SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-KSB

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

For the Fiscal Year Ended December 31, 2001     Commission File Number 000-32493

                            REGIONAL BANKSHARES, INC.
                 (Name of Small Business Issuer in its Charter)

      South Carolina                                  57-1108717
(State or Other Jurisdiction of           (IRS Employer Identification Number)
 Incorporation or Organization)

            206 South Fifth Street, Hartsville, South Carolina 29550
                (Address of Principal Executive Office, Zip Code)

         Issuer's Telephone Number, Including Area Code: (843) 383-4333

        Securities Registered Pursuant to Section 12(b) of the Act: None

           Securities Registered Pursuant to Section 12(g) of the Act:

                          Common stock, $1.00 par value
                                (Title of Class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section  13 or 15(d) of the  Exchange  Act  during  the past 12  months  (or for
shorter period that the  Registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The issuer's revenues for its most recent fiscal year were $2,233,014.

         There is no  established  trading  market for the  Registrant's  voting
common equity. The Registrant has no non-voting common equity  outstanding.  The
aggregate book value of the voting common equity held by non-affiliates on March
1, 2002, was approximately  $3,247,508.  As of March 1, 2002, there were 563,670
shares of the  Registrant's  common  stock,  $1.00 par value,  outstanding.  For
purposes of the foregoing calculation only, all directors and executive officers
of the Registrant have been deemed affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

(1)  Portions of the Registrant's Proxy Statement for the 2002 Annual Meeting of
     Shareholders - Part III

     Transitional Small Business Disclosure Format (check one):

     Yes [ ]  No [X]


<PAGE>


                              Cross-Reference Sheet
<TABLE>
<CAPTION>

<S>                                                                                                     <C>
  PART I
        Item 1.      Description of Business.............................................................1
        Item 2.      Description of Property.............................................................9
        Item 3.      Legal Proceedings...................................................................9
        Item 4.      Submission of Matters to Vote of Security Holders...................................9
  PART II
        Item 5.      Market for Common Equity and Related Stockholder Matters............................9
        Item 6.      Management's Discussion and Analysis or Plan of Operation..........................11
        Item 7.      Financial Statements...............................................................25
        Item 8.      Changes in and Disagreements with Accountants
                         on Accounting and Financial Disclosure.........................................46
  PART III
        Item 9.      Directors, Executive Officers, Promoters and Control Persons;
                         Compliance with Section 16(a) of the Exchange Act..............................46
        Item 10.     Executive Compensation.............................................................46
        Item 11.     Security Ownership of Certain Beneficial Owners and Management.....................46
        Item 12.     Certain Relationships and Related Transactions.....................................46
  PART IV
        Item 13.     Exhibits and Reports on Form 8-K...................................................47
</TABLE>


<PAGE>



                                     PART I

Forward-Looking Statements

         This  Report on Form  10-KSB  may  contain  forward-looking  statements
relating  to  such  matters  as  anticipated  financial  performance,   business
prospects,   technological  developments,  new  products  and  similar  matters.
Statements  included  in this  report  that are not  historical  in  nature  are
intended to be, and are hereby  identified as 'forward looking  statements.' The
words  "estimate,"  "project,"  "intend,"  "expect,"  "believe,"   "anticipate,"
"plan," and similar expressions identify forward looking statements. The Private
Securities   Litigation   Reform  Act  of  1995   provides  a  safe  harbor  for
forward-looking  statements.  In order to comply with terms of the safe  harbor,
Regional Bankshares,  Inc. (the "Company") notes that a variety of factors could
cause the Company's actual results and experience to differ  materially from the
anticipated   results  or  other   expectations   expressed  in  the   Company's
forward-looking  statements.  The risks and  uncertainties  that may  affect the
operations,  performances,  development  and results of the  Company's  business
include,  but are not limited to, the following:  risks from changes in economic
and industry  conditions;  changes in interest  rates;  risks inherent in making
loans including  repayment  risks and value of collateral;  dependence on senior
management ; and recently-enacted or proposed legislation.  Statements contained
in this filing regarding the demand for Hartsville Community Bank's products and
services,  changing economic conditions,  interest rates,  consumer spending and
numerous  other  factors may be  forward-looking  statements  and are subject to
uncertainties and risks.

Item 1.  Description of Business.

                                     GENERAL

         Regional  Bankshares,  Inc. is the  successor  registrant to Hartsville
Community Bank, National  Association (the "Bank").  The Bank was organized as a
national bank and opened for business in June, 1999. The Bank's common stock was
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, and
filings were made with the Office of the Comptroller of the Currency pursuant to
Section 12(i) of the Securities Exchange Act of 1934.

         Regional Bankshares,  Inc. is a South Carolina corporation incorporated
in 2000 to become the  holding  company  for the Bank.  On January 1, 2001,  the
Company completed its acquisition of the Bank and the Bank became a wholly-owned
subsidiary  of the  Company.  On January 10,  2001,  the Bank  converted  from a
national  bank to a South  Carolina  state bank.  The Company has no  operations
other than those carried on by the Bank as its wholly-owned subsidiary.

         The Bank  conducts  a general  banking  business  from its main  office
located in Hartsville, South Carolina. The Bank's business primarily consists of
accepting  deposits  and making  loans.  The Bank seeks  deposit  accounts  from
households  and  businesses in its primary market areas by offering a full range
of  savings  accounts,  retirement  accounts  (including  Individual  Retirement
Accounts),  checking accounts,  money market accounts,  and time certificates of
deposit. It also makes primarily commercial,  real estate and installment loans,
primarily  on a secured  basis,  to borrowers  in and around  Hartsville,  South
Carolina and makes other authorized investments.  Residential mortgage loans are
primarily  maintained  in-house with conventional  mortgage  financing  arranged
through a correspondent mortgage company.

                              BUSINESS OF THE BANK

Market Area

         The Bank's primary  market area is the community of  Hartsville,  South
Carolina and the surrounding  areas within a 15 mile radius of Hartsville.  This
market area comprises most of Darlington County, South Carolina,  as well as the
incorporated  areas of  Bishopville  in Lee  County  and  McBee in  Chesterfield
County. Most of the Bank's business is drawn from the city of Hartsville and the
greater Hartsville area, with significant  additional  business being drawn from
the area outside greater Hartsville but within the designated market area.


<PAGE>




         Hartsville  has a population  of  approximately  10,000 within the city
limits and 28,000 in the greater  Hartsville area.  Darlington County is located
in  the  northeastern  portion  of  South  Carolina  near  the  intersection  of
Interstates  I-95 and I-20. It is bordered on the north by  Chesterfield  County
and on the south by Florence County. Darlington County is served by an excellent
network of regional roads,  including major routes such as U.S.  Highways 15, 52
and 401. The primary link between the two major  communities  of Darlington  and
Hartsville is a four-lane  highway which tends to encourage  development  in the
area.

Competition

         South Carolina law permits statewide branching by banks and savings and
loan  associations.  Consequently,  many  financial  institutions  have branches
located in several  communities.  Currently,  in addition to the Bank,  21 other
financial institutions and branches of financial institutions are located in the
Bank's  market  area.  The  principal  areas and methods of  competition  in the
banking  industry  are the  services  offered,  pricing of those  services,  the
convenience and  availability  of the services,  and the degree of expertise and
personal manner with which those services are offered.

         The Bank  encounters  strong  competition  from  most of the  financial
institutions in its extended market area. In the conduct of certain areas of its
business, the Bank also competes with credit unions, insurance companies,  money
market  mutual  funds and other  financial  institutions,  some of which are not
subject to the same degree of regulation and  restrictions  as the Bank. Most of
these  competitors have  substantially  greater  resources and lending abilities
than  the  Bank and  offer  certain  services,  such as  international  banking,
investment  banking,  and  trust  services,  that  the Bank  does not  presently
provide.

Deposits

         The Bank offers the full range of deposit services typically  available
in most banks and savings and loan  associations,  including  checking accounts,
NOW accounts, and savings and other time deposits of various types, ranging from
daily  money  market  accounts  to  longer-term  certificates  of  deposit.  The
transaction  accounts and time certificates are tailored to the principal market
area  at  rates  competitive  with  those  offered  in the  area.  In  addition,
retirement accounts such as IRA's (Individual  Retirement Accounts) are offered.
All deposit  accounts are insured by the FDIC up to the maximum amount permitted
by  law.  The  Bank  solicits  these  accounts  from  individuals,   businesses,
associations and organizations, and government authorities.

Lending Activities

         The Bank emphasizes a range of lending services, including real estate,
commercial and consumer loans.  Consumer loans include both installment and term
loans, and include loans for automobiles,  household goods, education, boats and
general personal expenses.

         To address the risks inherent in making loans,  management maintains an
allowance  for loan losses based on, among other  things,  an  evaluation of the
Bank's  loan  loss  experience,   management's  experience  at  other  financial
institutions in the market area, the amount of past due and nonperforming loans,
current and  anticipated  economic  changes  and the values of loan  collateral.
Based upon such  factors,  management  makes various  assumptions  and judgments
about  the  ultimate  collectibility  of the  loan  portfolio  and  provides  an
allowance for potential  loan losses based upon a percentage of the  outstanding
balances and specific loans.  However,  because there are some risks that cannot
be precisely  quantified,  management's judgment of the allowance is necessarily
approximate  and  imprecise.  The adequacy and  methodology of the allowance for
loan losses is subject to regulatory examination and compared to a peer group of
financial institutions identified by the regulators.



                                       2
<PAGE>

Real Estate Loans

         One of the primary  components  of the Bank's loan  portfolio  is loans
secured by first or second  mortgages on residential and commercial real estate.
These loans generally consist of commercial real estate loans,  construction and
development  loans and residential  real estate loans (including home equity and
second mortgage  loans).  Interest rates may be fixed or adjustable and the Bank
generally  charges an origination  fee. The Bank also originates  mortgage loans
for sale into the  secondary  market,  earning a fee,  but avoiding the interest
rate risk of holding long-term, fixed-rate loans.

         The principal  economic risk associated with all loans,  including real
estate loans, is the creditworthiness of the Bank's borrowers.  The ability of a
borrower to repay a real estate loan depends upon a number of economic  factors,
including employment levels and fluctuations in the value of real estate. In the
case of a real estate  construction  loan, there is generally no income from the
underlying property during the construction period, and the developer's personal
obligations  under  the  loan  are  typically  limited.  Each of  these  factors
increases the risk of  nonpayment by the borrower.  In the case of a real estate
purchase  loan,  the  borrower may be unable to repay the loan at the end of the
loan  term and may thus be  forced to  refinance  the loan at a higher  interest
rate,  or,  in  certain  cases,  the  borrower  may  default  as a result of its
inability to refinance the loan.  In either case,  the risk of nonpayment by the
borrower is increased.

         The Bank also  faces  additional  credit  risks to the  extent  that it
engages in making  adjustable  rate mortgage loans  ("ARMs").  In the case of an
ARM, as interest rates increase, the borrower's required payments increase, thus
increasing  the  potential  for default.  The  marketability  of all real estate
loans,  including  ARMs, is also generally  affected by the prevailing  level of
interest rates.

Commercial Loans

         The Bank  makes  loans for  commercial  purposes  in  various  lines of
business.  Commercial loans include both secured and unsecured loans for working
capital  (including  inventory and  receivables),  loans for business  expansion
(including  acquisition  of  real  estate  and  improvements),   Small  Business
Administration ("SBA") loans for new businesses (as well as other governmentally
guaranteed  business loans), and loans for purchases of equipment and machinery.
Commercial loans vary greatly  depending upon the  circumstances  and loan terms
are structured on a case-by-case basis to better serve customer needs.

         The risks  associated  with  commercial  loans vary with many  economic
factors,  including the economy in the  Hartsville  area.  The  well-established
banks in the Bank's  market area make  proportionately  more loans to medium- to
large-sized  businesses than the Bank. Many of the Bank's  commercial  loans are
made to small- to medium-sized  businesses,  which are typically  smaller,  have
shorter operating histories,  and less sophisticated record keeping systems than
larger  entities.  As a  result,  these  smaller  entities  may be less  able to
withstand  adverse  competitive,  economic and financial  conditions than larger
borrowers. In addition, because payments on loans secured by commercial property
generally  depend to a large degree on the results of operations  and management
of the properties,  repayment of such loans may be subject,  to a greater extent
than  other  loans,  to  adverse  conditions  in the real  estate  market or the
economy.

Consumer Loans

         The Bank  makes a variety  of loans to  individuals  for  personal  and
household purposes,  including secured and unsecured installment and term loans,
home equity loans and lines of credit and  unsecured  revolving  lines of credit
such as credit  cards.  The  secured  installment  and term  loans to  consumers
generally  consist  of  loans  to  purchase  automobiles,   boats,  recreational
vehicles,  mobile homes and household furnishings,  with the collateral for each
loan being the purchased  property.  The  underwriting  criteria for home equity
loans and lines of credit  are  generally  the same as  applied by the Bank when
making a first  mortgage  loan,  as  described  above,  and home equity lines of
credit  typically expire 15 years or less after  origination,  unless renewed or
extended.



                                       3
<PAGE>

         Consumer  loans  generally  involve  more credit risks than other loans
because of the type and nature of the  underlying  collateral  or because of the
absence  of any  collateral.  Consumer  loan  repayments  are  dependent  on the
borrower's  continuing  financial  stability  and  are  likely  to be  adversely
affected by job loss,  divorce and  illness.  Furthermore,  the  application  of
various  federal and state laws,  including  federal  and state  bankruptcy  and
insolvency  laws,  may limit the amount  which can be recovered on such loans in
the case of default. In most cases, any repossessed  collateral will not provide
an adequate  source of repayment of the outstanding  loan balance.  Although the
underwriting  process for consumer  loans  includes a comparison of the value of
the security,  if any, to the proposed loan amount,  the Bank cannot predict the
extent to which the  borrower's  ability to pay, and the value of the  security,
will be affected by prevailing economic and other conditions.


Other Services

         The  Bank  participates  in a  regional  network  of  automated  teller
machines  that may be used by Bank  customers  in major  cities  throughout  the
Southeast.  The Bank  offers  both  VISA and  MasterCard  brands  of bank  cards
together  with  related  lines of  credit.  The lines of credit  may be used for
overdraft protection as well as pre-authorized credit for personal purchases and
expenses. The Bank also provides travelers checks, direct deposit of payroll and
social security checks, and automatic drafts for various accounts,  but will not
provide international or trust banking services in the near future.

         During 2001,  the Bank hired an investment  broker to offer  investment
and brokerage  services to the Bank's  customes  through Raymond James Financial
Services, Inc., a registered broker-dealer firm.

Employees

         The Bank has 19 full time employees. The Company has no employees.


                           SUPERVISION AND REGULATION

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation  may have a material  effect on the  business  of the Company and the
Bank.

General

         The Company is a bank  holding  company  under the federal Bank Holding
Company  Act  ("BHCA"),  and is  subject  to the  regulations  of the  Board  of
Governors of the Federal Reserve System (the "Federal Reserve"). Under the BHCA,
the Company's  activities and those of its  subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing services for
its  subsidiaries  or engaging in any other activity  which the Federal  Reserve
determines to be so closely related to banking or managing or controlling  banks
as to be a proper incident thereto. The Company may engage in a broader range of
activities  if  it  becomes  a  "financial  holding  company"  pursuant  to  the
Gramm-Leach-Bliley  Act,  which is  described  below under the  caption  "Recent
Legislation."  The BHCA prohibits the Company from acquiring  direct or indirect
control of more than 5% of the outstanding  voting stock or substantially all of
the  assets of any bank or from  merging  or  consolidating  with  another  bank
holding company without prior approval of the Federal Reserve. Additionally, the
BHCA  prohibits  the Company  from  engaging in or from  acquiring  ownership or
control of more than 5% of the  outstanding  voting stock of any company engaged
in a  non-banking  business  unless such  business is  determined by the Federal
Reserve to be so closely related to banking as to be properly  incident thereto.
The BHCA generally does not place territorial  restrictions on the activities of
such non-banking related activities.

         The Company is also subject to regulation and  supervision by the South
Carolina  State Board of Financial  Institutions  (the "State  Board").  A South
Carolina bank holding company must provide the State Board with information with
respect to the financial  condition,  operations,  management and  inter-company
relationships of the holding company and its subsidiaries.  The State Board also
may require such other information as is necessary to keep itself informed about
whether the  provisions  of South  Carolina law and the  regulations  and orders
issued  thereunder  by the State Board have been  complied  with,  and the State
Board may examine any bank holding company and its subsidiaries.



                                       4
<PAGE>

Obligations of the Company to its Subsidiary Bank

         A number of obligations  and  restrictions  are imposed on bank holding
companies  and their  depository  institution  subsidiaries  by Federal  law and
regulatory  policy that are designed to reduce  potential  loss  exposure to the
depositors of such  depository  institutions  and to the FDIC insurance funds in
the event the depository  institution  is in danger of becoming  insolvent or is
insolvent.  For example, under the policy of the Federal Reserve, a bank holding
company is required to serve as a source of financial strength to its subsidiary
depository  institutions and to commit resources to support such institutions in
circumstances  where it might not do so absent such  policy.  In  addition,  the
"cross-guarantee"  provisions of the Federal  Deposit  Insurance Act, as amended
("FDIA"),  require  insured  depository  institutions  under  common  control to
reimburse the FDIC for any loss suffered or reasonably anticipated by either the
Savings  Association  Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF")
of the  FDIC  as a  result  of the  default  of a  commonly  controlled  insured
depository  institution or for any assistance provided by the FDIC to a commonly
controlled  insured  depository  institution in danger of default.  The FDIC may
decline to enforce the cross-guarantee provisions if it determines that a waiver
is in the best  interest  of the SAIF or the BIF or both.  The FDIC's  claim for
damages  is  superior  to  claims  of  shareholders  of the  insured  depository
institution  or its holding  company but is subordinate to claims of depositors,
secured  creditors and holders of subordinated  debt (other than  affiliates) of
the commonly controlled insured depository institutions.

         The FDIA also provides that amounts  received from the  liquidation  or
other resolution of any insured  depository  institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit  liabilities of
the  institution  prior to payment  of any other  general  or  unsecured  senior
liability,   subordinated  liability,  general  creditor  or  shareholder.  This
provision  would give  depositors  a preference  over  general and  subordinated
creditors  and  shareholders  in the event a receiver is appointed to distribute
the assets of the Bank.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank
regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

Capital Adequacy Guidelines for Bank Holding Companies and State Banks

         The various federal bank regulators,  including the Federal Reserve and
the FDIC have adopted  risk-based and leverage capital  adequacy  guidelines for
assessing bank holding company and bank capital adequacy. These standards define
what qualifies as capital and establish minimum capital standards in relation to
assets and off-balance sheet exposures, as adjusted for credit risks.

         Failure  to meet  capital  requirements  could  subject  the  Bank to a
variety of enforcement remedies,  including the termination of deposit insurance
by the FDIC and a prohibition on the taking of brokered deposits.

         The risk-based  capital standards of both the Federal Reserve Board and
the FDIC explicitly identify  concentrations of credit risk and the risk arising
from non-traditional  activities,  as well as an institution's ability to manage
these risks,  as  important  factors to be taken into account by the agencies in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital due to changes in interest rates should be considered by the agencies as
a factor in evaluating a bank's capital  adequacy.  The Federal Reserve also has
recently issued  additional  capital  guidelines for bank holding companies that
engage in certain trading activities.

         The Bank exceeded all applicable capital  requirements by a wide margin
at December 31, 2001.

Payment of Dividends

         The  Company is a legal  entity  separate  and  distinct  from its bank
subsidiary.  Most of the  revenues of the  Company  are  expected to result from
dividends  paid to the Company by the Bank.  There are statutory and  regulatory
requirements  applicable to the payment of dividends by subsidiary banks as well
as by the Company to its  shareholders.  It is not anticipated  that the Company
will pay cash dividends in the near future.



                                       5
<PAGE>

Certain Transactions by the Company with its Affiliates

         Federal  law   regulates   transactions   among  the  Company  and  its
affiliates,  including  the  amount of bank loans to or  investments  in nonbank
affiliates  and the  amount  of  advances  to third  parties  collateralized  by
securities of an affiliate.  Further,  a bank holding company and its affiliates
are prohibited  from engaging in certain tie-in  arrangements in connection with
any extension of credit, lease or sale of property or furnishing of services.

FDIC Insurance Assessments

         Because the Bank's deposits are insured by the BIF, the Bank is subject
to insurance assessments imposed by the FDIC. Currently, the assessments imposed
on all FDIC deposits for deposit insurance have an effective rate ranging from 0
to 27 basis points per $100 of insured deposits,  depending on the institution's
capital position and other supervisory  factors.  However,  because  legislation
enacted in 1996  requires  that  insured  deposits pay a pro rata portion of the
interest due on the obligations  issued by the Financing  Corporation  ("FICO"),
the FDIC is currently  assessing  BIF-insured  deposits an additional 1.26 basis
points per $100 of deposits,  and SAIF-insured deposits an additional 6.30 basis
points per $100 of deposits,  to cover those  obligations.  The FICO  assessment
will  continue to be adjusted  quarterly  to reflect  changes in the  assessment
bases of the  respective  funds  based  on  quarterly  Call  Report  and  Thrift
Financial Report submissions.

Regulation of the Bank

         The Bank is subject to regulation by the State Board. In addition,  the
Bank is  subject  to  various  other  state and  federal  laws and  regulations,
including state usury laws,  laws relating to  fiduciaries,  consumer credit and
laws  relating  to branch  banking.  The Bank's loan  operations  are subject to
certain federal  consumer credit laws and  regulations  promulgated  thereunder,
including,  but not  limited  to: the federal  Truth-In-Lending  Act,  governing
disclosures of credit terms to consumer borrowers;  the Home Mortgage Disclosure
Act, requiring financial  institutions to provide certain information concerning
their mortgage  lending;  the Equal Credit  Opportunity Act and the Fair Housing
Act,  prohibiting  discrimination on the basis of certain  prohibited factors in
extending credit; the Fair Credit Reporting Act, governing the use and provision
of information to credit reporting agencies; the Bank Secrecy Act, dealing with,
among other things, the reporting of certain currency transactions; and the Fair
Debt  Collection  Act,  governing  the  manner  in which  consumer  debts may be
collected by collection agencies. The deposit operations of the Bank are subject
to the Truth in Savings Act,  requiring certain  disclosures about rates paid on
savings  accounts;  the  Expedited  Funds  Availability  Act,  which  deals with
disclosure of the availability of funds deposited in accounts and the collection
and return of checks by banks; the Right to Financial Privacy Act, which imposes
a duty to maintain certain  confidentiality of consumer  financial records,  and
the Electronic Funds Transfer Act and regulations promulgated thereunder,  which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.

         The  Bank  is  also  subject  to  the  requirements  of  the  Community
Reinvestment  Act (the  "CRA").  The CRA imposes on  financial  institutions  an
affirmative  and  ongoing  obligation  to meet the credit  needs of their  local
communities,  including low- and moderate-income neighborhoods,  consistent with
the safe and sound operation of those institutions. Each financial institution's
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also is considered in evaluating mergers,  acquisitions
and applications to open a branch or facility.

Other Safety and Soundness Regulations

         Prompt  Corrective  Action.  The federal  banking  agencies  have broad
powers under  current  federal law to take prompt  corrective  action to resolve
problems of insured depository institutions.  The extent of these powers depends
upon whether the  institutions in question are "well  capitalized,"  "adequately
capitalized,"    "undercapitalized,"    "significantly    undercapitalized"   or
"critically undercapitalized."



                                       6
<PAGE>

         A bank that is "undercapitalized"  becomes subject to provisions of the
FDIA:   restricting  payment  of  capital  distributions  and  management  fees;
requiring the FDIC to monitor the condition of the bank; requiring submission by
the bank of a capital  restoration  plan;  restricting  the growth of the bank's
assets and requiring prior approval of certain expansion proposals.  A bank that
is  "significantly   undercapitalized"   is  also  subject  to  restrictions  on
compensation  paid  to  senior  management  of  the  bank,  and a bank  that  is
"critically   undercapitalized"  is  further  subject  to  restrictions  on  the
activities of the bank and restrictions on payments of subordinated  debt of the
bank.  The  purpose  of these  provisions  is to  require  banks  with less than
adequate  capital to act quickly to restore  their  capital and to have the FDIC
move  promptly  to take over  banks  that are  unwilling  or unable to take such
steps.

         Brokered Deposits.  Under current FDIC regulations,  "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept  brokered  deposits  with a waiver  from the FDIC  (subject  to
certain  restrictions on payment of rates), while  "undercapitalized"  banks may
not accept brokered deposits.

Interstate Banking

         Under the Riegle-Neal  Interstate Banking and Branching  Efficiency Act
of 1994 the Company and any other  adequately  capitalized  bank holding company
located in South  Carolina can acquire a bank located in any other state,  and a
bank  holding  company  located  outside  South  Carolina  can acquire any South
Carolina-based  bank, in either case subject to certain  deposit  percentage and
other restrictions.  Unless prohibited by state law, adequately  capitalized and
managed bank holding  companies are permitted to  consolidate  their  multistate
bank operations into a single bank subsidiary and to branch  interstate  through
acquisitions. De novo branching by an out-of-state bank is permitted only if the
laws of the host state expressly permit it. The authority of a bank to establish
and operate  branches within a state continue to be subject to applicable  state
branching  laws.  South  Carolina law was amended,  effective  July 1, 1996,  to
permit such  interstate  branching but not de novo branching by an  out-of-state
bank.

Recent Legislation

         On November 12, 1999, the President signed the Gramm-Leach-Bliley  Act,
which  makes it easier for  affiliations  between  banks,  securities  firms and
insurance companies to take place. The Act removed Depression-era  barriers that
had separated  banks and securities  firms,  and seeks to protect the privacy of
consumers' financial information. Most of the provisions of the Act required the
applicable   regulators  to  adopt  regulations  in  order  to  implement  these
provisions, and a substantial number of regulations have already been adopted.

         Under provisions of the new legislation, which were effective March 11,
2000, banks,  securities firms and insurance companies are able to structure new
affiliations  through  a  holding  company  structure  or  through  a  financial
subsidiary.  The legislation creates a new type of bank holding company called a
"financial  holding  company" which has powers much more extensive than those of
standard holding companies. These expanded powers include authority to engage in
"financial  activities,"  which are activities that are (1) financial in nature;
(2) incidental to activities that are financial in nature;  or (3) complementary
to a  financial  activity  and that do not impose a safety and  soundness  risk.
Significantly,   the  permitted  financial   activities  for  financial  holding
companies  include  authority  to  engage  in  merchant  banking  and  insurance
activities,  including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well-managed, well-capitalized
and  have  received  a  rating  of   "satisfactory"   on  their  last  Community
Reinvestment Act examination.

         The  legislation  also  creates  another  new type of  entity  called a
"financial subsidiary." A financial subsidiary may be used by a national bank or
a group of national banks to engage in many of the same activities permitted for
a financial holding company, though several of these activities,  including real
estate development or investment,  insurance or annuity underwriting,  insurance
portfolio  investing and merchant  banking,  are reserved for financial  holding
companies.  A bank's  investment  in a financial  subsidiary  affects the way in


                                       7
<PAGE>

which the bank calculates its regulatory capital, and the assets and liabilities
of financial  subsidiaries  may not be consolidated  with those of the bank. The
bank must also be certain that its risk  management  procedures  are adequate to
protect it from  financial and  operational  risks created both by itself and by
any financial subsidiary.  Further, the bank must establish policies to maintain
the separate corporate  identities of the bank and its financial  subsidiary and
to prevent each from becoming liable for the obligations of the other.

         The Act also  establishes  the  concept  of  "functional  supervision,"
meaning that  similar  activities  should be  regulated  by the same  regulator.
Accordingly,  the Act spells out the regulatory authority of the bank regulatory
agencies,  the Securities and Exchange Commission and state insurance regulators
so that each type of activity is  supervised by a regulator  with  corresponding
expertise.  The Federal  Reserve Board is intended to be an umbrella  supervisor
with the  authority  to  require a bank  holding  company or  financial  holding
company  or any  subsidiary  of  either  to  file  reports  as to its  financial
condition,  risk management  systems,  transactions with depository  institution
subsidiaries  and  affiliates,  and compliance  with any federal law that it has
authority to enforce.

         Although the Act reaffirms that states are the regulators for insurance
activities  of  all  persons,  including   federally-chartered  banks,  the  Act
prohibits  states from preventing  depository  institutions and their affiliates
from conducting insurance activities.

         The Act also  establishes  a minimum  federal  standard  of  privacy to
protect the confidentiality of a consumer's  personal financial  information and
gives the consumer the power to choose how personal financial information may be
used by  financial  institutions.  The Act and the  regulations  adopted  by the
federal banking agencies under the Act require increased disclosure to consumers
about use of information about them and, in some  circumstances,  require notice
to, or consent from, consumers before the information may be provided to a third
party.

         The  Company  anticipates  that  the Act and  the  regulations  adopted
pursuant to the Act will be likely to create new opportunities to offer expanded
services to customers in the future,  though the Company has not yet  determined
what the nature of the expanded services might be or when the Company might find
it  feasible  to offer  them.  The  Company  further  expects  that the Act will
increase competition from larger financial  institutions that are currently more
capable  than the Company of taking  advantage of the  opportunity  to provide a
broader range of services.  However,  the Company  continues to believe that its
commitment to providing  high quality,  personalized  service to customers  will
permit it to remain competitive in its market area.

Legislative Proposals

         New proposed legislation, which could significantly affect the business
of banking,  has been  introduced  or may be introduced in Congress from time to
time.  Management  of the  Company  cannot  predict  the  future  course of such
legislative proposals or their impact on the Company and the Bank should they be
adopted.

Fiscal and Monetary Policy

         Banking  is  a  business   that  depends   largely  on  interest   rate
differentials. In general, the difference between the interest paid by a bank on
its deposits and its other  borrowings,  and the interest  received by a bank on
its loans and  securities  holdings,  constitutes  the major portion of a bank's
earnings.  Thus, the earnings and growth of the Company and the Bank are subject
to the influence of economic  conditions  generally,  both domestic and foreign,
and also to the  monetary  and  fiscal  policies  of the  United  States and its
agencies,  particularly the Federal Reserve.  The Federal Reserve  regulates the
supply of money through various means,  including open-market dealings in United
States government  securities,  the discount rate at which banks may borrow from
the Federal Reserve,  and the reserve  requirements on deposits.  The nature and
timing of any changes in such  policies  and their impact on the Company and the
Bank cannot be predicted.



                                       8
<PAGE>

Item 2.  Description of Property.

         The Bank owns its office building,  which is located at 206 South Fifth
Street in  Hartsville.  The property is at a corner  location one block from the
geographic  center  of  Hartsville.  This area of town is  undergoing  extensive
redevelopment, and is likely to be a center for retail, professional and service
business growth in the future. The office building comprises approximately 8,000
feet.  The  building  was  completed  in the second  quarter  of 2001,  and cost
approximately  $1,000,000.  The property on which the main office is located was
purchased from an unaffiliated third party for approximately $293,400.

Item 3.  Legal Proceedings.

         The  Company  may  from  time  to  time be a  party  to  various  legal
proceedings  arising in the ordinary  course of business,  but management of the
Company  is not aware of any  pending or  threatened  litigation  or  unasserted
claims or assessments that are expected to result in losses,  if any, that would
be material to the Company's business and operations.

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

         None.

Item 5.  Market for Common Equity and Related Stockholder Matters.

Absence of Market for Common Stock

         Although  the common  stock of the  Company  may be traded from time to
time on an individual  basis,  no  established  trading market has developed and
none is expected to develop in the foreseeable  future.  The common stock is not
listed on any exchange nor is it traded on the NASDAQ  National  Market  System,
nor are there any market makers known to  management.  In 2001,  management  was
aware of a few  transactions  in which the  Company's  common  stock  traded for
$14.50  per  share.   However,   management  has  not  ascertained   that  these
transactions  are the result of arm's length  negotiations  between the parties,
and because of the limited  number of shares  involved,  these prices may not be
indicative of the market value of the common stock.

         As of December 31, 2001, there were approximately 893 holders of record
of the Company's  common stock,  excluding  individual  participants in security
position listings.



                                       9
<PAGE>

Dividends

         The Company  has never paid any cash  dividends,  and to  maintain  its
capital,  does not expect to pay cash dividends in the near future. The dividend
policy of the Company is subject to the discretion of the Board of Directors and
depends upon a number of factors, including earnings, financial conditions, cash
needs  and  general  business  conditions,  as  well  as  applicable  regulatory
considerations.  Because the Company has no  operations  other than those of the
Bank and presently has no income of its own, the Company would rely on dividends
from the Bank as its principal  source of cash to pay dividends.  South Carolina
banking  regulations  restrict the amount of cash  dividends that can be paid to
shareholders,  and all of the Bank's cash dividends to shareholders  are subject
to the prior  approval  of the  South  Carolina  Commissioner  of  Banking.  The
information  set  forth  in  Note  19 to the  Company's  Consolidated  Financial
Statements  which are set forth  under  Item 7 below is  incorporated  herein by
reference.

         The  payment  of  dividends  by the  Company  and the  Bank may also be
affected  or limited by other  factors,  such as the  requirements  to  maintain
adequate capital above regulatory guidelines. In addition, if, in the opinion of
the applicable regulatory authority, a bank under its jurisdiction is engaged in
or is about to engage in an unsafe or unsound practice (which,  depending on the
financial  condition of the Bank, could include the payment of dividends),  such
authority may require, after notice and hearing, that such bank cease and desist
from  such  practice.  The  Federal  Reserve  and the FDIC  have  issued  policy
statements  which  provide that bank holding  companies and insured banks should
generally only pay dividends out of current operating earnings.

Issuance of Unregistered Securities

         In connection  with the Bank's  initial  public  offering,  each of its
organizers  received a warrant to  purchase  5,000  shares of the Bank's  common
stock. Upon acquisition of the Bank by the Company,  the warrants were converted
into warrants to purchase  common stock of the Company.  The exercise  price for
the warrants is $10 per share and they may be exercised over a ten-year  period.
The right to exercise  the  warrants  vested with  respect to  one-third  of the
warrants  on June 15,  2000,  and will vest with  respect  to  one-third  of the
remaining  warrants  on each of June 15, 2001 and June 15,  2002,  so long as an
organizer has served  continuously as a director from the Bank's formation until
the vesting  date.  Assuming all of the warrants  issued to the  organizers  are
exercised and that the Company  issues no further  common stock,  the organizers
would own an aggregate of 244,150 shares,  or 40%, of the Company's  outstanding
common stock.

         On January 1, 2001,  pursuant  to a  transaction  in which the  Company
became a one-bank  holding  company  for  Hartsville  Community  Bank,  National
Association, the Company exchanged 560,270 shares of its common stock for all of
the 560,270  outstanding  shares of common stock of Hartsville  Community  Bank,
National  Association.  The Company did not  register  issuance of its shares in
this  transaction  in reliance on the exemption  from  registration  provided by
Section 3(a)(12) of the Securities Act of 1933.


                                       10

<Page>

Item 6.   Management's Discussion and Analysis or Plan of Operation
                              Basis of Presentation

The following  discussion  should be read in conjunction  with the the Company's
Financial Statements and the Notes thereto and the other financial data included
elsewhere in this Annual Report.  The financial  information  provided below has
been  rounded in order to simplify  its  presentation.  However,  the ratios and
percentages   provided  below  are  calculated  using  the  detailed   financial
information  contained in the  Financial  Statements,  the Notes thereto and the
other financial data included elsewhere in this Annual Report.

The  terrorist  attacks that occurred in New York City and  Washington,  D.C. on
September 11, 2001, and the United States'  subsequent  response to these events
exacerbated a general  economic  slowdown that may adversely  affect our banking
business.  Economic  slowdowns or recessions  in our primary  market area may be
accompanied  by reduced  demand for  credit,  decreasing  interest  margins  and
declining  real  estate  values,  which may in turn  result in a decrease in net
earnings and an increased  possibility  of potential loan losses in the event of
default.  Any  sustained  period  of  decreased  economic  activity,   increased
delinquencies,  foreclosures  or losses  could  limit our growth and  negatively
affect our results of  operations.  We cannot  predict the extent or duration of
these events or their effect upon our business and operations. We will, however,
closely  monitor  the  effect  of  these  events  upon  our  business,  and make
adjustments to our business strategy as we deem necessary.

                                     General

On January 1, 2001, Hartsville Community Bank (the "Bank") became a wholly-owned
subsidiary of Regional Bankshares, Inc. (the Company). The Company acquired 100%
of the outstanding  common stock of the Bank. The Company was formed to serve as
a holding  company for the Bank. On January 10, 2001,  the Bank converted from a
nationally-chartered  bank to a state-chartered  bank.  Management believes that
the  conversion  will  more  accurately  reflect  the  operating  philosophy  of
management and the Board of Directors.

On May 10,  2001,  the Company  moved its  operations  to its newly  constructed
headquarters at 206 South Fifth Street in Hartsville,  South Carolina. The 8,250
square  foot  facility  allowed  the  Company to locate its main bank branch and
operations center into one facility.  The cost of the building was approximately
$1,328,844.  Additional  furniture  and  equipment  purchased  for the  building
totaled approximately $244,058.

The Bank opened for business on June 15, 1999. The principal  business  activity
of the Bank is to provide banking services to domestic  markets,  principally in
Darlington County,  South Carolina.  The deposits of the Bank are insured by the
Federal  Deposit  Insurance  Corporation.  In addition to providing  traditional
banking  services,  the Bank has a mortgage  loan  division.  The mortgage  loan
division  originates  loans to purchase  existing or construct  new homes and to
refinance existing  mortgages.  During 2001, the Bank hired an investment broker
to offer investment and brokerage  services to the Company's  customers  through
Raymond James Financial  Services,  Inc., a registered  broker-dealer firm. This
service  is  located  in space  leased  by the  Company  on  Carolina  Avenue in
Hartsville, South Carolina.




                                       11
<Page>

Organizing  activities for the Bank began in September 1998. Upon the completion
of the  application  process with the Office of the  Comptroller of the Currency
for national bank status and with the Federal Deposit Insurance  Corporation for
deposit insurance, the Bank was ready to issue stock. The Bank received approval
for the  authorization  to issue 2,000,000 shares of its common stock. The stock
sale resulted in the issuance of 560,270  shares at a price of $10.00 per share.
The offering resulted in capital totaling $5,533,541, net of selling expenses of
$69,159. The Bank began operations on June 15, 1999 at its temporary facility on
South Fourth Street in Hartsville, South Carolina.

                              Results of Operations

Year ended December 31, 2001, compared with year ended December 31, 2000

Net interest income increased  $395,513,  or 52.80%,  to $1,144,576 in 2001 from
$749,063 in 2000.  The increase in net interest  income was due  primarily to an
increase in average earning assets. Average earning assets increased $9,599,000,
or 64.50%, due to continued growth in the loan portfolio. The primary components
of interest  income were interest on loans,  including  fees, of $1,834,066  and
interest on federal funds sold of $133,228.

The Company's net interest  spread and net interest margin were 3.98% and 4.68%,
respectively,  in 2001 compared to 3.36% and 5.03%,  respectively,  in 2000. The
increase in net interest spread was primarily the result of management's efforts
to increase  loans,  which  generally have  relatively high interest rates, as a
percentage  of total  earning  assets and to  control  interest  rates  during a
declining  interest rate environment.  Yields on all earning assets,  other than
nonmarketable  equity  securities,  declined in 2001.  Yields on earning  assets
decreased  from  8.67%  in 2000 to 8.16% in  2001.  Yields  on  interest-bearing
liabilities decreased from 5.31% in 2000 to 4.18% in 2001.

The provision for loan losses was $129,841 in 2001 compared to $118,884 in 2000.
The Company  continues  to  maintain  the  allowance  for loan losses at a level
management  believes to be sufficient to cover known and inherent  losses in the
loan portfolio.

Noninterest  income  increased  $127,422,  or 118.18%,  to $235,245 in 2001 from
$107,823 in 2000. The increase is primarily  attributable  to increased  service
charges on deposit accounts.  Service charges increased $84,240,  or 179.82%, to
$131,088 for the year ended December 31, 2001.  The increase in service  charges
on deposit  accounts was  attributable  to an overall  increase in the number of
deposit  accounts  over the two years.  Residential  mortgage  origination  fees
increased  $29,315,  or 99.32%, to $58,830 for the year ended December 31, 2001.
The  decline in  interest  rates  during  2001  resulted  in more home  mortgage
refinancings.

Noninterest  expense increased  $191,697,  or 14.72%, to $1,494,220 in 2001 from
$1,302,523 in 2000. Noninterest expenses increased in all categories as a result
of our continued growth.  Other operating expenses increased $76,889 to $568,579
for the year ended  December 31,  2001.  The Company  incurred  $26,365 in legal
expenses in 2001 associated with the formation of the holding company.  Salaries
and benefits increased $84,920,  or 12.85%, to $745,844 in 2001 from $660,924 in
2000.  This increase is  attributable  to normal pay increases and the hiring of
additional  staff to meet  needs  associated  with  our  growth.  The  Company's
efficiency  ratio was 108.29% in 2001 compared to 152.01% in 2000.  The decrease
is attributable  to the increase in net interest income and noninterest  income.
The efficiency ratio is defined as noninterest expense divided by the sum of net
interest  income  and  noninterest  income,  net of gains and losses on sales of
assets.

The net loss was  $154,830  in 2001  compared to a net loss of $355,367 in 2000.
The  decrease in net loss  reflects our  continued  growth,  as  average-earning
assets  increased  from  $14,882,000  for the year ended  December  31,  2000 to
$24,481,000  for the year ended  December  31,  2001.  Return on average  assets
during 2001 was (0.55)%  compared to (2.14)%  during 2000, and return on average
equity was (3.44)% during 2001 compared to (7.51)% during 2000.

A comparison  between 2000 and 1999 is not relevant since the Bank was only open
for business 6.5 months in 1999.




                                       12
<Page>

                               Net Interest Income

General.  The largest  component of the Company's net income is its net interest
income, which is the difference between the income earned on assets and interest
paid on deposits and borrowings used to support such assets. Net interest income
is determined by the yields earned on the Company's  interest-earning assets and
the rates paid on its  interest-bearing  liabilities,  the  relative  amounts of
interest-earning  assets  and  interest-bearing  liabilities,  and the degree of
mismatch and the maturity and repricing  characteristics of its interest-earning
assets and  interest-bearing  liabilities.  Total interest  earning assets yield
less total  interest  bearing  liabilities  rate  represents  the  Company's net
interest rate spread.

Average  Balances,  Income and Expenses,  and Rates.  The  following  table sets
forth, for the years  indicated,  certain  information  related to the Company's
average  balance  sheet and its average  yields on assets and  average  costs of
liabilities.  Such  yields  are  derived  by  dividing  income or expense by the
average balance of the  corresponding  assets or liabilities.  Average  balances
have been derived from the daily balances throughout the periods indicated.

Average Balances, Income and Expenses, and Rates

<Table>
<Caption>
                                                                2001                                        2000
                                                 --------------------------------------      ---------------------------------------
                                                 Average       Income/           Yield/      Average        Income/           Yield/
(Dollars in thousands)                           Balance       Expense           Rate        Balance        Expense           Rate
                                                 -------       -------           ----        -------        -------           ----
Assets:
 Earning Assets:
<S>                                              <C>             <C>              <C>        <C>             <C>               <C>
    Loans (1) ...............................    $21,060         $ 1,834          8.71%      $10,052         $   992           9.87%
    Securities, taxable (2) .................        353              22          6.23           344              22           6.40
    Nonmarketable securities ................        104               9          8.65           192               9           4.69
    Federal funds sold ......................      2,964             133          4.49         4,294             267           6.22
                                                 -------         -------                     -------         -------
     Total earning assets ...................     24,481           1,998          8.16        14,882           1,290           8.67
                                                 -------         -------                     -------         -------
 Cash and due from banks ....................      1,151                                        675
 Premises and equipment .....................      1,868                                        686
 Other assets ...............................        728                                        486
 Allowance for loan losses ..................       (209)                                       (98)
                                                 -------                                    -------
      Total assets ..........................    $28,019                                    $16,631
                                                 =======                                    =======
Liabilities:
 Interest-bearing liabilities:
    Interest-bearing transaction accounts ...    $ 3,010             34           1.13%     $ 1,376               32           2.33%
    Savings deposits ........................      5,169            162           3.13        2,728              124           4.55
    Time deposits ...........................     11,597            640           5.52        6,080              385           6.33
    Other short-term borrowings .............        626             17           2.72            -                -              -
                                                 -------         ------                     -------          -------
     Total interest-bearing liabilities......     20,402            853           4.18       10,184              541           5.31
                                                 -------         ------                     -------          -------
  Demand deposits ...........................      2,793                                      1,552
  Accrued interest and other liabilities ....        321                                        163
  Shareholders' equity ......................      4,503                                      4,732
                                                 -------                                    -------
      Total liabilities and
       shareholders' equity .................    $28,019                                    $16,631
                                                 =======                                    =======
 Net interest spread ........................                                     3.98%                                        3.36%
 Net interest income ........................                    $1,145                                      $   749
                                                                 ======                                      =======
 Net interest margin ........................                                     4.68%                                        5.03%
</Table>



(1)  The  effect  of  fees  collected  on  loans  is  not   significant  to  the
computations.  Nonaccrual  loans are not included in average  balances on loans.
All loans and deposits are domestic.
(2) Average investment  securities exclude the valuation allowance on securities
available-for-sale.




                                       13
<Page>

                              Rate/Volume Analysis

Analysis of Changes in Net  Interest  Income.  Net  interest  income can also be
analyzed  in terms of the impact of  changing  rates and  changing  volume.  The
following  table  describes  the extent to which  changes in interest  rates and
changes in the volume of earning assets and  interest-bearing  liabilities  have
affected the Company's  interest income and interest  expense during the periods
indicated.  Information on changes in each category  attributable to (i) changes
due to volume (change in volume  multiplied by prior period rate),  (ii) changes
due to rates  (changes in rates  multiplied  by prior  period  volume) and (iii)
changes in  rate/volume  (change in rate  multiplied by the change in volume) is
provided as follows:

<Table>
<Caption>
                                                                                      2001 compared to 2000
                                                                                  Due to increase (decrease) in
 (Dollars in thousands)                                          Volume (1)         Rate (1)        Volume/Rate             Total
                                                                 ----------         --------        -----------             -----
Interest income:
<S>                                                             <C>                 <C>                 <C>                 <C>
  Loans ................................................           $ 1,085            $  (116)           $  (127)           $   842
  Securities, taxable ..................................                 1                 (1)                 -                  -
  Nonmarketable securities .............................                (3)                 6                 (3)                 -
  Federal funds sold and other .........................               (83)               (74)                23               (134)
                                                                   -------            -------            -------            -------
     Total interest income .............................             1,000               (185)              (107)               708
                                                                   -------            -------            -------            -------
Interest expense:
  Interest-bearing deposits ............................               509               (110)              (104)               295
  Short-term borrowings ................................                 -                  -                 17                 17
                                                                   -------            -------            -------            -------
     Total interest expense ............................               509               (110)               (87)               312
                                                                   -------            -------            -------            -------
       Net interest income .............................           $   491            $   (75)           $   (20)           $   396
                                                                   =======            =======            =======            =======
</Table>
<Table>
<Caption>
                                                                                      2000 compared to 1999
                                                                                  Due to increase (decrease) in
 (Dollars in thousands)                                            Volume             Rate          Volume/Rate             Total
                                                                 ----------         --------        -----------             -----
Interest income:
<S>                                                                <C>                <C>                <C>                <C>
  Loans ................................................           $   859            $    (4)           $   (21)           $   834
  Securities, taxable ..................................                18                  -                  3                 21
  Nonmarketable securities .............................                 5                 (1)                (1)                 3
  Federal funds sold and other .........................               111                  1                  1                113
                                                                   -------            -------            -------            -------
     Total interest income .............................               993                 (4)               (18)               971
                                                                   -------            -------            -------            -------
Interest expense:
  Interest-bearing deposits ............................               383                 12                 45                440
                                                                   -------            -------            -------            -------
     Total interest expense ............................               383                 12                 45                440
                                                                   -------            -------            -------            -------
      Net interest income ..............................           $   610            $   (16)           $   (63)           $   531
                                                                   =======            =======            =======            =======
</Table>
(1)  Volume-rate  changes  have been  allocated  to each  category  based on the
     percentage of the total change.




                                       14
<Page>

                               Net Interest Income

Interest Sensitivity.  The Company monitors and manages the pricing and maturity
of its assets and liabilities in order to diminish the potential  adverse impact
that  changes in  interest  rates  could have on its net  interest  income.  The
principal monitoring technique employed by the Company is the measurement of the
Company's  interest  sensitivity "gap," which is the positive or negative dollar
difference  between  assets and  liabilities  that are subject to interest  rate
repricing  within a given  period  of time.  Interest  rate  sensitivity  can be
managed   by   repricing    assets   or    liabilities,    selling    securities
available-for-sale,  replacing an asset or  liability at maturity,  or adjusting
the interest rate during the life of an asset or liability.  Managing the amount
of assets and  liabilities  repricing in this same time interval  helps to hedge
the risk and  minimize  the impact on net  interest  income of rising or falling
interest rates.

The following table sets forth the Bank's interest rate  sensitivity at December
31, 2001.

Interest Sensitivity Analysis

<Table>
<Caption>
                                                                            After One  After Three             Greater
                                                                             Through    Through     Within     Than One
December 31, 2001                                            Within One      Three       Twelve      One      Year or Non-
 (Dollars in thousands)                                        Month         Months      Months      Year      Sensitive      Total
                                                               -----         ------      ------      ----      ---------      -----
Assets
Interest-earning assets
<S>                                                          <C>          <C>           <C>         <C>          <C>        <C>
  Loans ..................................................   $  6,081     $  1,090      $  2,097    $  9,268     $ 17,606   $ 26,874
  Securities, taxable ....................................          -          201           153         354            -        354
  Nonmarktable securities ................................        138            -             -         138            -        138
  Federal funds sold .....................................      2,846            -             -       2,846            -      2,846
                                                             --------     --------      --------    --------     --------   --------
     Total earning assets ...............................      9,065        1,291         2,250      12,606       17,606     30,212
                                                             --------     --------      --------    --------     --------   --------

Liabilities
Interest-bearing liabilities:
  Interest-bearing deposits:
    Demand deposits ......................................      5,270            -             -       5,270            -      5,270
    Savings deposits .....................................      5,250            -             -       5,250            -      5,250
    Time deposits ........................................      1,367        2,959         9,005      13,331          480     13,811
                                                             --------     --------      --------    --------     --------   --------
      Total interest-bearing deposits ....................     11,887        2,959         9,005      23,851          480     24,331
                                                             --------     --------      --------    --------     --------   --------
  Advances from Federal Home Loan Bank ...................          -            -         1,750       1,750            -      1,750
                                                             --------     --------      --------    --------     --------   --------
      Total interest-bearing liabilities .................     11,887        2,959        10,755      25,601          480     26,081
                                                             --------     --------      --------    --------     --------   --------
Period gap ...............................................   $ (2,822)    $ (1,668)     $ (8,505)   $(12,995)    $ 17,126
                                                             ========     ========      ========     ========    ========
Cumulative gap ...........................................   $ (2,822)    $ (4,490)     $(12,995)   $(12,995)    $  4,131
                                                             ========     ========      ========     ========    ========
Ratio of cumulative gap to total earning assets ..........      (9.34)%     (14.86)%      (43.01)%    (43.01)%      13.67%
</Table>

The  above  table   reflects  the  balances  of   interest-earning   assets  and
interest-bearing  liabilities  at the  earlier of their  repricing  or  maturity
dates.  Overnight  federal funds are reflected at the earliest  pricing interval
due to the immediately available nature of the instruments.  Debt securities are
reflected at each instrument's ultimate maturity date. Scheduled payment amounts
of fixed rate  amortizing  loans are reflected at each  scheduled  payment date.
Scheduled  payment  amounts of variable rate  amortizing  loans are reflected at
each scheduled  payment date until the loan may be repriced  contractually;  the
unamortized  balance is  reflected at that point.  Interest-bearing  liabilities
with no  contractual  maturity,  such as savings  deposits and  interest-bearing
transaction  accounts,  are  reflected in the earliest  repricing  period due to
contractual  arrangements  which give the  Company the  opportunity  to vary the
rates paid on those deposits within a thirty-day or shorter period. However, the
Company is not  obligated  to vary the rates paid on these  deposits  within any
given period. Fixed rate time deposits, principally certificates of deposit, are
reflected at their contractual maturity dates.




                                       15
<Page>

                         Net Interest Income (continued)

The Company  generally  would benefit from  increasing  market rates of interest
when it has an  asset-sensitive  gap position and  generally  would benefit from
decreasing market rates of interest when it is liability-sensitive.  The Company
is cumulatively  liability-sensitive  for all periods within one year.  However,
the  Company's  gap  analysis  is  not  a  precise  indicator  of  its  interest
sensitivity position.  The analysis presents only a static view of the timing of
maturities and repricing  opportunities,  without taking into consideration that
changes in interest rates do not affect all assets and liabilities  equally. For
example,  rates  paid on a  substantial  portion  of core  deposits  may  change
contractually  within a relatively  short time frame, but those rates are viewed
by management as significantly less  interest-sensitive  than market-based rates
such as those  paid on  noncore  deposits.  Accordingly,  management  believes a
liability-sensitive  gap position is not as  indicative  of the  Company's  true
interest  sensitivity  as it would be for an  organization  which  depends  to a
greater extent on purchased funds to support earning assets. Net interest income
may  be  impacted  by  other  significant  factors  in  a  given  interest  rate
environment,  including  changes in the  volume  and mix of  earning  assets and
interest-bearing liabilities.

                     Provision and Allowance for Loan Losses

General.  The Company has developed  policies and  procedures for evaluating the
overall  quality  of its  credit  portfolio  and the  timely  identification  of
potential  problem  credits.  On a  quarterly  basis,  the  Company's  Board  of
Directors reviews and approves the appropriate level for the Company's allowance
for loan  losses  based upon  management's  recommendations,  the results of the
internal monitoring and reporting system, and an analysis of economic conditions
in its market.  The experience of management with other  financial  institutions
and the experience of other financial  institutions in the area has been to fund
the allowance  for loan losses at  approximately  1% of total loans  outstanding
until a history is established for the Company.

Additions to the allowance for loan losses,  which are expensed as the provision
for loan losses on the Company's  statement of income,  are made periodically to
maintain the allowance at an appropriate level based on management's analysis of
the  inherent  losses in the loan  portfolio.  Loan  losses and  recoveries  are
charged or credited directly to the allowance.  The amount of the provision is a
function of the level of loans  outstanding,  the level of nonperforming  loans,
historical  loan loss  experience,  the amount of loan losses  actually  charged
against the reserve during a given period, and current and anticipated  economic
conditions.

The Company's  allowance for loan losses is based upon judgments and assumptions
of risk elements in the portfolio, future economic conditions, and other factors
affecting  borrowers.  The  process  includes  identification  and  analysis  of
inherent losses in various  portfolio  segments  utilizing a credit risk grading
process and specific reviews and evaluations of significant  problem credits. In
addition,  management  monitors the overall portfolio quality through observable
trends in delinquency,  chargeoffs,  and general and economic  conditions in the
service   area.   The  adequacy  of  the  allowance  for  loan  losses  and  the
effectiveness of the Company's  monitoring and analysis system are also reviewed
periodically by the banking regulators and the Company's independent auditors.

Based on present information and an ongoing evaluation, management considers the
allowance  for loan losses to be adequate to meet  presently  known and inherent
losses in the loan  portfolio.  Management's  judgment about the adequacy of the
allowance is based upon a number of  assumptions  about  future  events which it
believes to be reasonable but which may or may not be accurate.  Thus, there can
be no assurance that  chargeoffs in future periods will not exceed the allowance
for loan losses or that  additional  increases in the  allowance for loan losses
will not be  required.  The Company does not  allocate  the  allowance  for loan
losses to specific  categories of loans but evaluates the adequacy on an overall
portfolio basis  utilizing a risk grading system.  Although real estate mortgage
loans comprise the largest category of total loans, the relative risk associated
with these loans is considered  less than  traditional  commercial  and consumer
loans.  Commercial  and consumer loans are usually  secured by collateral  other
than real estate and therefore contain a higher degree of risk.



                                       16
<Page>

               Provision and Allowance for Loan Losses (continued)

The following table sets forth certain information with respect to the Company's
allowance for loan losses and the  composition  of chargeoffs and recoveries for
the years ended  December  31, 2001 and 2000 and for the period June 15, 1999 to
December 31, 1999.

Allowance for Loan Losses

<Table>
<Caption>
(Dollars in thousands)                                                                    2001             2000              1999
                                                                                          ----             ----              ----
<S>                                                                                     <C>               <C>               <C>
Total loans outstanding at end of period .....................................          $26,874           $15,157           $ 5,536
                                                                                        =======           =======           =======
Average loans outstanding ....................................................          $21,060           $10,052           $ 1,604
                                                                                        =======           =======           =======
Balance of allowance for loan losses at beginning of period ..................          $   159           $    55               $ -
Loans charged off:
  Real estate - construction .................................................                -                 -                 -
  Real estate - mortgage .....................................................                -                 -                 -
  Commercial and industrial ..................................................                4                 -                 -
  Consumer and other .........................................................               19                21                 7
                                                                                        -------           -------           -------
     Total loan losses .......................................................               23                21                 7
                                                                                        -------           -------           -------
Recoveries of previous loan losses:
  Real estate - construction .................................................                -                 -                 -
  Real estate - mortgage .....................................................                -                 -                 -
  Commercial and industrial ..................................................                -                 -                 -
  Consumer and other .........................................................                2                 6                 -
                                                                                        -------           -------           -------
     Total recoveries ........................................................                2                 6                 -
                                                                                        -------           -------           -------
Net charge-offs ..............................................................               21                15                 7
Provision for loan losses ....................................................              130               119                62
                                                                                        -------           -------           -------
Balance of allowance for loan losses at end of period ........................          $   268           $   159           $    55
                                                                                        =======           =======           =======

Allowance for loan losses to period end loans ................................             1.00%             1.05%             0.99%
Ratio of chargeoffs to average loans .........................................             0.10%             0.15%             0.44%
</Table>


                              Nonperforming Assets

Nonperforming  Assets.  There were loans totaling $9,314 in nonaccrual status at
December  31,  2001.  There was one loan with a principal  balance of $10,789 in
nonaccrual status at December 31, 2000. There were no loans past due ninety days
or more and still accruing  interest at December 31, 2001 or 2000. There were no
restructured loans at December 31, 2001 or 2000.

Accrual of interest is discontinued on a loan when  management  believes,  after
considering  economic and business conditions and collection  efforts,  that the
borrower's  financial  condition  is such that the  collection  of  interest  is
doubtful.  A delinquent  loan is generally  placed in nonaccrual  status when it
becomes 90 days or more past due.  When a loan is placed in  nonaccrual  status,
all interest  which has been accrued on the loan but remains  unpaid is reversed
and deducted from current  earnings as a reduction of reported  interest income.
No additional  interest is accrued on the loan balance  until the  collection of
both principal and interest becomes reasonably  certain.  When a problem loan is
finally  resolved,  there may ultimately be an actual write-down or chargeoff of
the principal balance of the loan which would necessitate  additional charges to
earnings. For all periods presented, the additional interest income, which would
have been  recognized into earnings if the Company's  nonaccrual  loans had been
current in  accordance  with  their  original  terms and the amount of  interest
income on such loans that was included in net income, is immaterial.



                                       17
<Page>

                        Nonperforming Assets (continued)

Potential  Problem  Loans.  At December  31,  2001,  the Company had  identified
$13,817 in criticized  loans and $8,695 in classified loans through its internal
review  mechanisms.  At December 31, 2000, the Company had identified $39,597 in
criticized  loans and $12,766 in classified  loans  through its internal  review
mechanisms.  The  results of this  internal  review  process are  considered  in
determining  management's  assessment  of the adequacy of the allowance for loan
losses. Until a history is established, the overall objective of the Company has
been to maintain  the  allowance  for loan losses at  approximately  1% of total
loans to provide for inherent loan losses.

                         Noninterest Income and Expense

Noninterest Income.  Noninterest income for the year ended December 31, 2001 was
$235,245,  an increase of $127,422 from $107,823 for the year ended December 31,
2000.  The increase is  primarily a result of an increase in service  charges on
deposit  accounts from $46,848 for the year ended  December 31, 2000 to $131,088
for the year ended  December 31, 2001.  Residential  mortgage  origination  fees
increased  $29,315 or 99.32% from  $29,515 in 2000 to $58,830 for the year ended
December 31, 2001.

Noninterest  income for the year ended December 31, 2000 totaled  $107,823.  The
largest  component of  noninterest  income for the year ended December 31, 2000,
was service  charges on deposit  accounts  which  totaled  $46,848.  This amount
included NSF and overdraft  fees of $22,846.  Residential  mortgage  origination
fees totaled $29,515 for the year ended December 31, 2000.

The following  table sets forth the principal  components of noninterest  income
for the years ended  December 31, 2001 and 2000 and for the period June 15, 1999
to December 31, 1999.

(Dollars in thousands)                                  2001      2000      1999
                                                        ----      ----      ----
Service charges on deposit accounts ..............      $131      $ 47      $ 15
Credit life insurance commissions ................         9        14        11
Residential mortgage origination fees ............        59        30         8
Other income .....................................        36        17         5
                                                        ----      ----      ----
     Total noninterest income ....................      $235      $108      $ 39
                                                        ====      ====      ====

Noninterest  Expense.  Noninterest  expense  increased  $191,697  or  14.72%  to
$1,494,220 for the year ended December 31, 2001. Of this total,  other operating
expenses increased $76,889, or 15.64% to $568,579 in 2001 from $491,690 in 2000.
The  Company  incurred  $26,365 of legal  expenses in 2001  associated  with the
formation  of the holding  company.  Salaries and  employee  benefits  increased
$84,920, or 12.85%, in 2001 from $660,924 in 2000. This increase is attributable
to normal  pay  increases  and the  hiring  of  additional  staff to meet  needs
associated  with our growth.  Occupancy  expense  and  furniture  and  equipment
expense  increased  in  2001 as a  result  of the  new  corporate  headquarters.
Occupancy expense,  including depreciation charges, increased $11,791, or 19.63%
to $71,855 for the year ended December 31, 2001. Furniture and equipment expense
increased from $89,845 in 2000 to $107,942 for the year ended December 31, 2001.

Salaries and employee  benefits,  the largest component of noninterest  expense,
was $660,924  for the year ended  December 31,  2000.  Furniture  and  equipment
expense and net occupancy expense totaled $89,845 and $60,064, respectively, for
the year ended December 31, 2000. Other operating  expenses totaled $491,690 for
the year.  The largest item in other  operating  expenses was the service bureau
data processing charges which totaled $83,728.



                                       18
<Page>

                   Noninterest Income and Expense (continued)

The following table sets forth the primary components of noninterest expense for
the years ended  December  31, 2001 and 2000 and for the period June 15, 1999 to
December 31, 1999.

(Dollars in thousands)                               2001       2000        1999
                                                     ----       ----        ----
Salaries and employee benefits ................    $  746     $  661     $  532
Net occupancy and equipment expense ...........       180        150        100
Advertising and public relations ..............        36         65         71
Office supplies, stationery, and printing .....        30         36         55
Service bureau and related expense ............        99         84         41
Professional fees and services ................        90         51        111
Telephone expenses ............................        24         19         20
Other .........................................       289        237        187
                                                   ------     ------     ------
     Total noninterest expense ................    $1,494     $1,303     $1,117
                                                   ======     ======     ======
Efficiency ratio ..............................    108.29%    152.01%    433.48%


                                 Earning Assets

Loans.  Loans are the largest  category of earning assets and typically  provide
higher yields than the other types of earning assets. Associated with the higher
loan  yields  are the  inherent  credit and  liquidity  risks  which  management
attempts to control  and  counterbalance.  Loans  averaged  $21,060,000  in 2001
compared to  $10,052,000  in 2000,  an increase of  $11,008,000  or 109.51%.  At
December 31,  2001,  total loans were  $26,873,907  compared to  $15,157,361  at
December 31, 2000.

The following table sets forth the composition of the loan portfolio by category
at the dates  indicated and  highlights  the Company's  general  emphasis on all
types of lending.

Composition of Loan Portfolio

<Table>
<Caption>
December 31,                                                            2001                                  2000
                                                             -------------------------------       ---------------------------------
(Dollars in thousands)                                         Amount       Percent of Total         Amount         Percent of Total
                                                             --------       ----------------       --------         ----------------
<S>                                                          <C>                <C>                <C>                   <C>
Commercial and industrial ........................           $  3,634            13.52%            $  3,329               21.96%
Real estate
  Construction ...................................              2,231             8.30                1,439                9.49
  Mortgage-residential ...........................              8,654            32.20                4,421               29.17
  Mortgage-nonresidential ........................              7,356            27.37                1,937               12.78
Consumer .........................................              4,998            18.60                3,956               26.11
Other ............................................                  1             0.01                   75                0.49
                                                             --------           ------             --------              ------
      Total loans ................................             26,874           100.00%              15,157              100.00%
Allowance for loan losses ........................               (268)                                 (159)
                                                             --------                              --------
     Net loans ...................................           $ 26,606                              $ 14,998
                                                             ========                              ========
</Table>

The largest  component of the Company's loan  portfolio is real estate  mortgage
loans. At December 31, 2001, real estate mortgage loans totaled  $16,010,012 and
represented 59.57% of the total loan portfolio, compared to $6,357,811 or 41.95%
at December 31, 2000.



                                       19
<Page>

                           Earning Assets (continued)

In the context of this  discussion,  a "real estate mortgage loan" is defined as
any loan,  other than loans for construction  purposes,  secured by real estate,
regardless  of the  purpose of the loan.  It is common  practice  for  financial
institutions in the Company's market area to obtain a security  interest in real
estate whenever possible,  in addition to any other available  collateral.  This
collateral is taken to reinforce the likelihood of the ultimate repayment of the
loan and tends to increase  the  magnitude  of the real  estate  loan  portfolio
component.

Residential   mortgage  loans  totaled  $8,653,796  at  December  31,  2001  and
represented  32.20% of the total  loan  portfolio,  compared  to  $4,421,265  at
December 31,  2000.  Residential  real estate loans  consist of first and second
mortgages  on  single  or  multi-family  residential  dwellings.  Nonresidential
mortgage  loans,  which  include  commercial  loans and other  loans  secured by
multi-family  properties and farmland,  totaled $7,356,216 at December 31, 2001,
compared to  $1,936,546  at December 31, 2000.  This  represents  an increase of
$5,419,670  or  279.86%  from the  December  31,  2000  amount.  The  demand for
residential  and  commercial  real  estate  loans in the  Hartsville  market has
remained stable.  The Company has been able to compete favorably for residential
mortgage loans with other financial institutions by offering fixed rate products
having three and five year call provisions.

The  Company's  loan  portfolio  is also  comprised  heavily of consumer  loans.
Consumer  and other  loans  increased  $967,442,  or 24.00%,  to  $4,998,705  at
December 31, 2001 from $4,031,263 at December 31, 2000.

Commercial and industrial  loans  increased  $305,313 or 9.17%, to $3,634,353 at
December 31, 2001 from $3,329,040 at December 31, 2000.

The Company's loan portfolio reflects the diversity of its market. The Company's
home office is located in Hartsville in Darlington County,  South Carolina.  The
economy of  Hartsville  contains  elements  of medium  and light  manufacturing,
higher education, regional health care, and distribution facilities.  Management
expects the area to remain stable with continued growth in the near future.  The
diversity of the economy  creates  opportunities  for all types of lending.  The
Company does not engage in foreign lending.

The repayment of loans in the loan  portfolio as they mature is also a source of
liquidity for the Company.  The following  table sets forth the Company's  loans
maturing within specified intervals at December 31, 2001.

Loan Maturity Schedule and Sensitivity to Changes in Interest Rates

<Table>
<Caption>
                                                                                      Over One Year
December 31, 2001                                                   One Year or          Through          Over Five
 (Dollars in thousands)                                                Less            Five Years           Years             Total
                                                                    -----------        ----------           -----             -----
<S>                                                                    <C>               <C>               <C>               <C>
Commercial and industrial ..................................           $ 1,817           $ 1,739           $    78           $ 3,634
Real estate ................................................             6,378            10,095             1,768            18,241
Consumer and other .........................................             1,073             3,902                24             4,999
                                                                       -------           -------           -------           -------
                                                                       $ 9,268           $15,736           $ 1,870           $26,874
                                                                       -------           -------           -------           -------

Loans maturing after one year with:
  Fixed interest rates .....................................                                                                 $10,783
  Floating interest rates ..................................                                                                   6,823
                                                                                                                             -------
                                                                                                                             $17,606
                                                                                                                             =======
</Table>



                                       20
<Page>

                           Earning Assets (continued)

The  information  presented in the preceding  table is based on the  contractual
maturities  of the  individual  loans,  including  loans which may be subject to
renewal  at their  contractual  maturity.  Renewal  of such  loans is subject to
review and credit approval as well as modification of terms upon their maturity.
Consequently,  management  believes this treatment  presents fairly the maturity
and repricing structure of the loan portfolio shown in the above table.

Investment  Securities.  The investment securities portfolio is also a component
of the  Company's  total earning  assets.  Total  securities  available-for-sale
averaged  $353,000 in 2001,  compared to $344,000 in 2000. At December 31, 2001,
total  securities  available-for-sale  were $353,672.  Other than  nonmarketable
equity securities, all securities were designated as available-for-sale and were
recorded at their  estimated  fair value.  Investment  securities  also  include
certain  nonmarketable  equity securities including Federal Home Loan Bank stock
and Community Financial  Services,  Inc. stock. These securities are recorded at
their original cost and totaled $137,553 at December 31, 2001.

The   following   table   sets   forth   the  book   value  of  the   securities
available-for-sale held by the Company at December 31, 2001 and 2000.

Book Value of Securities

 December 31,                                                   2001        2000
                                                                ----        ----
(Dollars in thousands)
U.S. government agencies and corporations ..............        $349        $347
                                                                ----        ----

   Total securities available-for-sale .................        $349        $347
                                                                ====        ====


The following  table sets forth the scheduled  maturities  and weighted  average
yields of securities available-for-sale held at December 31, 2001.

Investment Securities Maturity Distribution and Yields

                                                 After One But
December 31, 2001                              Within Five Years      Total
                                               -----------------      -----
(Dollars in thousands)                         Amount    Yield   Amount    Yield
                                               ------    -----   ------    -----
U.S. government agencies and corporations ..   $354      6.23%    $354     6.23%
                                               ----               ----
  Total securities available for sale ......   $354      6.23%    $354     6.23%
                                               ====               ====


Other attributes of the securities  portfolio,  including yields and maturities,
are  discussed  above  in  "---Net  Interest  Income---   Interest   Sensitivity
Analysis."

Short-Term  Investments.  Short-term  investments,  which  consist  primarily of
federal funds sold, averaged $2,964,000 in 2001, compared to $4,294,000 in 2000.
At December 31, 2001, short-term investments totaled $2,845,956. These funds are
an important  source of the  Company's  liquidity.  Federal  funds are generally
invested in an earning capacity on an overnight basis.

                                       21
<Page>

                 Deposits and Other Interest-Bearing Liabilities

Average  interest-bearing  liabilities  increased  $10,218,000,  or  100.33%  to
$20,402,000 in 2001, from $10,184,000 in 2000. Average interest-bearing deposits
increased  $9,592,000,  or 94.19%,  to $19,776,000 in 2001, from  $10,184,000 in
2000.   These   increases   resulted  from   increases  in  all   categories  of
interest-bearing  liabilities,  primarily as a result of the continued growth of
the Company.

Deposits.   Average  total  deposits  increased   $10,833,000,   or  92.31%,  to
$22,569,000  in 2001,  from  $11,736,000  in 2000.  At December 31, 2001,  total
deposits were $27,742,137,  compared to $18,464,219 a year earlier,  an increase
of 50.25%.

The  following  table sets forth the  deposits  of the  Company by  category  at
December 31, 2001 and 2000.

Deposits

<Table>
<Caption>
December 31,                                                                      2001                            2000
                                                                                  ----                            ----
                                                                                          Percent of                      Percent of
(Dollars in thousands)                                                   Amount            Deposits          Amount        Deposits
                                                                         ------            --------          ------        --------
<S>                                                                    <C>                  <C>            <C>               <C>
Demand deposit accounts ....................................           $ 3,412               12.30%        $ 2,305            12.48%
NOW accounts ...............................................             5,270               19.00           2,726            14.76
Money market accounts ......................................             4,758               17.15           3,247            17.59
Savings accounts ...........................................               491                1.77             165             0.89
Time deposits less than $100,000 ...........................             8,558               30.85           6,119            33.14
Time deposits of $100,000 or over ..........................             5,253               18.93           3,902            21.14
                                                                       -------              ------         -------           ------
     Total deposits ........................................           $27,742              100.00%        $18,464           100.00%
                                                                       =======                             =======           ======
</Table>


Core  deposits,  which  exclude  time  deposits of  $100,000 or more,  provide a
relatively  stable  funding  source for the Company's  loan  portfolio and other
earning  assets.  The Company's  core deposits were  $22,489,084 at December 31,
2001.

Deposits, and particularly core deposits, have been the Company's primary source
of funding and have enabled the Company to meet successfully both its short-term
and long-term  liquidity needs.  Management  anticipates that such deposits will
continue  to be the  Company's  primary  source of  funding in the  future.  The
Company's  loan-to-deposit  ratio was 96.87% at December 31, 2001, and 82.09% at
December 31, 2000. The maturity distribution of the Company's time deposits over
$100,000 at December 31, 2001, is set forth in the following table:

Maturities of Time Deposits of $100,000 or More

<Table>
<Caption>
                                                                                                  After Six
                                                                                    After Three   Through
                                                                    Within Three   Through Six     Twelve    After Twelve
(Dollars in thousands)                                                 Months        Months        Months        Months       Total
                                                                       ------        ------        ------        ------       -----
<S>                                                                    <C>           <C>           <C>           <C>          <C>
 Certificates of deposit of $100,000 or more ..................        $1,510        $1,312        $2,131        $  300       $5,253
</Table>


Approximately  28.75% of the  Company's  time  deposits  of $100,000 or more had
scheduled  maturities within three months,  and 53.72% had maturities within six
months. Large certificate of deposit customers tend to be extremely sensitive to
interest rate levels, making these deposits less reliable sources of funding for
liquidity planning purposes than core deposits.


                                       22
<Page>

                                     Capital

The Federal  Reserve  Board and bank  regulatory  agencies  require bank holding
companies  and financial  institutions  to maintain  capital at adequate  levels
based on a percentage of assets and  off-balance-sheet  exposures,  adjusted for
risk weights ranging form 0% to 100%. Under the risk-based standard,  capital is
classified  into two tiers.  Tier 1 capital of the  Company  consists  of common
shareholders' equity minus certain intangible assets. Tier 2 capital consists of
the allowance  for loan losses  subject to certain  limitations.  A bank holding
company's  qualifying  capital base for purposes of its risk-based capital ratio
consists  of the sum of its Tier 1 and Tier 2 capital.  The  regulatory  minimum
requirements are 4% for Tier 1 and 8% for total risk-based capital.  The holding
company  and banking  subsidiary  are also  required  to  maintain  capital at a
minimum level based on quarterly average assets,  which is known as the leverage
ratio.  Only the  strongest  bank  holding  companies  and banks are  allowed to
maintain  capital  at  the  minimum  requirement.  All  others  are  subject  to
maintaining ratios 100 to 200 basis points above the minimum.

Analysis of Capital and Capital Ratios

                                                         The Bank    The Company
                                                         --------    -----------
(Dollars in thousands)
Tier 1 capital ...................................       $ 4,436        $ 4,449
Tier 2 capital ...................................           268            268
                                                         -------        -------
     Total qualifying capital ....................       $ 4,704        $ 4,717
                                                         =======        =======

Risk-adjusted total assets
 (including off-balance-sheet exposures) .........       $28,983        $28,993
                                                         =======        =======

Risk-based capital ratios:
  Tier 1 risk-based capital ratio ................         15.30%         15.35%
  Total risk-based capital ratio .................         16.23%         16.27%
  Tier 1 leverage ratio ..........................         13.49%         13.53%


                   Liquidity Management and Capital Resources

Liquidity management involves monitoring the Company's sources and uses of funds
in order to meet its day-to-day cash flow requirements while maximizing profits.
Liquidity  represents  the  ability of a Company to convert  assets into cash or
cash  equivalents  without  significant  loss and to raise  additional  funds by
increasing liabilities.  Without proper liquidity management,  the Company would
not be able to perform the primary  function  of a  financial  intermediary  and
would, therefore, not be able to meet the needs of the communities it serves.

Liquidity  management  is made more  complex  because  different  balance  sheet
components are subject to varying  degrees of management  control.  For example,
the timing of maturities of the  investment  portfolio is very  predictable  and
subject to a high degree of control at the time  investment  decisions are made.
However,  net deposit inflows and outflows are far less  predictable and are not
subject to nearly the same degree of control. Nevertheless,  management believes
that cash and cash  equivalents  in  combination  with deposit  inflows and loan
repayments  are  adequate  to meet  reasonably  foreseeable  demands for deposit
withdrawals and the funding of new loans.  The Company also has a line of credit
available  with  Federal  Home Loan Bank to borrow up to 10% of the Bank's total
assets as of  December  31,  2001,  or  $3,421,000.  The  Company  had  borrowed
$1,750,000  against  this line.  In  addition,  the Company has unused  lines to
purchase federal funds from unrelated banks totaling  $2,650,000 at December 31,
2001.


                                       23
<Page>

                               Impact of Inflation

Unlike  most  industrial  companies,  the assets and  liabilities  of  financial
institutions  such as the Company are primarily  monetary in nature.  Therefore,
interest rates have a more significant effect on the Company's  performance than
do the  effects of changes  in the  general  rate of  inflation  and  changes in
prices.  In  addition,  interest  rates  do not  necessarily  move  in the  same
direction  or in the same  magnitude  as the  prices of goods and  services.  As
discussed  previously,  management  seeks to manage  the  relationships  between
interest  sensitive  assets and  liabilities  in order to protect  against  wide
interest rate fluctuations, including those resulting from inflation.

                    Accounting and Financial Reporting Issues

In July, 2001 the Financial  Accounting  Standards Board (FASB) issued SFAS 141,
Business Combinations,  and SFAS 142, Goodwill and Other Intangible Assets. SFAS
141  eliminates  the pooling of  interests  method of  accounting  for  business
combinations  and requires the use of the purchase  method.  The Statement  also
requires that  intangible  assets be reported  separately  from  goodwill.  This
Statement is effective for all transactions initiated after June 30, 2001. Under
SFAS 142, goodwill is no longer subject to amortization;  however,  it should be
evaluated  for  impairment  on at least an annual basis and adjusted to its fair
value. In addition,  an acquired  intangible should be separately  recognized if
the benefit of the  intangible  asset is obtained  through  contractual or other
legal rights,  or if the intangible  asset can be sold,  transferred,  licensed,
rented or exchanged, regardless of intent to do so. However, the FASB recommends
that financial  institutions  continue to follow the basic guidelines of SFAS 72
in recording and amortizing goodwill and other unidentifiable intangible assets.
The Company adopted SFAS 141 on July 1, 2001. SFAS 142 is effective for entities
with fiscal years  beginning after December 15, 2001. The Company plans to adopt
SFAS 142 on January 1, 2002. The adoption of these  Statements will not have any
impact on the consolidated financial statements.

In June 1998, the FASB issued SFAS 133,  Accounting  for Derivative  Instruments
and Hedging  Activities,  which as amended by SFAS 137 and SFAS 138 is effective
for fiscal years  beginning  after June 15,  2000.  This  Statement  establishes
accounting  and  reporting  standards  for  derivative  instruments  and hedging
activities,   including  certain  derivative   instruments   embedded  in  other
contracts,  and requires that an entity  recognize all  derivatives as assets or
liabilities in the balance sheet and measure them at fair value.  The accounting
for changes in the fair value of a derivative  depends on how the  derivative is
used and how the  derivative  is  designated.  The Company  adopted  SFAS 133 on
January  1,  2001.  The  adoption  of SFAS 133 did not have  any  impact  on the
consolidated  financial statements since the Company did not have any derivative
instruments nor any derivative instruments embedded in other contracts in 2001.

                              Industry Developments

On November 4, 1999, the U.S.  Senate and House of  Representatives  each passed
the   Gramm-Leach-Bliley   Act,  previously  known  as  the  Financial  Services
Modernization  Act of 1999. The Act was signed into law by President  Clinton in
November 1999.  Among other things,  the Act repeals the  restrictions  on banks
affiliating  with  securities  firms  contained  in  sections  20  and 32 of the
Glass-Steagall Act. The Act also creates a new "financial holding company" under
the Bank Holding Company Act, which will permit holding companies to engage in a
statutorily  provided  list of financial  activities,  including  insurance  and
securities  underwriting and agency activities,  merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are  "complementary"  to financial  activities.  The Act is intended to grant to
community  banks  certain  powers as a matter of right that larger  institutions
have accumulated on an ad hoc basis.  Nevertheless,  the Act may have the result
of  increasing  the amount of  competition  that the  Company  faces from larger
institutions  and other  types of  companies.  In fact,  it is not  possible  to
predict the full effect that the Act will have on the Company.

From time to time,  various bills are  introduced in the United States  Congress
with  respect to the  regulation  of  financial  institutions.  Certain of these
proposals,  if adopted,  could significantly  change the regulation of banks and
the financial services industry. The Company cannot predict whether any of these
proposals will be adopted or, if adopted,  how these  proposals would affect the
Company.


                                       24
<Page>

Item 7.  Financial Statements.

Independent Auditors' Report
Consolidated Balance Sheets
Statements of Income
Statements of Changes in Shareholders' Equity and Comprehensive Income
Statements of Cash Flows
Notes to Consolidated Financial Statements






                       TOURVILLE, SIMPSON & CASKEY, L.L.P.
                          CERTIFIED PUBLIC ACCOUNTANTS
                              POST OFFICE BOX 1769
                         COLUMBIA, SOUTH CAROLINA 29202

                            TELEPHONE (803) 252-3000
                               FAX (803) 252-2226


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors
Regional Bankshares, Inc.
Hartsville, South Carolina


We have  audited  the  accompanying  consolidated  balance  sheets  of  Regional
Bankshares,  Inc. (formerly  Hartsville Community Bank, N.A.) as of December 31,
2001 and 2000 and the  related  consolidated  statements  of income,  changes in
shareholders'  equity  and  comprehensive  income,  and cash flows for the years
ended  December  31,  2001 and 2000 and for the period June 15, 1999 to December
31, 1999.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Regional Bankshares,  Inc., as
of December 31, 2001 and 2000 and the results of its  operations  and cash flows
for the years ended  December 31, 2001 and 2000 and for the period June 15, 1999
to December 31, 1999 in conformity with accounting principles generally accepted
in the United States of America.





Tourville, Simpson and Caskey, L.L.P.
Columbia, South Carolina
January 31, 2002



                                       25
<Page>

                            REGIONAL BANKSHARES, INC.


                           Consolidated Balance Sheets
                           December 31, 2001 and 2000

<Table>
<Caption>
                                                                                                        2001                2000
                                                                                                        ----                ----
Assets:
 Cash and cash equivalents:
<S>                                                                                                 <C>                <C>
  Cash and due from banks ....................................................................      $  1,350,004       $  1,408,628
  Federal funds sold .........................................................................         2,845,956          4,610,000
                                                                                                    ------------       ------------
     Total cash and cash equivalents .........................................................         4,195,960          6,018,628
                                                                                                    ------------       ------------

Investment securities:
  Securities available-for-sale ..............................................................           353,672            346,709
  Nonmarketable equity securities ............................................................           137,553            238,603
                                                                                                    ------------       ------------
     Total investment securities .............................................................           491,225            585,312
                                                                                                    ------------       ------------

Loans receivable: ............................................................................        26,873,907         15,157,361
  Less allowance for loan losses .............................................................          (268,446)          (159,000)
                                                                                                    ------------       ------------
    Loans, net ...............................................................................        26,605,461         14,998,361
                                                                                                    ------------       ------------

 Premises, furniture and equipment, net ......................................................         2,124,281          1,051,941
 Accrued interest receivable .................................................................           120,123             89,540
 Other assets ................................................................................           681,134            560,275
                                                                                                    ------------       ------------
     Total assets ............................................................................      $ 34,218,184       $ 23,304,057
                                                                                                    ============       ============

Liabilities:
 Deposits:
  Noninterest-bearing transaction accounts ...................................................      $  3,411,614       $  2,304,641
  Interest-bearing transaction accounts ......................................................         5,269,616          2,726,322
  Savings ....................................................................................         5,250,268          3,411,490
  Time deposits $100,000 and over ............................................................         5,253,053          3,902,384
  Other time deposits ........................................................................         8,557,586          6,119,382
                                                                                                    ------------       ------------
     Total deposits ..........................................................................        27,742,137         18,464,219
                                                                                                    ------------       ------------

  Advances from Federal Home Loan Bank .......................................................         1,750,000                  -
  Accrued interest payable ...................................................................           253,696            245,113
  Other liabilities ..........................................................................            20,112             24,005
                                                                                                    ------------       ------------
     Total liabilities .......................................................................        29,765,945         18,733,337
                                                                                                    ------------       ------------

Commitments and Contingencies (Notes 13 and 20)

Shareholders' Equity:
  Preferred stock, $1.00 par value, 1,000,000 shares authorized, none issued .................                 -                  -
  Common stock, $1.00 par value, 10,000,000 shares authorized; 563,670 and
  560,270 shares issued and outstanding at December 31, 2001 and 2000, respectively ..........           594,270            560,270
  Capital surplus ............................................................................         4,973,271          4,973,271
  Retained earnings (deficit) ................................................................        (1,118,042)          (963,212)
  Accumulated other comprehensive income .....................................................             2,740                391
                                                                                                    ------------       ------------
     Total shareholders' equity ..............................................................         4,452,239          4,570,720
                                                                                                    ------------       ------------

     Total liabilities and shareholders' equity ..............................................      $ 34,218,184       $ 23,304,057
                                                                                                    ============       ============
</Table>

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

                                       26
<Page>

                            REGIONAL BANKSHARES, INC.

                        Consolidated Statements of Income
                 for the years ended December 31, 2001 and 2000
              and for the period June 15, 1999 to December 31, 1999

<Table>
<Caption>
                                                                                    2001                 2000                1999
                                                                                    ----                 ----                ----
Interest income:
<S>                                                                           <C>                  <C>                  <C>
  Loans, including fees .............................................         $ 1,834,066          $   991,752          $   157,982
  Investment securities:
    Taxable .........................................................              22,299               22,110                1,202
    Nonmarketable equity securities .................................               8,176                8,907                5,465
  Federal funds sold ................................................             133,228              267,120              153,984
                                                                              -----------          -----------          -----------
     Total ..........................................................           1,997,769            1,289,889              318,633
                                                                              -----------          -----------          -----------

Interest expense:
  Time deposits $100,000 and over ...................................             232,289              134,967               13,499
  Other deposits ....................................................             604,271              405,859               66,677
  Advances from Federal Home Loan Bank ..............................              12,438                    -                    -
  Short-term borrowings .............................................               4,195                    -               20,241
                                                                              -----------          -----------          -----------
     Total ..........................................................             853,193              540,826              100,417
                                                                              -----------          -----------          -----------

Net interest income .................................................           1,144,576              749,063              218,216

Provision for loan losses ...........................................             129,841              118,884               61,637
                                                                              -----------          -----------          -----------

Net interest income after provision for loan losses .................           1,014,735              630,179              156,579
                                                                              -----------          -----------          -----------

Other income:
  Service charges on deposit accounts ...............................             131,088               46,848               15,420
  Credit life insurance commissions .................................               9,458               14,270               10,595
  Residential mortgage origination fees .............................              58,830               29,515                8,719
  Other income ......................................................              35,869               17,190                4,696
                                                                              -----------          -----------          -----------
     Total ..........................................................             235,245              107,823               39,430
                                                                              -----------          -----------          -----------

Other expenses:
  Salaries and employee benefits ....................................             745,844              660,924              531,874
  Net occupancy expense .............................................              71,855               60,064               46,865
  Furniture and equipment expense ...................................             107,942               89,845               53,246
  Other operating expenses ..........................................             568,579              491,690              484,869
                                                                              -----------          -----------          -----------
     Total ..........................................................           1,494,220            1,302,523            1,116,854
                                                                              -----------          -----------          -----------

Income (loss) before income taxes ...................................            (244,240)            (564,521)            (920,845)

Income tax provision (benefit) ......................................             (89,410)            (209,154)            (313,000)
                                                                              -----------          -----------          -----------

Net income (loss) ...................................................         $  (154,830)         $  (355,367)         $  (607,845)
                                                                              ===========          ===========          ===========

Earnings per share
Basic earnings (losses) per share ...................................         $     (0.28)         $     (0.63)         $     (1.08)
Diluted earnings (losses) per share .................................         $     (0.28)         $     (0.63)         $     (1.08)
</Table>

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


                                       27
<Page>

                            REGIONAL BANKSHARES, INC.

           Consolidated Statements of Changes in Shareholders' Equity
                  and Comprehensive Income for the years ended
                         December 31, 2001 and 2000 and
                for the period June 15, 1999 to December 31, 1999

<Table>
<Caption>
                                                                                                         Accumulated
                                                         Common Stock                        Retained      Other
                                                         ------------           Capital      Earnings   Comprehensive
                                                    Shares        Amount        Surplus      (Deficit)     Income           Total
                                                    ------        ------        -------      ---------     ------           -----
<S>                                                <C>        <C>            <C>           <C>            <C>           <C>
Common stock issued ........................       560,270    $   560,270    $ 5,042,430   $         -    $         -   $ 5,602,700

Cost of common stock issuance ..............                                     (69,159)                                   (69,159)

Net income (loss)
 for the period ............................                                                  (607,845)                    (607,845)

Other comprehensive ........................                                                                     (603)         (603)
                                                                                                                         -----------
 income (loss), net of tax
 benefit of $310

Comprehensive income .......................                                                                               (608,448)
                                               -----------    -----------    -----------   -----------    -----------   -----------

Balance, December 31, 1999 .................       560,270        560,270      4,973,271      (607,845)          (603)    4,925,093


Net income (loss) ..........................                                                  (355,367)                    (355,367)

Other comprehensive
 income (loss), net of tax expense of $539 .                                                                      994           994
                                                                                                                        -----------

Comprehensive income .......................                                                                               (354,373)
                                               -----------    -----------    -----------   -----------    -----------   -----------

Balance, December 31, 2000 .................       560,270        560,270      4,973,271      (963,212)           391     4,570,720


Net income (loss) ..........................                                                  (154,830)                    (154,830)

Other comprehensive income (loss),
   net of tax expense of $1,380                                                                                 2,349         2,349
                                                                                                                        -----------

Comprehensive income .......................                                                                               (152,481)

Exercise of stock warrants .................         3,400         34,000                                                    34,000
                                               -----------    -----------    -----------   -----------    -----------   -----------

Balance, December 31, 2001 .................       563,670    $   594,270    $ 4,973,271   $(1,118,042)   $     2,740   $ 4,452,239
                                               ===========    ===========    ===========   ===========    ===========   ===========
</Table>

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


                                       28
<Page>

                            REGIONAL BANKSHARES, INC.


                      Consolidated Statements of Cash Flows
               for the years ended December 31, 2001 and 2000 and
                for the period June 15, 1999 to December 31, 1999

<Table>
<Caption>
                                                                                      2001              2000               1999
                                                                                      ----              ----               ----
Cash flows from operating activities:
<S>                                                                              <C>                <C>                <C>
Net income (loss) .........................................................      $   (154,830)      $   (355,367)      $   (607,845)
Adjustments to reconcile net income to net cash used
 by operating activities:
   Provision for possible loan losses .....................................           129,841            118,884             61,637
   Depreciation and amortization expense ..................................           115,494             75,789             44,789
   Accretion and premium amortization .....................................            (3,234)            (3,045)              (161)
   Deferred income tax provision (benefit) ................................           (89,410)          (209,154)          (313,000)
   Increase in accrued interest receivable ................................           (30,583)           (60,967)           (28,573)
   Increase in accrued interest payable ...................................             8,583            212,913             32,200
   Increase in other assets ...............................................           (32,829)           (17,347)           (21,003)
   (Decrease) increase in other liabilities ...............................            (3,893)            (1,602)            25,607
                                                                                 ------------       ------------       ------------
     Net cash used by operating activities ................................           (60,861)          (239,896)          (806,349)
                                                                                 ------------       ------------       ------------

Cash flows from investing activities:
   Purchases of securities available-for-sale .............................                 -                  -           (342,883)
   Purchase of nonmarketable equity securities ............................           (67,100)           (70,453)          (168,150)
   Sale of nonmarketable equity securities ................................           168,150                  -                  -
   Net increase in loans to customers .....................................       (11,736,941)        (9,635,385)        (5,543,497)
   Purchase of premises and equipment .....................................        (1,187,834)          (520,511)          (652,008)
                                                                                 ------------       ------------       ------------
     Net cash used by investing activities ................................       (12,823,725)       (10,226,349)        (6,706,538)
                                                                                 ------------       ------------       ------------

Cash flows from financing activities:
   Net increase in demand deposits, interest-bearing
     transaction accounts and savings accounts  ...........................         5,489,045          4,809,774          3,632,679
   Net increase in certificates of deposit and other time deposits ........         3,788,873          7,311,079          2,710,687
   Advances from Federal Home Loan Bank ...................................         1,750,000                  -                  -
   Proceeds from exercise of stock warrants ...............................            34,000                  -                  -
   Issuance of common stock, net of direct costs ..........................                 -                  -          5,533,541
                                                                                 ------------       ------------       ------------
     Net cash provided by financing activities ............................        11,061,918         12,120,853         11,876,907
                                                                                 ------------       ------------       ------------

Net increase (decrease) in cash and cash equivalents ......................        (1,822,668)         1,654,608          4,364,020

Cash and cash equivalents, beginning of period ............................         6,018,628          4,364,020                  -
                                                                                 ------------       ------------       ------------

Cash and cash equivalents, end of period ..................................      $  4,195,960       $  6,018,628       $  4,364,020
                                                                                 ============       ============       ============
</Table>

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


                                       29
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - Regional Bankshares, Inc. (the Company) was incorporated to serve
as a bank holding  company for its  subsidiary,  Hartsville  Community Bank (the
Bank).  Hartsville  Community Bank was  incorporated as a national bank on March
24, 1999 and commenced  business on June 15, 1999. The Bank converted to a South
Carolina state bank on January 10, 2001. The principal  business activity of the
Bank  is to  provide  banking  services  to  domestic  markets,  principally  in
Darlington County, South Carolina.  The Bank is a state-chartered  bank, and its
deposits  are  insured  by  the  Federal  Deposit  Insurance  Corporation.   The
consolidated financial statements include the accounts of the parent company and
its wholly-owned  subsidiary after  elimination of all significant  intercompany
balances and transactions.

Management's  Estimates - 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  assets and 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.

Material  estimates that are  particularly  susceptible  to  significant  change
relate to the  determination  of the  allowance  for losses on loans,  including
valuation  allowances  for  impaired  loans,  and the  valuation  of real estate
acquired  in  connection  with  foreclosures  or in  satisfaction  of loans.  In
connection  with the  determination  of the  allowances  for losses on loans and
foreclosed  real  estate,   management   obtains   independent   appraisals  for
significant  properties.  Management must also make estimates in determining the
estimated useful lives and methods for depreciating premises and equipment.

While  management  uses available  information to recognize  losses on loans and
foreclosed  real estate,  future  additions to the  allowances  may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an  integral  part of their  examination  process,  periodically  review  the
Company's  allowances  for  losses on loans and  foreclosed  real  estate.  Such
agencies may require the Company to recognize  additions to the allowances based
on their  judgments  about  information  available  to them at the time of their
examination.  Because  of these  factors,  it is  reasonably  possible  that the
allowances for losses on loans and foreclosed real estate may change  materially
in the near term.

Significant  Group  Concentrations  of  Credit  Risk  - Most  of  the  Company's
activities  are  with  customers  located  within  Darlington  County  in  South
Carolina.  The types of securities in which the Company invests are discussed in
Note 4. The types of lending in which the Company  engages are discussed in Note
5. The Company does not have any significant  concentrations to any one industry
or customer.

Securities  Available-for-Sale  - Securities  available-for-sale  are carried at
amortized  cost and  adjusted  to  estimated  market  value by  recognizing  the
aggregate  unrealized gains or losses in a valuation  account.  Aggregate market
valuation  adjustments  are  recorded  in  shareholders'  equity net of deferred
income taxes.  Reductions  in market value  considered by management to be other
than temporary are reported as a realized loss and a reduction in the cost basis
of the security.  The adjusted cost basis of investments  available-for-sale  is
determined by specific  identification and is used in computing the gain or loss
upon sale.

Nonmarketable  Equity Securities - Nonmarketable  equity securities  include the
cost of the  Company's  investment  in the stock of the  Federal  Reserve  Bank,
Federal Home Loan Bank, and Community Financial  Services,  Inc. The stocks have
no quoted  market value and no ready market  exists.  Investment  in the Federal
Home Loan Bank is a condition of borrowing  from the Federal Home Loan Bank, and
the stock is pledged to collateralize such borrowings.  At December 31, 2001 and
2000,  the Bank's  investment  in Federal  Home Loan Bank stock was  $87,500 and
$20,400,  respectively.  At December 31, 2001, and 2000  investment in Community
Financial  Services,  Inc. was $50,053.  The investment in Federal  Reserve Bank
stock which  totaled  $168,150 at December 31, 2000 was disposed of in 2001 when
the Bank  converted  from a  national  bank  charter  to a state  bank  charter.
Dividends  received  on these  stocks are  included as a separate  component  of
interest income.


                                       30
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Loans - Loans are stated at their unpaid principal  balance.  Interest income is
computed using the simple interest method and is recorded in the period earned.

When  serious  doubt  exists as to the  collectibility  of a loan or when a loan
becomes  90 days  past due as to  principal  or  interest,  interest  income  is
generally  discontinued  unless the estimated net realizable value of collateral
exceeds the principal balance and accrued  interest.  When interest accruals are
discontinued, income earned but not collected is reversed.

The Company  identifies  impaired loans through its normal  internal loan review
process.  Loans  on  the  Company's  problem  loan  watch  list  are  considered
potentially impaired loans. These loans are evaluated in determining whether all
outstanding  principal and interest are expected to be collected.  Loans are not
considered  impaired if a minimal  payment  delay  occurs and all  amounts  due,
including  accrued  interest at the contractual  interest rate for the period of
delay,  are  expected to be  collected.  At December 31,  2001,  management  has
determined that no impairment of loans existed that would have a material effect
on the Company's financial statements.

Allowance  for Loan Losses - An allowance for possible loan losses is maintained
at a level deemed  appropriate by management to provide adequately for known and
inherent losses in the loan portfolio.  The allowance is based upon a continuing
review of past loan loss  experience,  current  and future  economic  conditions
which may affect the borrowers'  ability to pay, and the  underlying  collateral
value of the loans.  Loans which are deemed to be uncollectible  are charged off
and deducted  from the  allowance.  The  provision  for possible loan losses and
recoveries of loans previously charged off are added to the allowance.

Premises  and  Equipment  - Premises  and  equipment  are  stated at cost,  less
accumulated  depreciation.  The  provision for  depreciation  is computed by the
straight-line  method,  based on the  estimated  useful lives for  furniture and
equipment of 5 to 7 years and buildings of 40 years.  Leasehold improvements are
amortized  over 20 years.  The cost of assets sold or otherwise  disposed of and
the related  allowance for depreciation are eliminated from the accounts and the
resulting  gains or losses are reflected in the income  statement when incurred.
Maintenance  and  repairs  are  charged to current  expense.  The costs of major
renewals and improvements are capitalized.

Income Taxes - Income taxes are the sum of amounts  currently  payable to taxing
authorities  and the net changes in income taxes payable or refundable in future
years.  Income  taxes  deferred  to future  years  are  determined  utilizing  a
liability   approach.   This  method  gives  consideration  to  the  future  tax
consequences  associated with differences  between financial  accounting and tax
bases of certain assets and liabilities  which are principally the allowance for
loan losses and depreciable premises and equipment.

Retirement   Plan  -  The  Company  has  a  SIMPLE   retirement   plan  covering
substantially all employees.  Under the plan, participants are permitted to make
discretionary  contributions  up to  $6,000.  The  Company  can  match  employee
contributions by contributing up to 3% of each employee's annual compensation up
to a maximum of $3,000.  The Company matched  contributions  in 2001,  2000, and
1999 and charges to earnings were $13,743, $15,411, and $8,145, respectively.


                                       31
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock Compensation  Plans.  Statement of Financial  Accounting  Standards (SFAS)
123, Accounting for Stock-Based Compensation, encourages all entities to adopt a
fair value based method of accounting  for employee  stock  compensation  plans,
whereby  compensation  cost is  measured at the grant date based on the value of
the award and is  recognized  over the  service  period,  which is  usually  the
vesting  period.  However,  it also  allows  an entity to  continue  to  measure
compensation  cost for those plans  using the  intrinsic  value based  method of
accounting  prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees,  whereby compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date (or other  measurement
date) over the amount an employee  must pay to acquire the stock.  Stock options
issued under the  Company's  stock  option plan have no  intrinsic  value at the
grant date,  and under Opinion No. 25 no  compensation  cost is  recognized  for
them.  The Company has elected to continue with the  accounting  methodology  in
Opinion  No. 25 and, as a result,  will  provide  pro forma  disclosures  of net
income and earnings per share and other disclosures,  as if the fair value based
method of accounting had been applied. See Note 14.


Earnings Per Share - Basic  earnings per share  represents  income  available to
shareholders divided by the weighted-average number of common shares outstanding
during the period.  Diluted earnings per share reflects additional common shares
that would have been  outstanding if dilutive  potential  common shares had been
issued,  as well as any  adjustment to income that would result from the assumed
issuance.  Since no stock options have been issued, potential common shares that
may be issued by the Company  relate  solely to  outstanding  warrants,  and are
determined using the treasury stock method.

Comprehensive  Income - Accounting  principles generally require that recognized
revenue, expenses, gains, and losses be included in net income. Although certain
changes  in assets  and  liabilities,  such as  unrealized  gains and  losses on
available-for-sale  securities,  are  reported  as a separate  component  of the
equity  section of the balance  sheet,  such items,  along with net income,  are
components of comprehensive income.

The  components  of other  comprehensive  income and related tax effects for the
years  ended  December  31,  2001 and 2000 and for the period  June 15,  1999 to
December 31, 1999 are as follows:

<Table>
<Caption>
                                                                                              2001           2000             1999
                                                                                              ----           ----             ----
<S>                                                                                         <C>             <C>             <C>
Unrealized gains (losses) on available-for-sale securities: ........................        $ 3,729         $ 1,533         $  (913)
Reclassification adjustment for (gains) losses realized in net income ..............              -               -               -
                                                                                            -------         -------         -------

Net unrealized gains (losses) on securities ........................................          3,729           1,533            (913)

Tax effect .........................................................................         (1,380)           (539)            310
                                                                                            -------         -------         -------

Net-of-tax amount ..................................................................        $ 2,349         $   994         $  (603)
                                                                                            =======         =======         =======
</Table>

Statement of Cash Flows - For purposes of reporting  cash flows in the financial
statements,  the  Company  considers  certain  highly  liquid  debt  instruments
purchased with a maturity of three months or less to be cash  equivalents.  Cash
equivalents  include  amounts due from banks and federal funds sold.  Generally,
federal funds are sold for one-day periods.

Interest paid on deposits and other borrowings totaled $844,610,  $327,913,  and
$68,217 for the years ended  December  31, 2001 and 2000 and for the period June
15,1999 to December 31, 1999, respectively.


                                       32
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

There were no income tax payments  during the years ended  December 31, 2001 and
2000 or during the period June 15, 1999 to December 31, 1999.

Changes in the valuation account of securities available-for-sale, including the
deferred tax effects,  are considered  noncash  transactions for purposes of the
statement  of cash  flows  and are  presented  in  detail  in the  notes  to the
financial statements.

Off-Balance-Sheet  Financial  Instruments - In the ordinary  course of business,
the Company enters into  off-balance-sheet  financial instruments  consisting of
commitments to extend credit and letters of credit. These financial  instruments
are  recorded  in the  financial  statements  when they  become  payable  by the
customer.

Recent  Accounting  Pronouncements  - In  July,  2001 the  Financial  Accounting
Standards  Board (FASB) issued SFAS 141,  Business  Combinations,  and SFAS 142,
Goodwill  and Other  Intangible  Assets.  SFAS 141  eliminates  the  pooling  of
interests method of accounting for business combinations and requires the use of
the purchase  method.  The Statement  also requires  that  intangible  assets be
reported  separately  from  goodwill.   This  Statement  is  effective  for  all
transactions  initiated  after June 30,  2001.  Under SFAS 142,  goodwill  is no
longer subject to amortization;  however,  it should be evaluated for impairment
on at least an annual  basis and  adjusted to its fair value.  In  addition,  an
acquired  intangible  should be  separately  recognized  if the  benefit  of the
intangible  asset is obtained through  contractual or other legal rights,  or if
the intangible asset can be sold,  transferred,  licensed,  rented or exchanged,
regardless  of intent to do so.  However,  the FASB  recommends  that  financial
institutions continue to follow the basic guidelines of SFAS 72 in recording and
amortizing  goodwill and other  unidentifiable  intangible  assets.  The Company
adopted SFAS 141 on July 1, 2001. SFAS 142 is effective for entities with fiscal
years  beginning after December 15, 2001. The Company plans to adopt SFAS 142 on
January 1, 2002.  The  adoption of these  Statements  is not  expected to have a
material impact on the consolidated financial statements.

In June 1998, the FASB issued SFAS 133,  Accounting  for Derivative  Instruments
and Hedging  Activities,  which as amended by SFAS 137 and SFAS 138 is effective
for fiscal years  beginning  after June 15,  2000.  This  Statement  establishes
accounting  and  reporting  standards  for  derivative  instruments  and hedging
activities,   including  certain  derivative   instruments   embedded  in  other
contracts,  and requires that an entity  recognize all  derivatives as assets or
liabilities in the balance sheet and measure them at fair value.  The accounting
for changes in the fair value of a derivative  depends on how the  derivative is
used and how the  derivative  is  designated.  The Company  adopted  SFAS 133 on
January  1,  2001.  The  adoption  of SFAS 133 did not have  any  impact  on the
consolidated  financial statements since the Company did not have any derivative
instruments nor any derivative instruments embedded in other contracts in 2001.

Reclassifications  - Certain captions and amounts in the 2000 and 1999 financial
statements were reclassified to conform with the 2001 presentation.


                                       33
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 2 - CORPORATE REORGANIZATION

On November 15, 2000,  the  shareholders  of Hartsville  Community  Bank,  N.A.,
approved a plan of corporate  reorganization  under which  Hartsville  Community
Bank, N.A., became a wholly-owned  subsidiary of Regional Bankshares,  Inc. (the
Company), which was organized at the direction of the Company's management.  The
original  authorized  common stock of Regional  Bankshares,  Inc., is 10,000,000
shares  with a par  value  of $1.00  per  share.  In  addition,  the  authorized
preferred   stock  of  the  Company  is  1,000,000   shares.   Pursuant  to  the
reorganization,  the  Company  issued  560,270  shares  of its  common  stock in
exchange  for all of the  560,270  outstanding  common  shares of the Bank.  The
effective date of the  reorganization  was January 1, 2001 and was accounted for
as if it were a pooling of interests.  The accompanying financial statements for
the year ended  December  31,  2000 and for the period June 15, 1999 to December
31, 1999 are  unchanged  from the  amounts  previously  reported  by  Hartsville
Community Bank, N.A. A summary of the Bank's operations and shareholders' equity
as of and for the year  ended  December  31,  2000 are not  presented  since the
audited financial statements reflect those amounts.

On January 10, 2001, the Bank converted  from a  nationally-chartered  bank to a
state-chartered bank.


NOTE 3 - CASH AND DUE FROM BANKS

The Company is required to maintain cash balances with The Bankers Bank to cover
all cash letter  transactions.  At December 31, 2001, the requirement was met by
the cash balance in the account and by the line available for federal funds.


NOTE 4 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of securities available-for-sale at
December 31, 2001 and 2000 were:

<Table>
<Caption>
                                                                                               Gross Unrealized
                                                                       Amortized               ----------------       Estimated Fair
                                                                          Cost              Gains         Losses           Value
                                                                          ----              -----         ------           -----
December 31, 2001
<S>                                                                     <C>                <C>           <C>              <C>
U.S. government agencies and corporations ...................           $349,323           $  4,349      $      -         $353,672
                                                                        ========           ========      ========         ========

December 31, 2000
U.S. government agencies and corporations ...................           $346,089           $    623      $      3         $346,709
                                                                        ========           ========      ========         ========
</Table>


There were no sales of securities in 2001 or 2000.

The following is a summary of maturities of securities  available-for-sale as of
December 31, 2001. The amortized cost and estimated fair values are based on the
contractual  maturity  dates.  Actual  maturities  may differ  from  contractual
maturities  because  borrowers may have the right to call or prepay  obligations
with or without penalty.

                                                             Securities
                                                         Available-For-Sale
                                                         ------------------
                                                      Amortized   Estimated Fair
                                                        Cost           Value
                                                        ----           -----

Due after one year but within five years .........    $349,323        $353,672
                                                      ========        ========


At December 31, 2001 and 2000,  securities  with amortized costs of $149,573 and
$148,687 and estimated fair values of $152,672 and $148,684,  respectively, were
pledged to secure public deposits.


                                       34
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 5 - LOANS

Major  classifications  of loans  receivable  at December  31, 2001 and 2000 are
summarized as follows:

                                                      2001               2000
                                                      ----               ----
Real estate - construction ...............        $ 2,230,837        $ 1,439,247
Real estate - mortgage ...................         16,010,012          6,357,811
Commercial and industrial ................          3,634,353          3,329,040
Consumer and other .......................          4,998,705          4,031,263
                                                  -----------        -----------

    Total gross loans ....................        $26,873,907        $15,157,361
                                                  ===========        ===========

Transactions  in the allowance for loan losses for the years ended  December 31,
2001  and  2000  and for the  period  June 15,  1999 to  December  31,  1999 are
summarized below:

                                              2001        2000           1999
                                              ----        ----           ----
Balance, beginning of year ...........    $ 159,000     $  54,629     $       -
Provision charged to operations ......      129,841       118,884        61,637
Recoveries on
 loans previously charged-off ........        2,800         6,506             -
Loans charged-off ....................      (23,195)      (21,019)       (7,008)
                                          ---------     ---------     ---------

Balance, end of year .................    $ 268,446     $ 159,000     $  54,629
                                          =========     =========     =========

At December 31, 2001 and 2000, the Bank had loans in nonaccrual  status totaling
$9,314 and  $10,789,  respectively.  There were no loans past due ninety days or
more and still accruing interest at December 31, 2001 and 2000.

Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
Although the Company's loan portfolio is diversified,  a substantial  portion of
its  borrowers'  ability to honor the terms of their loans is  dependent  on the
economic conditions in Darlington County and surrounding areas.


NOTE 6 - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at December 31, 2001 and 2000:

                                                     2001               2000
                                                     ----               ----
Land and land improvements ...............       $   368,166        $   353,669
Building .................................         1,328,844                  -
Furniture and equipment ..................           653,076            354,237
Construction in progress .................                 -            464,613
                                                 -----------        -----------
    Total ................................         2,350,086          1,172,519
Less, accumulated depreciation ...........          (225,805)          (120,578)
                                                 -----------        -----------

    Premises and equipment, net ..........       $ 2,124,281        $ 1,051,941
                                                 ===========        ===========

The  Bank  capitalized   approximately  $16,575  in  interest  relating  to  the
construction of the new corporate headquarters during 2001.


                                       35
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 7 - DEPOSITS

At December 31, 2001, the scheduled  maturities of  certificates of deposit were
as follows:

 Maturing In                                                           Amount
 -----------                                                           ------
2002 .......................................................         $13,330,838
2003 .......................................................             431,801
2004 .......................................................                   -
2005 .......................................................                   -
2006 .......................................................              48,000
                                                                     -----------
     Total .................................................         $13,810,639
                                                                     ===========

NOTE 8 - ADVANCES FROM FEDERAL HOME LOAN BANK

Advances  from the Federal  Home Loan Bank  totaled  $1,750,000  at December 31,
2001. The two advances with contractual  amounts of $750,000 and $1,000,000 both
have interest rates of 1.83%. Both advances are variable rate and reprice daily.
The maturity date of the advances is August 21, 2002.  Advances from the Federal
Home Loan Bank are  secured by one to four  family  residential  mortgage  loans
which totaled  $6,529,193 at December 31, 2001 and by the Company's stock in the
Federal Home Loan Bank.


NOTE 9 - OTHER OPERATING EXPENSES

Other  operating  expenses for the year ended December 31, 2001 and 2000 and for
the period June 15, 1999 to December 31, 1999 are summarized below:

                                                    2001        2000      1999
                                                    ----        ----      ----
Professional fees .............................   $ 90,438   $ 51,074   $111,181
Telephone expenses ............................     24,442     19,405     20,013
Office supplies, stationery, and printing .....     29,685     35,682     54,706
Service bureau and related expenses ...........     99,010     83,728     41,018
Advertising and public relations ..............     35,993     64,746     70,525
ATM related expenses ..........................     32,303     18,898     10,664
Other .........................................    256,708    218,157    176,762
                                                  --------   --------   --------

     Total ....................................   $568,579   $491,690   $484,869
                                                  ========   ========   ========


                                       36
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 10 - INCOME TAXES

Income tax expense  (benefit) for the years ended December 31, 2001 and 2000 and
for the period June 15, 1999 to December 31, 1999 is summarized as follows:

<Table>
<Caption>
                                                                                  2001                  2000                 1999
                                                                                  ----                  ----                 ----
Currently payable:
<S>                                                                           <C>                   <C>                   <C>
  Federal ........................................................            $       -             $       -             $       -
  State ..........................................................                    -                     -                     -
                                                                              ---------             ---------             ---------
     Total current ...............................................                    -                     -                     -
                                                                              ---------             ---------             ---------
Change in deferred income taxes:
  Federal ........................................................              (77,299)             (184,232)             (276,726)
  State ..........................................................              (10,731)              (24,383)              (36,584)
                                                                              ---------             ---------             ---------
     Total deferred ..............................................              (88,030)             (208,615)             (313,310)
                                                                              ---------             ---------             ---------

Income tax expense ...............................................            $ (88,030)            $(208,615)            $(313,310)
                                                                              =========             =========             =========

Income tax expense is allocated as follows:
  To continuing operations .......................................            $ (89,410)            $(209,154)            $(313,000)
  To shareholders' equity ........................................                1,380                   539                  (310)
                                                                              ---------             ---------             ---------

     Income tax expense ..........................................            $ (88,030)            $(208,615)            $(313,310)
                                                                              =========             =========             =========
</Table>


The gross  amounts of deferred  tax assets and deferred  tax  liabilities  as of
December 31, 2001 and 2000 are as follows:

                                                           2001           2000
                                                           ----           ----
 Deferred tax assets:
  Allowance for loan losses ..........................   $  98,482    $  58,652
  Contributions carryforward .........................       1,550        1,267
  Net operating loss carryforward ....................     501,545      435,660
  Organization costs .................................     714,543       89,053
  Other ..............................................         577            -
                                                         ---------    ---------
     Total gross deferred tax assets .................     673,608      584,632
  Less, valuation allowance ..........................     (45,171)     (42,744)
                                                         ---------    ---------
     Total net deferred tax assets ...................     628,437      541,888
                                                         ---------    ---------

Deferred tax liabilities:
  Unrealized gain on securities available-for-sale ...       1,609          229
  Accumulated depreciation ...........................      16,334       19,195
                                                         ---------    ---------
    Total deferred tax liabilities ...................      17,943       19,424
                                                         ---------    ---------

    Net deferred tax asset ...........................   $ 610,494    $ 522,464
                                                         =========    =========


                                       37
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 10 - INCOME TAXES (continued)

Deferred tax assets  represent the future tax benefit of deductible  differences
and,  if it is more  likely  than not that a tax asset will not be  realized,  a
valuation  allowance is required to reduce the  recorded  deferred tax assets to
net realizable value. As of December 31, 2001, management has determined that it
is more likely than not that  $628,440 of the total  deferred  tax asset will be
realized, and accordingly, has established a valuation allowance of $45,168.

The Bank has a net  operating  loss for income tax purposes of  $1,293,557 as of
December 31, 2001. This net operating loss expires in the year 2020.

Reconciliation  between  the  income tax  expense  and the  amount  computed  by
applying the federal statutory rate of 34% to income before income taxes for the
years  ended  December  31,  2001 and 2000 and for the period  June 15,  1999 to
December 31, 1999 follows:

<Table>
<Caption>
                                                                                      2001               2000               1999
                                                                                      ----               ----               ----
<S>                                                                               <C>                 <C>                 <C>
Tax expense at statutory rate ..........................................          $ (83,041)          $(191,937)          $(313,087)
State income tax, net of federal income tax benefit ....................            (10,735)            (25,062)            (41,028)
Change in the deferred tax asset valuation allowance ...................              2,427               4,726              38,018
Other, net .............................................................              1,939               3,119               3,097
                                                                                  ---------           ---------           ---------
     Total .............................................................          $ (89,410)          $(209,154)          $(313,000)
                                                                                  =========           =========           =========
</Table>


NOTE 11 - LEASES

On October 1, 2001, the Company  entered into a lease agreement for office space
for its  brokerage  service  with the  employee  hired to manage  the  brokerage
business.  The lease has an initial term of one year which expires September 30,
2002 and is renewable,  at the Company's  option,  for an additional  year.  The
Company  pays rent at a rate of $800 per month.  Rent expense for the year ended
December 31, 2001 totaled $2,400.  The future minimum lease payment for the year
2002 is $7,200.

The Company  leased its main office  building  under an  operating  lease from a
third party until the Company  moved to its new  corporate  headquarters  in May
2001.  Rental expense for the years ended December 31, 2001 and 2000 and for the
period  June 15,  1999 to  December  31,  1999 was  $5,418,  $11,280 and $9,950,
respectively. The lease expired in May 2001.

The Company also leased the former operations center from Industrial Properties,
Inc. A director of the Bank is a shareholder  in this Company.  The building was
being rented on a monthly basis. Rental expense for the years ended December 31,
2001 and 2000 and for the period June 15, 1999 to December  31, 1999 was $6,400,
$19,200 and $1,600, respectively.


NOTE 12 - RELATED PARTY TRANSACTIONS

Certain parties  (principally  certain  directors and executive  officers of the
Company, their immediate families and business interests) were loan customers of
and had other  transactions  in the normal  course of business with the Company.
Related party loans are made on substantially the same terms, including interest
rates  and  collateral,   as  those   prevailing  at  the  time  for  comparable
transactions with unrelated persons and do not involve more than the normal risk
of  collectibility.  As of December  31, 2001 and 2000,  the Company had related
party loans  totaling  $2,412,585  and  $1,821,222,  respectively.  During 2001,
advances  on  related  party  loans  totaled   $1,769,523  and  repayments  were
$1,178,160.


                                       38
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 12 - RELATED PARTY TRANSACTIONS (continued)

As  discussed  in  Note  11,  the  Bank  leased  its  operations  center  from a
corporation of which a director is an officer and shareholder  through May 2001.
The total  amount paid to the  director  for rental  expense for the years ended
December  31, 2001 and 2000,  and for the period  June 15, 1999 to December  31,
1999 was $6,400, $19,200 and $1,600, respectively.

Janitorial  services are provided by a company in which the  president and owner
is a director of the Company.  The total amount paid to this company was $12,611
and $7,146, for the years ended December 31, 2001 and 2000, respectively.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company may, from time to time, become a
party to legal claims and disputes.  At December 31, 2001,  management and legal
counsel  are not aware of any pending or  threatened  litigation  or  unasserted
claims or  assessments  that  could  result in  losses,  if any,  that  would be
material to the financial statements.


NOTE 14 - STOCK COMPENSATION PLAN

On May 10, 2001, the shareholders  approved the Regional Bankshares,  Inc. "2001
Stock Option Plan" (the Plan).  The Plan provides for grants of "Incentive Stock
Options,"  within the meaning of section 422 of the  Internal  Revenue  Code and
"Non-qualified  Stock Options" that do not so qualify. The Plan provides for the
issuance of 50,000  shares of the  Company's  common  stock to officers  and key
employees.  Options  may be  granted  for a term  of up to ten  years  from  the
effective date of grant and become  exercisable  six months after being granted.
The Board of Directors  will  determine the per-share  exercise  price,  but for
incentive  stock  options the price will not be less than 100% of the fair value
of a share of common  stock on the date the  option is  granted.  There  were no
options issued in 2001.


NOTE 15 - STOCK WARRANTS

In accordance  with the provision of the  Company's  initial  public stock sale,
each of the twelve organizers received 5,000 stock warrants which gives them the
right to  purchase  5,000  shares of the  Company's  common  stock at a price of
$10.00 per share.  The warrants vest equally over a three-year  period beginning
June 15,  2000 and  expire on June 15,  2010 or ninety  days  after the  warrant
holder ceases to serve as a member of the Board of Directors.

A summary of the status of the Company's  stock warrants as of December 31, 2001
and 2000, and changes during the years is presented below:

                                                         2001            2000
                                                         ----            ----
                                                      Warrants        Warrants
                                                      --------        --------
Outstanding at beginning of year .................      60,000         60,000
Granted ..........................................           -              -
Exercised ........................................       3,400              -
Cancelled ........................................           -              -
                                                        ------         ------

Outstanding at ending of year ....................      56,600         60,000
                                                        ======         ======



At December 31, 2001, there were 36,600 warrants exercisable.



                                       39
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 16 - EARNINGS PER SHARE

Net  income  per  share - basic  is  computed  by  dividing  net  income  by the
weighted-average  number of common  shares  outstanding.  Net income per share -
diluted is  computed by dividing  net income by the  weighted-average  number of
common  shares  outstanding  and  dilutive  common share  equivalents  using the
treasury stock method.  Dilutive common share equivalents  include common shares
issuable upon exercise of outstanding  stock  warrants and stock options.  There
were no dilutive common share equivalents outstanding during 2001, 2000, or 1999
due to the net loss;  therefore,  basic earnings per share and diluted  earnings
per share were the same.

<Table>
<Caption>
                                                                                   2001                  2000                1999
                                                                                   ----                  ----                ----
Net income (loss) per share - basic computation:

<S>                                                                             <C>                  <C>                  <C>
Net income (loss) available to common shareholders ...................          $ (154,830)          $ (355,367)          $(607,845)
                                                                                ==========           ==========           =========

Average common shares outstanding - basic ............................             560,652              560,270             560,270
                                                                                ==========           ==========           =========

Net income (loss) per share - basic ..................................          $    (0.28)          $    (0.63)          $   (1.08)
                                                                                ==========           ==========           =========
</Table>


NOTE 17 - REGULATORY MATTERS

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 possibly  additional  discretionary  actions by
regulators  that, if undertaken,  could have a direct adverse 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  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to  maintain  minimum  ratios of Tier 1 and total  capital as a
percentage of assets and off-balance-sheet exposures,  adjusted for risk weights
ranging from 0% to 100%. Tier 1 capital consists of common shareholders' equity,
excluding the unrealized  gain or loss on securities  available-for-sale,  minus
certain  intangible  assets.  Tier 2 capital  consists of the allowance for loan
losses subject to certain  limitations.  Total capital for purposes of computing
the  capital  ratios  consists  of the sum of  Tier 1 and  Tier 2  capital.  The
regulatory  minimum  requirements  are 4% for Tier 1 and 8% for total risk-based
capital.

The Bank is also required to maintain  capital at a minimum level based on total
assets,  which is known as the  leverage  ratio.  Only the  strongest  banks are
allowed to  maintain  capital at the minimum  requirement  of 3%. All others are
subject to maintaining ratios 1% to 2% above the minimum.

As of December 31, 2001,  the most recent  notification  from the Bank's primary
regulator categorized it as well-capitalized  under the regulatory framework for
prompt  corrective  action.  There are no conditions  or events that  management
believes have changed the Bank's category.


                                       40
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 17 - REGULATORY MATTERS (continued)

The following  table  summarizes the capital  amounts and ratios of the Bank and
the regulatory minimum requirements at December 31, 2001 and 2000.

<Table>
<Caption>
                                                                                                                    To Be Well-
                                                                                                                 Capitalized Under
                                                                                           For Capital           Prompt Corrective
                                                                     Actual              Adequacy Purposes       Action Provisions
                                                                     ------              -----------------       -----------------
                                                              Amount          Ratio     Amount        Ratio    Amount         Ratio
                                                              ------          -----     ------        -----    ------         -----
December 31, 2001
The Bank
<S>                                                         <C>              <C>     <C>              <C>    <C>              <C>
   Total capital (to risk-weighted assets) ............     $4,703,962       16.23%  $2,318,659       8.00%  $2,898,324       10.00%
   Tier 1 capital (to risk-weighted assets) ...........      4,435,516       15.30%   1,159,330       4.00%   1,738,995        6.00%
   Tier 1 capital (to average assets) .................      4,435,516       13.49%   1,315,669       4.00%   1,644,586        5.00%

December 31, 2000
The Bank
   Total capital (to risk-weighted assets) ............     $4,729,329       27.77%  $1,362,662       8.00%  $1,703,327       10.00%
   Tier 1 capital (to risk-weighted assets) ...........      4,570,329       26.83%     681,331       4.00%   1,021,996        6.00%
   Tier 1 capital (to average assets) .................      4,570,329       21.70%     842,285       4.00%   1,052,856        5.00%
</Table>

The Federal Reserve has similar  requirements  for bank holding  companies.  The
Company is not  currently  subject to these  requirements  because  the  Federal
Reserve  guidelines  contain an exemption for bank holding  companies  with less
than $150,000,000 in consolidated assets.


NOTE 18 - UNUSED LINES OF CREDIT

As of December  31,  2001,  the  Company had unused  lines of credit to purchase
federal funds from unrelated  banks totaling  $2,650,000.  These lines of credit
are available on a one to fourteen day basis for general corporate purposes. The
Company  also has a line of credit to borrow  funds from the  Federal  Home Loan
Bank up to 10% of the  Bank's  total  assets,  which  totaled  $3,421,000  as of
December 31, 2001. As of December 31, 2001, the Bank had borrowed  $1,750,000 on
this line.


NOTE 19 - RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS, OR ADVANCES

South Carolina banking regulations  restrict the amount of dividends that can be
paid to shareholders.  All of the Bank's dividends to Regional Bankshares,  Inc.
are payable only from the  undivided  profits of the Bank. At December 31, 2001,
the Bank had negative  undivided  profits.  The Bank is  authorized  to pay cash
dividends up to 100% of net income in any calendar  year without  obtaining  the
prior approval of the  Commissioner of Banking provided that the Bank received a
composite  rating  of  one  or  two at the  last  Federal  or  State  regulatory
examination.  Under Federal Reserve Board  regulations,  the amounts of loans or
advances from the Bank to the parent company are also restricted.

                                       41
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 20 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company 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 consist of commitments to extend credit and standby
letters of credit.  Commitments  to extend  credit are  agreements  to lend to a
customer as long as there is no violation of any  condition  established  in the
contract. Commitments generally have fixed expiration dates or other termination
clauses  and may require  payment of a fee. A  commitment  involves,  to varying
degrees,  elements  of credit  and  interest  rate risk in excess of the  amount
recognized in the balance  sheet.  The Company's  exposure to credit loss in the
event of  nonperformance  by the other party to the instrument is represented by
the contractual notional amount of the instrument. Since certain commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company uses the same credit
policies in making commitments to extend credit as it does for  on-balance-sheet
instruments. Letters of credit are conditional commitments issued to guarantee a
customer's  performance  to a third party and have  essentially  the same credit
risk as other lending facilities.

Collateral held for commitments to extend credit varies but may include accounts
receivable,   inventory,   property,   plant,   equipment  and  income-producing
commercial properties.

The  following   table   summarizes  the  Bank's   off-balance-sheet   financial
instruments whose contract amounts represent credit risk as of December 31, 2001
and 2000:

                                                        2001             2000
                                                        ----             ----
Commitments to extend credit ...............        $4,084,418        $2,597,058
Standby letters of credit ..................           100,000                 -



NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair  value of a  financial  instrument  is the amount at which the asset or
obligation could be exchanged in a current  transaction between willing parties,
other than in a forced or liquidation  sale.  Fair value estimates are made at a
specific  point in time based on relevant  market  information  and  information
about  the  financial  instruments.   Because  no  market  value  exists  for  a
significant portion of the 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.

The following  methods and  assumptions  were used to estimate the fair value of
significant financial instruments:

Cash and Due from Banks - The carrying  amount is a reasonable  estimate of fair
value.

Federal  Funds  Sold -  Federal  funds  sold are for a term of one day,  and the
carrying amount approximates the fair value.

Investment Securities - The fair values of securities  available-for-sale  equal
the carrying  amounts,  which are the quoted  market  prices.  If quoted  market
prices  are not  available,  fair  values are based on quoted  market  prices of
comparable  securities.  The carrying value of nonmarketable  equity  securities
approximates the fair value since no ready market exists for the stocks.


                                       42
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Loans - For certain  categories of loans,  such as variable rate loans which are
repriced  frequently  and have no  significant  change in credit risk and credit
card receivables,  fair values are based on the carrying amounts. The fair value
of other types of loans is estimated by discounting  the future cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.

Deposits - The fair value of demand deposits, savings, and money market accounts
is the  amount  payable  on demand at the  reporting  date.  The fair  values of
certificates of deposit are estimated  using a discounted cash flow  calculation
that  applies  current  interest  rates to a  schedule  of  aggregated  expected
maturities.

Advances  from Federal Home Loan Bank - The  carrying  amounts of variable  rate
borrowings are  reasonable  estimates of fair value because they can be repriced
frequently.

Accrued  Interest   Receivable  and  Payable  -  The  carrying  value  of  these
instruments is a reasonable estimate of fair value.

Off-Balance-Sheet   Financial   Instruments  -  The  carrying  amount  for  loan
commitments which are off-balance-sheet  financial instruments  approximates the
fair value since the obligations are typically based on current market rates.

The  carrying  values  and  estimated  fair  values of the  Company's  financial
instruments as of December 31, 2001 and 2000 are as follows:

<Table>
<Caption>
                                                                                2001                                 2000
                                                                                ----                                 ----
                                                                     Carrying       Estimated Fair        Carrying   Estimated Fair
                                                                      Amount             Value             Amount         Value
                                                                      ------             -----             ------         -----
Financial Assets:
<S>                                                              <C>               <C>               <C>               <C>
   Cash and due from banks .................................     $  1,350,004      $  1,350,004      $  1,408,628      $  1,408,628
   Federal funds sold ......................................        2,845,956         2,845,956         4,610,000         4,610,000
   Securities available-for-sale ...........................          353,672           353,672           346,709           346,709
   Nonmarketable equity securities .........................          137,553           137,553           238,603           238,603
   Loans ...................................................       26,873,907        27,114,724        15,157,361        15,166,219
   Allowance for loan losses ...............................         (268,446)         (268,446)         (159,000)         (159,000)
   Accrued interest receivable .............................          120,123           120,123            89,540            89,540

Financial Liabilities:
   Demand deposit, interest-bearing
    transaction, and savings accounts.......................       13,931,498        13,931,498         8,442,453         8,442,453
   Certificates of deposit and other time deposits .........       13,810,639        13,831,192        10,021,766         9,973,705
   Advances from Federal Home Loan Bank ....................        1,750,000         1,750,000                 -                 -
   Accrued interest payable ................................          253,696           253,696           245,113           245,113

<Caption>
                                                                      Notional      Estimated Fair       Notional     Estimated Fair
Off-Balance-Sheet Financial Instruments:                               Amount           Value             Amount           Value
                                                                       ------           -----             ------           -----

<S>                                                              <C>               <C>               <C>               <C>
Commitments to extend credit ...............................     $  4,084,418      $  4,084,418      $  2,597,058      $  2,597,058
Letters of credit ..........................................          100,000           100,000                 -                 -
</Table>

                                       43
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 22 - REGIONAL BANKSHARES, INC. (PARENT COMPANY ONLY)

Presented below are the condensed financial  statements for Regional Bankshares,
Inc. (Parent Company Only).

                                  Balance Sheet
                                December 31, 2001

                                                                          2001
                                                                          ----
Assets
  Cash .......................................................        $    3,750
  Investment in banking subsidiary ...........................         4,438,256
  Other assets ...............................................            10,233
                                                                      ----------
    Total assets .............................................        $4,452,239
                                                                      ==========

Liabilities and shareholders' equity
  Other liabilities ..........................................        $        -

  Shareholders' equity .......................................         4,452,239
                                                                      ----------

    Total liabilities and shareholders' equity ...............        $4,452,239
                                                                      ==========


                               Statement of Income
                      for the year ended December 31, 2001

                                                                         2001
                                                                         ----
Income .........................................................      $       -

Expenses
  Other expenses ...............................................         30,250
                                                                      ---------

Income (loss) before income taxes and equity in
 undistributed earnings of banking subsidiary ..................        (30,250)

  Income tax benefit ...........................................        (10,233)

  Equity in undistributed losses of banking subsidiary .........       (134,813)
                                                                      ---------

  Net loss .....................................................      $(154,830)
                                                                      =========


                                       44
<Page>

                            REGIONAL BANKSHARES, INC.

                   Notes to Consolidated Financial Statements

NOTE 22 - REGIONAL BANKSHARES, INC. (PARENT COMPANY ONLY) (continued)

                             Statement of Cash Flows
                      for the year ended December 31, 2001

                                                                          2001
                                                                          ----
Cash flows from operating activities
  Net income (loss) .............................................     $(154,830)
  Adjustments to reconcile net income (loss) to net cash
    used by operating activities:
     Equity in undistributed earnings of banking subsidiary .....       134,813
     Increase in other assets ...................................       (10,233)
                                                                      ---------
       Net cash used by operating activities ....................       (30,250)
                                                                      ---------

Cash flows from financing activities
  Proceeds from borrowings ......................................        35,000
  Repayment of borrowings .......................................       (35,000)
  Exercise of stock warrants ....................................        34,000
                                                                      ---------
    Net cash provided by financing activities ...................        34,000
                                                                      ---------

Increase in cash ................................................         3,750

Cash and cash equivalents, beginning of period ..................             -
                                                                      ---------

Cash and cash equivalents, ending of period .....................     $   3,750
                                                                      =========

Cash paid during the period for:
   Interest .....................................................     $   3,553


                                       45
<Page>

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

          None.


                                    PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act

     The  information  set forth under the captions  "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement
to be used in connection  with the Company's  2002 Annual  Stockholders  Meeting
(the "Proxy Statement"), is incorporated herein by reference.

Item 10.  Executive Compensation

         The information set forth under the caption  "Management  Compensation"
and "2001 Stock Option Plan" in the Proxy  Statement is  incorporated  herein by
reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The  information  set forth under the caption  "Security  Ownership  of
Management" in the Proxy Statement is incorporated herein by reference.

Item 12.   Certain Relationships and Related Transactions

         The information set forth under the caption "Certain  Relationships and
Related   Transactions"  in  the  Proxy  Statement  is  incorporated  herein  by
reference.


                                       46
<Page>

                                     PART IV

Item 13.  Exhibits and Reports on Form 8-K

(a)      Exhibits required by Item 601 of Regulation S-B.

Exhibit
Number            Description
------            -----------

3.1            Articles of  Incorporation  of the  Registrant  (incorporated  by
               reference to exhibits to Registrant's  Registration  Statement on
               Form 8-A (the "Form 8-A")).

3.2            Bylaws of Registrant (incorporated by reference to the Form 8-A).

4.1            Specimen Common Stock  Certificate  (incorporated by reference to
               the Form 8-A).

4.2            Form of Warrant  Agreement Issued to Organizers  (incorporated by
               reference  to exhibits to  Registrant's  Form 10-KSB for the year
               ended December 31, 2000 (the "2000" Form 10-KSB).

10.1           Employment  Agreement between Hartsville Community Bank, National
               Association  and Curtis A. Tyner  (incorporated  by  reference to
               exhibits to the 2000 Form 10-KSB).

10.2           Lease  Agreement  dated  October  23,  1998  between   Hartsville
               Community   Investors,   LLC  and  Gordon  McBride   (assumed  by
               Registrant)  (incorporated  by  reference to exhibits to the 2000
               Form 10-KSB).

10.3           Regional Bankshares, Inc. 2001 Stock Option Plan (incorporated by
               reference to the Company's Proxy Statment relating to the May 10,
               2001 Annual Meeting of Shareholders).

21             Subsidiaries of the Registrant

(b)      No Reports on Form 8-K were filed in the fourth quarter of 2001.


                                       47
<Page>

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                                 REGIONAL BANKSHARES, INC.

March 26, 2002                   By: s/Curtis A. Tyner, Sr.
                                    --------------------------------------------
                                     Curtis A. Tyner, Sr.
                                     President, Chief Executive Officer and
                                        Chief Financial Officer

         In accordance with the Exchange Act, this Report has been signed by the
following  persons on behalf of the  registrant and in the capacities and on the
dates stated.

<TABLE>
<CAPTION>

                  Signature                                         Title                               Date
                  ---------                                         -----                               ----

<S>                                            <C>                                                 <C>

s/Gosnold G. Segars, Jr.
----------------------------                         Chairman of the Board of Directors            March 27, 2002
Gosnold G. Segars, Jr.

s/Curtis A. Tyner, Sr.
----------------------------                      President, Chief Executive Officer, Chief        March 26, 2002
Curtis A. Tyner, Sr.                              Financial Officer and Director (Principal
                                                 Executive Officer and Principal Accounting
                                                                  Officer)

s/Francine P. Bachman
----------------------------                                      Director                         March 27, 2002
Francine P. Bachman


----------------------------                                      Director                         March __, 2002
T. James Bell, Jr.


----------------------------                                      Director                         March __, 2002
Peter C. Coggeshall, Jr.

s/Franklin Hines
----------------------------                                      Director                         March 27, 2002
Franklin Hines

s/J. Richard Jones
----------------------------                                      Director                         March 27, 2002
J. Richard Jones


----------------------------                                      Director                         March __, 2002
Woodward H. Morgan III


----------------------------                                      Director                         March __, 2002
Randolph G. Rogers

s/Howard W. Tucker, Jr.
----------------------------                                      Director                         March 27, 2002
Howard W. Tucker, Jr.


----------------------------                                      Director                         March __, 2002
Patricia M. West
</TABLE>


                                       48
<Page>

                                  EXHIBIT INDEX

Exhibit
Number         Description
------         -----------

3.1            Articles of  Incorporation  of the  Registrant  (incorporated  by
               reference to exhibits to Registrant's  Registration  Statement on
               Form 8-A (the "Form 8-A")).

3.2            Bylaws of Registrant (incorporated by reference to the Form 8-A).

4.1            Specimen Common Stock  Certificate  (incorporated by reference to
               the Form 8-A).

4.2            Form of Warrant  Agreement Issued to Organizers  (incorporated by
               reference  to exhibits to  Registrant's  Form 10-KSB for the year
               ended December 31, 2000 (the "2000" Form 10-KSB).

10.1           Employment  Agreement between Hartsville Community Bank, National
               Association  and Curtis A. Tyner  (incorporated  by  reference to
               exhibits to the 2000 Form 10-KSB).

10.2           Lease  Agreement  dated  October  23,  1998  between   Hartsville
               Community   Investors,   LLC  and  Gordon  McBride   (assumed  by
               Registrant)  (incorporated  by  reference to exhibits to the 2000
               Form 10-KSB).

10.3           Regional Bankshares, Inc. 2001 Stock Option Plan (incorporated by
               reference to the Company's Proxy Statment relating to the May 10,
               2001 Annual Meeting of Shareholders).

21             Subsidiaries of the Registrant



                                       49