EXHIBIT 13

                                  Annual Report

<PAGE>

                                  ANNUAL REPORT

                               September 30, 1999











                      FIRST PALMETTO FINANCIAL CORPORATION
<PAGE>
                                TABLE of CONTENTS

FIRST PALMETTO FINANCIAL CORPORATION
------------------------------------

The Company                                                            1

Selected Consolidated Financial and Other Data                       1-2

Management's Discussion and Analysis of Financial
  Condition and Results of Operations                               3-14

Consolidated Financial Statements
    Consolidated Statements of Financial Condition                    15
    Consolidated Statements of Income                                 16
    Consolidated Statements of Stockholders' Equity                17-18
    Consolidated Statements of Cash Flows                          19-20
    Notes to Consolidated Financial Statements                     21-41

Independent Auditors' Report                                          42

Board of Directors and Executive Officers                             43

Corporate Information                                                 44

Common Stock Information                                              45

<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

THE COMPANY

     First  Palmetto  Financial  Corporation  ("First  Palmetto")  is a  holding
company  organized to provide  ownership for First Palmetto Savings Bank, F.S.B.
(the "Bank"), a wholly owned subsidiary. The Bank is a federally chartered stock
savings bank. The Bank's deposits are insured by the Federal  Deposit  Insurance
Corporation  ("FDIC"),  and the  Bank  is  regulated  by the  Office  of  Thrift
Supervision  ("OTS").  The Bank's business is conducted  through its home office
located in Camden,  South  Carolina and through  sixteen branch offices in other
South Carolina locations of Bishopville,  Camden, Columbia,  Darlington,  Elgin,
Irmo, Kershaw, Lancaster, Lexington, Lugoff, Manning, Myrtle Beach, North Myrtle
Beach, Pageland and Pontiac.

     The Bank is engaged in the business of attracting deposits from the general
public and investing in loans secured by first liens on single and  multi-family
residences,  condominiums,  commercial  properties,  and on other  improved real
estate. The Bank originates loans secured by first liens on land to be developed
into lots ready for  construction of single family homes.  The Bank also invests
in unsecured and secured home improvement loans,  automobile loans, equity loans
on residential real estate,  interest-bearing bank deposits, U.S. Government and
agency  obligations,   mortgage-backed   securities  and  other  investments  as
permitted by applicable laws and regulations.

     First Palmetto's results of operations depend primarily on its net interest
income, which is the difference between the interest income it receives from its
loan and investment  portfolios and its cost of funds. Other significant sources
of income are service charges on deposit accounts,  loan servicing fees and gain
on sale of loans.

SELECTED CONSOLIDATED FINANCIAL AND OTHER 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
  ("FHLB") 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>
                                       1
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

Consolidated Summary of Operations
<TABLE>
<CAPTION>
                                                                      Years Ended September 30,
                                         -------------------------------------------------------------------------
                                                 1999           1998           1997            1996           1995
                                         ------------   ------------   ------------   -------------   ------------
                                                                        (In thousands)

<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 before income taxes                      7,184          6,532          5,239           3,207          3,658
Income taxes                                    2,581          2,354          1,909           1,195          1,300
                                         ------------   ------------   ------------    ------------   ------------
Net income                               $      4,603   $      4,178   $      3,330    $      2,012   $      2,358
                                         ============   ============   ============    ============   ============
</TABLE>

Financial Ratios
<TABLE>
<CAPTION>
                                                                         Years Ended September 30,
                                               -------------------------------------------------------------------------
                                                       1999           1998           1997            1996           1995
                                               ------------   ------------   ------------    ------------   ------------
<S>                                            <C>            <C>            <C>             <C>            <C>
Return on average assets (net income
  divided by average total assets)                  1.03%           1.06%           .94%           .61%            .78%

Return on average equity (net income
  divided by average equity)                       17.06%          18.21%         16.24%         10.33%          13.17%

Average equity-to-assets ratio (average
  equity divided by average total assets)           6.02%           5.84%          5.80%          5.87%           5.90%

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 common share                     $     2.60     $      2.20    $      1.90     $     1.60     $      1.40
</TABLE>

                                       2
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

RESULTS of OPERATIONS  FOR THE FISCAL YEAR ENDED  SEPTEMBER  30, 1999,  COMPARED
with the FISCAL YEAR ENDED SEPTEMBER 30, 1998

     Net income for the fiscal year ended  September 30, 1999,  was $4.6 million
as compared to $4.2 million for the preceding  fiscal year. Net income increased
by $425,000 or 10.2%.

     Net interest  income for fiscal 1999 equaled  $15.2  million as compared to
$13.8  million for the fiscal year ended  September  30,  1998.  The increase of
10.2% amounted to $1.4 million. Other income for fiscal 1999 was $2.6 million as
compared to $3.9 million for fiscal 1998 while other expense for the  respective
fiscal years was $9.4 million and $8.9 million.  A more  detailed  discussion of
the comparative years follows.

     Net interest income  increased by $1.4 million or 10.2%. The primary reason
for  the   increase  in  net   interest   income  was  an  increase  in  average
interest-earning  assets for fiscal 1999 of  approximately  $53.6  million.  The
yield on interest-earning assets was relatively constant,  decreasing only .54%.
Average cost of funds decreased during the year from 5.04% during the year ended
September 30, 1998 to 4.61% during the year ended  September 30, 1999.  Interest
rate spread decreased to 3.17% as compared to 3.28% for the previous year.

     Total interest income for fiscal 1999 was $33.2 million, up $2.2 million or
7.0% from $31.0 million for fiscal 1998. The primary reason for the increase was
an  increase  in average  interest-earning  assets due to the  increase  in loan
demand  primarily in commercial real estate loans. The average yield on interest
earning  assets  decreased to 7.78% for fiscal 1999 versus 8.32% for fiscal year
1998.

     Total interest  expense for fiscal 1999 was $18.1 million compared to $17.3
million for fiscal 1998. The increase of $777,000 represented a 4.5% increase in
interest  expense.  The increase in interest  expense was  primarily  due to the
increase in average  interest-bearing  liabilities as a result of borrowing from
the Federal Home Loan Bank at  attractive  interest  rates and through  deposits
received by offering highly competitive rates in targeted markets.  The increase
in   interest-bearing   liabilities   was   necessary  to  fund  the  growth  in
interest-earning assets. Cost of funds decreased to 4.61% for the 1999 period as
compared to 5.04% for the 1998 period. Average interest-bearing liabilities were
$391.5  million at September 30, 1999 as compared to $342.6 million at September
30, 1998.

                                       3
<PAGE>
Average Balances, Interest and Average Yields

     The  following  table  sets forth  certain  information  relating  to First
Palmetto's  average balance sheets and reflects the average yields on assets and
average costs of  liabilities  for the periods  indicated and the average yields
earned and rates paid at September  30, 1999.  Such yields and costs are derived
by  dividing  income  or  expense  by the  average  daily  balance  of assets or
liabilities, respectively, for the periods presented.
<TABLE>
<CAPTION>
                                                                    Years Ended September 30,
                                       ------------------------------------------------------------------------------
                                                          1999                                 1998
                                       --------------------------------------   -------------------------------------
                                                                      Average                                 Average
                                            Average                    Yield/      Average                     Yield/
                                            Balance     Interest         Cost      Balance      Interest         Cost
                                            -------     --------         ----      -------      --------         ----
                                                                    (Dollars in thousands)

Interest-earning assets:
<S>                                     <C>          <C>                <C>     <C>          <C>               <C>
   Loans (1)                            $   285,721  $    24,892        8.71%   $  253,003   $    23,011       9.10%
   Interest-earning deposits                 18,904        1,209        6.40        22,820         1,414       6.20
   Investment securities (2)                 41,518        2,598        6.26        45,431         2,989       6.58
   Mortgage-backed securities                80,547        4,511        5.60        51,803         3,612       6.97
                                        -----------  -----------                ----------   -----------
     Total interest-earning assets          426,690       33,210        7.78       373,057        31,026       8.32
                                                     -----------                             -----------
Noninterest-earning assets                   21,399                                 19,435
                                        -----------                             ----------
     Total assets                       $   448,089                             $  392,492
                                        ===========                             ==========
</TABLE>

<TABLE>
<CAPTION>
TABLE (continued)
                                            Years Ended September 30,
                                       ---------------------------------
                                                    1997
                                       ---------------------------------
                                                                 Average      At September 30, 1999
                                       Average                    Yield/      ---------------------
                                       Balance     Interest         Cost       Balance        Rate
                                       -------     --------         ----       -------        ----
                                                           (Dollars in thousands)

Interest-earning assets:
<S>                                    <C>            <C>              <C>      <C>              <C>
   Loans (1)                           $   240,224    $  21,576        8.98%    $  317,012       8.35%
   Interest-earning deposits                15,411        1,000        6.49          8,848       5.14
   Investment securities (2)                46,632        3,163        6.78         60,174       5.94
   Mortgage-backed securities               32,249        2,163        6.71         59,877       6.16
                                       -----------    ---------                 ----------
     Total interest-earning assets         334,516       27,902        8.34        445,911       7.66
                                                      ---------
Noninterest-earning assets                  19,061                                  29,840
                                       -----------                              ----------
     Total assets                      $   353,577                              $  475,751
                                       ===========                              ==========

(1) Includes non-accrual loans.
(2) Includes available-for-sale securities.
</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                   Years Ended September 30,
                                        ------------------------------------------------------------------------------
                                                          1999                                    1998
                                        --------------------------------------  --------------------------------------
                                                                      Average                                 Average
                                            Average                    Yield/      Average                     Yield/
                                            Balance     Interest         Cost      Balance      Interest         Cost
                                            -------     --------         ----      -------      --------         ----
                                                                     (Dollars in thousands)
Interest-bearing liabilities:
<S>                                     <C>          <C>                <C>     <C>          <C>               <C>
   Interest-bearing checking (1)        $    61,069  $     1,285        2.10%   $   57,075   $     1,502       2.63%
   Savings deposits                          22,639          460        2.03        21,994           524       2.38
   Time deposits                            243,318       12,778        5.25       229,975        13,143       5.71
   FHLB borrowings                           64,501        3,529        5.47        33,572         2,106       6.27
                                        -----------  -----------                ----------   -----------
     Total interest-bearing liabilities     391,527       18,052        4.61       342,616        17,275       5.04
                                                     -----------                             -----------
Noninterest-bearing liabilities:
   Noninterest checking                      26,486                                 23,900
   Other                                      3,090                                  3,036
                                        -----------                             ----------
     Total liabilities                      421,103                                369,552
Stockholders' equity                         26,986                                 22,940
                                        -----------                             ----------
     Total liabilities and
       stockholders' equity             $   448,089                             $  392,492
                                        ===========                             ==========
Net interest income                                  $    15,158                             $    13,751
                                                     ===========                             ===========
Interest rate spread                                                    3.17%                                  3.28%
                                                                       =====                                  =====
Net yield on average interest-earning assets                            3.55%                                  3.69%
                                                                       =====                                  =====
Ratio of average interest-earning                                       1.09%                                  1.09%
  assets to average interest-bearing liabilities                       =====                                  =====
</TABLE>
TABLE (continued)
<TABLE>
<CAPTION>
                                             Years Ended September 30,
                                        ----------------------------------------
                                                          1997
                                        ----------------------------------------
                                                                        Average    At September 30, 1999
                                              Average                    Yield/    ---------------------
                                              Balance     Interest         Cost       Balance       Rate
                                              -------     --------         ----       -------       ----
                                                     (Dollars in thousands)
Interest-bearing liabilities:
<S>                                       <C>             <C>             <C>      <C>              <C>
   Interest-bearing checking (1)          $    56,923     $  1,487        2.61%    $   65,416       2.06%
   Savings deposits                            22,151          562        2.54         22,805       2.02
   Time deposits                              203,052       11,369        5.60        246,076       5.06
   FHLB borrowings                             28,906        1,607        5.56         83,000       5.39
                                          -----------     --------                  ---------
     Total interest-bearing liabilities       311,032       15,025        4.83        417,297       4.48
                                                          --------
Noninterest-bearing liabilities:
   Noninterest checking                        19,886                                  27,467
   Other                                        2,149                                   2,756
                                          -----------                              ----------
     Total liabilities                        333,067                                 447,520
Stockholders' equity                           20,510                                  28,231
                                          -----------                              ----------
     Total liabilities and
       stockholders' equity               $   353,577                              $  475,751
                                          ===========                              ==========
Net interest income                                       $  12,877
                                                          =========
Interest rate spread                                                      3.51%                     3.18%
                                                                         =====                     =====
Net yield on average interest-earning assets                              3.85%
                                                                         =====
Ratio of average interest-earning                                         1.08%
  assets to average interest-bearing liabilities                         =====
</TABLE>
(1)  Includes NOW's and MMDA
                                       5
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

Rate/Volume Analysis
--------------------

     The following  table sets forth certain  information  regarding  changes in
First Palmetto's interest income and interest expense for the periods indicated.
For each  category of  interest-earning  asset and  interest-bearing  liability,
information is provided on changes attributable to (1) changes in volume (change
in volume  multiplied by the prior year's rate); (2) changes in rates (change in
rate  multiplied  by the prior year's  volume);  and (3) changes in  rate-volume
(change in rate  multiplied  by the change in volume).  The  combined  effect of
changes in rate-volume has been allocated  proportionately  to changes in volume
and rate.
<TABLE>
<CAPTION>
                                                              Years Ended September 30,
                                   -----------------------------------------------------------------------------
                                                1999 vs. 1998                          1998 vs. 1997
                                   ---------------------------------------  ------------------------------------
                                             Increase (Decrease)                    Increase (Decrease)
                                                   Due to                                 Due to
                                   ---------------------------------------  ------------------------------------
                                        Volume         Rate         Total       Volume         Rate        Total
                                        ------         ----         -----       ------         ----        -----
                                                                     (In thousands)

Interest income:
<S>                                <C>          <C>           <C>          <C>          <C>          <C>
  Loans                            $     2,914  $    (1,033)  $     1,881  $     1,155  $       280  $     1,435
  Mortgage-backed securities             1,807         (908)          899        1,337          112        1,449
  Investment securities                   (250)        (141)         (391)         (80)         (94)        (174)
  Other                                   (248)          43          (205)         470          (56)         414
                                   -----------  -----------   -----------  -----------  -----------  -----------
Total interest-earning assets            4,223       (2,039)        2,184        2,882          242        3,124
                                   -----------  -----------   -----------  -----------  -----------  -----------
Interest expense:

  Deposits                                 693       (1,339)         (646)       1,300          451        1,751
  FHLB advances                          1,816         (393)        1,423          274          225          499
                                   -----------  -----------   -----------  -----------  -----------  -----------
Total interest-bearing liabilities       2,509       (1,732)          777        1,574          676        2,250
                                   -----------  -----------   -----------  -----------  -----------  -----------
Net interest income                $     1,714  $      (307)  $     1,407  $     1,308  $      (434) $       874
                                   ===========  ===========   ===========  ===========  ===========  ===========
</TABLE>

     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  increased as a result of 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  nonperforming  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 for the year ended  September 30, 1998.  The balance in
the allowance for loan losses at September 30, 1999 was $5.4 million compared to
$4.6 million at September 30, 1998.  Nonperforming  assets at September 30, 1999
totaled  $924,000,  a $212,000  reduction from the $1.1 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. Management continually reviews the
adequacy of the allowance for loan losses,  considering  such factors as reviews
of delinquent  loans and other  problem  loans,  composition  of the Bank's loan
portfolio,  historical charge-offs,  general economic conditions that may affect
borrowers' ability to repay and the value of collateral.  The allowance for loan
losses is subject to adjustment by regulators.

     Other  income for fiscal 1999 was $2.6  million as compared to $3.9 million
for fiscal 1998. The other income decrease was primarily attributable to gain on
sale of investments in the amount of $632,000 and a gain on the sale of a branch
office in the amount of $784,000 in the 1998 period.

                                       6
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

     Other  expenses for fiscal 1999 were $9.4 million  compared to $8.9 million
for fiscal 1998, an increase of $571,000 or 6.4%.  Tabular  comparisons of broad
expense categories for fiscal 1999 compared to fiscal 1998 are as follows:

                                                            Years Ended
                                                            September 30,
                                                  ---------------------------
                                                          1999           1998
                                                  ------------   ------------
                                                           (In thousands)

  Compensation and related benefits               $      4,456   $      4,153
  Occupancy and data processing fees                     1,919          1,939
  Federal deposit and other insurance premiums             339            315
  Amortization of intangible assets                        318            349
  Telephone, postage, supplies and other                 2,400          2,105
                                                  ------------   ------------
      Total other expense                         $      9,432   $      8,861
                                                  ============   ============

     The effective  tax rate was 35.9% for the year ended  September 30, 1999 as
compared  to 36.0% for the year ended  September  30,  1998.  See Note 11 to the
Notes to Consolidated Financial Statements.

RESULTS of OPERATIONS  FOR THE FISCAL YEAR ENDED  SEPTEMBER  30, 1998,  COMPARED
with the FISCAL YEAR ENDED SEPTEMBER 30, 1997

     Net income for the fiscal year ended  September 30, 1998,  was $4.2 million
as compared to $3.3 million for the preceding  fiscal year. Net income increased
by $848,000 or 25.5%.

     Net interest  income for fiscal 1998 equaled  $13.8  million as compared to
$12.9 million for the fiscal year ended September 30, 1997. The increase of 6.8%
amounted to $874,000.  Other income for fiscal 1998 was $3.9 million as compared
to $2.6 million for fiscal 1997 while other  expense for the  respective  fiscal
years were $8.9 million and $8.8  million.  A more  detailed  discussion  of the
comparative years follows.

     Net interest  income  increased by $874,000 or 6.8%. The primary reason for
the increase in net interest income was an increase in average  interest-earning
assets  for  fiscal  1998  of   approximately   $38.5  million.   The  yield  on
interest-earning  assets was relatively constant,  decreasing only .02%. Average
cost of funds  increased  during  the year  from  4.83%  during  the year  ended
September 30, 1997 to 5.04% during the year ended  September 30, 1998.  Interest
rate spread decreased to 3.28% as compared to 3.51% for the previous year.

     Total interest income for fiscal 1998 was $31.0 million, up $3.1 million or
11.2% from $27.9  million for fiscal 1997.  The primary  reason for the increase
was an increase in average  interest-earning  assets due to the  acquisition  of
mortgage-backed   securities  and  an  increase  in  loan  demand  primarily  in
commercial  real estate  loans.  The average  yield on interest  earning  assets
decreased slightly to 8.32% for fiscal 1998 versus 8.34% for fiscal year 1997.

     Total interest  expense for fiscal 1998 was $17.3 million compared to $15.0
million for fiscal  1997.  The  increase  of $2.2  million  represented  a 15.0%
increase in interest expense. The increase in interest expense was primarily due
to the increase in average interest-bearing  liabilities as a result of deposits
received by offering highly competitive rates in targeted markets. Cost of funds
increased to 5.04% for the 1998 period as compared to 4.83% for the 1997 period.
Average  interest-bearing  liabilities were $342.6 million at September 30, 1998
as compared to $311.0 million at September 30, 1997.

                                       7
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

     The provision for loan losses for fiscal 1998 was $2.3 million  compared to
$1.4 million for the preceding  year.  The  increased  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.  Also during the year,  management has emphasized increasing
loans  with  large  balances  as  evidenced  by six loans  over $1.0  million at
September  30, 1998,  compared to one loan over $1.0  million at  September  30,
1997. Net  charge-offs to the allowance for loan losses were $622,000 during the
fiscal year ended September 30, 1998, as compared to $783,000 for the year ended
September  30, 1997.  The balance in the  allowance for loan losses at September
30, 1998 was $4.6 million  compared to $3.0 million at September  30, 1997.  The
allowance  for loan  losses  as a  percentage  of loans  was  1.73% and 1.18% at
September 30, 1998 and 1997,  respectively.  Management  continually reviews the
adequacy of the allowance for loan losses,  considering  such factors as reviews
of delinquent  loans and other  problem  loans,  composition  of the Bank's loan
portfolio,  historical charge-offs,  general economic conditions that may affect
borrowers' ability to repay and the value of collateral.

     Other  income for fiscal 1998 was $3.9  million as compared to $2.6 million
for fiscal 1997. The other income increase was primarily attributable to gain on
sale of investments in the amount of $632,000 and a gain in the sale of a branch
office in the amount of $784,000.

     Other  expenses for fiscal 1998 were $8.9 million  compared to $8.8 million
for fiscal 1997,  a decrease of $15,000 or .17%.  Tabular  comparisons  of broad
expense categories for fiscal year 1998 compared to fiscal 1997 are as follows:

                                                              Years Ended
                                                              September 30,
                                                    ---------------------------
                                                            1998           1997
                                                    ------------   ------------
                                                             (In thousands)

  Compensation and related benefits                 $      4,153   $      3,979
  Occupancy and data processing fees                       1,939          2,130
  Federal deposit and other insurance premiums               315            367
  Amortization of intangible assets                          349            579
  Telephone, postage, supplies and other                   2,105          1,791
                                                    ------------   ------------
      Total other expense                           $      8,861   $      8,846
                                                    ============   ============

     The effective  tax rate was 36.0% for the year ended  September 30, 1998 as
compared  to 36.4% for the year ended  September  30,  1997.  See Note 11 to the
Notes to Consolidated Financial Statements.

                                       8
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

FINANCIAL CONDITION

     Total assets at  September  30,  1999,  were $475.8  million as compared to
$433.7 million at September 30, 1998, an increase of $42.0 million or 9.7%.

     Loans  receivable  at  September  30, 1999,  increased by $53.0  million to
$317.0  million as  compared to $264.0  million at the  previous  year-end.  The
increase was  primarily as a result of the  employment  of several loan officers
whose primary  function is the production of consumer and  commercial  loans and
the  additional  loan  production  as a result  of  branching  efforts  into new
markets.

     Mortgage-backed  securities  decreased  $36.0 million from $95.9 million at
September  30,  1998 to $59.9  million  at  September  30,  1999 and  investment
securities  increased from $38.0 million to $60.2 million at September 30, 1999.
The  significant  loan growth  contributed  to the reduction in total capital to
risk-weighted  assets from 11.10% in fiscal 1998 to 10.46% in fiscal 1999. Since
the bank's investments in U.S. Government obligations have no risk weighting and
are tax free for state  purposes,  a substantial  portion of the repayments from
the  mortgage-backed  securities  portfolio was  reinvested  in U.S.  Government
obligations to enhance its risk-weighted returns.

     Deposits  increased  $17.9 million to $361.8 million at September 30, 1999,
compared to $343.9 million at the previous year end as First  Palmetto  targeted
several markets for growth by offering highly competitive rates.

     FHLB  advances  increased to $83.0 million at September 30, 1999 from $60.7
million at September 30, 1998 as First Palmetto  sought to reduce  interest rate
sensitivity by borrowing for longer terms at historically  low rates and to fund
the growth in interest-earning assets.

     Stockholders'  equity  increased  to $28.2  million at  September  30, 1999
compared to $25.2  million at September  30, 1998.  Increases  were $4.6 million
from net income and sale of common stock of $300,000. Decreases were the payment
of dividends of approximately $1.8 million.

CAPITAL RESOURCES

     Regulatory Capital Requirements. Under OTS regulations savings associations
must maintain  "Tier 1" capital  equal to at least 4% of adjusted  total assets,
"Tier 1"  capital  equal to at least 4% of  "risk-weighted"  assets and a "total
capital"  equal to at least 8% of  "risk-weighted"  assets.  For purposes of the
regulations,  "Tier 1"  capital  is  defined  as  common  stockholders'  equity,
noncumulative  perpetual preferred stock and related surplus,  minority interest
in  the   equity   accounts   of  fully   consolidated   subsidiaries,   certain
nonwithdrawable accounts and pledged deposits and qualifying intangibles.  "Tier
1" capital is  generally  reduced  by the  amount of the  savings  association's
intangible  assets  for  which  no  market  exists.  Limited  exceptions  to the
deduction of intangible  assets are provided for mortgage  servicing  rights and
certain qualifying intangibles. "Tier 1" capital are to be further reduced by an
amount  equal  to  a  savings  association's  debt  and  equity  investments  in
subsidiaries engaged in activities not permissible to national banks.

     At September  30, 1999,  the Bank's "Tier 1" capital  ratio to total assets
was  5.68%,  "Tier 1" to  risk-weighted  assets  ratio  was  9.20% and its total
capital to  risk-weighted  assets ratio was 10.46%.  At that date,  the Bank had
$313,000 of qualifying intangibles and $890,000 of investments in and extensions
of credit to  subsidiaries  engaged in activities not  permissible  for national
banks.

     The Bank may not declare or pay a cash dividend on, or purchase, any of its
common  stock,  if the effect  thereof would cause the capital of the Bank to be
reduced below the minimum regulatory capital requirements.

                                       9
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

ASSET and LIABILITY MANAGEMENT, INTEREST RATE SENSITIVITY and MARKET RISK

     Market risk is the risk of loss from adverse  changes in market  prices and
rates.  The Bank's  market  risk  arises  principally  from  interest  rate risk
inherent in its lending,  deposit and borrowing activities.  Management actively
monitors  and manages its  interest  rate risk  exposure.  Other types of market
risks,  such as foreign currency exchange rate risk and commodity price risk, do
not arise in the normal course of the Bank's business activities.

     First Palmetto manages the different maturity and repricing characteristics
of its  interest-earning  asset and  interest-bearing  liability  portfolios  to
achieve a desired  interest rate  sensitivity  position and thereby limiting its
exposure  to  interest  rate  risk.  The  primary  objective  of  interest  rate
sensitivity  management is to maintain net interest income growth while reducing
exposure to the risks inherent in interest rate movements.

     Profitability  is affected by  fluctuations in interest rates. A sudden and
substantial  increase in interest rates may adversely impact the Bank's earnings
to  the  extent  that  the  interest  rates  on   interest-earning   assets  and
interest-bearing liabilities do not change at the same speed, to the same extent
or on the same basis.  As part of its effort to manage  interest rate risk,  the
Bank monitors its net portfolio value ("NPV"), a methodology  adopted by the OTS
to assist the Bank in assessing interest rate risk.

     Generally,  NPV is the discounted  present value of the difference  between
incoming  cash flows on  interest-earning  assets and other  assets and outgoing
cash  flows  on   interest-bearing   liabilities  and  other  liabilities.   The
application of the  methodology  attempts to quantify  interest rate risk as the
change in the NPV which would result from the theoretical 200 basis point ("bp")
(1 basis  point  equals  .01%)  change in market  rates.  Both a 200 basis point
increase  in market  interest  rates and a 200 basis  point  decrease  in market
interest rates are considered.

     The  following  table  presents  the Bank's NPV at September  30, 1999,  as
calculated by the OTS, based on information provided to the OTS by the Bank.
<TABLE>
<CAPTION>
       Change                             Net Portfolio Value                   NPV as % of PV Assets
       In rates             $ Amount          $ Change         % Change        NPV Ratio         Change
       --------             --------          --------         --------        ---------         ------
         <S>            <C>                   <C>                 <C>           <C>            <C>
         +300 bp        $     43,353          $  -1,488            -3%          9.27%            +3 bp
         +200 bp              44,591               -250            -1%          9.41%           +17 bp
         +100 bp              45,155                314            +1%          9.41%           +17 bp
            0 bp              44,841                                            9.24%
         -100 bp              43,511             -1,330            -3%          8.88%           -36 bp
         -200 bp              41,573             -3,268            -7%          8.40%           -84 bp
         -300 bp              39,407             -5,434           -12%          7.89%          -135 bp
</TABLE>
Risk measures:  200 bp rate shock                              9/30/99
                                                           -----------

Pre-shock NPV ratio:  NPV as % of PV of assets                   9.24%
Post-shock NPV ratio                                             8.40%
Sensitivity Measure:  Decline in NPV ratio                       84 bp

                                       10
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

     The  computation  of  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions,  including relative levels of market
interest  rates,  loan  prepayments  and deposit decay rates,  and should not be
relied upon as indicative of actual results. The computations do not contemplate
any actions the Bank could undertake in response to changes in interest rates.

     Another important measure of interest rate risk is the  Asset/Liability Gap
ratio.  The  difference  between  the  amount  of  interest-earning  assets  and
interest-bearing  liabilities  to be repriced  during a specified time period is
referred to as the asset/liability gap position. Key assumptions for determining
the  period  for   repricing   are  as   follows:   (1)  fixed  rate  loans  and
mortgage-backed  securities  are  generally  amortized  adjusted by market based
prepayment rates; (2) adjustable rate loans and  mortgage-backed  securities are
repriced on their respective  adjustment dates; (3) loans with call features are
amortized  without any prepayment  assumption with the balance  repricing at the
call date;  (4) investment  securities are repriced at maturity;  (5) NOW, money
market and  savings are  repriced  using  market  based  decay  rates;  (6) time
deposits  are repriced at maturity;  (7) fixed rate  borrowings  are repriced at
maturity adjusted for contractual principal repayments;  and (8) adjustable rate
borrowings are repriced on their  adjustment  dates.  Management  believes these
assumptions are reasonable based upon First Palmetto's historical experience.

     First Palmetto's  liability sensitive  cumulative gap position for one year
at September 30, 1999,  was (24.06%).  A liability  sensitive gap indicates that
over the course of a year an upward movement in rates will negatively impact net
interest income (and  consequently  operating  results) since  liabilities  will
reprice faster than assets. Conversely, a liability sensitive gap in a declining
interest  rate  environment  will  positively  impact net  interest  income (and
consequently  operating  results)  since  liabilities  will reprice  faster than
assets.

     The following table presents First Palmetto's asset/liability gap ratios as
of September 30, 1999.
<TABLE>
<CAPTION>
                                                   Six months
At September 30, 1999               Six months       to one        One to     Three to    Over five
                                       or less         year   three years   five years        years        Total
                                       -------         ----   -----------   ----------        -----        -----
Interest-earning assets                                         (Dollars in thousands)
<S>                                <C>          <C>           <C>          <C>          <C>          <C>
  Loans and mortgage-backed
    securities (1)                 $   100,442  $    27,258   $   156,465  $    72,340  $    25,830  $   382,335
  Investment securities                  7,004        6,004        26,385       19,781        1,000       60,174
  Other interest-earning assets (2)      8,848            -             -            -            -        8,848
                                   -----------  -----------   -----------  -----------  -----------  -----------
      Total interest-earning
        assets                         116,294       33,262       182,850       92,121       26,830      451,357
                                   -----------  -----------   -----------  -----------  -----------  -----------
Interest-bearing liabilities
  Interest-bearing deposits             96,955      152,188        58,452        9,795       16,907      334,297
  Borrowings                             9,000            -         2,000        2,000       70,000       83,000
                                   -----------  -----------   -----------  -----------  -----------  -----------
      Total interest-bearing
        liabilities                    105,955      152,188        60,452       11,795       86,907      417,297
                                   -----------  -----------   -----------  -----------  -----------  -----------
Sensitivity gap
  Period                           $    10,339  $  (118,926)  $   122,398  $    80,326  $   (60,077) $    34,060
                                   ===========  ===========   ===========  ===========  ===========  ===========
  Cumulative                       $    10,339  $  (108,587)  $    13,811  $    94,137  $    34,060  $    34,060
                                   ===========  ===========   ===========  ===========  ===========  ===========
Gap as a percentage of
  interest-earning assets
  Period                                 2.29%     (26.35)%        27.12%       17.80%     (13.31)%        7.55%
                                   ===========  ===========   ===========  ===========  ===========  ===========
  Cumulative                             2.29%     (24.06)%         3.06%       20.86%        7.55%        7.55%
                                   ===========  ===========   ===========  ===========  ===========  ===========
</TABLE>
(1)  Excludes the allowance for loan losses.
(2)  Includes  interest-earning  deposits and  certificates  of deposit in other
     banks.

                                       11
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

     To reduce First Palmetto's  exposure to interest rate risk,  management has
implemented the following strategies:

       (1)    Originate for its own portfolio only adjustable rate mortgages and
              longer-term amortizing loans with call provisions of five years or
              less (unless specific exceptions are made).

       (2)    Originate fixed rate mortgages  according to the specifications of
              the Federal Home Loan Mortgage  Corporation,  and sell them in the
              secondary mortgage market.

       (3)    Increase commercial real estate and consumer lending activities in
              order to increase  outstanding  loans with shorter  maturities  or
              adjustable  rates so as to increase the interest rate  sensitivity
              of First Palmetto's loan portfolio.

       (4)    Invest in securities with maturities of five years or less.

       (5)    Extend the lives of liabilities  through the use  of  Federal Home
              Loan Bank advances or other extended maturity obligations.

       (6)    Offer premium rates on certificates  of  deposit  with  maturities
              greater than twelve months.

     Senior management oversees implementation of the strategies noted above. It
reviews  national and local market economic data and interest rate  projections.
Senior  management  also regularly  reviews the  relationship  between  interest
sensitive  assets and  interest  sensitive  liabilities  and reports to the full
Board of  Directors on the  progress of First  Palmetto's  attempt to reduce the
mismatch existing between them.

IMPACT OF INFLATION

     First Palmetto does not believe that inflation has had a material effect on
its operations during the last three fiscal years. Increases in personnel costs,
supplies, occupancy, data processing fees or other operating expenses should the
current rates of inflation  increase  materially  could affect First  Palmetto's
operations,  however,  in the past First  Palmetto  has  generally  been able to
increase  net  yields  and other  items of income  sufficient  to meet  negative
impacts of increasing costs.

IMPACT OF CHANGING PRICES

     First Palmetto  provides  financial and related services and its assets and
liabilities  are monetary in nature,  therefore  First  Palmetto is not directly
subject to impact  from  changes  in prices of  production  materials.  Interest
rates,  which  have  a  more  significant   impact  on  financial   institutions
performance,  do not  necessarily  move in the  same  direction  or in the  same
magnitude  as the prices of goods and  services,  which  would be more  directly
affected by inflation.

                                       12
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

LIQUIDITY

     Liquidity  management  involves meeting the cash flow requirements of First
Palmetto both at the holding  company level as well as at the subsidiary  level.
The holding company requires cash for various  operating needs including general
operating  expenses  and  payment  of  dividends  to  shareholders.  Sources  of
liquidity for the holding company include dividends from the Bank to the holding
company and existing cash reserves and earnings.

     First  Palmetto's  primary  sources  of  liquidity  are  deposits  and loan
principal and interest repayments. Additionally, First Palmetto has historically
generated  funds  through the sale in the  secondary  market of mortgage  loans.
During the current year funds were made available primarily from the increase of
deposits of $17.9  million,  FHLB advances of $54 million,  the sale of loans on
the  secondary  market in the amount of $43.4  million,  from the  maturities of
investment  securities  in the  amount  of $25.9  million,  and  from  principal
collections of  mortgage-backed  securities of $44.4  million.  These funds were
used to purchase  mortgage-backed  securities of $8.7 million, fund net loans of
$97.8 million,  repay FHLB advances of $31.7 million and to purchase  investment
securities in the amount of $48.1 million.

     These and other factors  resulted in cash and cash  equivalents  increasing
$874,000 during the year ended September 30, 1999.

     The Bank, as a member of the Federal Home Loan Bank System,  is required by
regulation  to  maintain a daily  average  balance of liquid  assets  equal to a
certain  percentage  of net  withdrawable  savings and current  borrowings.  The
Bank's  liquidity  ratio  at  September  30,  1999 is in  excess  of  regulatory
requirements of 4% and will remain so in the upcoming fiscal year.

YEAR 2000 CONSIDERATIONS

     Many existing  computer  programs use only two digits to identify a year in
the date field.  These programs were designed and developed without  considering
the impact of the upcoming change in the century. If uncorrected,  many computer
programs could fail or create erroneous results by or at the Year 2000. The Year
2000 issue affects virtually all companies and organizations.

     The business risks associated with Year 2000 are considerable.  Some of the
risks include errors in accruing interest for loans and deposits,  communication
devices may become  inoperable,  and basic  utilities  may cease to be provided.
Recognizing the risks of computer errors as the result of Year 2000, the Federal
Financial  Institutions  Examination  Council  ("FFIEC")  issued an  interagency
statement on May 5, 1997,  providing an outline for  institutions to effectively
manage the Year 2000  challenges.  The guidance  identified  the following  five
stages for Year 2000 management: awareness, assessment,  renovation, testing and
implementation  stages.  First  Palmetto has  completed all five stages for Year
2000  management.  A significant  portion of First  Palmetto's  mission critical
products and services is provided by a third party service  bureau.  The service
bureau completed the renovation stage in November,  1998 and the Bank tested the
renovated  software.  The testing phase was concluded in January,  1999 at which
time the  implementation  phase commenced.  Implementation  was completed in all
material respects by the end of May, 1999. In March, 1999 the Bank finalized its
business resumption plan.

     In fiscal 1999,  First  Palmetto paid the service  bureau a $40,000 fee for
its Year 2000 efforts and $15,000 for various hardware and software upgrades. As
of September  30, 1999,  First  Palmetto had incurred  approximately  $79,000 in
direct  compliance costs  associated with the Year 2000 problem.  First Palmetto
estimates  that $82,000 will be the total direct  compliance  costs  through the
Year 2000.  The Bank has not  estimated  the salaries  paid to  employees  whose
responsibilities include ensuring First Palmetto is Year 2000 ready.

                                       13
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

     Although First Palmetto  believes it will be fully  compliant,  the risk of
system failure cannot be eliminated.  Also,  First Palmetto cannot guarantee the
performance of third parties as to which it has mutual relationships.

ACCOUNTING PRONOUNCEMENTS

     The Company  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 September 30, 1999 that will affect the
Company'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.  The Company  plans to adopt SFAS 133 in fiscal
year 2001 without any impact on its  consolidated  financial  statements  as the
Company does not have any derivative  financial  instruments and is not involved
in any hedging activities.

     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,"  which 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. The Company  adopted SFAS 134 in fiscal year 1999 without any
impact on its consolidated financial statements.

FORWARD-LOOKING STATEMENTS

     The  forgoing  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 the Company 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 the Company's
customers actions of government regulators,  the level of market interest rates,
and general economic conditions.

                                       14
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                 Consolidated Statements of Financial Condition
                           September 30, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS                                                                                 1999           1998
                                                                               ------------   ------------
                                                                                         (In thousands)

<S>                                                                            <C>            <C>
Cash and due from banks                                                        $     11,001   $      6,983
Interest-bearing deposits in other banks                                              8,748         11,892
Certificates of deposit in other banks                                                  100            100
Investment securities held to maturity (market value of $59,449 and
  $38,521 at September 30, 1999 and 1998, respectively)                              60,174         37,969
Mortgage-backed securities held to maturity
  (market value of $59,453 and $97,654 at
  September 30, 1999 and 1998, respectively)                                         59,877         95,862
Loans, net of allowance for loan losses of
  $5,446 in 1999 and $4,649 in 1998                                                 317,012        263,989
Accrued interest receivable                                                           3,150          3,126
Real estate acquired in settlement of loans                                              88            500
Stock in the Federal Home Loan Bank (FHLB)                                            4,150          3,333
Premises and equipment                                                                7,500          6,664
Prepaid expenses and other assets                                                     3,951          3,327
                                                                               ------------   ------------
           Total assets                                                        $    475,751   $    433,745
                                                                               ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                       $    361,764   $    343,947
FHLB advances                                                                        83,000         60,667
Accrued expenses and other liabilities                                                2,756          3,962
                                                                               ------------   ------------
           Total liabilities                                                        447,520        408,576
                                                                               ------------   ------------
Stockholders' equity
   Preferred stock, $.01 par value, 500,000 shares
     authorized, none issued and outstanding                                              -              -
   Common stock, $.01 par value, 1,500,000 shares
     authorized, 752,014 and 748,014 shares issued
     in 1999 and 1998, respectively                                                       8              7
   Additional paid-in capital                                                         6,979          6,680
   Retained earnings, substantially restricted                                       21,869         19,107
   Treasury stock, at cost (40,004 shares in 1999 and 1998)                            (625)          (625)
                                                                               ------------   ------------
           Total stockholders' equity                                                28,231         25,169
                                                                               ------------   ------------
Commitments
           Total liabilities and stockholders' equity                          $    475,751   $    433,745
                                                                               ============   ============
</TABLE>
           See accompanying notes to consolidated financial statements

                                       15
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                        Consolidated Statements of Income
                 Years ended September 30, 1999, 1998, and 1997
<TABLE>
<CAPTION>
                                                                                 1999              1998             1997
                                                                        -------------    --------------    -------------
Interest income:                                                    (Dollars in thousands, except net income per share data)
<S>                                                                     <C>              <C>               <C>
   Loans                                                                $      24,892    $       23,011    $      21,576
   Mortgage-backed securities                                                   4,511             3,612            2,163
   Investment securities                                                        2,598             2,989            3,163
   Other                                                                        1,209             1,414            1,000
                                                                        -------------    --------------    -------------
       Total interest income                                                   33,210            31,026           27,902
                                                                        -------------    --------------    -------------
Interest expense:
   Deposits                                                                    14,523           15,169            13,418
   FHLB advances                                                                3,529             2,106            1,607
                                                                        -------------    --------------    -------------
       Total interest expense                                                  18,052            17,275           15,025
                                                                        -------------    --------------    -------------
       Net interest income                                                     15,158            13,751           12,877
Provision for loan losses                                                       1,144             2,262            1,428
                                                                        -------------    --------------    -------------
       Net interest income after provision for loan losses                     14,014            11,489           11,449
                                                                        -------------    --------------    -------------
Other income:
   Service charges                                                              1,366             1,293            1,205
   Loan servicing                                                                 296               451              524
   Gain on sales of loans                                                         664               515              173
   Gain on sale of investments                                                      -               632              254
   Gain on sale of branch                                                           -               784                -
   Miscellaneous                                                                  276               229              480
                                                                        -------------    --------------    -------------
       Total other income                                                       2,602             3,904            2,636
                                                                        -------------    --------------    -------------
Other expense:
   Compensation and related benefits                                            4,456             4,153            3,979
   Net occupancy                                                                1,057             1,133            1,233
   Data processing fees                                                           862               806              897
   Telephone, postage, and supplies                                               745               612              709
   Federal deposit and other insurance premiums                                   339               315              367
   Amortization of intangible assets                                              318               349              579
   Miscellaneous                                                                1,655             1,493            1,082
                                                                        -------------    --------------    -------------
       Total other expense                                                      9,432             8,861            8,846
                                                                        -------------    --------------    -------------

   Income before income taxes                                                   7,184             6,532            5,239

Income taxes                                                                    2,581             2,354            1,909
                                                                        -------------    --------------    -------------
       Net income                                                       $       4,603    $        4,178    $       3,330
                                                                        =============    ==============    =============
Net income per common share-basic                                       $        6.50    $        5.90     $        4.80
                                                                        =============    ==============    =============
Average number of common shares outstanding-basic                             708,021          708,010           693,174
                                                                        =============    ==============    =============

</TABLE>

           See accompanying notes to consolidated financial statements

                                       16
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                 Consolidated Statements of Stockholders' Equity
                  Years ended September 30 1999, 1998, and 1997
<TABLE>
<CAPTION>
                                                                                 Accumulated
                                                 Additional                            other                        Total
                                     Common         paid-in       Retained     comprehensive       Treasury  stockholders'
                                      stock         capital       earnings       income, net          stock        equity
                                      -----         -------       --------       -----------          -----        ------
Balance at                                                            (In thousands)
<S>                            <C>             <C>            <C>               <C>            <C>           <C>
  September 30, 1996           $          7    $      6,080   $     14,474      $        272   $       (625) $     20,208
                               ------------    ------------   ------------      ------------   ------------  ------------
Sale of common stock                      -             600              -                 -              -           600

Cash dividends ($1.90 per
  share)                                  -               -         (1,316)                -              -        (1,316)

Net income                                -               -          3,330                 -              -         3,330

Other comprehensive income,
  net of tax
   Unrealized gains on  securities
     available for sale, net of tax
     effect of $89                        -               -              -                 -              -           153

   Less, reclassification
     adjustment for gains
     included in net income,
     net of tax effect of $70             -               -              -                 -              -          (120)
                               ------------    ------------   ------------      ------------   ------------  ------------
Other comprehensive income                -               -              -                33              -            33
                               ------------    ------------   ------------      ------------   ------------  ------------
Comprehensive income                      -               -              -                 -              -         3,363
                               ------------    ------------   ------------      ------------   ------------  ------------
Balance at
  September 30, 1997                      7           6,680         16,488               305           (625)       22,855
                               ------------    ------------   ------------      ------------   ------------  ------------
Cash dividends ($2.20 per
  share)                                  -               -         (1,559)                -              -        (1,559)

Net income                                -               -          4,178                 -              -         4,178

Other comprehensive income,
  net of tax
   Reclassification adjustment for
     gains included in net income,
     net of tax effect of $179            -               -              -                 -              -          (305)
                               ------------    ------------   ------------      ------------   ------------  ------------
Other comprehensive income                -               -              -              (305)             -          (305)
                               ------------    ------------   ------------      ------------   ------------  ------------
Comprehensive income                      -               -              -                 -              -         3,873
                               ------------    ------------   ------------      ------------   ------------  ------------
Balance at
  September 30, 1998                      7           6,680         19,107                -0-          (625)       25,169
                               ------------    ------------   ------------      ------------   ------------  ------------
</TABLE>
           See accompanying notes to consolidated financial statements

                                       17
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                 Consolidated Statements of Stockholders' Equity
                  Years ended September 30 1999, 1998, and 1997
<TABLE>
<CAPTION>
                                                                                 Accumulated
                                                 Additional                            other                        Total
                                     Common         paid-in       Retained     comprehensive       Treasury  stockholders'
                                      stock         capital       earnings       income, net          stock        equity
                                      -----         -------       --------       -----------          -----        ------
                                                                      (In thousands)
<S>                            <C>             <C>            <C>               <C>            <C>           <C>
Net income                                -               -          4,603                 -              -         4,603

Cash dividends ($2.60 per
  share)                                  -               -         (1,841)                -              -        (1,841)

Sale of common stock                      1             299              -                 -              -           300
                               ------------    ------------   ------------      ------------   ------------  ------------
Balance at
  September 30, 1999           $          8    $      6,979   $     21,869      $         -0-  $       (625) $     28,231
                               ============    ============   ============      ============   ============  ============
</TABLE>

           See accompanying notes to consolidated financial statements

                                       18
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                      Consolidated Statements of Cash Flows
                 Years ended September 30, 1999, 1998, and 1997
<TABLE>
<CAPTION>

                                                                                 1999              1998             1997
                                                                        -------------    --------------    -------------
Cash flows from operating activities:                                                    (In thousands)
<S>                                                                     <C>              <C>               <C>
   Net income                                                           $       4,603    $        4,178    $       3,330
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Accretion and amortization of discounts and
         premiums, net                                                            246              (136)            (250)
       Decrease in deferred loan fees, net                                        (21)              (34)             (10)
       Provision for loan losses                                                1,144             2,262            1,428
       Gain on sale of available-for-sale securities                                -              (632)            (254)
       (Gain) loss on sale of real estate acquired in settlement
         of loans, net                                                             54               (28)             (15)
       Gain on sale of branch                                                       -              (784)               -
       Depreciation                                                               357               434              468
       Amortization of intangible assets                                          318               349              579
       Proceeds from sale of loans                                             43,422            29,961           11,764
       Originations and principal repayments of loans
         held for sale, net                                                   (43,101)          (29,446)         (11,591)
       Increase in accrued interest receivable                                    (24)             (400)            (346)
       (Increase) decrease in prepaid expenses and other assets                  (734)             (812)              69
       Increase (decrease) in accrued expenses and other
          liabilities                                                          (1,206)            1,871           (1,573)
                                                                        -------------    --------------    -------------
       Net cash provided by operating activities                                5,058             6,783            3,599
                                                                        -------------    --------------    -------------
Cash flows from investing activities:
   Net decrease in certificates of deposit in other banks                           -               299                -
   Proceeds from maturities of investment securities held
     to maturity                                                               25,879            30,480           20,000
   Purchases of investment securities held to maturity                        (48,060)          (20,623)         (21,079)
   Proceeds from sale of available-for-sale securities                              -             1,304              426
   Purchases of mortgage-backed securities held to maturity                    (8,663)          (80,433)          (4,563)
   Principal collected on mortgage-backed securities
     held to maturity                                                          44,378            16,918            5,206
   Net increase in loans                                                      (54,671)          (23,297)         (27,226)
   Proceeds from sale of real estate acquired in
     settlement of loans                                                          562               326              671
   Improvements made to real estate held for
     development and sale                                                        (208)             (366)               -
   Proceeds from sale of FHLB stock                                             1,225                56               93
   Purchases of FHLB stock                                                     (2,042)           (1,359)               -
   Capital expenditure for premises and equipment                              (1,193)           (1,317)          (1,497)
   Retirements of premises and equipment                                            -               272               82
   Sale of branch                                                                   -            (5,549)               -
                                                                        -------------    --------------    -------------
       Net cash used in investing activities                                  (42,793)          (83,289)         (27,887)
                                                                        -------------    --------------    -------------
                                                                                                             (Continued)

                                       19
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                      Consolidated Statements of Cash Flows
                 Years ended September 30, 1999, 1998, and 1997

                                                                                 1999              1998             1997
                                                                        -------------    --------------    -------------
Cash flows from financing activities:                                                    (In thousands)
   Net increase in deposits                                                    17,817            38,701           32,611
   Proceeds from FHLB advances                                                 54,000            45,000            7,000
   Repayment of FHLB advances                                                 (31,667)          (11,567)         (12,317)
   Sale of common stock                                                           300                 -              600
   Cash dividends                                                              (1,841)           (1,559)          (1,316)
                                                                        -------------    --------------    -------------
       Net cash provided by financing activities                               38,609            70,575           26,578
                                                                        -------------    --------------    -------------
Net increase (decrease) in cash and cash equivalents                              874            (5,931)           2,290

Cash and cash equivalents at beginning of year                                 18,875            24,806           22,516
                                                                        -------------    --------------    -------------
Cash and cash equivalents at end of year                                $      19,749    $       18,875    $      24,806
                                                                        =============    ==============    =============

Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
       Interest                                                         $      18,083    $       17,005    $      14,829
       Income taxes                                                             4,143             1,654            2,231

Supplemental schedule of noncash investing and
  financing activities:
       Loans transferred to real estate acquired in
         settlement loans                                                         204               691              508

       Increase (decrease) in unrealized gain on
         available-for-sale securities, net                                         -              (305)              33
</TABLE>
           See accompanying notes to consolidated financial statements

                                       20
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements
                       September 30, 1999, 1998, and 1997

(1)    Summary of Significant Accounting Policies
       ------------------------------------------

       The following is a description  of the more  significant  accounting  and
       reporting  policies  which  First  Palmetto  Financial   Corporation  and
       subsidiary  ("First  Palmetto")  followed in preparing and presenting the
       consolidated financial statements.

       (a)    Principles of Consolidation and Reporting
              -----------------------------------------

              The accompanying  consolidated  financial  statements  include the
              accounts of First Palmetto  Financial  Corporation  and its wholly
              owned subsidiary, First Palmetto Savings Bank, F.S.B. (the "Bank")
              and  its  subsidiary,  Palmetto  State  Service  Corporation.  All
              significant intercompany balances have been eliminated.

       (b)    Use of Estimates in the Preparation of Financial Statements
              -----------------------------------------------------------

              The  preparation  of  financial   statements  in  conformity  with
              generally accepted  accounting  principles  requires management to
              make estimates and assumptions that affect the reported amounts of
              assets and liabilities and disclosure of contingent liabilities at
              the date of the financial  statements and the reported  amounts of
              revenues and expenses during the reporting period.  Actual results
              could differ from those estimates.

       (c)    Reclassifications
              -----------------

              Certain  amounts in the September  30, 1998 and 1997  consolidated
              financial  statements  have been  reclassified to conform with the
              1999 presentations.  These  reclassifications had no impact on net
              income or stockholders' equity as previously reported.

       (d)    Investment and Mortgage-Backed Securities
              -----------------------------------------

              Statement  of  Financial   Accounting  Standards  (SFAS)  No.  115
              addresses the accounting  and reporting for  investments in equity
              securities  that have  readily  determinable  fair  values and all
              investments in debt securities.  These  investments are classified
              into three categories as follows:

              -   held-to-maturity securities - reported at amortized cost,

              -   trading securities - reported at  fair value  with  unrealized
                  gains and losses included in earnings, or

              -   available-for-sale  securities  - reported  at fair value with
                  unrealized  gains and losses reported as a separate  component
                  of stockholders' equity (net of tax effect).

              Investment and mortgage-backed  securities have been classified as
              held-to-maturity  securities because First Palmetto has the intent
              and the ability to hold all such securities until maturity.

              Gains  and  losses  on sales of  securities  are  recognized  on a
              specific   identification   basis.   Premiums  and  discounts  are
              amortized into interest income using a level yield method.

                                                                     (Continued)
                                       21
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

              Regulations  require  First  Palmetto  to  maintain  cash and U.S.
              Government and other  approved  securities in an amount equal to a
              prescribed  percentage  (4% at  September  30,  1999)  of  deposit
              accounts  (net of  loans  on  deposit  accounts)  plus  short-term
              borrowings.  First Palmetto was in compliance with such regulation
              at September 30, 1999.

       (e)    Loans Held for Sale
              -------------------

              Loans held for sale are  carried at the lower of cost or market as
              determined  by  the  outstanding  commitments  from  investors  to
              purchase  such  loans  or  current  investor  yield   requirements
              calculated  on the  aggregate  loan  basis.  Gains and  losses are
              realized  at the  time of sale to a third  party.  First  Palmetto
              originates and sells whole loans, generally retaining servicing on
              conventional loans and releasing  servicing on governmental loans.
              Servicing fees range from .25% to .375% on conventional loans.

              As of January 1, 1997, the Bank adopted the provisions of SFAS No.
              125,  "Accounting for Transfers and Servicing of Financial  Assets
              and   Extinguishment  of  Liabilities."   SFAS  No.  125  provides
              accounting and reporting  standards for transfers and servicing of
              financial assets and extinguishment of liabilities. This statement
              applies prospectively to transactions occurring after December 31,
              1996, and  establishes new standards that focus on control whereby
              after a transfer of financial  assets,  an entity  recognizes  the
              financial and servicing  assets it controls and the liabilities it
              has incurred,  derecognizes financial assets when control has been
              surrendered,  and derecognizes  liabilities when extinguished.  In
              December,  1996,  the FASB issued SFAS No. 127,  "Deferral  of the
              Effective  Date of Certain  Provisions of FASB Statement No. 125."
              SFAS No. 127 defers for one year the effective date of portions of
              SFAS No. 125 that address  secured  borrowings  and collateral for
              all transactions.  Additionally,  SFAS No. 127 defers for one year
              the effective date of transfers of financial  assets that are part
              of   repurchase   agreements,   securities   lending  and  similar
              transactions.  The adoption of SFAS No. 125 as amended by SFAS No.
              127 did not  have a  material  impact  on the  Bank's  results  of
              operations or financial positions.

       (f)    Provision for Loan Losses
              -------------------------

              The allowance for loan losses is the amount considered adequate to
              absorb  inherent  losses  in  the  loan  portfolio.   Management's
              evaluation  of the adequacy of the  allowance is based on a review
              of such factors which  include the market value of the  underlying
              collateral,   growth  and   composition  of  the  loan  portfolio,
              delinquency   trends,   history  of   charge-offs   and   economic
              conditions.

              While  management  uses the  best  information  available  to make
              evaluations,  future adjustments to the allowance may be necessary
              if  conditions  differ  from the  assumptions  used in making  the
              evaluations.

              In addition,  various regulatory agencies,  as an integral part of
              their  examination  process,  periodically  review the adequacy of
              First  Palmetto's  allowance  for loan losses.  Such  agencies may
              require First  Palmetto to recognize  adjustments to the allowance
              based on their  judgments about  information  available to them at
              the time of their examination.

                                                                     (Continued)
                                       22
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       (g)    Impairment of Loans
              -------------------

              Loans  are  considered  to  be  impaired  when,  in   management's
              judgement, the collection of all amounts of principal and interest
              is  not  probable  in  accordance  with  the  terms  of  the  loan
              agreement.  The Company  accounts for impaired loans in accordance
              with SFAS 114, "Accounting by Creditors for Impairment of a Loan",
              as amended by SFAS 118 in the areas of disclosure requirements and
              methods of  recognizing  income.  SFAS 114 requires  that impaired
              loans be valued at fair value,  which is determined based upon the
              present  value of  expected  cash flows  discounted  at the loan's
              effective  interest  rate,  the  market  price  of  the  loan,  if
              available,  or the value of the  underlying  collateral.  All cash
              receipts on impaired  loans are  applied to  principal  until such
              time as the principal is brought current. After principal has been
              satisfied, future cash receipts are applied to interest income, to
              the extent that any  interest  has been  foregone.  As a practical
              matter,  the Bank  determines  which loans are impaired  through a
              loan review process.

       (h)    Real Estate Acquired in Settlement of Loans
              -------------------------------------------

              Real estate acquired in settlement of loans represents real estate
              acquired through foreclosure or deed in lieu of foreclosure and is
              recorded at the lower of cost or fair value less estimated selling
              costs.  Costs relating to the  development  and improvement of the
              property are capitalized,  whereas,  those relating to holding the
              property are charged to expense.

       (i)    Premises and Equipment
              ----------------------

              Premises and  equipment are recorded at cost and  depreciation  is
              provided  over the  estimated  useful lives of the related  assets
              principally on a straight-line  basis.  Estimated lives are ten to
              forty years for buildings,  building  components and  improvements
              and two to five years for furniture, fixtures and equipment.

              Leasehold  improvements  are recorded at cost and  amortization is
              provided  over the lesser of the related  lease term or  estimated
              useful life principally on a straight-line basis.

              Maintenance  and repairs  are  charged to expense as incurred  and
              improvements   are   capitalized.   The  costs   and   accumulated
              depreciation   relating  to  premises  and  equipment  retired  or
              otherwise  disposed of are  eliminated  from the  accounts and any
              resulting gains or losses are credited or charged to operations.

       (j)    Loan Interest Income
              --------------------

              When loans become more than ninety days past due,  First  Palmetto
              places such loans on  nonaccrual  status or provides an  allowance
              for uncollected interest on accrued interest if, in the opinion of
              management,  collectibility  of that accrued interest is doubtful.
              Any allowance is netted against accrued interest receivable in the
              consolidated financial statements.  If the delinquent payments are
              made, the loan is returned to accrual  status.  Interest income on
              impaired loans is recognized on a cash basis.

                                                                     (Continued)
                                       23
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       (k)    Loan Origination Fees and Costs
              -------------------------------

              Loan origination  fees and certain direct loan  origination  costs
              are deferred and amortized over the contractual life, adjusted for
              prepayments,  of the  related  loan as an  adjustment  of the loan
              yield using the level yield method.  Direct costs of  unsuccessful
              loans and indirect costs are expensed as incurred.

       (l)    Income Taxes
              ------------

              Deferred tax assets and  liabilities are recognized for the future
              tax consequences attributable to differences between the financial
              statement  carrying amounts of existing assets and liabilities and
              their  respective tax bases.  Deferred tax assets and  liabilities
              are measured  using enacted tax rates expected to apply to taxable
              income  in the  years in which  those  temporary  differences  are
              expected to be  recovered  or settled.  The effect on deferred tax
              assets and  liabilities  of a change in tax rates is recognized in
              income in the period that includes the enactment date.

       (m)    Intangible Assets
              -----------------

              Goodwill,  representing  the  excess  of the  purchase  price of a
              business  combination  over the fair value of net assets acquired,
              is being amortized by charges to operations  generally over twelve
              years, using the straight-line method.

              Deposit-based   premiums,   representing  the  cost  of  acquiring
              deposits from other financial institutions, are being amortized by
              charges to operations over seven years, an estimate of the life of
              the existing deposit relationship, using the straight-line method.
              The amount of goodwill and deposit based premiums at September 30,
              1999 was $649,000 and at September 30, 1998 was $967,000. This was
              included in other assets.

       (n)    Stock Based Compensation
              ------------------------

              First  Palmetto  reports   stock-based   compensation   using  the
              intrinsic value method  prescribed in Accounting  Principles Board
              Opinion  ("APB") 25,  "Accounting  for Stock Issued to Employees",
              which measures  compensation expense as the excess, if any, of the
              quoted  market  price of First  Palmetto  stock at the date of the
              grant over the amount an  employee  must pay to acquire the stock.
              SFAS 123,  "Accounting for Stock-Based  Compensation",  encourages
              but does not require  companies  to record  compensation  cost for
              stock-based  compensation  plans  at  fair  value.  No  additional
              disclosure  under SFAS 123 is required for First  Palmetto at this
              time because no stock  options have been  granted.  (See  footnote
              15.)

       (o)    Cash and Cash Equivalents
              -------------------------

              Cash and cash  equivalents  include  cash and due from  banks  and
              interest-bearing balances in other banks. Generally, cash and cash
              equivalents  are considered to have  maturities of three months or
              less.
                                                                     (Continued)
                                       24
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       (p)    Earnings Per Share
              ------------------

              Basic  earnings  per share are  computed  by  dividing  net income
              applicable to common shareholders by the  weighted-average  number
              of  common  shares  outstanding.  Diluted  earnings  per share are
              computed by dividing net income by the weighted-average  number of
              shares of common  stock and common stock  equivalents  outstanding
              during the period, with common stock equivalents  calculated based
              on the average market price. The effect of common stock equivalent
              shares  applicable  to stock option plans has not been included in
              the  calculation  of net income per share  because no shares  have
              been granted.

       (q)    Business Segments
              -----------------

              Effective October 1, 1998, the Bank adopted SFAS 131, "Disclosures
              About Segments of an Enterprise and Related Information." SFAS 131
              requires that a public business  enterprise  report  financial and
              descriptive  information about its reportable  operating segments.
              Operating  segments are  components of an  enterprise  about which
              separate  financial  information  is  available  that is evaluated
              regularly by the chief operating decision maker in deciding how to
              allocate resources and assess performance.  SFAS 131 requires that
              a public  enterprise  report a measure of segment  profit or loss,
              certain  specific  revenue  and  expense  items,  segment  assets,
              information  about  the  way  that  the  operating  segments  were
              determined and other items. The Bank operates as one segment.

       (r)    Comprehensive Income
              --------------------

              In  1999,  First  Palmetto   adopted  SFAS  No.  130,   "Reporting
              Comprehensive  Income".  SFAS No. 130 requires that changes in the
              amounts  of  comprehensive  income  items be  shown  in a  primary
              financial  statement.  Comprehensive  income  is  defined  by  the
              statement  as " the  change in equity  (net  assets) of a business
              enterprise  during a period from transactions and other events and
              circumstances  from nonowner  sources.  It includes all changes in
              equity during a period except those resulting from  investments by
              owners and  distributions  to owners." In accordance with SFAS No.
              130, First Palmetto  elected to disclose  changes in comprehensive
              income in its Consolidated  Statements of Changes in Stockholders'
              Equity.

                                                                     (Continued)
                                       25
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(2)    Investment Securities
       ---------------------

       Investment securities consist of the following:
<TABLE>
<CAPTION>
                                                                                Gross             Gross
                                                          Amortized        Unrealized        Unrealized           Market
                                                               Cost             Gains            Losses            Value
                                                      -------------     -------------    --------------    -------------
       September 30, 1999:                                                        (In thousands)
       <S>                                            <C>               <C>              <C>               <C>
         U.S. Government obligations due:
           Within 12 months                           $      13,008     $          55    $            -    $      13,063
           Beyond 12 months but
             within 5 years                                  46,166                23               806           45,383
           Over 5 years                                       1,000                 3                 -            1,003
                                                      -------------     -------------    --------------    -------------
                                                      $      60,174     $          81    $          806    $      59,449
                                                      =============     =============    ==============    =============
       September 30, 1998:
         U.S. Government obligations due:
           Within 12 months                           $      14,991     $         148    $            -    $      15,139
           Beyond 12 months but
             within 5 years                                  22,978               404                 -           23,382
                                                      -------------     -------------    --------------    -------------
                                                      $      37,969     $         552    $          -0-    $      38,521
                                                      =============     =============    ==============    =============
</TABLE>
       During 1999,  1998 and 1997,  investment  securities with total amortized
       cost of $25.9  million,  $30.5 million and $20.0  million,  respectively,
       matured or were sold within ninety days of maturity.  Proceeds from these
       maturities and sales were $25.9 million, $30.5 million and $20.0 million.

       At September 30, 1999,  investment  securities  with an amortized cost of
       $16.9  million  were  pledged to secure  public  deposits and deposits of
       individuals.

(3)    Mortgage-Backed Securities
       --------------------------

       Mortgage-backed securities consist of the following:
<TABLE>
<CAPTION>
                                                                                Gross             Gross
                                                          Amortized        Unrealized        Unrealized           Market
       September 30, 1999:                                     Cost             Gains            Losses            Value
                                                      -------------     -------------    --------------    -------------
         FHLMC participation certificates                                         (In thousands)
       <S>                                            <C>               <C>              <C>               <C>
           (6.00% - 7.39%, due 2008 through
            2028)                                     $      26,797     $         134    $          348    $      26,583
         FNMA mortgage-backed securities
           (5.25% - 7.45%, due 2003 through
            2028)                                            33,014               323               529           32,808
         Various mortgage-backed securities                      66                 -                 4               62
                                                      -------------     -------------    --------------    -------------
                                                      $      59,877     $         457    $          881    $      59,453
                                                      =============     =============    ==============    =============
</TABLE>

                                                                     (Continued)
                                       26
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
                                                                                Gross             Gross
                                                          Amortized        Unrealized        Unrealized           Market
       September 30, 1998:                                     Cost             Gains            Losses            Value
                                                      -------------     -------------    --------------    -------------
         FHLMC participation certificates                                         (In thousands)
       <S>                                            <C>               <C>              <C>               <C>
           (5.28% - 7.90%, due 2008 through
            2028)                                     $      43,568     $         617    $            -    $      44,185
         FNMA mortgage-backed securities
           (5.30% - 7.80%, due 2003 through
            2028)                                            52,209             1,173                 -           53,382
         Various mortgage-backed securities                      85                 2                 -               87
                                                      -------------     -------------    --------------    -------------
                                                      $      95,862     $       1,792    $          -0-    $      97,654
                                                      =============     =============    ==============    =============
</TABLE>
       There were no sales of  mortgage-backed  securities  during 1999, 1998 or
       1997. At September 30, 1999, mortgage-backed securities with an amortized
       cost of $57.3 million were pledged to secure public deposits and deposits
       of individuals.

(4)    Loans
       -----

       Loans consist of the following:
<TABLE>
<CAPTION>
                                                                           September 30,
                                                                 -------------------------------
                                                                           1999             1998
                                                                 --------------    -------------
       Real estate mortgage (principally single                               (In thousands)
       <S>                                                       <C>               <C>
         family dwellings, 1-4 units)                            $      134,550    $     117,928
       Commercial real estate                                           132,601           97,557
       Real estate construction                                           8,456            9,127
       Commercial                                                        24,206           15,724
       Installment                                                       25,103           29,847
       Loans held for sale                                                1,698            2,019
                                                                 --------------    -------------
              Sub-total                                                 326,614          272,202
                                                                 --------------    -------------
       Undisbursed proceeds on real estate construction                  (3,938)          (3,325)
       Deferred loan fees, net                                             (218)            (239)
       Allowance for loan losses                                         (5,446)          (4,649)
                                                                 --------------    -------------
                                                                 $      317,012    $     263,989
                                                                 ==============    =============
</TABLE>
       Loans serviced for others  approximated  $140.7 million,  $130.4 million,
       and $128.9 million at September 30, 1999,  1998, and 1997,  respectively.
       Mortgage servicing rights were immaterial for all periods reported.

       The following summarizes the changes in the allowance for loan losses for
       the years ended September 30, 1999, 1998, and 1997:

                                                1999          1998         1997
                                                ----          ----         ----
                                                        (In thousands)

       Balance at beginning of year        $   4,649    $    3,009    $   2,364
       Provision for loan losses               1,144         2,262        1,428
       Loan charge-offs                         (626)         (937)        (917)
       Recoveries                                279           315          134
                                           ---------    ----------    ---------
       Balance at end of year              $   5,446    $    4,649    $   3,009
                                           =========    ==========    =========
                                                                     (Continued)
                                       27
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       At September 30, 1999 and 1998, the recorded investment in loans that are
       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.

       First  Palmetto  offers  mortgage  and  consumer  loans to its  officers,
       directors and employees  for the financing of their  personal  residences
       and for other  personal  purposes.  These loans are currently made in the
       ordinary course of business and are made on substantially the same terms,
       including  interest  rates  and  collateral,  prevailing  at the time for
       comparable  transactions with other persons.  Management does not believe
       these  loans  involve  more than the  normal  risk of  collectibility  or
       present other unfavorable features. The following summarizes the activity
       of loans to the officers, directors and employees at September 30, 1999.

                                                                 (In thousands)
       Loan balances, September 30, 1998                         $       4,374
       New loans originated                                              5,043
       Loan repayments                                                   2,999
                                                                 -------------
       Loan balances, September 30, 1999                         $       6,418
                                                                 =============

       First Palmetto is a party to financial instruments with off-balance-sheet
       risk in the normal course of business to meet the financing  needs of its
       customers.  These  financial  instruments  include  commitments to extend
       credit and  standby  letters of credit.  Those  instruments  involve,  to
       varying  degrees,  elements of credit and interest rate risk in excess of
       the amount recognized in the statement of financial condition.

       First Palmetto's  exposure to credit loss in the event of  nonperformance
       by the other party to the financial  instrument for commitments to extend
       credit and  standby  letters  of credit is  represented  by the  contract
       amount of those instruments. First Palmetto uses the same credit policies
       in making  commitments as it does for  on-balance-sheet  instruments.  At
       September 30, 1999 and 1998,  preapproved  but unused lines of credit for
       loans  totaled  approximately  $23.5 million and $22.7  million,  standby
       letters  of  credit  approximated  $3.7  million  and $1.4  million,  and
       outstanding  loan  commitments  aggregated $1.9 million and $2.2 million,
       respectively.  Of these loan commitments,  $-0- are at variable rates and
       $1.9 million and $2.2  million are at fixed rates at  September  30, 1999
       and 1998,  respectively.  The  interest  rates for these  commitments  at
       September  30,  1999  range  from  7.25%  to  9.00%.  These  commitments,
       including  undisbursed proceeds on construction loans,  represent no more
       than  the  normal  lending  risk  that  First  Palmetto  commits  to  its
       borrowers.  Management  believes  that  these  commitments  can be funded
       through normal operations.  First Palmetto is not involved with any other
       types of financial instruments with off-balance sheet risk.

                                                                     (Continued)
                                       28
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       First Palmetto grants residential, residential construction,  commercial,
       and  installment  loans to  customers  throughout  its  market  area.  As
       reflected in the summary of loans  receivable at September 30, 1999,  the
       largest  component  of  First  Palmetto's  loan  portfolio   consists  of
       lower-risk,  single-family,  1-4 unit residential  loans. The higher risk
       components  of the loan  portfolio  consist of real estate  construction,
       commercial,  and installment  loans for which repayment is more dependent
       on the current real estate market and general economic conditions.

(5)    Accrued Interest
       ----------------

       Accrued interest receivable consists of the following:

                                                             September 30,
                                                     -------------------------
                                                        1999             1998
                                                     ----------     ----------
                                                            (In thousands)
       Loans                                         $    1,911     $    1,742
       Investment securities                                886            821
       Mortgage-backed securities                           353            563
                                                     ----------     ----------
                                                     $    3,150     $    3,126
                                                     ==========     ==========

       At September 30, 1999 and 1998,  the allowance for  uncollected  interest
       amounted to $56,000 and $36,000, respectively.

(6)    Real Estate Acquired in Settlement of Loans
       -------------------------------------------

       Real estate acquired in settlement of loans consists of the following:

                                                             September 30,
                                                     -------------------------
                                                        1999             1998
                                                     ----------     ----------
                                                            (In thousands)
       Single family residences                      $       78     $       81
       Commercial property                                   10            419
                                                     ----------     ----------
                                                     $       88     $      500
                                                     ==========     ==========

(7)    Investments Required by Law
       ---------------------------

       First  Palmetto is  required by law to invest in stock of a Federal  Home
       Loan Bank (FHLB). No ready market exists for the FHLB stock and it has no
       quoted  market value.  This stock is  redeemable  at $100 per share,  its
       historical cost basis, subject to certain limitations set by the FHLB.

       Eligible  deposit  accounts  are  insured up to  $100,000  by the Federal
       Deposit Insurance Corporation. Federal deposit insurance expense amounted
       to  approximately  $249,000,  $247,000  and  $288,000 for the years ended
       September 30, 1999, 1998, and 1997, respectively.

                                                                     (Continued)
                                       29
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(8)    Premises and Equipment
       ----------------------

       Premises and equipment consist of the following:

                                                          Accumulated   Net Book
                                                Cost      Depreciation    Value
                                                ----      ------------    -----
       September 30, 1999:                               (In thousands)
          Land and improvements               $  3,576    $       4    $  3,572
          Office buildings and improvements      4,250        1,326       2,924
          Leasehold improvements                 1,290          694         596
          Furniture, fixtures and equipment      1,128          792         336
          Automobiles                              115           43          72
                                              --------    ---------    --------
                                              $ 10,359    $   2,859    $  7,500
                                              ========    =========    ========
       September 30, 1998:
          Land and improvements               $  2,918    $       4    $  2,914
          Office buildings and improvements      4,476        1,197       3,279
          Leasehold improvements                   790          670         120
          Furniture, fixtures and equipment        926          609         317
          Automobiles                               88           54          34
                                              --------    ---------    --------
                                              $  9,198    $   2,534    $  6,664
                                              ========    =========    ========

       First Palmetto  leases various  equipment and real estate under operating
       leases expiring on various dates through 2019.  Minimum lease commitments
       under all noncancelable leases are as follows:

       Years ending September 30,                      (In thousands)
       --------------------------
                  2000                                $          116
                  2001                                            98
                  2002                                            98
                  2003                                            69
                  2004                                            61
                  Later years                                    188
                                                      --------------
                                                      $          630
                                                      ==============

       Rent  expense was  $116,000,  $139,000  and  $133,000 for the years ended
       September 30, 1999, 1998, and 1997, respectively.

                                                                     (Continued)
                                       30
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(9)    Deposits
       --------

       Deposits consist of the following:
                                                            September 30,
                                                      ------------------------
                                                            1999          1998
                                                      ----------    ----------
                                                             (In thousands)

       Noninterest bearing checking                   $   27,467    $  22,038
       NOWs (.75% in 1999 and 1.50% in 1998)              43,685       38,228
       MMDAs (2.25% in 1999 and 1998)                     21,731       19,511
       Savings (2.00% in 1999 and 2.25% in 1998)          22,805       22,482
                                                      ----------    ----------
                                                         115,688      102,259
                                                      ----------    ----------
       Time:
          Less than 3.00%                                     10           16
          3.00% to 4.99%                                 110,277       20,117
          5.00% to 6.99%                                 135,671      221,357
          7.00% to 9.99%                                     118          198
                                                      ----------    ----------
                                                         246,076      241,688
                                                      ----------    ----------
                                                      $  361,764    $ 343,947
                                                      ==========    =========
       Weighted average cost of deposits
         (as of dates indicated above)                     4.26%        4.82%
                                                      ==========    =========

       A summary of time deposits by maturity as of September 30, 1999 follows:

                                                              (In thousands)
          October 1, 1999 - September 30, 2000                $      223,889
          After September 30, 2000                                    22,187
                                                              --------------
               Total time deposits                            $      246,076
                                                              ==============

       At September 30, 1999 and 1998, the aggregate  amount of time deposits of
       $100,000  or  more  amounted  to  $63.3   million   and  $58.4   million,
       respectively.

       Interest expense on deposits consists of the following:

                                              Years ended September 30,
                                ------------------------------------------------
                                         1999              1998             1997
                                -------------    --------------    -------------
                                                  (In thousands)
       NOWs and MMDAs           $       1,285    $        1,502    $       1,487
       Savings                            460               524              562
       Time                            12,778            13,143           11,369
                                -------------    --------------    -------------
                                $      14,523    $       15,169    $      13,418
                                =============    ==============    =============

       At  September  30,  1999,   approximately  $45.8  million  in  investment
       securities and  mortgage-backed  securities were pledged to secure public
       deposits and deposits of individuals.

                                                                     (Continued)
                                       31
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(10)   FHLB Advances
       -------------

       FHLB advances consist of the following:

                                                         September 30,
                                       Interest    ------------------------
              Maturity Date                Rate         1999           1998
              -------------            --------    ---------    -----------
                                                        (In thousands)
              January 8, 1999            5.57%     $       -    $     5,000
              February 25, 1999          5.30%             -            500
              April 28, 1999             5.23%             -            167
              July 27, 1999              5.82%             -          1,000
              July 27, 2000              6.02%             -          1,000
              January 29, 2001           5.69%         2,000          2,000
              July 5, 2004               6.49%             -          6,000
              July 30, 2004              5.72%         2,000              -
              May 19, 2008               5.09%        16,000         16,000
              June 4, 2008               5.55%        25,000         25,000
              June 19, 2008              4.97%         4,000          4,000
              October 1, 2008            4.89%         5,000              -
              October 1, 2008            5.41%         5,000              -
              August 7, 2009             4.95%        10,000              -
              August 13, 2009            6.39%         5,000              -
              Daily                    Variable        9,000              -
                                                   ---------    -----------
                                                   $  83,000    $    60,667
                                                   =========    ===========

       At September 30, 1999,  all stock in the FHLB,  selected  mortgage-backed
       securities and a specific lien on certain first mortgage loans secured by
       one to four unit  single-family  dwellings  were pledged as collateral to
       secure these advances.

(11)   Income Taxes
       ------------

       Income tax expense consists of the following:

                                        Years ended September 30,
                          ------------------------------------------------
                                   1999              1998             1997
                          -------------    --------------    -------------
       Current:                             (In thousands)
          Federal         $       2,719    $        3,014    $       1,629
          State                     280               277               42
                          -------------    --------------    -------------
                                  2,999             3,291            1,671
                          -------------    --------------    -------------
       Deferred:

          Federal                  (350)             (818)             211
          State                     (68)             (119)              27
                          -------------    --------------    -------------
                                   (418)             (937)             238
                          -------------    --------------    -------------
                          $       2,581    $        2,354    $       1,909
                          =============    ==============    =============

                                                                     (Continued)
                                       32
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       The income tax expense of First  Palmetto  for the years ended  September
       30,  1999,  1998,  and 1997 was  different  from the amount  computed  by
       applying  the  federal  income  tax rate to income  before  income  taxes
       because of the following:

                                                      Years ended September 30,
                                                    ---------------------------
                                                    1999        1998       1997
                                                    ----        ----       ----
                                                        (Dollars in thousands)
       Income tax expense at federal rate         $  2,443    $  2,220  $  1,781
       Increase in income taxes resulting from:
          Other, net                                   138         134       128
                                                  --------    --------  --------
                                                  $  2,581    $  2,354  $  1,909
                                                  ========    ========  ========
       Effective tax rate                            35.9%       36.0%     36.4%
                                                  ========    ========  ========

       The tax effects of temporary  differences  that give rise to  significant
       portions of deferred tax assets and deferred tax liabilities at September
       30, 1999 and 1998 are presented below:

                                                             September 30,
                                                       ----------------------
                                                           1999         1998
                                                           ----         ----
       Deferred tax assets:                                 (In thousands)
          Allowance for loan losses                    $   2,015    $   1,720
          Accrued vacation pay                                25           25
          Tax over book basis in intangible asset            374          373
          Depreciation                                        36           34
          Other                                               21           13
                                                       ---------    ---------
              Total gross deferred tax assets              2,471        2,165
                                                       ---------    ---------
       Deferred tax liabilities:
          Tax bad debts in excess of base year               335          447
          FHLB stock basis over tax basis                    315          315
                                                       ---------    ---------
              Total gross deferred tax liability             650          762
                                                       ---------    ---------
                  Net deferred tax asset               $   1,821    $   1,403
                                                       =========    =========

       No valuation  allowance for deferred tax assets was required at September
       30, 1999 and 1998.  The  realization  of net  deferred  tax assets may be
       based on utilization of carrybacks to prior taxable periods, anticipation
       of future  taxable  income in certain  periods,  and the  utilization  of
       tax-planning strategies. Management has determined that it is more likely
       than not that the net  deferred  tax asset can be  supported  based  upon
       these criteria.

                                                                     (Continued)
                                       33
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       Prior to recent legislation  enacted by the Small Business Job Protection
       Act of 1996, the Bank was allowed a special bad debt deduction related to
       additions  to tax  bad  debt  reserves  established  for the  purpose  of
       absorbing losses. The provisions of the Code permitted the Bank to deduct
       from taxable  income an allowance for bad debts based on the greater of a
       percentage  (8%) of taxable  income before such  deduction or actual loss
       experience.  For 1996,  the percentage of taxable income method was used.
       For tax years beginning after fiscal 1996, this method has been repealed.
       In 1998, First Palmetto used the "Bank" experience method or the specific
       charge-off  method.  First Palmetto is required to recapture into taxable
       income 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.  During the year ended  September 30,
       1999, the Bank  recaptured  $303,000.  The remaining  amount to recapture
       over the next three  years is  $908,000.  The base year  reserves of $4.6
       million will not be subject to recapture unless the bad debt reserves are
       used for purposes  other than to absorb bad debt losses or the Bank fails
       to meet the tax definition of a thrift.

       Income  tax  returns  for  1996  and  subsequent  years  are  subject  to
       examination by the taxing authorities.

(12)   Regulatory Capital Requirements
       -------------------------------

       The  Bank  is  subject  to  various   regulatory   capital   requirements
       administered  by the federal  banking  agencies.  Failure to meet minimum
       capital   requirements  can  initiate  certain   mandatory  and  possible
       additional discretionary actions by regulators that, if undertaken, could
       have a direct material effect on the Bank's financial  statements.  Under
       capital  adequacy  guidelines  and the  regulatory  framework  for prompt
       corrective  action,  the Bank must meet specific capital  guidelines that
       involve  quantitative  measures  of the Bank's  assets,  liabilities  and
       certain off-balance-sheet items as calculated under regulatory accounting
       practices.  The  Bank's  capital  amounts  and  classifications  are also
       subject to  qualitative  judgements by the regulators  about  components,
       risk weightings and other factors.

       As of September 30, 1999, the Bank was  categorized  as  well-capitalized
       under the regulatory  framework for prompt  corrective  action. To remain
       well capitalized, the Bank must maintain minimum total risk-based, Tier I
       risk-based,  and  Tier I core  ("leverage")  ratios  as set  forth in the
       table.  There are no conditions or events since that date that management
       believes have changed the Bank's category.

                                                                     (Continued)
                                       34
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       The Bank's actual  capital  amounts and ratios are also  presented in the
       table.
<TABLE>
<CAPTION>
                                                                                                To be well
                                                                                            capitalized under
                                                                  For capital adequacy      prompt corrective
                                             Actual                     purposes            action provisions
                                     ----------------------     ----------------------     ---------------------
                                     Amount           Ratio     Amount          Ratio      Amount          Ratio
                                     ------           -----     ------          -----      ------          -----
       As of September 30, 1999:
       <S>                         <C>              <C>       <C>               <C>      <C>              <C>
       Tier 1 capital
         (to total assets)         $ 26,965          5.68%    $ 19,003          4.00%    $ 23,754          5.00%
       Tier I capital
         (to risk-weighted assets)   26,965          9.20       11,723          4.00       17,586          6.00
       Total capital
         (to risk-weighted assets)   30,651         10.46       23,447          8.00       29,309         10.00

       As of September 30, 1998:
       Tier 1 capital
         (to total assets)         $ 24,144          5.58%    $ 17,308          4.00%    $ 21,635          5.00%
       Tier I capital
         (to risk-weighted assets)   24,144          9.84        9,814          4.00       14,720          6.00
       Total capital
         (to risk-weighted assets)   27,230         11.10       19,628          8.00       24,534         10.00
</TABLE>
       Under the  framework,  the Bank's capital levels allow the Bank to accept
       brokered deposits without prior approval from regulators.

       Federal   regulations   permit   institutions   subject  only  to  normal
       supervision  to pay out 100  percent  of net  income  to  date  over  the
       calendar year and 50 percent of surplus capital existing at the beginning
       of the calendar year without supervisory approval.

       The Bank may not declare or pay a cash  dividend on, or purchase,  any of
       its common  stock,  if the effect  thereof would cause the capital of the
       Bank to be reduced below the minimum regulatory capital requirements.

(13)   Pension Plan
       ------------

       First Palmetto has a noncontributory  defined contribution profit sharing
       plan for substantially all employees. Contributions are 8% of each active
       participant's  compensation  for  the  year  plus  5.7%  of  each  active
       participant's  compensation  for the year over $10,000.  First Palmetto's
       expense  related to the plan amounted to $405,000,  $340,000 and $330,000
       for the years ended September 30, 1999, 1998, and 1997, respectively.

                                                                     (Continued)
                                       35
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(14)   Stock Option Plan
       -----------------

       Options  under the First  Palmetto  Financial  Corporation's  1990  Stock
       Option  Plan (the 1990 Plan) may be granted to  employees  at an exercise
       price  equal to the  fair  market  value of the  stock on the date of the
       grant  and shall be  exercisable  within  ten years  from the date of the
       grant.  In the  case of an  employee  who  owns  more  than  10% of First
       Palmetto's  outstanding  common  stock at the time the option is granted,
       the option  price may not be less than 110% of the fair  market  value of
       the shares on the date of the grant,  and shall not be exercisable  after
       the  expiration of five years from the date it is granted.  Option shares
       may be paid for in cash,  shares of common  stock,  or a  combination  of
       both. An aggregate of 66,459  additional shares of common stock have been
       reserved for issuance  under this plan. At September 30, 1999, no options
       had been granted under this plan.

(15)   Fair Value of Financial Instruments
       -----------------------------------

       Fair value estimates,  methods,  and assumptions as of September 30, 1999
       and 1998 for First  Palmetto  are set forth  below and are subject to the
       following limitations.

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

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

                                                                     (Continued)
                                       36
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       First Palmetto's fair value methods and assumptions are as follows:

       -  Cash and due from banks,  interest-bearing  deposits  in other  banks,
          certificates  of deposit in other banks and FHLB stock - the  carrying
          value is a reasonable estimate of fair value.

       -  Available-for-sale    securities,     investment    securities,    and
          mortgage-backed  securities - fair value is based on available  quoted
          market  prices or quoted  market  prices for similar  securities  if a
          quoted market price is not available.

       -  Loans - fair value for fixed and  adjustable  rate loans is  estimated
          based  upon   discounted   future  cash  flows  using  discount  rates
          comparable to rates currently offered for such loans.

       -  Deposits - the fair value of time  deposits is  estimated  using rates
          currently  offered for deposits of similar remaining  maturities.  The
          fair value of all other deposit account types is the amount payable on
          demand at year-end.

       -  FHLB  advances - fair value is estimated  based on the  current  rates
          offered to First Palmetto for debt with the same remaining maturities.

       -  Commitments  to extend  credit and  standby  letters of credit - First
          Palmetto's  variable  rate credit  commitments  are subject to minimal
          interest rate risk exposure  since the rates  periodically  (generally
          one year or less) adjust to market. Fixed rate loan commitments do not
          represent  significant  interest rate risk exposure as these loans are
          typically sold.

       Based on the  limitations,  methods,  and  assumptions  noted above,  the
       estimated fair values of First  Palmetto's  financial  instruments are as
       follows:
<TABLE>
<CAPTION>
                                                                       Carrying           Fair
                                                                         Amount          Value
                                                                         ------          -----
       September 30, 1999:                                                    (In thousands)
          Financial assets:
       <S>                                                           <C>            <C>
              Cash and due from banks                                $    11,001    $    11,001
              Interest-bearing deposits in other banks                     8,748          8,748
              Certificates of deposit in other banks                         100            100
              Investment securities held to maturity                      60,174         59,449
              Mortgage-backed securities held to maturity                 59,877         59,453
              Loans                                                      317,012        315,842
              FHLB stock                                                   4,150          4,150

          Financial liabilities:
              Deposits                                                   361,764        360,715
              FHLB advances                                               83,000         76,423

                                                                     (Continued)
                                       37
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

       September 30, 1998:
          Financial assets:
              Cash and due from banks                                $     6,983    $     6,983
              Interest-bearing deposits in other banks                    11,892         11,892
              Certificates of deposit in other banks                         100            100
              Investment securities held to maturity                      37,969         38,521
              Mortgage-backed securities held to maturity                 95,862         97,654
              Loans                                                      263,989        265,851
              FHLB stock                                                   3,333          3,333

          Financial liabilities:
              Deposits                                                   343,947        345,553
              FHLB advances                                               60,667         61,688
</TABLE>

                                                                     (Continued)
                                       38
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(16)   Summary of Quarterly Income Statement Information (Unaudited)
       -------------------------------------------------------------

       A summary of quarterly income  statement  information for the years ended
       September 30, 1999 and 1998 follows:
<TABLE>
<CAPTION>
                                                               (Dollars in thousands, except per share amounts)
                                                                                 Three months ended
       1999                                             December 31          March 31           June 30     September 30
       ----                                           -------------     -------------    --------------    -------------
       <S>                                            <C>               <C>              <C>               <C>
       Interest income                                $       8,342     $       8,146    $        8,220    $       8,502
       Interest expense                                       4,732             4,450             4,358            4,512
                                                      -------------     -------------    --------------    -------------
           Net interest income                                3,610             3,696             3,862            3,990

       Provision for loan losses                                160               335               280              369
                                                      -------------     -------------    --------------    -------------
           Net interest income after
             provision for loan losses                        3,450             3,361             3,582            3,621

       Other income                                             795               642               592              573
       Other expense                                          2,335             2,424             2,345            2,328
                                                      -------------     -------------    --------------    -------------
       Income before income taxes                             1,910             1,579             1,829            1,866
       Income taxes                                             680               566               667              668
                                                      -------------     -------------    --------------    -------------
           Net income                                 $       1,230     $       1,013    $        1,162    $       1,198
                                                      =============     =============    ==============    =============
       Per common share data-basic                    $        1.74     $        1.43    $        1.64     $        1.69
                                                      =============     =============    ==============    =============
       Average common shares outstanding-basic              708,010           708,010           708,010          708,053
                                                      =============     =============    ==============    =============

                                                                                 Three months ended
       1998                                             December 31          March 31           June 30     September 30
       ----                                           -------------     -------------    --------------    -------------
       Interest income                                $       7,394     $       7,472    $        7,879    $       8,281
       Interest expense                                       4,056             4,072             4,408            4,739
                                                      -------------     -------------    --------------    -------------
           Net interest income                                3,338             3,400             3,471            3,542

       Provision for loan losses                                671               404               500              687
                                                      -------------     -------------    --------------    -------------
           Net interest income after
             provision for loan losses                        2,667             2,996             2,971            2,855

       Other income                                           1,874               749               630              651
       Other expense                                          2,366             2,094             2,186            2,215
                                                      -------------     -------------    --------------    -------------
       Income before income taxes                             2,175             1,651             1,415            1,291
       Income taxes                                             783               594               515              462
                                                      -------------     -------------    --------------    -------------
           Net income                                 $       1,392     $       1,057    $          900    $         829
                                                      =============     =============    ==============    =============
       Per common share data-basic                    $        1.97     $        1.49    $        1.27     $        1.17
                                                      =============     =============    ==============    =============
       Average common shares outstanding-basic              708,010           708,010           708,010          708,010
                                                      =============     =============    ==============    =============
</TABLE>
                                                                     (Continued)
                                       39
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

(17)   Parent Company Financial Data
       -----------------------------

       The  primary  asset  of  First  Palmetto  (the  Parent  Company)  is  its
       investment in the Bank and its principal  sources of income are dividends
       from the Bank and equity in undistributed net income of the Bank. Certain
       regulatory  and other  requirements  restrict the lending of funds by the
       Bank to the Parent Company and the amount of dividends  which can be paid
       to the Parent  Company.  At September  30, 1999,  the Bank had  available
       undivided profits of approximately $6.8 million for payments of dividends
       without obtaining prior regulatory approval.

       The  following  is a summary of selected  financial  information  for the
       Parent Company:

                        Statements of Financial Condition
                        ---------------------------------
<TABLE>
<CAPTION>
                                                                                                   September 30,
                                                                                         -------------------------------
                                                                                                   1999             1998
                                                                                         --------------    -------------
       Assets                                                                                      (In thousands)
       ------
       <S>                                                                               <C>               <C>
       Cash on deposit with subsidiary                                                   $          443    $         246
       Certificate of deposit                                                                       100                -
       Investment in subsidiary                                                                  27,954           25,189
       Taxes receivable                                                                               9                9
                                                                                         --------------    -------------
              Total assets                                                               $       28,506    $      25,444
                                                                                         ==============    =============
       Liabilities
       -----------
       Due to subsidiary                                                                 $          275    $         275
                                                                                         --------------    -------------
               Total liabilities                                                                    275              275
                                                                                         --------------    -------------
       Stockholders' equity
       --------------------
       Common stock                                                                                   8                7
       Additional paid-in capital                                                                 6,979            6,680
       Retained earnings, substantially restricted                                               21,869           19,107
       Treasury stock, at cost                                                                     (625)            (625)
                                                                                         --------------    -------------
              Total stockholders' equity                                                         28,231           25,169
                                                                                         --------------    -------------
              Total liabilities and stockholders' equity                                 $       28,506    $      25,444
                                                                                         ==============    =============
</TABLE>
                              Statements of Income
                              --------------------
<TABLE>
<CAPTION>
                                                                               Years ended September 30,
                                                               ------------------------------------------------
                                                                        1999              1998             1997
                                                               -------------    --------------    -------------
                                                                                 (In thousands)
       <S>                                                     <C>              <C>               <C>
       Dividends from subsidiary                               $       1,850    $            -    $         900
       Equity in undistributed net income of subsidiary                2,765             3,887            2,256
       Other income                                                        3               485              285
                                                               -------------    --------------    -------------
              Total income                                             4,618             4,372            3,441
       Expenses                                                           15               194              111
                                                               -------------    --------------    -------------
              Net income                                       $       4,603    $        4,178    $       3,330
                                                               =============    ==============    =============
</TABLE>

                                                                     (Continued)
                                       40
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                   Notes to Consolidated Financial Statements

                            Statements of Cash Flows
                            ------------------------

<TABLE>
<CAPTION>
                                                                                     Years ended September 30,
                                                                        ------------------------------------------------
                                                                                 1999              1998             1997
                                                                        -------------    --------------    -------------
       Cash flows from operating activities:                                             (In thousands)
       <S>                                                              <C>              <C>               <C>
         Net income                                                     $       4,603    $        4,178    $       3,330
         Adjustments to reconcile  net income to net cash
           provided by (used in) operating activities:
             Gain on sale of available-for-sale securities                          -              (485)            (254)
             Equity in undistributed net income of subsidiary                  (2,765)           (3,887)          (2,256)
             Increase (decrease) in taxes payable/receivable                        -              (103)              94
                                                                        -------------    --------------    -------------
         Net cash provided by (used in)  operating activities                   1,838              (297)             914
                                                                        -------------    --------------    -------------
       Cash flows from investing activities:
         Purchase of certificate of deposit                                      (100)                -                -
         Proceeds from sale of available-for-sale securities                        -               907              426
                                                                        -------------    --------------    -------------
         Net cash provided by (used in) investing activities                     (100)              907              426
                                                                        -------------    --------------    -------------

       Cash flows from financing activities:
         Sale of common stock                                                     300                 -              600
         Increase in due to bank                                                    -               275                -
         Dividends paid to stockholders                                        (1,841)           (1,559)          (1,316)
                                                                        -------------    --------------    -------------
         Net cash used in financing activities                                 (1,541)           (1,284)            (716)
                                                                        -------------    --------------    -------------
       Net increase (decrease) in cash and cash equivalents                       197              (674)             624
       Cash and cash equivalents at beginning of year                             246               920              296
                                                                        -------------    --------------    -------------

       Cash and cash equivalents at end of year                         $         443    $          246    $         920
                                                                        =============    ==============    =============
       Supplemental schedule of noncash financing activities:

          Increase (decrease) in unrealized gain on
            available-for-sale securities of parent company                         -              (305)              33
</TABLE>
(18)   Commitments and Contingencies
       -----------------------------

       First Palmetto is involved in various claims and legal actions arising in
       the  ordinary  course of  business.  In the  opinion of  management,  the
       ultimate  disposition  of the matters will not have a material  effect on
       First Palmetto's financial position, results of operations or liquidity.

       The average Federal Reserve balance  requirement as of September 30, 1999
       was $882,000.

                                       41
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
First Palmetto Financial Corporation
Camden, South Carolina

We have audited the accompanying  consolidated statements of financial condition
of First Palmetto  Financial  Corporation and subsidiary  (First Palmetto) as of
September 30, 1999 and 1998, and the related consolidated  statements of income,
stockholders'  equity  and cash  flows for each of the  years in the  three-year
period ended September 30, 1999. These consolidated financial statements are the
responsibility of First Palmetto's management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of First  Palmetto
Financial  Corporation  and  subsidiary at September 30, 1999 and 1998,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period  ended  September  30, 1999,  in  conformity  with  generally
accepted accounting principles.

Greenville, South Carolina                                    /s/ KPMG, LLP
                                                              KPMG, LLP
November 24, 1999

                                       42
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                    BOARD of DIRECTORS and EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
<S>                                                                  <C>
DIRECTORS                                                            EXECUTIVE OFFICERS

H. Davis Green, Jr.                                                  H. Davis Green, Jr.
Chairman of the Board,                                               Chairman of the Board
First Palmetto Financial Corporation
H. Davis Green, Jr. Appraisals
Camden, South Carolina

Samuel R. Small                                                      Samuel R. Small
Chief Executive Officer,                                             President and Chief Executive Officer
First Palmetto Financial Corporation
Camden, South Carolina

Steve G. Williams, Jr.                                               Steve G. Williams, Jr.
Senior Vice President and Treasurer,                                 Senior Vice-President and Treasurer
First Palmetto Financial Corporation
Camden, South Carolina

Pierce W. Cantey, Jr.                                                Darlene H. Love
Managing Partner,                                                    Secretary
Cantey, Tiller, Pierce and Associates, LLP
Camden, South Carolina                                               DIRECTORS EMERITUS

William R. Clyburn                                                   H. B. Marshall, Jr.
President, Bill Clyburn Realty, Inc.                                 Retired Agent, New York Life Insurance Company
Kershaw, South Carolina                                              Camden, South Carolina

Frank Goodale                                                        Austin M. Sheheen, Sr.
Merchant, F.D. Goodale, Jeweler                                      Business Executive (Retired), Sheheen Texaco
Camden, South Carolina                                               Camden, South Carolina

Donald H. Holland                                                    William F. Tripp, Jr.
Attorney                                                             Plant Manager (Retired), E.I. DuPont
Camden, South Carolina                                               Camden, South Carolina

Charlie E. Nash
Retired President, Charlie E. Nash Insurance Agency, Inc.
Camden, South Carolina

Glenn G. Tucker
President, Tucker Down East Resources, Inc.
Camden, South Carolina
</TABLE>
                                       43
<PAGE>
                      FIRST PALMETTO FINANCIAL CORPORATION

                              CORPORATE INFORMATION

CORPORATE HEADQUARTERS
First Palmetto Financial Corporation
407 DeKalb Street
Camden, South Carolina  29020
Telephone (803) 432-1416

STOCK TRANSFER AGENT
First Palmetto Savings Bank, F.S.B.
407 DeKalb Street
Camden, South Carolina  29020

INDEPENDENT ACCOUNTANTS
KPMG LLP
Suite 900
55 Beattie Place
Greenville, South Carolina  29601

BRANCH OFFICES
104 East Church Street, Bishopville, South Carolina 29010
2310 North Broad Street, Camden, South Carolina 29020
3932 Forest Drive, Columbia, South Carolina 29206
8921 Two Notch Road, Columbia, South Carolina 29223
266 Cashua Street, Darlington, South Carolina 29532
Highway #1, Elgin, South Carolina 29045
10540 Two Notch Road, Elgin, South Carolina 29045
7327 St. Andrews Road, Irmo, South Carolina 29063
301 Hampton Street, Kershaw, South Carolina 29067
409 North Main Street, Lancaster, South Carolina 29721
5321 Sunset Boulevard, Lexington, South Carolina 29072
Highway #1, Lugoff, South Carolina 29078
111 North Brooks Street, Manning, South Carolina 29102
10207 North Kings Highway, Myrtle Beach, South Carolina 29572
501 Highway 17, South, North Myrtle Beach, South Carolina 29582
210 North Pearl Street, Pageland, South Carolina 29728

SUBSIDIARY
First Palmetto Savings Bank, F.S.B.
407 DeKalb Street
Camden, South Carolina  29020

EMPLOYEES
At September 30, 1999 the Bank employed 128 persons.

                                       44
<PAGE>
COMMON STOCK INFORMATION

     At September 30, 1999,  First  Palmetto had 712,010  shares of common stock
outstanding held by approximately 390 shareholders of record.

     At the present time, there is no established public trading market in which
shares of First Palmetto's common stock are regularly traded,  nor are there any
uniformly  quoted  prices for such shares.  The  following is the known range of
high and low sales prices for the common stock for the two most recent years.

                                 October 1, 1998 to         October 1, 1997 to
Stock Data-Per Share             September 30, 1999         September 30, 1998
--------------------             ------------------         ------------------
Sales Price (Estimated)
   High                               $75.00                      $51.00
   Low                                $51.00                      $40.00
Book Value at September 30            $39.65                      $35.55
Annual Cash Dividend                  $ 2.60                      $ 2.20

FORM 10-K INFORMATION
---------------------

     A copy of Form 10-K, including financial statements and schedules, as filed
with the Securities and Exchange  Commission will be furnished without charge to
stockholders as of the record date upon written request made to First Palmetto's
corporate headquarters, attention Darlene Love, Secretary.

                                       45