - | --- | -
|                                       |  | December 31,  
|                                       |  |               
|                                       |  | 2002           |      | 2001
|                                       |  |                |      |     
|                                       |  | (in thousands)
|Accumulated other comprehensive income |  | $              | (198 | )    |  | $ | (43 | )
|Accretion income                       |  |                | (18  | )    |  |   | (14 | )
|Depreciation                           |  |                | 46   |      |  |   | 54  |  
|Deferred loan fees                     |  |                |     |      |  |   | 28  |  
|Allowance for loan losses              |  |                | 336  |      |  |   | 316 |  
|Deferred compensation                  |  |                | 67   |      |  |   | 48  |  
|                                       |  |                |      |      |  |   |     |  
|Net deferred tax asset                 |  | $              | 233  |      |  | $ | 389 |  
|                                       |  |                |      |      |  |   |     |  





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Note P  Commitments and Contingencies
The financial statements do not reflect various commitments and contingent
liabilities which arise in the normal course of business and which involve
elements of credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities are commitments to extend credit and
standby letters-of-credit. A summary of these commitments and contingent
liabilities follows:

|                             |  |                |        |      |  |   |       | 
|---------------------------- |  | -------------- | ------ | ---- |  | - | ----- | 
|                             |  | December 31,  
|                             |  |               
|                             |  | 2002           |        | 2001
|                             |  |                |        |     
|                             |  | (in thousands)
|Commitments to extend
credit |  | $              | 12,865 |      |  | $ | 5,614 | 
|Standby letters-of-credit    |  | $              | 426    |      |  | $ | 381   | 

The Bank uses the same credit policies in making commitments to extend credit
and in issuing standby letters-of-credit as it does for extensions of credit
shown on the balance sheets.

The Bank is party to litigation, outstanding commitments and other contingent
liabilities arising in the normal course of business. In the opinion of
management, the resolution of such matters will not have a material effect on
the financial statements.

The Bank has a $7,000,000 unused line-of-credit with Federal Home Loan Bank,
and a $1,500,000 line-of-credit with Independent Bankers Bank of Florida for
the purchase of Federal funds.

Note Q  Concentrations of Credit
Substantially all of the Banks loans, commitments and standby
letters-of-credit have been granted to customers in Hillsborough County,
Florida. The concentrations of credit by type of loan are set forth in Note C.
The distribution of commitments to extend credit approximates the distribution
of loans outstanding. Standby letters-of-credit were granted primarily to
commercial borrowers.

At December 31, 2002, the Bank had $3,861,845 in excess of FDIC deposit
insurance in non-interest bearing accounts with other financial institutions.

Note R  Related Parties
Certain officers, directors, employees of the Bank, and certain corporations
and individuals related to such persons have deposits and indebtedness, in the
form of loans, as customers. The total of such deposits at December 31, 2002,
was $2,831,000. Total loans to such persons and their affiliates amounted to
$4,957,970, and $4,416,000 at December 31, 2002 and 2001, respectively. During
2002, originations of related party loans totaled $10,182,958 and payments on
related party loans totaled $9,640,988.

Note S   Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:

Cash and Short-term Investments:
For those short-term instruments, the carrying amount is a reasonable estimate
of fair value.

Investment Securities:
For securities held as investments, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.

Loans Receivable:
For loans subject to repricing and loans intended for sale within six months,
fair value is estimated at the carrying amount plus accrued interest.

The fair value of other types of loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.

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

Short-term Debt:
For short-term debt, including accounts and demand notes payable, the carrying
amount is a reasonable estimate of fair value.

Long-term Debt:
The fair value of long-term debt is estimated by discounting the future cash
flows using the current rates for similar debt.





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Note S  Disclosures About Fair Value of Financial Instruments (Continued)
The estimated fair values of the Banks financial instruments at December 31,
2002, are as follows:

|                                         |  |                |         |       |  |   |         | 
|---------------------------------------- |  | -------------- | ------- | ----- |  | - | ------- | 
|                                         |  | Carrying       |         | Fair 
|                                         |  | Amount         |         | Value
|                                         |  |                |         |      
|                                         |  | (in thousands)
|Financial
Assets                         |  |                |         |       |  |   |         | 
|Cash and short-term investments          |  | $              | 13,240  |       |  | $ | 13,240  | 
|Investment securities                    |  |                | 22,341  |       |  |   | 22,408  | 
|Loans                                    |  |                | 74,402  |       |  |   | 78,609  | 
|Financial
Liabilities                    |  |                |         |       |  |   |         | 
|Deposits                                 |  | $              | 101,754 |       |  | $ | 102,496 | 
|Accounts payable and accrued liabilities |  |                | 674     |       |  |   | 674     | 
|Advances under line-of-credit            |  |                | 970     |       |  |   | 970     | 
|Short-term borrowings                    |  |                | 222     |       |  |   | 222     | 
|Long-term debt                           |  |                | 2,967   |       |  |   | 3,263   | 





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Note T  Parent Company Financial Information
Presented below are condensed financial statements for Valrico Bancorp, Inc.
(parent only):

Condensed Balance Sheets as of
December 31:

|                                           |  |                |        |      |  |   |       | 
|------------------------------------------ |  | -------------- | ------ | ---- |  | - | ----- | 
|                                           |  | 2002           |        | 2001
|                                           |  |                |        |     
|                                           |  | (in thousands)
|Assets                                     |  |                |        |      |  |   |       | 
|Cash                                       |  | $              | 53     |      |  | $ | 24    | 
|Investment in subsidiary bank, net         |  |                | 8,668  |      |  |   | 7,492 | 
|Facilities, net                            |  |                | 1,530  |      |  |   | 1,563 | 
|Other assets                               |  |                | 66     |      |  |   | 68    | 
|                                           |  |                |        |      |  |   |       | 
|Total assets                               |  | $              | 10,317 |      |  | $ | 9,147 | 
|                                           |  |                |        |      |  |   |       | 
|Liabilities
and Stockholders Equity       |  |                |        |      |  |   |       | 
|Stockholders equity                       |  |                |        |      |  |   |       | 
|Liabilities:                               |  |                |        |      |  |   |       | 
|Accrued liabilities                        |  | $              | 7      |      |  | $ | 3     | 
|Line-of-credit                             |  |                | 970    |      |  |   | 970   | 
|Note payable                               |  |                | 967    |      |  |   | 1,040 | 
|Total liabilities                          |  |                | 1,944  |      |  |   | 2,013 | 
|Stockholders equity                       |  |                | 8,373  |      |  |   | 7,134 | 
|                                           |  |                |        |      |  |   |       | 
|Total liabilities and stockholders equity |  | $              | 10,317 |      |  | $ | 9,147 | 
|                                           |  |                |        |      |  |   |       | 

Condensed Statements of Operations and
Stockholders Equity Year
Ended December 31:

|                                                                         |  |                |       |      |  |   |       |  
|------------------------------------------------------------------------ |  | -------------- | ----- | ---- |  | - | ----- | -
|                                                                         |  | 2002           |       | 2001
|                                                                         |  |                |       |     
|                                                                         |  | (in thousands)
|Equity in net income of subsidiary bank:                                 |  |                |       |      |  |   |       |  
|Undistributed                                                            |  | $              | 874   |      |  | $ | 691   |  
|Distributed                                                              |  |                |      |      |  |   | 44    |  
|Rent income                                                              |  |                | 204   |      |  |   | 204   |  
|Interest expense                                                         |  |                | (118  | )    |  |   | (147  | )
|Other expenses                                                           |  |                | (83   | )    |  |   | (48   | )
|                                                                         |  |                |       |      |  |   |       |  
|Net income                                                               |  |                | 877   |      |  |   | 744   |  
|Stockholders Equity                                                     |  |                |       |      |  |   |       |  
|Beginning of year                                                        |  |                | 7,134 |      |  |   | 6,312 |  
|Dividends paid                                                           |  |                | (43   | )    |  |   | (43   | )
|Stock issuance                                                           |  |                | 103   |      |  |   | 12    |  
|Net change in unrealized holding losses
on securities in subsidiary bank |  |                | 302   |      |  |   | 109   |  
|                                                                         |  |                |       |      |  |   |       |  
|End of year                                                              |  | $              | 8,373 |      |  | $ | 7,134 |  
|                                                                         |  |                |       |      |  |   |       |  





---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

DECEMBER 31, 2002


Condensed Statements of Cash Flows
Year Ended December 31:

|                                                                                 |  |                |      |      |  |   |      |  
|-------------------------------------------------------------------------------- |  | -------------- | ---- | ---- |  | - | ---- | -
|                                                                                 |  | 2002           |      | 2001
|                                                                                 |  |                |      |     
|                                                                                 |  | (in thousands)
|Cash Flows from Operating Activities                                             |  |                |      |      |  |   |      |  
|Net income                                                                       |  | $              | 877  |      |  | $ | 744  |  
|Adjustment to reconcile net income to net
cash provided by operating activities: |  |                |      |      |  |   |      |  
|Equity in undistributed earnings of subsidiary                                   |  |                | (874 | )    |  |   | (691 | )
|Depreciation                                                                     |  |                | 33   |      |  |   | 28   |  
|Decrease (increase) in other assets                                              |  |                | 2    |      |  |   | 5    |  
|(Increase) in accounts payable and accrued liabilities                           |  |                | 4    |      |  |   |     |  
|                                                                                 |  |                |      |      |  |   |      |  
|Net cash used in operating activities                                            |  |                | 42   |      |  |   | 86   |  
|Cash Flows from Financing Activities                                             |  |                |      |      |  |   |      |  
|Issuance of common stock                                                         |  |                | 103  |      |  |   | 12   |  
|Cash dividend on common stock                                                    |  |                | (43  | )    |  |   | (43  | )
|Principal payments on long-term debt                                             |  |                | (73  | )    |  |   | (68  | )
|                                                                                 |  |                |      |      |  |   |      |  
|Net cash used in financing activities                                            |  |                | (13  | )    |  |   | (99  | )
|                                                                                 |  |                |      |      |  |   |      |  
|Net Increase (Decrease) in Cash                                                  |  |                | 29   |      |  |   | (13  | )
|Cash
at Beginning of Year                                                        |  |                | 24   |      |  |   | 37   |  
|                                                                                 |  |                |      |      |  |   |      |  
|Cash
at End of Year                                                              |  | $              | 53   |      |  | $ | 24   |  
|                                                                                 |  |                |      |      |  |   |      |  





---



##### Table of Contents






ITEM 9. Changes In And Disagreements With
Accountants On Accounting And Financial Disclosure

There were no changes in accountants, nor were there any disagreements with
accountants on accounting and financial disclosure.




ITEM 10. Directors And Principal
Officers Of The Company

Directors of the Company

The information required by Item 10 pertaining to directors of the Company is
incorporated herein by reference to the sections entitled Election of
Directors in the Companys definitive proxy statement for
its 2003 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
within 120 days of the end of the Companys fiscal year ended December 31,
2002.

Principal Officers of the Company and its Subsidiary Bank

All principal officers of the Company are elected by the Board of Directors and
serve at the pleasure of the Board. There are no arrangements or understanding
between the Company and any principal officer pursuant to which any such person
was elected as a principal officer of the Company.

J. E. Bob McLean, III, 66,is Chairman of the Bank and Company and was
elected President and CEO in May 1997 of the Company. Mr. McLean is the owner
and President of J. E. McLean & Sons, a family business he took over in 1967.
He is a citrus grower who also harvests and ships fruit. Prior to that, Mr.
McLean was a banker at Marine Bank of Tampa and was employed with Tampa
Electric for three and a half years. He is a third generation of Valrico,
attending Brandon High School and the University of Florida for a couple of
years. Mr. McLean served in the Army. He has served as Chairman of the Board
of the Bank since its inception in 1989 and has served as Chairman of the Board
for the Company since May 1995.

Jerry L. Ball, 50,The President and CEO of the Bank is also the Executive
Vice President of the Company. In May 1997, Mr. Ball was promoted to his
current position. In 1995, Mr. Ball was promoted to Executive Vice President.
From 1989 to May 1995, Mr. Ball served in the position of Senior Vice President
and Cashier. From 1980 to April 1989, Mr. Ball was an Assistant Vice President
and Branch Manager for First Union National Bank of Florida. Mr. Ball attended
King College and received a B.A. degree in Business and Economics. He is a
graduate of the School of Banking at the University of Florida. Mr. Ball has
over 23 years of banking experience.

Donald Weaver, 60,joined the Company and Bank in November 1995. He was hired
as Senior Vice President of Commercial Loans of the Bank. In May 1997, he was
promoted to Executive Vice President and Director of Commercial Loans and was
elected to the position of Secretary to the Company. He has over 35 years in
commercial banking, all within the Hillsborough County area. He attended
Hillsborough Community College and has attended a number of banking schools.
He has been a resident of the Brandon area for over 25 years.

Set forth below are the names and ages of the other principal officers of the
Companys subsidiary bank, giving their principal occupation and business
experience of each such principal officer during the past six years. All of
such information has been furnished by each such person.

Glenn J. Chasteen, 51,is currently serving as Senior Vice President-Consumer
Loans. He has been the Banks installment lender since June 1989. From
January 1987 to October 1988, Mr. Chasteen served as Senior Vice President of
San Antonio Citizens Federal Credit Union. From February 1980 to January 1987,
Mr. Chasteen served as Vice President-Consumer Lending with Sun Bank of Tampa
Bay (formerly known as Brandon State Bank).

Carol Todd Johnson, 71,has served as Vice President and Business Development
Officer of the Bank since June 1991. Mrs. Johnson serves in this position on a
part-time basis and was promoted in 1995 to Vice President-Business
Development. From 1972 to May 1991, Mrs. Johnson was Vice President of
Business and Community Development Officer at the Brandon office of Barnett
Bank.

Susan L. Radford, 45,is currently serving as a Vice President 
Cashier/Compliance Officer. She was promoted to this position in July 2000.
Ms. Radford has 24 years of banking experience, 15 years in bank operations.

Glenda C. Peacock, 63,is currently serving as a Vice President  Loan
Officer/Branch Coordinator . She has been serving in this capacity since
August 1, 2000. Prior to this, she served as a branch manager of our Brandon
location since March 1994. Mrs. Peacock was hired by the Bank in August 1993
where she served as an AVP  Loan Officer.




ITEM 11. Management Compensation And
Transactions





---



##### Table of Contents



The information required by Item 11 pertaining to management compensation and
transactions with management of the Company is incorporated herein by reference
to the sections entitled Executive Compensation and Other Information and
Certain Transactions in the Companys definitive
proxy statement for its 2003
Annual Meeting of Shareholders, which will be filed with the Federal Deposit
Insurance Corporation within 120 days of the end of the Companys fiscal year
ended December 31, 2002.




ITEM 12. Security Ownership Of Certain
Beneficial Owners And Management

Security Ownership of Certain Beneficial Owners

The only class of voting securities of the Company
is its Common Stock, 308,737
shares of which were outstanding as of December 31, 2002. To the best
knowledge of the Company, other than Messrs. Carlton, Holmberg and Amerson
(whose shareholdings are listed in Security Ownership of Management below),
there are no other persons who own beneficially more than five percent (5%) of
the Companys Common Stock.

Security Ownership of Management

The information set forth below as to the beneficial ownership of shares of
Common Stock of the Company by each director of the Company, and by all
directors and principal officers of the Company as a group, as of December 31,
2002 has been furnished by the respective persons.

|                                                             |  |                   |         |            |  |  |       | 
|------------------------------------------------------------ |  | ----------------- | ------- | ---------- |  |  | ----- | 
|                                                             |  | Amount and Nature |         |            |  | 
|                                                             |  | of Beneficial     |         | Percent of
|Name of Beneficial Owner                                     |  | Ownership         |         | Class     
|                                                             |  |                   |         |           
|LeVaughn Amerson                                             |  |                   | 33,703  | (1)        |  |  | 10.75 | 
|Jerry L. Ball                                                |  |                   | 8,000   | (8)        |  |  | 2.53  | 
|C. Dennis Carlton                                            |  |                   | 30,878  | (2)        |  |  | 9.85  | 
|H. Leroy English                                             |  |                   | 8,825   | (1)        |  |  | 1.82  | 
|David A. Gee                                                 |  |                   | 0       |            |  |  | 0.00  | 
|Gregory L. Henderson                                         |  |                   | 15,203  | (3)        |  |  | 4.85  | 
|Douglas A. Holmberg                                          |  |                   | 34,010  | (4)        |  |  | 10.75 | 
|Charles E. Jennings, Jr.                                     |  |                   | 12,469  | (5)        |  |  | 3.98  | 
|J. E. Bob McLean, III                                      |  |                   | 13,959  | (6)        |  |  | 4.41  | 
|J. Bill Noriega, Jr.                                       |  |                   | 12,229  | (7)        |  |  | 3.90  | 
|Donald M. Weaver                                             |  |                   | 6,300   | (9)        |  |  | 2.00  | 
|                                                             |  |                   |         |            |  |  |       | 
|All directors and principal officers as a group (11 persons) |  |                   | 175,576 |            |  |  | 55.84 | 



| | 1. |  | All of these shares are owned as joint tenant with this individuals
spouse. Includes 4703 shares subject to options which are presently
exercisable.                                                                                                                                                                                                                                                                                 
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Includes 26,025 shares which Mr. Carlton owns individually and 50
shares each owned in trust for Mr. Carltons three children ( a total of
150 shares) of which Mr. Carlton is sole trustee. Includes 4703 shares
subject to options which are presently exercisable.                                                                                                                                                                 
|
| | 3. |  | Includes 10,000 shares which Dr. Henderson owns as joint tenant with
Kathy Henderson, his wife, and 125 shares each owned by a trust set up
for Dr. Hendersons four (4) children (a total of 500 shares) of which
Kathy Henderson is sole trustee and as to which Dr. Henderson disclaims
beneficial ownership. Includes 4703 shares subject to options which are
presently exercisable.                                             
|
| | 4. |  | Includes 29,207 shares which Mr. Holmberg owns individually. Also
includes 100 shares which are owned by Mr. Holmbergs wife, as to which
shares Mr. Holmberg disclaims beneficial ownership. Includes 4703 shares
subject to options which are presently exercisable.                                                                                                                                                                
|
| | 5. |  | Includes 5,000 shares held in a Valrico State Bank Self-Directed Ira
for the sole benefit of Mr. Jennings; 2,466 shares of which Mr. Jennings
owns individually and 200 shares which Mr. Jennings owns as joint tenant
with his wife. Also, includes 100 shares which Mr. Jennings wife owns
as to which shares Mr. Jennings disclaims beneficial ownership. Includes
4703 shares subject to options which are presently exercisable.
|
| | 6. |  | Includes 4,200 shares Mr. McLean owns as joint tenant with his wife
and daughter and 1,170 shares owned by Mr. McLean in trust for his
grandchildren for which Mr. McLean is sole trustee. Also includes 1,100
shares owned by Mr. McLeans daughter, son-in-law, and wife as to which
shares Mr. McLean disclaims beneficial ownership. Includes 7,489 shares
subject to options which are presently exercisable.                    
|
| | 7. |  | Includes 7,226 shares which Mr. Noriega owns individually and 100
shares each owned joint with three of Mr. Noriegas children (a total of
300 shares). Includes 4703 shares subject to options which are presently
exercisable.                                                                                                                                                                                                      
|
| | 8. |  | Includes 450 shares which Mr. Ball owns jointly with his spouse.
Includes 7500 shares subject to options which are presently exercisable.                                                                                                                                                                                                                                                                                             
|
| | 9. |  | Includes 100 shares which Mr. Weaver owns individually and 200 shares
owned in joint with Mr. Weavers spouse. Includes 6000 shares subject to
options which are presently exercisable.                                                                                                                                                                                                                                                

|                                                                  |       |                         |        |        |                      |                         |       |                         |  |  |     |     | 
|----------------------------------------------------------------- | ----- | ----------------------- | ------ | ------ | -------------------- | ----------------------- | ----- | ----------------------- |  |  | --- | --- | 
|                                                                  |       |                         |        |        |                      | Number of Securities    |      
|                                                                  |       |                         |        |        |                      | Remaining Available for |      
|                                                                  |       |                         |        |        |                      | Future Issuance Under   |      
|                                                                  |       | Number of Securities to |        |        | Weighted-Average     |                         |       | Equity Compensation     | 
|                                                                  |       | be Issued Upon Exercise |        |        | Exercise Price of    |                         |       | Plans (Excluding        | 
|                                                                  |       | of Outstanding Options, |        |        | Outstanding Options, |                         |       | Securities Reflected in | 
|                                                                  |       | Warrants and Rights     |        |        | Warrants and Rights  |                         |       | Column(a))              | 
|                                                                  |       |                         |        |        |                      |                         |       |                         | 
|                                                                  |       | (a)                     |        |        | (b)                  |                         |       | (c)                     | 
|                                                                  |       |                         |        |        |                      |                         |       |                         | 
|Equity compensation plans approved by security
    holders        |       |                         | 0      |        |                      |                         | 0     |                         |  |  | 0   |    
|Equity compensation plans not approved by security
    holders(1) |       |                         | 64,613 |        |                      |                         | 16.73 |                         |  |  | 387 |    
|                                                                  |       |                         |        |        |                      |                         |       |                         | 
|                                                                  | Total |                         |        | 64,613 |                      |                         |       | 16.73                   |  |  |     | 387 | 
|                                                                  |       |                         |        |        |                      |                         |       |                         | 

| | 
| | 
| | 



| | (1) |  | Consists of common shares of
the Company authorized for issuance under outstanding options or
reserved for options to be awarded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | All common shares included in equity
compensation plans not approved by shareholders are covered by
outstanding options, or reserved for issuance under options to be
awarded, under the Valrico Bancorp, Inc. 1998 Stock Option Plan (the
Plan). Each of these options is a nonqualified option,
meaning a stock option that does not qualify under Section 422 of the
Internal Revenue Code for the special tax treatment available for
qualified, or incentive, stock options. Each outstanding
option vested immediately as to all shares covered by the option.
Each outstanding option may be exercised for a term of 10 years from
the date of the grant of the option, subject to earlier termination
in the event of death, disability or other termination of the
employment of the option holder. Subject to termination in any event
at the end of the option term, the option holder has a limited period
(one year after death or disability and two years after retirement)
following termination of employment due to disability, death or
retirement after age 65, to exercise the options. The options
terminate three months after termination of employment for reasons
other than death, disability or termination for cause, and
immediately upon termination of employment if for cause. The exercise
price and number of shares covered by the option are to be adjusted
to reflect any share dividend, share split, merger or other
recapitalization of the common shares of the Corporation. The options
are not transferable other than by will or state inheritance laws.
The Plan is to be administered by the Board of Directors or a
Committee of the Board of Directors, who may establish certain terms
and limits in granting options, subject to the limits of the Plan.
All options must be awarded with an exercise price of not less than
the fair market value of the covered shares at the date of grant.





---



##### Table of Contents





ITEM 14. Controls and
Procedures

Within the 90 day prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Companys management, including the
Companys President and Chief Executive Officer and Vice
President and Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure
controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the President and
Chief Executive Officer and Vice President and Chief Financial
Officer concluded that the Companys disclosure controls
and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated
subsidiaries) required to be included in the Companys
periodic SEC filings.

There were no significant changes made in the Companys
internal controls or in other factors that could significantly
affect these internal controls subsequent to the date of the
evaluation performed by the Companys Chief Executive
Officer and Chief Financial Officer.



---



##### Table of Contents



Certain officers, directors, security holders with more than five percent
ownership, and corporations and individuals related to such persons have
indebtedness in the form of loans. These loans to such persons are made in the
ordinary course of business. The loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and do not involve more than
the normal risk of collectibility, nor do they present other unfavorable
features.





---



##### Table of Contents



ITEM 15.     Exhibits,
Financials Statement Schedules and Reports on
Form 8-K

The following consolidated financial statements
of the registrant and the independent auditors report
therein are filed as part of this report;

|                                    |                                                                                                                                                                                    |  | 
|----------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|Independent Auditors Report        |                                                                                                                                                                                    | 
|Financial Statements (Consolidated) |                                                                                                                                                                                    | 
|                                    | Statements of Condition 
    December 31, 2002 and 2001                                                                                                                           |  | 
|                                    | Statements of Income  years ended
    December 31, 2002, 2001 and 2000                                                                                                            |  | 
|                                    | Statements of Cash Flows  years ended
    December 31, 2002, 2001 and 2000                                                                                                        |  | 
|                                    | Notes to Consolidated Financial Statements (all
    financial statement schedules have been omitted as required
    information is included in consolidated financial statements.) |  | 

Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended December 31, 2002.

Exhibits

|        |  |                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------
|Number  |  | Description                                                                                                            
|        |  |                                                                                                                        
|(3)(i)  |  | Articles of Incorporation of the Company (a)                                                                           
|        |  |                                                                                                                        
|(3)(ii) |  | Bylaws of the Company (a)                                                                                              
|        |  |                                                                                                                        
|(10)(a) |  | Lease  Valrico State Bank  Jim Redman Parkway Office (c)                                                             
|        |  |                                                                                                                        
|(b)     |  | Lease  Valrico State Bank  Brandon Office (b)(c)                                                                     
|        |  |                                                                                                                        
|(c)     |  | Valrico State Bank Stock Option Plan (b)(c)                                                                            
|        |  |                                                                                                                        
|(d)     |  | Valrico Bancorp Inc, Stock Option Plan (d)                                                                             
|        |  |                                                                                                                        
|(21)    |  | Valrico State Bank (b)                                                                                                 
|        |  |                                                                                                                        
|99.1    |  | Certification pursuant to 18 U.S.C. Section 1350, as enacted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                        
|99.2    |  | Certification pursuant to 18 U.S.C. Section 1350, as enacted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                        

|    |  |                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------
|(a) |  | Incorporated by reference to the Companys Registration Statement
#33-90524 on Form S-4 for the registrant.
|    |  |                                                                                                            
|(b) |  | Incorporated by reference to the Companys December 31, 1995 Form 10-K.                                    
|    |  |                                                                                                            
|(c) |  | Incorporated by reference to the Companys December 31, 1997 Form 10-K                                     
|    |  |                                                                                                            
|(d) |  | Incorporated by reference to the Companys December 31, 1998 Form 10-K                                     





---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 28, 2002.

Valrico Bancorp, Inc.

|                            |  |                                        
|--------------------------- |  | ---------------------------------------
|By: /s/ Bob McLean          |  | By: /s/ Jerry L. Ball                  
|                            |  |                                        
|Bob McLean, President & CEO |  | Jerry L. Ball, Executive Vice President

Dated: March 28, 2003.

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

|                             |  |                                              |  |               
|---------------------------- |  | -------------------------------------------- |  | --------------
|Signatures                   |  | Titles                                       |  | Date          
|                             |  |                                              |  |               
|/s/ J. E. Bob McLean, III  |  | President and
Chief Executive Officer        |  | March 28, 2003
|J. E. Bob McLean, III      |  | (Chief Executive Officer)                    |  |               
|                             |  |                                              |  |               
|/s/ Jerry L. Ball            |  | Executive Vice President and Director        |  | March 28, 2003
|Jerry L. Ball                |  | (Principal Financial
and Accounting Officer) |  |               
|                             |  |                                              |  |               
|/s/ C. Dennis Carlton        |  | Director                                     |  | March 28, 2003
|C. Dennis Carlton            |  |                                              |  |               
|                             |  |                                              |  |               
|/s/ H. Leroy English         |  | Director                                     |  | March 28, 2003
|H. Leroy English             |  |                                              |  |               
|                             |  |                                              |  |               
|/s/ Gregory L. Henderson     |  | Director                                     |  | March 28, 2003
|Gregory L. Henderson         |  |                                              |  |               
|                             |  |                                              |  |               
|/s/ Douglas A. Holmberg      |  | Director                                     |  | March 28, 2003
|Douglas A. Holmberg          |  |                                              |  |               
|                             |  |                                              |  |               
|/s/ Charles E. Jennings, Jr. |  | Director                                     |  | March 28, 2003
|Charles E. Jennings, Jr.     |  |                                              |  |               
|                             |  |                                              |  |               
|/s/ J. Bill Noriega, Jr.   |  | Director                                     |  | March 28, 2003
|J. Bill Noriega, Jr.       |  |                                              |  |               
|                             |  |                                              |  |               
|/s/ LeVaughn Amerson         |  | Director                                     |  | March 28, 2003
|LeVaughn Amerson             |  |                                              |  |               





---



##### Table of Contents



EXHIBIT INDEX

ITEM 15.     Exhibits,
Financials Statement Schedules and Reports on
Form 8-K

The following consolidated financial statements
of the registrant and the independent auditors report
therein are filed as part of this report;

|                                    |                                                                                                                                                                                    |  | 
|----------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|Independent Auditors Report        |                                                                                                                                                                                    | 
|Financial Statements (Consolidated) |                                                                                                                                                                                    | 
|                                    | Statements of Condition 
    December 31, 2002 and 2001                                                                                                                           |  | 
|                                    | Statements of Income  years ended
    December 31, 2002, 2001 and 2000                                                                                                            |  | 
|                                    | Statements of Cash Flows  years ended
    December 31, 2002, 2001 and 2000                                                                                                        |  | 
|                                    | Notes to Consolidated Financial Statements (all
    financial statement schedules have been omitted as required
    information is included in consolidated financial statements.) |  | 

Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended December 31, 2002.

Exhibits

|        |  |                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------
|Number  |  | Description                                                                                                            
|        |  |                                                                                                                        
|(3)(i)  |  | Articles of Incorporation of the Company (a)                                                                           
|        |  |                                                                                                                        
|(3)(ii) |  | Bylaws of the Company (a)                                                                                              
|        |  |                                                                                                                        
|(10)(a) |  | Lease  Valrico State Bank  Jim Redman Parkway Office (c)                                                             
|        |  |                                                                                                                        
|(b)     |  | Lease  Valrico State Bank  Brandon Office (b)(c)                                                                     
|        |  |                                                                                                                        
|(c)     |  | Valrico State Bank Stock Option Plan (b)(c)                                                                            
|        |  |                                                                                                                        
|(d)     |  | Valrico Bancorp Inc, Stock Option Plan (d)                                                                             
|        |  |                                                                                                                        
|(21)    |  | Valrico State Bank (b)                                                                                                 
|        |  |                                                                                                                        
|99.1    |  | Certification pursuant to 18 U.S.C. Section 1350, as enacted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                        
|99.2    |  | Certification pursuant to 18 U.S.C. Section 1350, as enacted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                        

|    |  |                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------
|(a) |  | Incorporated by reference to the Companys Registration Statement
#33-90524 on Form S-4 for the registrant.
|    |  |                                                                                                            
|(b) |  | Incorporated by reference to the Companys December 31, 1995 Form 10-K.                                    
|    |  |                                                                                                            
|(c) |  | Incorporated by reference to the Companys December 31, 1997 Form 10-K                                     
|    |  |                                                                                                            
|(d) |  | Incorporated by reference to the Companys December 31, 1998 Form 10-K                                     





---



##### Table of Contents



Certifications

I, J.E. McLean, III, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Valrico Bancorp,
Inc.;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                               



| | a) |  | Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and                                                                                                  
|
| | c) |  | Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



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



| | a) |  | All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and                                                                                                                                        





---



##### Table of Contents





|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date or our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |     |  |                                                                      
|-------------------- | --- |  | ---------------------------------------------------------------------
|Date: March 28, 2003 | By: |  | /s/ J.E McleanJ.E. McLean, III,
President and Chief Executive Officer





---



##### Table of Contents



I, Jerry L. Ball, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Valrico Bancorp,
Inc.;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                               



| | a) |  | Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and                                                                                                  
|
| | c) |  | Presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



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



| | a) |  | All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and                                                                                                                                        





---



##### Table of Contents





|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date or our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                           
|-------------------------------------------------------------------------------------------
|Date: March 28, 2003                                                                       
|                                                                                           
|By: \s\ Jerry L. BallJerry L. Ball,    Executive Vice President and Chief Financial Officer