SECURITIES and EXCHANGE COMMISSION
                             Washington, D. C. 20549
                             -----------------------

                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1999
                         Commission File Number: 0-18932

                      FIRST PALMETTO FINANCIAL CORPORATION
         -------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                       57-0921284
----------------------------------------    ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

    407 DeKalb Street, Camden, S.C.                       29020
----------------------------------------    ------------------------------------
(Address of principal executive offices)                (Zip Code)

        Registrant's telephone number, including area code: 803-432-1416

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

     Indicate  by check mark  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. YES |X| NO

     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 its 10-K or any amendments to this Form
10-K. |X|

     The  registrant's  voting stock is not regularly and actively traded in any
established  market,  and there are no regularly quoted bid and asked prices for
the  registrant's  voting stock.  As of November 4, 1999,  the aggregate  market
value of the voting stock held by non-affiliates of the registrant,  computed by
reference  to the  most  recent  privately  negotiated  sales  prices  known  to
management,  was  approximately  $30.0  million  (399,860  shares at $75.00  per
share).  It is  assumed  for  purposes  of  this  calculation  that  all  of the
registrant's directors and executive officers are affiliates of the registrant.

     As of November 5, 1999 there were issued and outstanding  712,010 shares of
the registrant's common stock.

DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     September 30, 1999 (the "Annual  Report").  (Parts I and II)
2.   Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders
     (PART III).
<PAGE>
                                     PART I

ITEM 1.  Business
-----------------

General
-------

     First Palmetto Financial Corporation.  First Palmetto Financial Corporation
("First  Palmetto") was incorporated  under the laws of the State of Delaware on
January 24, 1990 but did not issue stock or begin  operations  until October 31,
1990.

     First Palmetto is classified as a unitary  savings and loan holding company
subject  to  regulation  by the  Office of  Thrift  Supervision  ("OTS")  of the
Department of the Treasury.  First Palmetto's principal business is the business
of its  subsidiary,  First Palmetto  Savings Bank,  F.S.B.  (the "Bank") and the
Bank's  subsidiary.  Except  as  otherwise  noted,  references  herein  to First
Palmetto include the Bank. As a federally chartered savings  association,  First
Palmetto is subject to extensive  regulation and  examination by the OTS and the
Federal Deposit  Insurance  Corporation  ("FDIC"),  as the  administrator of the
Savings  Association  Insurance  Fund ("SAIF")  which  insures First  Palmetto's
deposits.

     The Bank's  main  office is located at 407  DeKalb  Street,  Camden,  South
Carolina  (telephone  (803)  432-1416).  First  Palmetto also has sixteen branch
offices in other South  Carolina  locations in  Bishopville,  Camden,  Columbia,
Darlington, Elgin, Irmo, Kershaw, Lancaster,  Lexington, Lugoff, Manning, Myrtle
Beach, North Myrtle Beach, Pageland and Pontiac.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     Financial   Condition   Data.  The  following   tables   present   selected
consolidated  financial  information  and other data for First  Palmetto  at the
dates and for the periods indicated.

Consolidated Financial Condition Data
<TABLE>
<CAPTION>
                                                                            At September 30,
                                            -------------------------------------------------------------------------
                                                    1999           1998           1997            1996           1995
                                            ------------   ------------   ------------    ------------   ------------
                                                                           (In thousands)
<S>                                         <C>            <C>            <C>             <C>            <C>
Assets                                      $    475,751   $    433,745   $    372,948    $    344,547   $    323,183
Loans, net                                       317,012        263,989        252,336         227,209        198,373
Cash and investment securities (a)                80,023         56,944         74,030          70,519         71,807
Mortgage-backed securities                        59,877         95,862         32,367          33,010         39,410
Deposits                                         361,764        343,947        320,769         288,157        267,313
Federal Home Loan Bank advances                   83,000         60,667         27,233          32,550         33,367
Stockholders' equity, substantially
  restricted                                      28,231         25,169         22,855          20,208         19,345
---------------------------------------------------------------------------------------------------------------------
<FN>
(a)    Includes  cash and due from  banks,  interest-bearing  deposits  in other banks,  certificates  of  deposit in
       other  banks,   available-for-sale securities and investment securities.
</FN>
</TABLE>
                                       2
<PAGE>
Consolidated Summary of Operations
<TABLE>
<CAPTION>
                                                                   Years Ended September 30,
                                            -------------------------------------------------------------------------
                                                    1999           1998           1997            1996           1995
                                            ------------   ------------   ------------    ------------   ------------
                                                              (In thousands, except per share data)

<S>                                         <C>            <C>            <C>             <C>            <C>
Interest income                             $     33,210   $     31,026   $     27,902    $     26,016   $     22,794
Interest expense                                  18,052         17,275         15,025          14,186         12,483
                                            ------------   ------------   ------------    ------------   ------------
Net interest income                               15,158         13,751         12,877          11,830         10,311
Provision for loan losses                          1,144          2,262          1,428             885            482
                                            ------------   ------------   ------------    ------------   ------------
Net interest income after
  provision for loan losses                       14,014         11,489         11,449          10,945          9,829
Other income                                       2,602          3,904          2,636           2,255          1,934
Other expense                                      9,432          8,861          8,846           9,993          8,105
Income taxes                                       2,581          2,354          1,909           1,195          1,300
                                            ------------   ------------   ------------    ------------   ------------
Net income                                  $      4,603   $      4,178   $      3,330    $      2,012   $      2,358
                                            ============   ============   ============    ============   ============
Net income per common share-basic           $       6.50   $       5.90   $       4.80    $       2.90   $       3.40
                                            ============   ============   ============    ============   ============
Book value per common share                 $      39.65   $      35.55   $      32.28    $      29.16   $      27.90
                                            ============   ============   ============    ============   ============
Dividends per share                         $       2.60   $       2.20   $       1.90    $       1.60   $       1.40
                                            ============   ============   ============    ============   ============
</TABLE>

Financial Ratios
<TABLE>
<CAPTION>
                                                              For the year ended September 30,
                                                           -------------------------------------
                                                              1999            1998          1997
                                                           -------         -------       -------
<S>                                                        <C>              <C>          <C>
Return on average assets (net income
   divided by average total assets)                         1.03%            1.06%         .94%

Return on average equity (net income
   divided by average equity)                              17.06%           18.21%       16.24%

Dividend payout ratio (dividends declared
   divided by net income)                                     40%              37%          40%

Average equity-to-average assets ratio (average
   equity divided by average total assets)                  6.02%            5.84%        5.80%
</TABLE>

LENDING ACTIVITIES

     General. First Palmetto offers residential,  construction,  commercial real
estate, installment and commercial business loans.

                                       3
<PAGE>
       Loan  Portfolio  Data.  The  following  table  sets forth  selected  data
relating to the  composition of First  Palmetto's loan portfolio by type of loan
and type of security at the dates indicated.
<TABLE>
<CAPTION>
                                                                      At September 30,
                              -----------------------------------------------------------------------------------------------
                                     1999                1998               1997                 1996              1995
                              ----------------    ----------------    ----------------   ----------------   -----------------
                                                                       (Dollars in thousands)
<S>                           <C>       <C>       <C>       <C>       <C>       <C>      <C>       <C>      <C>        <C>
Type of Loan:
   Real estate loans:
     1-4 Family               $136,248   43.0%    $119,947   45.4%    $129,244   51.2%   $123,155   54.2%   $106,264    53.6%
     Commercial                132,601   41.8       97,557   37.0       78,147   31.0      62,043   27.3      56,489    28.4
     Construction                8,456    2.7        9,127    3.5        8,462    3.4       8,695    3.8       5,431     2.7
   Commercial business          24,206    7.6       15,724    6.0       13,525    5.4      12,578    5.5      10,055     5.1
   Installment loans            25,103    7.9       29,847   11.3       29,131   11.5      27,847   12.3      24,376    12.3
Less:
   Undisbursed loan proceeds     3,938    1.2        3,325    1.3        2,891    1.2       4,461    2.0       2,240     1.1
   Deferred loan fees              218     .1          239     .1          273     .1         284     .1         202      .1
   Allowance for loan losses     5,446    1.7        4,649    1.8        3,009    1.2       2,364    1.0       1,800      .9
                              --------  -----     --------  -----     --------  -----    --------  -----    --------   -----
         Total                $317,012  100.0%    $263,989  100.0%    $252,336  100.0%   $227,209  100.0%   $198,373   100.0%
                              ========  =====     ========  =====     ========  =====    ========  =====    ========   =====
</TABLE>
                                       4
<PAGE>
     Large Loans.  At September 30, 1999,  First  Palmetto's  five largest loans
ranged  from $1.5 to $2.5  million.  All of these  loans  were  secured  by real
property in First Palmetto's primary market area.

     Sensitivities  of Loans to Changes in Interest  Rates.  The following table
sets forth certain  information  as of September 30, 1999,  regarding the dollar
amount  of  loans  maturing  in  First  Palmetto's   portfolio  based  on  their
contractual  terms to maturity,  including  scheduled  repayments  of principal.
Demand  loans,  loans  having no stated  schedule  of  repayments  and no stated
maturity and overdrafts are reported as due in one year or less.
<TABLE>
<CAPTION>
                                      Due           Due two
                               during the      through five     Due after five
                              year ending       years after        years after
                            September 30,     September 30,      September 30,
                                     2000              1999               1999             Total
                            -------------    --------------      -------------     -------------
                                                        (In thousands)
<S>                         <C>              <C>                 <C>               <C>
Real Estate                 $      92,412    $      134,355      $      50,538     $     277,305
Commercial Business                16,131             7,713                362            24,206
Installment                        19,113             5,571                419            25,103
                            -------------    --------------      -------------     -------------
       Total                $     127,656    $      147,639      $      51,319     $     326,614
                            =============    ==============      =============     =============
</TABLE>

     The following table sets forth, as of September 30, 1999, the dollar amount
of loans in First  Palmetto's  portfolio  due more than one year after such date
which had predetermined  interest rates and had floating or adjustable  interest
rates.

                                             Floating or
                        Predetermined         Adjustable
                                Rates              Rates               Total
                        -------------       ------------       -------------
                                            (In thousands)

Real Estate            $      173,719      $      11,174       $     184,893
Commercial                      7,670                405               8,075
Installment                     5,381                609               5,990
                       --------------      -------------       -------------
       Total           $      186,770      $      12,188       $     198,958
                       ==============      =============       =============

     Residential  Loans.  Residential  loans,  which  comprised  43% of the loan
portfolio or $136.2 million at September 30, 1999, are generally underwritten to
the Federal Home Loan Mortgage Corporation ("FHLMC") guidelines. Charge-offs for
these type loans totaled $2,000 for the fiscal year ended September 30, 1999 and
$148,000 for the  previous  year.  Residential  loans,  the largest  category of
loans, represents the least amount of credit risk.

     Construction  Loans.  Construction loans totaled a net $8.5 million or 2.7%
of the loan portfolio at September 30, 1999.

     During fiscal 1999, First Palmetto originated $13.4 million of construction
loans,  which  represented 4.7% of its total loans originated during the period.
Substantially  all of First Palmetto's  construction loan portfolio at September
30, 1999 consisted of loans secured by single-family dwellings.

                                       5
<PAGE>
     Construction  financing is generally  considered to involve a higher degree
of  credit  risk than  long-term  financing  of  residential  properties.  First
Palmetto's  risk of loss on a  construction  loan is dependent  largely upon the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  or  development  and the estimated  cost  (including  interest) of
construction.  If the estimate of  construction  cost or the  salability  of the
property upon completion of the project proves to be inaccurate,  First Palmetto
may be required  to advance  funds  beyond the amount  originally  committed  to
permit the construction of the development.

     Commercial Real Estate Loans. First Palmetto's  commercial real estate loan
portfolio  generally  consists of income producing  properties or owner occupied
properties.

     Commercial  real estate  loans,  including  loans  secured by  multi-family
apartment projects with more than four units,  constituted  approximately $132.6
million,  or 41.8% of First Palmetto's net loan portfolio at September 30, 1999.
This was an increase of $35.0  million from the previous  year.  These loans are
typically secured by commercial real estate located in Horry, Kershaw, Lexington
or Richland County,  South Carolina.  Commercial real estate loans are generally
made in amounts  up to $1.0  million  and are  generally  considered  to involve
higher risks than owner-occupied residential real estate loans. First Palmetto's
largest  single   commercial   real  estate  loan  at  September  30,  1999  was
approximately $2.5 million. Commercial properties are evaluated based on whether
the income produced would be sufficient to pay the scheduled payments.

     Installment  Loans.   Installment  loans  decreased  to  $25.1  million  at
September 30, 1999. In originating  consumer loans,  First Palmetto focuses on a
customer's  debt  obligations,  ability  and  willingness  to repay and  general
economic  trends in evaluating  credit  request.  Charge-offs  on consumer loans
totaled  $134,000 and $394,000 for the fiscal years ended September 30, 1999 and
1998, respectively.  Due to the higher credit risks and operating costs inherent
in consumer loans, rates are generally higher than those required on residential
and commercial loans.

     Commercial  Business Loans.  Commercial business loans increased from $15.7
million at September  30, 1998 to $24.2  million at September  30, 1999. As with
commercial real estate loans,  these types of loans  generally  result in higher
credit  risk  to  First  Palmetto.  Commercial  business  loans  are  frequently
unsecured  or secured  by  inventory,  accounts  receivable  and other  types of
personal  property.  In the event of default,  the  collateral,  if any,  may be
difficult to liquidate at market  prices.  To manage this risk,  First  Palmetto
assesses the financial condition of the borrower as well as the marketability of
the  collateral  on the loan (if  applicable)  in  evaluating  the loan request.
Restrictive debt covenants which limit such items as officers' salaries, working
capital and equity capital are included in commercial business loan agreements.

     Charge-offs for commercial real estate and business loans totaled  $490,000
and  $395,000  for  the  fiscal  years  ended   September  30,  1999  and  1998,
respectively.

     First Palmetto originates commercial business loans on a limited basis.

                                       6
<PAGE>
     The following table sets forth loans and loan participations  purchased and
sold by First Palmetto during the periods indicated.
<TABLE>
<CAPTION>
                                                            Years Ended September 30,
                                    -------------------------------------------------------------------------
                                            1999           1998           1997            1996           1995
                                    ------------   ------------   ------------    ------------   ------------
                                                                  (In thousands)
<S>                                 <C>            <C>            <C>             <C>            <C>
Loans originated:
   Residential                      $    106,101   $     82,713   $     64,476    $     71,530   $     39,039
   Residential construction               13,350         12,922         12,396          14,747          9,079
   Commercial real estate,
     including construction              141,007         75,065         50,960          35,235         43,248
   Consumer                               22,520         22,391         19,935          19,456         19,838
                                    ------------   ------------   ------------    ------------   ------------
       Total loans originated       $    282,978   $    193,091   $    147,767    $    140,968   $    111,204
                                    ============   ============   ============    ============   ============

Loans sold                          $     43,422   $     29,961   $     11,764    $     16,210   $      9,227
                                    ============   ============   ============    ============   ============
</TABLE>

     Non-Performing  Assets and Asset  Classification.  Loans are  reviewed on a
regular  basis and are placed on a  non-accrual  status when,  in the opinion of
management,  the collection of additional  interest is doubtful.  Management and
the directors of First Palmetto review on a monthly basis individual loans which
are classified as non-performing assets.  Management also evaluates the adequacy
of the  allowance for loan losses based on specific  review of delinquent  loans
and other loans with problems, composition of the Bank's loan portfolio, history
of  charge-offs,  general  economic  conditions,  value of collateral  and other
factors. Interest accrued and unpaid at the time a loan is placed on non-accrual
status is  charged  against  interest  income.  Subsequent  payments  are either
applied to the  outstanding  principal  balance or recorded as interest  income,
depending on the assessment of the ultimate collectibility of the loan.

     At September 30, 1999 and 1998, the recorded investments in loans that were
considered to be impaired was $2.2 million and $851,000, respectively. There was
no specific  allowance  for credit  losses  related to the impaired  loans as of
September 30, 1999 and 1998. The average  recorded  investment in impaired loans
during  the  years  ended  September  30,  1999 and 1998  was $1.1  million  and
$923,000,  respectively.  Interest  income  recognized  on the  cash  basis  for
impaired loans  amounted to $150,000 and $127,000 for the years ended  September
30, 1999 and 1998,  respectively.  Large  groups of  smaller-balance  homogenous
loans such as  residential  mortgages  and  consumer  installment  loans are not
evaluated for impairment individually.

     First Palmetto had nonaccrual  loans of approximately  $836,000,  $636,000,
and $981,000,  at September 30, 1999,  1998,  and 1997,  respectively.  Foregone
interest  income related to nonaccrual  loans for the years ended  September 30,
1999,  1998 and 1997  amounted to $56,000,  $36,000 and  $60,000,  respectively.
Interest income recognized on nonaccrual loans for the years ended September 30,
1999, 1998 and 1997 amounted to $36,000, $25,000 and $38,000, respectively.

     Real estate  acquired by First  Palmetto as a result of  foreclosure  or by
deed in lieu of  foreclosure  is classified as real estate owned until such time
as it is sold.  When such  property is acquired,  it is recorded at the lower of
the  unpaid  principal  balance  of the  related  loan or its  fair  value  less
estimated  costs to sell.  Thereafter,  such  properties are carried at lower of
cost or fair value less  estimated  costs to sell. At September  30, 1999,  real
estate owned in the amount of $78,000 was secured by single family  dwellings or
land and  $10,000  was  secured by  commercial  property.  All such  property is
located in First  Palmetto's  primary  lending area and  management is currently
seeking to sell all property.

                                       7
<PAGE>
     At September 30, 1999,  the allowance for loan losses  totaled $5.4 million
compared to $4.6 million at September 30, 1998. The allowance for loan losses as
a  percentage  of loans  was 1.69% and  1.73% at  September  30,  1999 and 1998,
respectively.  Asset  quality has  improved for the  comparative  years with the
ratio of  non-performing  assets to total assets decreasing to .20% at September
30, 1999 from .26% and .35% at September 30, 1998 and 1997, respectively. All of
the  allowance  for  loan  losses  has  been  allocated  to  general   reserves.
Approximately  $3.1 million has been allocated to commercial loans, $1.4 million
has been  allocated  to real estate  mortgage,  $500,000  has been  allocated to
installment loans and the remainder of the allowance has been allocated to other
loans.

     The provision for loan losses for fiscal 1999 was $1.1 million  compared to
$2.3 million for the  preceding  year. In the previous  year,  the provision for
loan  losses  resulted  from  the  higher  level of  loans  outstanding  and the
continuing shift in the loan mix from lower risk  residential  lending to higher
risk  consumer  and  commercial  lending.  Management  decreased  the  amount it
provided  for loan losses as compared to 1998 after  considering  the decline in
net charge-offs,  the decline in  non-performing  assets and other factors.  Net
charge-offs  to the  allowance  for loan losses were $347,000 or .12% of average
loans during the fiscal year ended  September  30, 1999, as compared to $622,000
or .25% of average  loans  during the fiscal  year  ended  September  30,  1998.
Non-performing  assets at  September  30,  1999  totaled  $924,000,  a  $212,000
reduction  from the $1.1 million at September 30, 1998.  Management  continually
reviews the adequacy of the allowance for loan losses,  considering such factors
as reviews of delinquent loans and other loans with problems, composition of the
Bank's loan portfolio, history of charge-offs,  general economic conditions that
may affect borrowers ability to repay and the value of collateral.

     While First Palmetto  believes it has established  its existing  allowances
for loan losses in accordance  with generally  accepted  accounting  principles,
there can be no assurance that  regulators,  in reviewing First  Palmetto's loan
portfolio,  will not request  First  Palmetto to adjust its  allowance  for loan
losses, thereby impacting First Palmetto's financial condition and earnings.

     At September 30, 1999, there were no  concentrations  of loans in any types
of industry  which  exceeded 10% of First  Palmetto's  total loans that were not
otherwise  disclosed as a loan category above. In addition,  there were no loans
which were not classified as non-accrual or  restructured  at September 30, 1999
which may be so classified in the near future  because known  information  about
possible credit problems of borrowers which causes  management to have doubts as
to the ability of the borrowers to comply with the present loan repayment terms.

                                       8
<PAGE>

     The following  table sets forth an analysis of First  Palmetto's  allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                    Years Ended September 30,
                                         -------------------------------------------------------------------------
                                                 1999           1998           1997            1996           1995
                                         ------------   ------------   ------------    ------------   ------------
                                                                    (Dollars in thousands)
<S>                                      <C>            <C>            <C>             <C>            <C>
Balance at beginning of period           $      4,649   $      3,009   $      2,364    $      1,800   $      1,655

Loans charged off:
   Residential                                      2            148            272              63             16
   Consumer                                       134            394            182             220            200
   Commercial                                     490            395            463             284            180
                                         ------------   ------------   ------------    ------------   ------------
           Total charge-offs                      626            937            917             567            396
                                         ------------   ------------   ------------    ------------   ------------
Recoveries
   Residential                                     17            209              -               -              2
   Consumer                                        32             51             54              52             30
   Commercial                                     230             55             80             194             27
                                         ------------   ------------   ------------    ------------   ------------
           Total recoveries                       279            315            134             246             59
                                         ------------   ------------   ------------    ------------   ------------

Provision for loan losses                       1,144          2,262          1,428             885            482
                                         ------------   ------------   ------------    ------------   ------------
Balance at end of period                 $      5,446   $      4,649   $      3,009    $      2,364   $      1,800
                                         ============   ============   ============    ============   ============
Ratio of net charge-offs to the
 allowance for loan losses                      6.37%          13.4%          26.0%           13.6%          18.7%
                                         ============   ============   ============    ============   ============
Ratio of net charge-offs to average
  loans outstanding during the period            .12%           .25%           .33%            .15%           .19%
                                         ============   ============   ============    ============   ============
</TABLE>
                                       9
<PAGE>
     The  following  table sets forth  information  regarding  First  Palmetto's
non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                            At September 30,
                                -------------------------------------------------------------------------------------------------
                                        1999                 1998                1997               1996              1995
                                --------------------  ------------------  ------------------  ----------------  -----------------
                                          Percentage          Percentage          Percentage        Percentage         Percentage
                                                  of                  of                  of                of                 of
                                               Total               Total               Total             Total              Total
                                 Amount       Assets   Amount     Assets   Amount     Assets   Amount   Assets   Amount    Assets
                                 ------       ------   ------     ------   ------     ------   ------   ------   ------    ------
                                                                              (Dollars in thousands)

<S>                              <C>           <C>    <C>          <C>    <C>         <C>    <C>         <C>    <C>           <C>
Non-accrual loans                $ 836         .18%   $   636      .14%   $   981     .26%   $   984     .29%   $    823      .25%
Accruing loans 90 days
  or more past due                   -           -          -        -          -       -          -       -           -        -
                                 -----     --------   -------  --------   -------  -------   -------  -------   -------- ---------
         Total                     836         .18        636      .14        981     .26        984     .29         823      .25
                                 -----     --------   -------  --------   -------  -------   -------  -------   -------- ---------

Other non-performing
 assets  (a)                        88         .02        500      .12        332     .09        480     .14       1,031      .32
                                 -----     --------   -------  --------   -------  -------   -------  -------   -------- ---------

Troubled debt restructurings         -           -          -        -          -       -          -       -           -        -
                                 -----     --------   -------  --------   -------  -------   -------  -------   -------- ---------
Total non-performing assets      $ 924         .20%   $ 1,136      .26%   $ 1,313     .35%   $ 1,464     .43%   $  1,854      .57%
                                 =====     ========   =======  ========   =======  =======   =======  =======   ======== =========
<FN>
(a)  Other  non-performing  assets  represents  property  acquired  by First Palmetto  through  foreclosure  or  repossession.  This
property  is  initially recorded at the lower of its fair value less estimated costs to sell or the cost of the related loan at time
of foreclosure.
</FN>
</TABLE>
                                       10
<PAGE>
INVESTMENT ACTIVITIES

     Interest   on   investment   securities,   available-for-sale   securities,
interest-bearing  deposits and  mortgage-backed  securities  have provided First
Palmetto's second largest source of revenue after interest on loans. Interest on
such investments  constituted  23.2%,  22.9% and 20.7% of the total interest and
other  revenues  of  First  Palmetto  in  fiscal  years  1999,  1998  and  1997,
respectively.  At September  30, 1999,  investment  securities,  mortgage-backed
securities,   Federal   Home   Loan  Bank   ("FHLB")   of   Atlanta   stock  and
interest-bearing  deposits in other  banks  totaled  $133.0  million or 27.9% of
First Palmetto's total assets.

     In accordance with generally accepted accounting principles, First Palmetto
reports its investments, other than investments  available-for-sale,  at cost as
adjusted  for  discounts  and  unamortized   premiums.   In  1997,   investments
available-for-sale  were  reported  at  fair  value.  In  1999,  all  investment
securities and mortgage-backed securities are held to maturity.

     First Palmetto's  mortgage-backed securities ("MBS") portfolio at September
30, 1999 was composed of adjustable  rate mortgage  ("ARM") MBS of $21.8 million
and  fixed  rate  MBS of  $38.1  million.  The ARM  MBS  have  weighted  average
adjustment dates in the period from December, 1999 to June, 2000. At the present
level of interest  rates,  the fixed rate MBS  portfolio  has a duration of less
than two years. As interest rates  increase,  market value of the fixed rate MBS
will  decrease and the  duration of the fixed rate  portfolio  will  lengthen as
borrowers  are less likely to refinance the loans  collateralizing  the MBS. ARM
MBS often experience decreased  prepayments in rising interest rate environments
as borrowers are less likely to fix their mortgage rates. Unlike fixed rate MBS,
the fully  indexed ARM MBS maintain or increase in value as rates rise,  but not
in the same  magnitude,  because the interest  rate  adjusts  annually to market
rate.  See  "Management's  Discussion  and Analysis of Financial  Condition  and
Results of  Operations  -- ASSET and  LIABILITY  MANAGEMENT  and  INTEREST  RATE
SENSITIVITY" in the Annual Report to Stockholders  (Exhibit 13) for a discussion
of First Palmetto's interest rate sensitivity risk and the associated prepayment
risk.

     First  Palmetto's  MBS  portfolio is  classified as held to maturity and is
therefore  carried at amortized cost.  Although these securities are in the held
to maturity category,  they are readily marketable and have a market value which
is slightly less than their carrying value at September 30, 1999.

     As a member of the FHLB  System,  First  Palmetto  is  required to maintain
minimum  levels of liquid  assets  specified  by the OTS which vary from time to
time.   See   "Regulation  --  Savings   Association   Regulation  --  Liquidity
Requirements."  The  following  table  sets  forth the  carrying  value of First
Palmetto's interest-earning deposits,  available-for-sale securities, investment
securities and mortgage-backed  securities at September 30, 1999, 1998 and 1997.
The market  values of First  Palmetto's  interest-earning  deposits,  investment
securities  and  mortgage-backed  securities  at  September  30,  1999 were $8.7
million, $59.4 million and $59.5 million, respectively.

                                       11
<PAGE>
     The  following  table  sets  forth  the book  values  of  First  Palmetto's
investments:

                                                         September 30,
                                              ---------------------------------
                                                1999        1998        1997
                                              --------    --------    ---------
                                                       (In thousands)

Interest-bearing deposits and certificates
 of deposits in other banks                   $  8,848    $ 11,992    $ 18,484
                                              ========    ========    ========

Investment securities
U.S. Government obligations                   $ 60,174    $ 37,969    $ 47,918
Available-for-sale investments                       -           -         907
                                              --------    --------    --------
       Total investments                      $ 60,174    $ 37,969    $ 48,825
                                              ========    ========    ========

Mortgage-backed securities
FHLMC and FNMA                                $ 59,811    $ 95,777    $ 32,241
Other                                               66          85         126
                                              --------    --------    --------
                                              $ 59,877    $ 95,862    $ 32,367
                                              ========    ========    ========

FHLB of Atlanta stock                         $  4,150    $  3,333    $  2,030
                                              ========    ========    ========

     The  following  table  sets  forth  the  amounts  and  maturities  of First
Palmetto's investments at September 30, 1999:
<TABLE>
<CAPTION>

                                                       Due after         Due after
                                         Due in         one year        five years               Due
                                       one year          through           through             after
                                        or less       five years         ten years         ten years            Total
                                        -------       ----------         ---------         ---------            -----
                                                                  (Dollars in thousands)
<S>                               <C>              <C>               <C>              <C>               <C>
Investment securities             $      13,008    $      46,166     $       1,000    $            -    $      60,174
Mortgage-backed securities                    -              378            13,896            45,603           59,877
                                  -------------    -------------     -------------    --------------    -------------
       Total                      $      13,008    $      46,544     $      14,896    $       45,603    $     120,051
                                  =============    =============     =============    ==============    =============

Weighted average yield                    5.20%            5.80%             6.61%             6.40%            6.06%
                                  =============    =============     =============    ==============    =============
</TABLE>
                                       12
<PAGE>
DEPOSITS

     Deposits.  First Palmetto  offers a number of deposit  accounts,  including
statement,  regular savings accounts,  NOW/Checking,  IRA accounts, money market
accounts and certificate  accounts ranging in maturity generally from 90 days to
three years.  Deposit account terms vary, with the principal  differences  being
the minimum balance required,  the time period the funds must remain on deposit,
the related penalty for early  withdrawal,  and the interest rate.  Deposits can
also be  affected  by branch  acquisitions,  branch  sales  and the rates  being
offered for deposits compared to other investment opportunities.

     First  Palmetto's  deposits are obtained  primarily  from  residents of the
State of South Carolina.  Management of First Palmetto  estimated that less than
1/2 of 1% of deposits are obtained from customers  residing outside the State of
South Carolina.  The principal methods used by First Palmetto to attract deposit
accounts  include the  offering  of a wide  variety of  services  and  accounts,
competitive  interest rates and convenient  office  locations and service hours.
First Palmetto utilizes  traditional  marketing methods to attract new customers
and savings deposits, including mass media advertising and direct mailings.

     At September  30, 1999,  First  Palmetto  had $22.2  million of  fixed-rate
certificates  with  remaining  terms  of one year or  longer,  or 6.14% of total
deposits. Substantially all time deposits renew at maturity. As of September 30,
1999,  there were no  concentrations  of  deposits  which  would have a material
impact on the Bank if they were not renewed.

     Interest rates paid, maturity terms,  service fees and withdrawal penalties
are  established by First Palmetto on a periodic basis.  Determination  of rates
and terms are predicated on funds acquisition and liquidity requirements,  rates
paid by competitors and growth goals.

     Management's  current policy is to not accept brokered deposits,  which are
more likely to be withdrawn than deposits made by other depositors. At September
30, 1999, First Palmetto had no brokered deposits.

     Deposit Flow. The following  table sets forth the changes in dollar amounts
of deposits in the types of accounts offered by First Palmetto between the dates
indicated.
<TABLE>
<CAPTION>
                                   Percent                                 Percent                               Percent
                    September           of                  September           of    Increase     September          of
                      30,1999     Deposits     Increase      30, 1998     Deposits   (Decrease)     30, 1997    Deposits
                  -----------  -----------  -----------   -----------  -----------  ----------   -----------  ----------
                                                          (Dollars in thousands)
<S>               <C>               <C>     <C>           <C>              <C>      <C>          <C>              <C>
NOW checking
  and noninterest
  bearing
  checking        $    71,152        19.7%  $    10,886   $    60,266       17.5%   $       285  $    59,981       18.6%
Money market
  deposit              21,731         6.0         2,220        19,511        5.7           (275)      19,786        6.2
Savings                22,805         6.3           323        22,482        6.5            444       22,038        6.9
Certificates
  of deposit          246,076        68.0         4,388       241,688       70.3         22,724      218,964       68.3
                  -----------  -----------  -----------   -----------  ----------   -----------  -----------  ----------
                  $   361,764       100.0%  $    17,817   $   343,947      100.0%   $    23,178  $   320,769      100.0%
                  ===========  ===========  ===========   ===========  ==========   ===========  ===========  ==========
</TABLE>
                                       13
<PAGE>
     The  following  table sets forth  First  Palmetto's  average  balances  and
interest rates based on daily balances during the periods indicated.
<TABLE>
<CAPTION>
                                                                Years Ended September 30,
                                            1999                         1998                      1997
                              ---------------------------  --------------------------   -----------------------
                                                  Average                     Average                   Average
                                    Average          Rate        Average         Rate       Average        Rate
                                    Balance          Paid        Balance         Paid       Balance        Paid
                              -------------      --------  -------------     --------   -----------     -------
                                                              (Dollars in thousands)
<S>                           <C>                 <C>      <C>                 <C>      <C>              <C>
Interest-bearing checking     $      61,069       2.10%    $      57,075       2.63%    $    56,923      2.61%
Savings deposits                     22,639       2.03            21,994       2.38          22,151      2.54
Time deposits                       243,318       5.25           229,975       5.71         203,052      5.60
                              -------------                -------------                -----------
                              $     327,026       4.44%    $     309,044       4.90%    $   282,126      4.76%
                              =============                =============                ===========
</TABLE>
       The following table sets forth First Palmetto's time deposits  classified
by rates as of dates indicated.

                                        At September 30,
                                   1999           1998           1997
                         --------------  -------------  -------------
                                            (In thousands)

Less than 3.00%          $           10  $          16  $          21
3.00% - 4.99%                   110,277         20,117          4,547
5.00% - 6.99%                   135,671        221,357        212,678
7.00% - 9.99%                       118            198          1,718
                         --------------  -------------  -------------
                         $      246,076  $     241,688  $     218,964
                         ==============  =============  =============

     The  following  table  sets  forth  the  amount  and  maturities  of  First
Palmetto's time deposits at September 30, 1999.
<TABLE>
<CAPTION>
                                        After one    After two
                             Through      through      through         After
Rate                        one year    two years  three years   three years     Total       Rate
-------                   ----------  -----------  ----------- ------------- ---------   --------
                                                     (Dollars in thousands)
<S>                       <C>         <C>          <C>         <C>          <C>             <C>
Less than 3.00%           $        9  $         1  $        -  $        -   $       10      2.78%
3.00% - 4.99%                 93,070       14,816       2,355          36      110,277      4.58
5.00% - 6.99%                130,778        4,386         400         107      135,671      5.42
7.00% - 9.99%                     32           19           -          67          118      9.05
                          ----------  -----------  ----------  ----------   ----------
                          $  223,889  $    19,222  $    2,755  $      210   $  246,076      5.06%
                          ==========  ===========  ==========  ==========   ==========
</TABLE>
     The following table indicates the amount of First  Palmetto's  certificates
of deposit of $100,000 or more by time remaining  until maturity as of September
30, 1999.

                                                     Certificates
Maturity                                               of deposit
--------                                               ----------
                                                    (In thousands)

Three months or less                                $      19,096
Over three through six months                              18,044
Over six through twelve months                             17,005
Over twelve months                                          9,140
                                                    -------------
   Total                                            $      63,285
                                                    =============

                                       14
<PAGE>
     In the year ended  September 30, 1999,  First  Palmetto had new deposits of
$1.7 billion,  withdrawals of $1.7 billion and interest  credited to the deposit
accounts of $12.3  million  resulting  in a net increase of $17.8  million.  New
deposits volume includes rollovers of existing accounts.

     Borrowings.  Deposits and loan sales and repayments are the primary sources
of funds for First  Palmetto's  lending and  investment  activities  and for its
general purposes.  First Palmetto also may rely upon advances  (borrowings) from
the FHLB of Atlanta to  supplement  its supply of lendable  funds,  meet deposit
withdrawal  requirements and to extend the term of its liabilities.  The FHLB of
Atlanta  traditionally has served as First Palmetto's  primary borrowing source.
Advances from the FHLB of Atlanta are  collateralized  by First Palmetto's stock
in the FHLB of Atlanta, selected mortgage-backed  securities and a specific lien
on certain first mortgages secured by one to four family dwellings. At September
30, 1999, the Bank had $83.0 million outstanding in FHLB advances, of which 74.0
million are fixed and 9.0 million  are  variable.  Advances in the amount of $67
million include call provisions. The advances are to mature as follows:

                                                                       Weighted
                                                                        Average
                                                                  Interest Rate
                                                                  -------------
                                                  (In thousands)

 Maturing in the year ended September 30, 2000      $   9,000          Variable
 Maturing in the year ended September 30, 2001          2,000            5.69%
 Maturing in the year ended September 30, 2004          2,000            5.72%
 Maturing in the year ended September 30, 2008         45,000            5.33%
 Maturing in the year ended September 30, 2009         25,000            4.92%
                                                    ---------        ---------
                                                    $  83,000            5.21%
                                                    =========        =========

     The  following  table  sets  forth  certain  information   regarding  First
Palmetto's FHLB advances:
<TABLE>
<CAPTION>
                                         1999                        1998                        1997
                                -------------------         ---------------------       -------------------
                                Amount         Rate         Amount           Rate       Amount         Rate
                                ------         ----         ------           ----       ------         ----
                                                           (Dollars in thousands)
<S>                            <C>            <C>           <C>             <C>         <C>            <C>
FHLB advances
   Balance at
    September 30               $83,000        5.39%         $60,667         5.50%       $27,233        5.81%
   Average during year          64,501        5.47           33,572         6.27         28,906        5.56
   Maximum month-end
    balance during year         83,000           -           61,767            -         32,550           -
</TABLE>

     The FHLB of Atlanta  functions as a central  reserve bank providing  credit
for savings banks and certain other member financial associations.  As a member,
First  Palmetto is  required to own capital  stock in the FHLB of Atlanta and is
authorized  to apply for  advances on the  security of such stock and certain of
its  home  mortgages  and  other  assets  (principally,   securities  which  are
obligations of, or guaranteed by, the United States) provided certain  standards
related  to   creditworthiness   have  been  met.  See  "Regulation  --  Savings
Association Regulation -- Federal Home Loan Bank System."

                                       15
<PAGE>
SUBSIDIARY ACTIVITIES

     The Bank is permitted by  regulation to invest an amount equal to 2% of its
assets in subsidiaries (service corporations),  with an additional investment of
1% of assets where such investment  serves primarily  community,  inner-city and
community  development  purposes.  In addition,  associations meeting regulatory
capital  requirements  and certain other tests may invest up to 50% of their net
worth in conforming first mortgage loans to service  corporations.  At September
30, 1999, the net book value of the Bank's investments in stock, unsecured loans
and conforming loans in its service corporation was $890,000.

     Palmetto  State  Service  Corporation  ("PSSC")  was formed in 1976 for the
purpose of investing in real estate for future  development  and/or sale.  These
investments  are wholly owned by PSSC and do not represent  joint  ventures with
First  Palmetto.  During  fiscal  1999,  PSSC had a net  income of  $27,000.  At
September 30, 1999, First Palmetto had $500,000 invested in PSSC's common stock,
and negative retained earnings in PSSC amounting to $323,000. PSSC is engaged in
activities not permissible to national banks.  For a discussion of the effect of
this  investment  on  First  Palmetto's  regulatory  capital  requirements,  see
"Regulation   --  Savings   Association   Regulation   --   Regulatory   Capital
Requirements."

COMPETITION

     First Palmetto faces strong  competition in the attraction of deposits (its
primary  source of lendable  funds) and in the  origination  of loans.  Its most
direct  competition for deposits comes from other thrift  associations  and from
commercial  banks located in its primary market area.  Particularly  in times of
high  interest  rates,   First  Palmetto  also  faces   additional   significant
competition  for investors'  funds from short-term  money market  securities and
other  corporate and government  securities.  First  Palmetto's  competition for
loans comes  principally from other savings  associations,  commercial banks and
mortgage banking companies.

     First Palmetto  competes for loans  principally  through the interest rates
and loan fees it charges  and the  efficiency  and  quality of the  services  it
provides  borrowers,  real estate  brokers  and home  builders.  First  Palmetto
competes for deposits by offering depositors a wide variety of savings accounts,
checking   accounts,   convenient   office   locations,   drive-in   facilities,
tax-deferred retirement programs, travelers checks, money orders, safety deposit
boxes and other services.

EMPLOYEES

     First  Palmetto  and  its  subsidiaries  had 128  full  time  employees  at
September 30, 1999.  None of First  Palmetto's  employees are  represented  by a
collective bargaining agreement, and First Palmetto believes that it enjoys good
relations with its personnel.

     First Palmetto currently maintains a comprehensive employee benefit program
for qualified employees providing among other benefits,  health insurance,  life
insurance, long-term disability insurance, pension plans and stock option plans.

                                       16
<PAGE>
SAVINGS ASSOCIATION REGULATION

     General. As a savings  association,  First Palmetto is subject to extensive
regulation by the OTS for compliance with various regulatory  requirements.  The
FDIC also has the authority to conduct special examinations. First Palmetto must
file reports with OTS describing its activities and financial  condition.  It is
also  subject  to  certain  reserve  requirements  promulgated  by the  Board of
Governors of the Federal  Reserve  System (the "Federal  Reserve  Board").  This
supervision  and  regulation  is  intended   primarily  for  the  protection  of
depositors.  Certain of these  regulatory  requirements are referred to below or
appear elsewhere herein.

     Recent Legislation. On November 12, 1999, President Clinton signed into law
the Gramm-Leach-Bliley  Act, which effected a sweeping reform of federal banking
laws. Among other major provisions,  the  Gramm-Leach-Bliley Act authorizes bank
holding  companies to become  "financial  holding  companies"  and, as such,  to
affiliate with insurance companies and securities underwriters.

     Despite its profound  impact on the  structure  of the  nation's  financial
services industry,  the  Gramm-Leach-Bliley  Act will have few direct effects on
the  operations  or powers of most  savings  associations  and  savings and loan
holding  companies.  As discussed  further  below,  the  Gramm-Leach-Bliley  Act
terminates  the  so-called  "unitary  thrift  holding  company"  exemption  on a
prospective basis;  however, the authority of currently existing unitary savings
and loan holding companies, such as First Palmetto, to engage in essentially any
business  activity is unaffected  by the statute.  See "Savings and Loan Holding
Company Regulation - Activities Restrictions."

     The  Gramm-Leach-Bliley  Act  imposes  significant  new  financial  privacy
obligations and reporting requirements on all financial institutions,  including
federal savings  associations.  Specifically,  the statute,  among other things,
will  require  financial  institutions  (a) to  establish  privacy  policies and
disclose them to customers both at the  commencement of a customer  relationship
and on an annual  basis and (b) to permit  customers  to opt out of a  financial
institution's   disclosure  of  financial  information  to  nonaffiliated  third
parties. The Gramm-Leach-Bliley Act requires the federal financial regulators to
promulgate  regulations  implementing  these  provisions  within  six  months of
enactment,  and the  statute's  privacy  requirements  will take effect one year
after enactment.

     Regulatory   Capital   Requirements.   Under   OTS   regulations,   savings
associations must maintain Tier 1 (core) capital equal to 4.0% of adjusted total
assets,  Tier 1 (core)  capital  equal to 4.0% of  "risk-weighted"  assets and a
combination of core and "supplementary" capital equal to 8.0% of "risk-weighted"
assets.  In  addition,  the OTS has adopted  regulations  which  impose  certain
restrictions on savings  associations that have a total risk-based capital ratio
that is less than 8.0%,  a ratio of Tier 1 capital to adjusted  total  assets of
less than 4.0% (or 3.0% if the  institution  is rated  composite 1 under the OTS
examination rating system). For the purpose of these regulations, Tier 1 capital
has the same  definition as core capital.  See "--Prompt  Corrective  Regulatory
Action."  Core  capital  is defined as common  stockholders'  equity  (including
retained earnings), noncumulative perpetual preferred stock and related surplus,
minority  interests in the equity accounts of fully  consolidated  subsidiaries,
certain   nonwithdrawable   accounts  and  pledged   deposits  and   "qualifying
supervisory  goodwill."  Core  capital is  generally  reduced by the amount of a
savings  association's  intangible assets,  with limited exceptions for mortgage
servicing  rights  ("MSRs"),  purchased  credit card  relationships  and certain
grandfathered  intangible assets.  Tangible capital is given the same definition
as core capital.  Core and tangible capital are further reduced by the amount of
a savings  association's debt and equity investments in subsidiaries  engaged in
activities not permissible for national banks.

     At  September  30, 1999,  First  Palmetto's  Tier 1 capital  ratio to total
assets was 5.68%, its Tier 1 capital ratio to risk-weighted assets was 9.20% and
its total capital ratio to risk-weighted  assets was 10.46%. At that date, First
Palmetto  had  $313,000  of  qualifying   intangible   assets  and  $890,000  of
investments in and extensions

                                       17
<PAGE>
of credit to  subsidiaries  engaged in activities not  permissible  for national
banks. As of September  30,1999,  the Bank was  categorized as  well-capitalized
under the regulatory framework for prompt corrective action.

     The  following  table  reconciles  the Bank's  stockholder's  equity  under
generally  accepted  accounting  principles  at September 30, 1999 to its Tier 1
capital and total regulatory capital.

                                                          (Dollars in thousands)
                                                          ----------------------
Stockholder's equity under generally
   accepted accounting principles                               $      28,254
Less:
   Deductible investments in and extensions of
      credit to subsidiary                                                890
   Deductible intangible assets                                           649
   Disallowed servicing assets and deferred tax assets                     63
Add:
   Qualifying intangible assets                                           313
                                                                -------------
Tier 1 (core) capital                                                  26,965
Add:
   Allowances for loan losses                                           3,686
                                                                -------------
Total capital                                                   $      30,651
                                                                =============
Tier 1 (core) capital as a percentage of adjusted total assets          5.68%
                                                                =============
Tier 1 (core) capital as a percentage of risk-weighted assets           9.20%
                                                                =============
Total capital as a percentage of risk-weighted assets                  10.46%
                                                                =============

     The following table sets forth First Palmetto's  capital position  relative
to its various minimum regulatory capital requirements at September 30, 1999.

                                                                      Percent of
                                                           Amount         Assets
                                                       ----------    -----------
                                                         (Dollars in thousands)

Tier 1 capital (to total assets)                       $   26,965        5.68%
Tier 1 capital requirement                                 19,003        4.00
                                                       ----------    ---------
     Excess                                            $    7,962        1.68%
                                                       ==========    =========

Tier 1 capital (to risk-weighted assets)               $   26,965        9.20%
Tier 1 capital requirement                                 11,723        4.00
                                                       ----------    ---------
     Excess                                            $   15,242        5.20%
                                                       ==========    =========

Total capital (i.e., core and supplementary capital)
  (to risk-weighted assets)                            $   30,651       10.46%
Risk-based capital requirement                             23,447        8.00
                                                       ----------    ---------
     Excess                                            $    7,204        2.46%
                                                       ==========    =========

     In addition to requiring generally applicable capital standards for savings
associations,  the Director of OTS is  authorized to establish the minimum level
of  capital  for a  savings  association  at such  amount  or at such  ratio  of
capital-to-assets  as the Director determines to be necessary or appropriate for
such  association in light of the particular  circumstances  of the association.
The Director of OTS may treat the failure of any savings association to maintain
capital at or above such level as an unsafe or unsound  practice and may issue a
directive  requiring any savings  association which fails to maintain capital at
or above the minimum  level  required by the  Director to submit and adhere to a
plan for increasing capital. Such an order may be enforced in the same manner as
an order issued by the FDIC.

                                       18
<PAGE>
     In  addition,  the OTS  risk-based  capital  requirements  require  savings
institutions  with more than a "normal"  level of interest rate risk to maintain
additional total capital. A savings institution's interest rate risk is measured
in terms of the sensitivity of its "net portfolio  value" to changes in interest
rates.  Net  portfolio  value is defined,  generally,  as the  present  value of
expected cash inflows from existing assets and off-balance  sheet contracts less
the present value of expected cash outflows from existing liabilities. A savings
institution  is  considered  to have a  "normal"  level of  interest  rate  risk
exposure if the decline in its net portfolio  value after an immediate 200 basis
point increase or decrease in market  interest rates  (whichever  results in the
greater  decline)  is less than two percent of the  current  estimated  economic
value of its assets.  A savings  institution with a greater than normal interest
rate risk will be  required  to deduct  from  total  capital,  for  purposes  of
calculating its risk-based capital requirement,  an amount equal to one-half the
difference between the institution's  measured interest rate risk and the normal
level of  interest  rate risk,  multiplied  by the  economic  value of its total
assets.  The OTS,  however,  has postponed  indefinitely  the date on which this
interest  rate risk  component  must be  deducted  from an  institution's  total
capital.

     Federal  Home  Loan Bank  System.  First  Palmetto  is a member of the FHLB
System,  which  consists  of 12  regional  Federal  Home Loan  Banks  subject to
supervision and regulation by the Federal  Housing  Finance Board ("FHFB").  The
FHLB provides a central credit facility primarily for member associations.  As a
member of the FHLB of  Atlanta,  First  Palmetto is required to acquire and hold
shares of capital stock in the FHLB of Atlanta in an amount at least equal to 1%
of the  aggregate  unpaid  principal of its home mortgage  loans,  home purchase
contracts, and similar obligations at the beginning of each year, or 1/20 of its
advances  (borrowings)  from the FHLB of Atlanta,  whichever  is greater.  First
Palmetto was in compliance with this  requirement  with an investment in FHLB of
Atlanta stock at September  30, 1999 of $4.2 million.  As of September 30, 1999,
First  Palmetto  had  outstanding  advances  of $83.0  million  from the FHLB of
Atlanta.

     Liquidity  Requirements.  Savings  associations are required to maintain an
average daily balance of liquid assets (cash,  certain time  deposits,  bankers'
acceptances,  highly  rated  corporate  debt and  commercial  paper,  qualifying
mortgage-related  securities  and mortgage  loans,  securities of certain mutual
funds,  and  specified  United  States  government,   state  or  federal  agency
obligations)  equal  to the  monthly  average  of  not  less  than  a  specified
percentage (currently 4%) of their net withdrawable  short-term savings deposits
plus  short-term  borrowings.  Monetary  penalties may be imposed for failure to
meet liquidity  requirements.  At September 30, 1999, First Palmetto exceeds the
required liquidity percentage.

     Qualified  Thrift Lender Test. The Home Owners' Loan Act ("HOLA")  requires
all savings  institutions  to meet one of two Qualified  Thrift  Lender  ("QTL")
tests or suffer a number of sanctions,  including restrictions on activities. To
qualify as a QTL, a savings  institution  must  either (i) be deemed a "domestic
building and loan  association"  under the Internal Revenue Code (the "Code") by
maintaining  at least 60% of its  total  assets in  specified  types of  assets,
including cash, certain government securities, loans secured by and other assets
related to  residential  real  property,  educational  loans and  investments in
premises of the  institution or (ii) satisfy the statutory QTL test set forth in
the HOLA by  maintaining  at least  65% of its  "portfolio  assets"  in  certain
"Qualified  Thrift  Investments."  For purposes of the HOLA QTL test,  portfolio
assets are defined as total assets less the sum of intangibles, property used in
the business of the savings  institution and liquidity  investments in an amount
not exceeding 20% of total assets. Qualified Thrift Investments consist of among
other things,  (i) loans,  equity  positions or securities  related to domestic,
residential real estate or manufactured  housing,  (ii) 50% of the dollar amount
of  residential  mortgage loans subject to sale under certain  conditions  (iii)
loans to small businesses,  student loans and credit card loans and (iv) subject
to a 20% of portfolio assets limit, of an institution's  investments in loans to
finance "starter homes" and loans for  construction,  development or improvement
of housing and community  service  facilities or for financing small business in
"credit needy" areas.

                                       19
<PAGE>
     A savings  institution must maintain its status as a QTL on a monthly basis
in at least nine out of every 12 months.  An initial failure to qualify as a QTL
results in a number of sanctions,  including the imposition of certain operating
restrictions and a restriction on obtaining  additional  advances from its FHLB.
If a savings  institution  does not  requalify  as a QTL within  the  three-year
period  after it fails the QTL  test,  it would be  required  to  terminate  any
activity not  permissible  for a national bank and repay as promptly as possible
any outstanding advances from its FHLB. In addition, the holding company of such
an institution  would be required to register as a bank holding company with the
Federal Reserve Board. At September 30, 1999, the Bank qualified as a QTL.

     Loans-to-One-Borrower   Limitations.  Savings  institutions  generally  are
subject to the lending limits applicable to national banks. With certain limited
exceptions, the maximum amount that a savings institution or a national bank may
lend to any borrower (including certain related entities of the borrower) at one
time  may  not  exceed  15%  of  the  unimpaired  capital  and  surplus  of  the
institution,  plus an additional 10% of unimpaired capital and surplus for loans
fully  secured  by  readily  marketable  collateral.  Savings  institutions  are
additionally  authorized to make loans to one borrower,  for any purpose,  in an
amount not to exceed  $500,000 or, by order of the Director of OTS, in an amount
not to exceed the lesser of $30,000,000 or 30% of unimpaired capital and surplus
to  develop  residential  housing,  provided:  (i) the  purchase  price  of each
single-family  dwelling in the development  does not exceed  $500,000;  (ii) the
savings   institution  is  in  compliance  with  its  fully  phased-in   capital
requirements; (iii) the loans comply with applicable loan-to-value requirements;
and (iv) the aggregate amount of loans made under this authority does not exceed
150% of unimpaired capital and surplus.

     At September 30, 1999,  First  Palmetto's  loans-to-one  borrower limit was
$4.2 million, and First Palmetto did not have any loans over its limit.

     Real Estate Lending Standards. Under OTS regulations,  savings associations
must adopt and maintain written policies that establish  appropriate  limits and
standards  for  extensions  of credit that are secured by liens or  interests in
real estate or are made for the purpose of financing  permanent  improvements to
real estate.  These  policies  must  establish  loan  portfolio  diversification
standards, prudent underwriting standards,  including loan-to-value limits, that
are clear and  measurable,  loan  administration  procedures and  documentation,
approval and  reporting  requirements.  The real estate  lending  policies  must
reflect  consideration  of the  Interagency  Guidelines  for Real Estate Lending
Policies (the  "Interagency  Guidelines")  that have been adopted by the federal
bank  regulators.  First  Palmetto  believes that its current  lending  policies
conform to the requirements.

     Deposit Insurance. First Palmetto is required to pay assessments based on a
percent of its insured deposits to the FDIC for insurance of its deposits by the
SAIF.  Under the Federal  Deposit  Insurance  Act (the "FDI  Act"),  the FDIC is
required to set semiannual assessments for SAIF-insured institutions to maintain
the designated  reserve ratio of the SAIF at 1.25% of estimated insured deposits
or at a higher percentage of estimated insured deposits that the FDIC determines
to be justified for that year by  circumstances  raising a  significant  risk of
substantial future losses to the SAIF.

     The FDIC has adopted a  risk-based  insurance  system for  determining  the
deposit insurance assessments to be paid by insured depository institutions. The
FDIC assigns an  institution  to one of three  capital  categories  based on the
institution's  financial  information,  as of the reporting  period ending seven
months before the assessment  period,  consisting of (1) well  capitalized,  (2)
adequately  capitalized  or (3)  undercapitalized,  and on of three  supervisory
subcategories  within each capital group.  The supervisory  subgroup to which an
institution  is assigned is based on a  supervisory  evaluation  provided to the
FDIC by the  institution's  primary federal  regulator and information  that the
FDIC determines to be relevant to the institution's  financial condition and the
risk posed to the deposit  insurance  funds.  Assessment  rates for  SAIF-member
institutions  like the Bank  depend  on the  capital  category  and  supervisory
category to which they are assigned and currently range from 0 basis point to 27
basis points.  The Bank's  assessment rate for the year ended September 30, 1999
was .046% of assessable deposits.

                                       20
<PAGE>
     In addition,  SAIF-insured  institutions like the Bank are required,  until
December  31,  1999,  to pay  assessments  to the  FDIC  at an  annual  rate  of
approximately  .058% of  insured  deposits  to help fund  interest  payments  on
certain bonds issued by the  Financing  Corporation  ("FICO"),  an agency of the
federal  government  established to  recapitalize  the  predecessor to the SAIF.
During this period,  Bank  Insurance  Fund ("BIF") member banks will be assessed
for payment of the FICO  obligations at one-fifth the annual rate  applicable to
SAIF member institutions.  After December 31, 1999, BIF and SAIF members will be
assessed at the same rate (estimated at approximately .0216% of insured deposits
for the year 2000) to service the FICO obligations. These assessments, which may
be revised based on the level of FDIC-insured deposits,  will continue until the
FICO bonds mature in 2017.

     Standards  for Safety  and  Soundness.  The FDI Act  requires  the  federal
banking  agencies,  including the OTS, to prescribe  for all insured  depository
institutions  standards  relating to,  among other  things,  internal  controls,
information systems and audit systems, loan documentation,  credit underwriting,
interest rate risk exposure, asset growth, asset quality and compensation,  fees
and benefits and such other operational and managerial standards as the agencies
deem  appropriate.  The federal banking agencies have adopted final  regulations
and  Interagency  Guidelines  Establishing  Standards  for Safety and  Soundness
("Guidelines")  to  implement  safety and  soundness  standards  pursuant to the
statute.  The Guidelines  set forth the safety and soundness  standards that the
federal  banking  agencies  use to  identify  and  address  problems  at insured
depository  institutions before capital becomes impaired. The Guidelines address
internal  controls  and  information  systems;  internal  audit  system;  credit
underwriting;  loan  documentation;  interest rate risk exposure;  asset growth;
asset quality; earnings; and compensation, fees and benefits. If the appropriate
federal banking agency determines that an institution fails to meet any standard
prescribed by the  Guidelines,  the agency may require the institution to submit
to the agency an acceptable  plan to achieve  compliance  with the standard,  as
required  by the FDI Act.  The final  regulations  establish  deadlines  for the
submission and review of such safety and soundness compliance plans.

     Prompt Corrective Regulatory Action. Under the OTS prompt corrective action
regulations,  the OTS is required to take certain  supervisory  actions  against
undercapitalized   institutions,   the  severity  of  which   depends  upon  the
institution's degree of capitalization.

     Under  the  prompt  corrective  action  regulations,  a  "well-capitalized"
institution is one that is not subject to any  regulatory  order or directive to
meet any specific  capital level and that has or exceeds the  following  capital
levels:  a total  risk-based  capital ratio of 10%, a Tier 1 risk-based  capital
ratio of 6%, and a leverage ratio of 5%. An "adequately capitalized" institution
is one that does not  qualify as  "well-capitalized"  but meets or  exceeds  the
following  capital  requirements:  a total  risk-based  capital  of 8%, a Tier 1
risk-based capital ratio of 4%, and a leverage ratio of either (i) 4% or (ii) 3%
if the bank has the highest  composite  examination  rating.  An institution not
meeting  these  criteria  is  treated  as   "undercapitalized,"   "significantly
undercapitalized,"  or critically  undercapitalized"  depending on the extent to
which the  institution's  capital  levels are below the  adequately  capitalized
standards. An institution that falls within any of the three  "undercapitalized"
categories will be subject to certain severe  regulatory  sanctions  required by
FDICIA and the implementing regulations.

                                       21
<PAGE>
     The table  below  presents  First  Palmetto's  capital  position,  which is
considered  to be "well  capitalized",  at September  30, 1999,  relative to the
various minimum  regulatory  capital  requirements  under the prompt  corrective
action regulations.

                                                                Percent of
                                                  Amount        Assets (1)
                                              --------------    ------------
                                                   (Dollars in thousands)

Tier 1 or leverage capital                    $       26,965           5.68%
Tier 1 or leverage capital requirement                23,754           5.00
                                              --------------    ------------
      Excess                                  $        3,211            .68%
                                              ==============    ============

Tier 1 risk-based capital                     $       26,965           9.20%
Tier 1 risk-based capital requirement                 17,586           6.00
                                              --------------    ------------
      Excess                                  $        9,379           3.20%
                                              ==============    ============

Risk-based capital                            $       30,651          10.46%
Risk-based capital requirement                        29,309          10.00
                                              --------------    ------------
      Excess                                  $        1,342            .46%
                                              ==============    ============

(1)  Based upon adjusted total assets for purposes of Tier 1 capital or leverage
     capital  requirements,  and risk-weighted assets for purposes of the Tier 1
     risk-based and risk-based capital requirements.

     Federal  Reserve  System.  Pursuant to regulations  of the Federal  Reserve
Board, a thrift  association must maintain  average daily reserves.  No reserves
are required to be maintained on the first $5.0 million of transaction accounts,
and  reserves  equal to 3% must be  maintained  on the  next  $44.3  million  of
transaction  accounts,  plus  reserves  equal  to 10% on  the  remainder.  These
percentages  are subject to adjustment  by the Federal  Reserve  Board.  Because
required  reserves  must  be  maintained  in the  form  of  vault  cash  or in a
non-interest  bearing  account  at a Federal  Reserve  Bank,  the  effect of the
reserve   requirement   is  to   reduce   the   amount   of  the   association's
interest-earning assets. First Palmetto meets its reserve requirements.

     Limitations on Capital  Distributions.  OTS regulations  impose limitations
upon capital  distributions  by savings  institutions,  such as cash  dividends,
payments to repurchase or otherwise acquire its shares, payments to stockholders
of another  institution  in a cash-out  merger and other  distributions  charged
against  capital.  Under the OTS  capital  distribution  regulations,  a savings
institution   that  qualifies  for  expedited   treatment  of   applications  by
maintaining specified supervisory  examination ratings and that is not otherwise
restricted in making capital  distributions  may,  without prior approval by the
OTS, make capital  distributions  during a calendar year equal to its net income
for such year plus its retained net income for the preceding two years.  Capital
distributions  in excess of such  amount are subject to prior OTS  approval.  In
addition,  even if a proposed capital distribution is less than the above limit,
a  savings  institution  must  give  notice  to the OTS at least 30 days  before
declaration of a capital distribution to its holding company.

     Under the OTS's prompt  corrective  action  regulations,  the Bank would be
prohibited   from   paying   dividends   if  the   Bank   were   classified   as
"undercapitalized"   under  such  rules.  See  "--Prompt  Corrective  Regulatory
Action."  Further,  earnings of the Bank  appropriated  to bad debt reserves and
deducted  for  federal  income tax  purposes  are not  available  for payment of
dividends or other  distributions  to the Bank  without  payment of taxes at the
then  current  tax rate by the Bank on the amount of earnings  removed  from the
reserves for such distributions.

                                       22
<PAGE>
     The Bank is  prohibited  from  making any  capital  distributions  if after
making the  distribution,  it would be  undercapitalized  as defined in the OTS'
prompt  corrective  action  regulations.  See  "--Prompt  Corrective  Regulatory
Action."  After  consultation  with the  FDIC,  however,  the OTS may  permit an
undercapitalized savings association to repurchase,  redeem, retire or otherwise
acquire shares or ownership interests if the repurchase,  redemption, retirement
or other acquisition;  (i) is made in connection with the issuance of additional
shares or other obligations of the institution in at least an equivalent amount;
and (ii) will  reduce  the  institution's  financial  obligations  or  otherwise
improve the institution's financial condition.

     In addition to the foregoing,  earnings of First Palmetto  appropriated  to
bad debt  reserves  and  deducted  from  Federal  income  tax  purposes  are not
available  for payment of cash  dividends  without  payment of taxes at the then
current tax rate by First  Palmetto on the amount of earnings  removed  from the
reserves for such  distributions.  See  "--Taxation."  First Palmetto intends to
make full use of this  favorable  tax  treatment  afforded to the Bank and First
Palmetto  and does not  contemplate  use of any earnings of the Bank in a manner
which  would  limit  the  Bank's  bad  debt  deduction  or  create  federal  tax
liabilities.

SAVINGS AND LOAN HOLDING COMPANY REGULATION

     First Palmetto is a savings and loan holding  company within the meaning of
the HOLA. As such,  First Palmetto is registered  with the OTS and is subject to
regulations,   examinations,   supervision  and  reporting  requirements.  As  a
subsidiary of First Palmetto, the Bank is subject to certain restrictions in its
dealing with First Palmetto and any affiliates of First Palmetto. First Palmetto
also is required to file certain  reports with,  and  otherwise  comply with the
rules and regulations of, the Securities and Exchange  Commission  ("SEC") under
the federal securities laws.

     Activities  Restrictions.  As the  owner of a single  savings  association,
First Palmetto is a unitary  savings and loan holding  company.  Under the HOLA,
there  are  generally  no  restrictions  on the  business  activities  of  First
Palmetto, as a unitary savings and loan holding company,  provided that the Bank
continues  to satisfy the QTL test.  The Board of  Directors  of First  Palmetto
presently intends to continue to operate First Palmetto as a unitary savings and
loan holding company. The  Gramm-Leach-Bliley Act terminated the "unitary thrift
holding  company  exemption"  for all  companies  that apply to acquire  savings
associations after May 4, 1999. Since First Palmetto is grandfathered under this
provision of the Gramm-Leach-Bliley  Act, its unitary holding company powers and
authorities were not affected.  However, if First Palmetto were in the future to
sell control of the Bank to any other company, such company would not succeed to
First Palmetto's grandfathered status under the Gramm-Leach-Bliley Act and would
be subject to restrictions on its business activities.

     Restrictions  on  Acquisitions.  A savings and loan  holding  company  must
obtain prior approval of the Director of OTS before acquiring (i) control of any
other savings  association or savings and loan holding company or  substantially
all the assets  thereof  or (ii) more than 5% of the voting  shares of a savings
association or holding  company  thereof which is not a subsidiary.  Except with
the prior  approval of the  Director of OTS, no director or officer of a savings
and loan holding  company or person owning or  controlling by proxy or otherwise
more than 25% of such company's  stock,  may also acquire control of any savings
association,  other  than a  subsidiary  savings  association,  or of any  other
savings and loan holding company.

     The OTS has amended its regulations to permit federal savings  institutions
to  branch in any state or states  of the  United  States  and its  territories.
Except in supervisory cases or when interstate  branching is otherwise permitted
by state law or other statutory provision, a federal savings institution may not
establish an out-of-state branch unless (i) it qualifies as a "domestic building
and loan association" under Section  7701(a)(19) of the Internal Revenue Code of
1986,  as amended  and the total  assets  attributable  to all  branches  of the
association  in the state would  qualify if such  branches  taken as a whole for
treatment as a domestic building and loan association and (ii) such branch would
not result in (a) formation of a prohibited multi-state multiple

                                       23
<PAGE>
savings  and loan  holding  company  or (b) a  violation  of  certain  statutory
restrictions on branching by savings association subsidiaries of banking holding
companies.  A  federal  savings  institution  generally  may not  establish  new
branches unless it meets or exceeds minimum regulatory capital requirements. The
OTS will also consider the institution's record of compliance with the Community
Reinvestment Act in connection with any branch application.

     Transactions with Affiliates. Transactions between savings associations and
any affiliate  are governed by Sections 23A and 23B of the Federal  Reserve Act.
An affiliate of a savings  association is any company or entity which  controls,
is controlled by or is under common control with the savings  association.  In a
holding company  context,  the parent holding  company of a savings  association
such as First  Palmetto and any  companies  which are  controlled by such parent
holding company are affiliates of the savings association.  Generally,  Sections
23A and 23B (i)  limit  the  extent  to which  the  savings  association  or its
subsidiaries may engage in "covered  transactions"  with any one affiliate to an
amount equal to 10% of such association's capital stock and surplus, and contain
an aggregate  limit on all such  transactions  with all  affiliates to an amount
equal to 20% of such  capital  stock and surplus and (ii)  require that all such
transactions be on terms  substantially  the same, or at least as favorable,  to
the  association  or subsidiary as those provided to a  non-affiliate.  The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee  and  similar  other  types of  transactions.  In addition to the
restrictions  imposed by Sections  23A and 23B, no savings  association  may (i)
loan or otherwise  extend credit to an affiliate,  except for an affiliate which
engages only in activities which are permissible for bank holding companies,  or
(ii)  purchase  or invest in any  stocks,  bonds,  debentures,  notes or similar
obligations of any affiliate,  except for affiliates  which are  subsidiaries of
the savings association.

TAXATION

     General.  First Palmetto files consolidated federal income tax returns on a
September  30 fiscal  year end basis.  Consolidated  returns  have the effect of
eliminating   intercompany   distributions,   including   dividends,   from  the
computation  of  consolidated  taxable  income for the taxable year in which the
distributions occur.

     Federal Income Taxation.  Savings associations generally are subject to the
provisions  of the  Code in the  same  general  manner  as  other  corporations.
However,  prior to enactment of recent  legislation under the Small Business Job
Protection Act of 1996 ("SBJPA-96")  savings institutions such as the Bank which
met certain  definitional tests and other conditions  prescribed by the Code may
have benefited from certain favorable provisions regarding their deductions from
taxable income for annual  additions to their bad debt reserve.  For purposes of
the bad debt reserve  deduction,  loans were  separated  into  "qualifying  real
property  loans," which generally were loans secured by interest in certain real
property,  and  nonqualifying  loans,  which are all other  loans.  The bad debt
reserve  deduction with respect to nonqualifying  loans was based on actual loss
experience.  The  amount  of the bad debt  reserve  deduction  with  respect  to
qualifying  real  property  loans was based upon  actual  loss  experience  (the
"experience method") or a percentage of taxable income determined without regard
to such deduction (the  "percentage  of taxable income  method").  For the years
ended  September  30,  1996 and 1995,  First  Palmetto  calculated  the bad debt
reserve deduction based upon the percentage of taxable income method.

     Under  the  percentage  of  taxable  income  method,  the bad debt  reserve
deduction for qualifying real property loans was computed as a percentage, which
Congress has reduced from as much as 60% in prior years to 8% of taxable income,
with certain adjustments,  effective for taxable years beginning after 1986. The
bad debt deduction  under the percentage of taxable income method was subject to
certain  limitations.  First,  the  amount  added to the  reserve  for losses on
qualifying real property loans could not exceed the amount necessary to increase
the balance of such reserve at the close of the taxable year to 6% of such loans
outstanding at the end of the taxable year. Further, the addition to the reserve
for losses on qualifying real property loans could

                                       24
<PAGE>
not exceed the amount which,  when added to that year's addition to the bad debt
reserve  for losses on  nonqualifying  loans,  equals the amount by which 12% of
total deposits or withdrawable  accounts of depositors at year-end  exceeded the
sum of surplus,  undivided  profits and  reserves at the  beginning of the year.
Finally,  the  percentage  bad debt  deduction  under the  percentage of taxable
income method was reduced by the deduction for losses on nonqualifying loans.

     Under  SBJPA-96  legislation  enacted on August 20, 1996, the percentage of
taxable  income method was repealed for tax years  beginning  after December 31,
1995. In future years, the Bank must use the "Bank"  experience method available
to  institutions  with total assets of less than $500 million.  Under the recent
legislation,  the Bank  will also be  required  to  recapture  into  income  its
"applicable  excess reserve",  the portion of its bad debt reserves that exceeds
its base year  reserves.  The amount of bad debt  reserves  subject to recapture
over six years for the Bank is $1.2  million.  The recapture may be deferred for
the 1997 and 1998 tax years provided that the Bank meets the  "residential  loan
requirement"  for both tax years.  The Bank has met this requirement tax for the
1997 and 1998 tax year,  deferring  recapture of the "applicable excess reserve"
for the 1997 and 1998 tax year. In 1999,  the Bank  recognized and paid taxes on
$303,000 of the $1.2 million bad debt reserves subject to recapture. The portion
of the  Bank's tax bad debt  reserve  that is not  recaptured  under the new law
(i.e., the Bank's base year reserves of $4.6 million) is subject to recapture at
a  later  date  only  under  certain  limited  circumstances,   including  stock
repurchases  or  redemptions  by the thrift or the conversion of the thrift to a
type of  institution  (such as a credit union) that is not considered a bank for
tax purposes. Importantly, the new law eliminated any recapture as a result of a
savings association's conversion to a commercial bank charter or acquisition.

     First  Palmetto's  federal  income tax returns have not been audited  since
1984.

     State Income Taxation. Under South Carolina law, First Palmetto is required
to pay  income  tax at the rate of 6% of net  income,  as  defined  in the South
Carolina statute.  This tax is imposed on financial  associations in lieu of the
general state business  corporation  income tax. State income  taxation of First
Palmetto has not been material.

ACCOUNTING PRONOUNCEMENTS

     First Palmetto prepares its financial statements and related disclosures in
conformity with standards established by, among others, the financial Accounting
Standards  Board  (the  "FASB").  Because  the  information  needed  by users of
financial reports is dynamic, the FASB frequently has new rules and proposed new
rules for  companies  to apply in  reporting  their  activities.  The  following
discussion  addresses  such  changes as of June 30, 1999 that will affect  First
Palmetto's future reporting.

     In June, 1998, the FASB issued Statement of Financial  Accounting Standards
No. 133 ("SFAS No. 133"),  "Accounting  for Derivative  Instruments  and Hedging
Activities".  SFAS No. 133  establishes  accounting and reporting  standards for
derivative  instruments  and for  hedging  activities.  Statement  of  Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities  - Deferral of the  Effective  Date of FASB  Statement  No. 133 - and
amendment of FASB No. 133" delayed the effective  date of this statement for one
year.  This  Statement  is  effective  for all fiscal  quarters of fiscal  years
beginning after June 15, 2000.  First Palmetto plans to adopt SFAS 133 in fiscal
year 2001 without any impact on its consolidated  financial  statements as First
Palmetto does not have any derivative financial  instruments and is not involved
in any hedging activities.

                                       25
<PAGE>
     In  October,  1998,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization   of  Mortgage  Loans  Held  for  Sale  by  a  Mortgage   Banking
Enterprise," establishes accounting and reporting standards for certain mortgage
banking  activities.  It also conforms the subsequent  accounting for securities
retained after the  securitization  of other types of assets.  This statement is
effective for financial statements for fiscal years beginning after December 15,
1998.  First Palmetto adopted SFAS 134 in fiscal year 1999 without any impact on
its consolidated financial statements.

FORWARD-LOOKING STATEMENTS

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

                                       26
<PAGE>
Item 2.  Properties
-------------------

       The following table sets forth the locations of First Palmetto's offices,
as well as certain  additional  information  relating  to those  offices,  as of
September 30, 1999.
<TABLE>
<CAPTION>
                             Year Facility             Leased          Approximate
                                     Began                 or               Square           Net Book
Office Location                 Operations              Owned              Footage              Value
---------------                 ----------              -----              -------              -----
<S>                                <C>             <C>                      <C>         <C>
Main Office
   407 DeKalb Street               1963            Owned                    10,337      $     519,046
   Camden, S.C.  29020

Bishopville Branch Office
   104 East Church Street          1994            Leased                    1,300      $           -
   Bishopville, S.C.  29010                        (Expires 2000,
                                                   with five year
                                                   renewal option)

Camden Operations Center
   Broad and DeKalb Street         1934            Owned                     7,900      $     256,100
   Camden, S.C.  29020

Camden Operations Center
   1050 Broad Street               1997            Owned                     6,400      $     321,062
   Camden, S.C.  29020

Columbia Branch Offices
   3932 Forest Drive               1988            Owned                     4,950      $     525,658
   Columbia, S.C.  29206

   8921 Two Notch Road             1980            Leased                    2,200      $     103,675
   Columbia, S.C.  29223                           (Expires 2008,
                                                   with two ten year
                                                   renewal options)

Darlington Branch Office
   266 Cashua Street               1992            Owned                     1,600      $           -
   Darlington, S.C.  29532

Dusty Bend Branch Office
   2310 North Broad Street         1981            Leased                    1,600      $           -
   Camden, S.C.  29020                             (Expires 2002,
                                                   with ten year
                                                   renewal option)

Elgin Branch Office
   Highway #1                      1986            Leased                    1,200      $      36,339
   Elgin, S.C.  29045                              (Expires 2006,
                                                   with ten year
                                                   renewal option)

Irmo Branch Office
   7327 St. Andrews Road           1996            Owned                     2,200      $     498,154
   Irmo, S.C.  29063
</TABLE>

                                       27
<PAGE>
<TABLE>
<CAPTION>
                             Year Facility             Leased          Approximate
                                     Began                 or               Square           Net Book
Office Location                 Operations              Owned              Footage              Value
---------------                 ----------              -----              -------              -----
<S>                                <C>             <C>                      <C>         <C>
Kershaw Branch Office
   301 Hampton Street              1996            Owned                     2,850      $     367,469
   Kershaw, S.C.  29067

Lancaster Branch Office
   509 North Main Street           1973            Owned                     3,040      $     711,710
   Lancaster, S.C.  29721

Lexington Branch Office
   5321 Sunset Boulevard           1997            Owned                     2,950      $     601,283
   Lexington, S.C.  29072

Lugoff Branch Office
   Highway #1 South                1969            Owned                     3,900      $     860,941
   Lugoff, S.C.  29078

Manning Branch Office
   111 N. Brooks Street            1995            Owned                     4,000      $     200,667
   Manning, SC  29102

Myrtle Beach Branch Office
   10207 North Kings Highway       1997            Owned                     3,240      $     630,540
   Myrtle Beach, S.C.

   501 Highway 17 South            1998            Leased                               $     390,725
   North Myrtle Beach, S. C.                       (Expires 2002)

Pageland Branch Office
   201 N. Pearl Street             1994            Owned                     1,300      $     332,304
   Pageland, S.C.  29728

Pontiac Branch Office
   10540 Two Notch Road            1989            Leased                    1,300      $      72,229
   Elgin, S.C.  29045                              (Expires 2019,
                                                   with ten year
                                                   renewal option)
</TABLE>
Item 3.  Legal Proceedings
--------------------------

     Although  First  Palmetto,  from time to time, is involved in various legal
proceedings occurring in the ordinary course of business,  there are no material
legal  proceedings  to which First  Palmetto or its  subsidiary is a party or to
which any of their property is subject.

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

     No matters were  submitted to a vote of security  holders  during the final
quarter of fiscal 1999.

                                       28
<PAGE>
                                     PART II

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

     The  information  required by this item is incorporated by reference to the
section  captioned  "Corporate  Information -- Common Stock  Information" in the
Annual Report.

Item 6.  Selected Financial Data
--------------------------------

     The  information  required by this item is incorporated by reference to the
tables captioned "Selected  Consolidated  Financial and Other Data" in Part I of
this report.

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

     The  information  required by this item is incorporated by reference to the
section captioned  "Management's  Discussion and Analysis of Financial Condition
and Results of Operations" in the Annual Report.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk
--------------------------------------------------------------------

     The  information  required by this item is incorporated by reference to the
section captioned  "Management's  Discussion and Analysis of Financial Condition
and Results of Operations" in the Annual Report.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

     First  Palmetto's   Consolidated   Statements  of  Financial  Condition  at
September  30, 1999 and 1998,  Consolidated  Statements  of Income for the three
years ended September 30, 1999,  Consolidated Statements of Stockholders' Equity
for the three years ended  September 30, 1999,  and  Consolidated  Statements of
Cash Flows for the three years  ended  September  30,  1999,  together  with the
related notes and report of KPMG LLP, independent  certified public accountants,
are contained in the Annual Report and are incorporated herein by reference.

Item 9.   Changes  in  and  Disagreements  with  Accountants  on  Accounting and
Financial Disclosure
--------------------------------------------------------------------------------

     Not applicable.

                                       29
<PAGE>
                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     For information  concerning the Board of Directors of First  Palmetto,  the
information  contained  under the section  captioned  "Election of Directors" in
First  Palmetto's  definitive  proxy statement for First  Palmetto's 1999 Annual
Meeting of  Stockholders  (the  "Proxy  Statement")  is  incorporated  herein by
reference.

Item 11.  Executive Compensation
--------------------------------

     The  information   contained  under  the  section  captioned  "Election  of
Directors  -- Executive  Compensation"  in the Proxy  Statement is  incorporated
herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

       (a)    Security Ownership of Certain Beneficial Owners

              Information  required  by this  item  is  incorporated  herein  by
              reference to the section  captioned  "Principal  Holders of Common
              Stock" of the Proxy Statement.

       (b)    Security Ownership of Management

              Information  required  by this  item  is  incorporated  herein  by
              reference to the section captioned "Stock Ownership of Management"
              of the Proxy Statement.

       (c)    Changes in Control

              Management of First Palmetto knows of no  arrangements,  including
              any  pledge by any person of  securities  of First  Palmetto,  the
              operation of which may at a subsequent  date result in a change of
              control of First Palmetto.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the sections  captioned  "Executive  Compensation --  Compensation  Committee
Interlocks and Insider  Participation"  and "Certain  Transactions" in the Proxy
Statement.

                                       30
<PAGE>
                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

     (a) (1)  Financial  Statements - The  following  financial  statements  are
included in the Annual Report. The remaining information appearing in the Annual
Report is not  deemed to be filed as part of this  report,  except as  expressly
provided herein.

     1.   Certified Public Accountants' Report

     2.   Consolidated  Statements of Financial  Condition at September 30, 1999
          and 1998

     3.   Consolidated  Statements  of Income for the Years Ended  September 30,
          1999, 1998 and 1997

     4.   Consolidated  Statements of  Stockholders'  Equity for the Years Ended
          September 30, 1999 1998 and 1997

     5.   Consolidated  Statements  of Cash Flows for the Years Ended  September
          30, 1999, 1998 and 1997

     6.   Notes to Consolidated Financial Statements

     (a) (2) Financial  Statement  Schedules - All financial statement schedules
have been omitted as the required information is either inapplicable or included
in the Consolidated Financial Statements or related notes.

     (a) (3) Exhibits - The following  exhibits are either filed as part of this
report or are incorporated herein by reference:

     Exhibit No. 3.1   Restated Certificate of Incorporation  of  First Palmetto
                       Financial  Corporation  (incorporated  by  reference   to
                       Exhibit 3.1 to First Palmetto's registration statement on
                       Form S-4 filed with the SEC on June 14, 1990)

     Exhibit No. 3.2   Bylaws   of   First   Palmetto   Financial    Corporation
                       (incorporated  by  reference  to   Exhibit  3.2  to First
                       Palmetto's registration statement on Form S-4 filed  with
                       the SEC on June 14, 1990)

     Exhibit No. 10.1  Stock Option Plan of First Palmetto Financial Corporation
                       (incorporated  by  reference  to  Exhibit  10.8  to First
                       Palmetto's registration statement on Form S-4 filed  with
                       the SEC on June 14, 1990)

     Exhibit No. 10.2  Agreement and  Plan  of  Conversion  and   Reorganization
                       (incorporated   by  reference  to  Exhibit 2.1  to  First
                       Palmetto's registration statement on Form S-4 filed  with
                       the SEC on June 14, 1990)

     Exhibit No. 10.3  Amended and  Restated  Agreement and Plan of Merger dated
                       June 12, 1990  (incorporated  by reference to Exhibit 2.2
                       to First Palmetto's registration  statement on  Form  S-4
                       filed with the SEC on June 14, 1990)

     Exhibit No. 13    1999 Annual  Report to  Stockholders  (Except  for  those
                       portions   of  the  Annual  Report  which  are  expressly
                       incorporated  herein by reference,  the Annual Report  is
                       furnished  for  the  information  of  the  SEC and is not
                       deemed "filed" as part of this report)

                                       31
<PAGE>
     Exhibit No. 22    Subsidiaries

     Exhibit No. 27    Financial Data Schedules (SEC use only)

          (a)     Reports on Form 8-K - None.

          (b)     Exhibits - All exhibits to this report are attached or
                  incorporated by reference as stated above.

          (c)     Financial Statement Schedules - None.

                                       32
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  as of December 28,
1999.

                             FIRST PALMETTO FINANCIAL CORPORATION


                             By: /s/ Samuel R. Small
                                 -----------------------------------------------
                                 Samuel R. Small
                                 President, Chief Executive Officer and Director
                                 (Duly Authorized Representative)

     Pursuant to the  requirement 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 indicated as of December 28, 1999.
<TABLE>
<CAPTION>
<S>                                              <C>


By:/s/ H. Davis Green, Jr.                       By:/s/ Samuel R. Small
   ---------------------------------------------    -------------------------------------------------
   H. Davis Green, Jr.                              Samuel R. Small
   Chairman of the Board                            President, Chief Executive Officer and Director
                                                    (Principal Executive Officer)

By:/s/ Steve G. Williams, Jr.                   By: /s/ Pierce W. Cantey, Jr.
   ---------------------------------------------    -------------------------------------------------
   Steve G. Williams, Jr.                           Pierce W. Cantey, Jr.
   Senior Vice President, Treasurer,                Director
   Chief Financial Officer, and Director
   (Principal Financial and Accounting Officer)

By:/s/ William R. Clyburn                        By:/s/ Frank D. Goodale, Jr.
   ---------------------------------------------    -------------------------------------------------
   William R. Clyburn                               Frank D. Goodale, Jr.
   Director                                         Director

By:/s/ Donald H. Holland                         By:/s/ Charlie E. Nash
   ---------------------------------------------    -------------------------------------------------
   Donald H. Holland                                Charlie E. Nash
   Director                                         Director


By:/s/ Glenn G. Tucker
   ---------------------------------------------
   Glenn G. Tucker
   Director
</TABLE>

                                       33
<PAGE>
                                INDEX TO EXHIBITS

Exhibit
-------

    3.1   Restated  Certificate of Incorporation of First Palmetto Financial
          Corporation  (incorporated by  reference to  Exhibit 3.1 to  First
          Palmetto's registration statement  on  Form S-4 filed with the SEC
          on June 14, 1990)

    3.2   Bylaws of First Palmetto Financial  Corporation (incorporated  by
          reference  to  Exhibit  3.2  to  First  Palmetto's   registration
          statement on Form S-4 filed with the SEC on June 14, 1990)

    10.1  Stock  Option   Plan  of  First  Palmetto  Financial  Corporation
          (incorporated  by  reference to Exhibit 10.8 to First  Palmetto's
          registration statement on Form S-4 filed with the SEC on June 14,
          1990)

    10.2  Agreement and Plan of Conversion and Reorganization  (incorporated
          by  reference to Exhibit 2.1  to  First  Palmetto's   registration
          statement on Form S-4 filed with the SEC on June 14, 1990)

    10.3  Amended and Restated Agreement and  Plan  of Merger dated June 12,
          1990 (incorporated by reference to Exhibit 2.2 to First Palmetto's
          registration statement on Form S-4 filed  with the SEC on June 14,
          1990)

    13    1999 Annual Report to Stockholders  (Except  for those portions of
          the Annual Report  which  are  expressly  incorporated   herein by
          reference,  the Annual Report  is furnished for the information of
          the SEC and is not deemed "filed" as a part of this report.)

    22    Subsidiaries

    27    Financial Data Schedules (SEC use only)

                                       34