UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-QSB

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

                             Commission File Number
                                    000-28037

                            FIRST SOUTH BANCORP, INC.
                      (Exact Name of Small Business Issuer)

     SOUTH CAROLINA                                      57-1086258
(State of Incorporation)                    (IRS Employer Identification number)


                           1450 John B White Sr. Blvd.
                        Spartanburg, South Carolina 29306
                     (Address of Principal Executive Office)

                                 (864) 595-0455
                           (Issuer's Telephone Number)

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

                           COMMON STOCK, NO PAR VALUE

Check  whether the issuer (1) has filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for shorter  period that
the Issuer was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES {X} N0 { }


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:  Common Stock, no par value,  1,682,040
shares outstanding on July 30, 2004.

Transitional Small Business Disclosure Format (Check One) YES { } NO { X }










<PAGE>






                            FIRST SOUTH BANCORP, INC.

                                   FORM 10-QSB

                                      INDEX


PART I - FINANCIAL INFORMATION                                              Page

  Item 1.  Financial Statements

           Balance Sheets ..............................................      3

           Statements of Operations ....................................      4

           Statements of Comprehensive Income ..........................      5

           Statements of Cash Flows ....................................      6

           Statements of Changes in Shareholders' Equity ...............      7

           Notes to Unaudited Financial Statements .....................    8-9


  Item 2.  Management's Discussion and Analysis or Plan of Operation ...  10-20

  Item 3.  Controls and Procedures......................................     20

Part II -         OTHER INFORMATION ....................................     21

  Item 2.  Changes in Securities and Small Business Issuer
           Purchases of Equity Securities

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

  Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES .............................................................     22


CERTIFICATIONS..........................................................  23-26














                                       2
<PAGE>
                           FIRST SOUTH BANCORP, INC.

                         PART I - FINANCIAL INFORMATION

                          Item 1 - Financial Statements

                          FIRST SOUTH BANCORP, INC AND
                                   SUBSIDIARY
                           Consolidated Balance Sheets
                          (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                                                                (Unaudited)
                                                                                                  June 30,                 Dec. 31,
                                                                                                    2004                     2003
                                                                                                    ----                     ----
Assets
<S>                                                                                              <C>                      <C>
Cash & due from banks ............................................................               $   3,658                $   4,435
Due from banks - interest bearing ................................................                  17,600                       27
 Investment securities:
    Securities held to maturity ..................................................                   3,662                    3,874
    Securities available for sale ................................................                  14,546                    9,672
Loans ............................................................................                 237,009                  227,239
      Less, allowance for loan losses ............................................                  (2,610)                  (2,600)
Loans - net ......................................................................                 234,399                  224,639
Property & equipment, net ........................................................                   5,347                    5,409
Investment in FSBS Capital Trust .................................................                     155                        -
Other assets .....................................................................                   4,196                    4,028
                                                                                                 ---------                ---------
Total assets .....................................................................               $ 283,563                $ 252,084
                                                                                                 =========                =========

Liabilities
Deposits:
      Noninterest-bearing ........................................................               $  22,681                $  18,941
      Interest-bearing ...........................................................                 212,583                  196,428
                                                                                                 ---------                ---------
    Total deposits ...............................................................                 235,264                  215,369

Securities sold under repurchase agreements ......................................                   5,884                    6,089
Other borrowed funds .............................................................                  10,000                   12,000
Demand notes issued to the U.S. Treasury .........................................                     208                      236
Subordinated debt ................................................................                   5,155                        -
Other liabilities ................................................................                   1,688                    1,981
                                                                                                 ---------                ---------
    Total liabilities ............................................................                 258,199                  235,675

Shareholders' equity
Common stock - no par value; 20,000,000 authorized,
  Outstanding 1,682,040 and 1,382,040  respectively
Paid-in capital ..................................................................                  18,634                   11,152
Undivided profits ................................................................                   6,778                    5,225
Accumulated other comprehensive income/(loss) ....................................                     (48)                      32
                                                                                                 ---------                ---------
Total shareholders' equity .......................................................                  25,364                   16,409

Total liabilities and shareholders' equity .......................................               $ 283,563                $ 252,084
                                                                                                 =========                =========
</TABLE>





                                       3
<PAGE>

                     FIRST SOUTH BANCORP, INC AND SUBSIDIARY

                            Statements of Operations


<TABLE>
<CAPTION>
                                                                                              (Unaudited)
                                                                                         Period ended June 30,

                                                                            Three Months                        Six Months
                                                                        2004            2003                2004             2003
                                                                        ----            ----                ----             ----
                                                                                   (Dollars in thousands, except per share)
Interest income
<S>                                                                   <C>               <C>               <C>               <C>
               Loans, including fees .......................          $ 3,447           $ 3,095           $ 6,858           $ 5,735
               Investment securities .......................              118               118               237               277
               Interest bearing deposits ...................               20                23                25                40
                                                                      -------           -------           -------           -------

               Total interest income .......................            3,585             3,236             7,120             6,052
Interest expense
               Deposits and borrowings .....................            1,169             1,102             2,301             2,133

Net interest income ........................................            2,416             2,134             4,819             3,919
               Provision for loan losses ...................              (40)             (310)              (53)             (518)
                                                                      -------           -------           -------           -------
Net interest income after provision ........................            2,376             1,824             4,766             3,401

Noninterest income
               Service charges on deposit accounts .........               92                87               185               157
               Other income ................................              251               162               371               292
                                                                      -------           -------           -------           -------
               Total noninterest income ....................              343               249               556               449

Noninterest expense
               Salaries and benefits .......................              864               734             1,692             1,441
               Occupancy and equipment .....................              201               138               416               266
               Other expense ...............................              415               428               781               739
                                                                      -------           -------           -------           -------
               Total noninterest expense ...................            1,480             1,300             2,889             2,446

Income before income taxes .................................            1,239               773             2,433             1,404
               Provision for income taxes ..................              447               307               879               506
                                                                      -------           -------           -------           -------

Net income .................................................          $   792           $   466           $ 1,554           $   898
                                                                      =======           =======           =======           =======

Basic per share earnings ...................................          $  0.47           $  0.34           $  0.97           $  0.65

Diluted earnings per share .................................          $  0.44           $  0.32           $  0.91           $  0.62
</TABLE>









                                       4
<PAGE>

                     FIRST SOUTH BANCORP, INC.AND SUBSIDIARY

                 Consolidated Statements of Comprehensive Income


                                                              (Unaudited)
                                                           Six Months Ended
                                                                June 30,
                                                            2004          2003
                                                            ----          ----
Net Income .........................................      $ 1,554       $   898

Other comprehensive income (loss):

Change in unrealized holdings gains &
    losses on available for sale securities ........         (128)           11

Income tax (expense) benefit on other
                comprehensive income(loss) .........           48            (4)
                                                          -------       -------

Total other comprehensive income (loss) ............          (80)            7
                                                          -------       -------

Comprehensive income ...............................      $ 1,474       $   905
























                                       5
<PAGE>






                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows



<TABLE>
<CAPTION>
                                                                                                                (Unaudited)
                                                                                                             Six Months Ended
                                                                                                                  June 30,
                                                                                                            2004             2003
                                                                                                            ----             ----
                                                                                                           (amounts in thousands)
Operating Activities
<S>                                                                                                    <C>                 <C>
Net income .....................................................................................         $  1,554          $    898

Adjustments to reconcile net income to net cash provided by operating activities
              Provision for loan losses ........................................................               53               518
              Depreciation .....................................................................              179               109
              Amortization .....................................................................                8                 -
              Deferred Tax Asset ...............................................................              (49)             (160)
              Decrease (increase) in other assets ..............................................              (84)              193
              Increase (decrease) in accrued expenses and other liabilities ....................              255               567
                                                                                                         --------          --------

Net cash provided by operating activities ......................................................            1,916             2,125
                                                                                                         --------          --------


Investing Activities
              Purchase of securities ...........................................................           (8,000)           (2,000)
              Sale/(Purchase) of restricted FHLB stock .........................................               50               100
              Proceeds from MBS principal paydowns .............................................              189                 -
              Proceeds from called  securities .................................................            3,000             8,000
              Origination of loans, net of principal collected .................................          (10,770)          (45,106)
              (Purchase) of premises and equipment .............................................             (113)           (1,522)
              Investments in and advances to subsidiaries ......................................             (155)                -
                                                                                                         --------          --------

Net cash used in investing activities ..........................................................          (15,799)          (40,528)
                                                                                                         --------          --------

Financing Activities
              Net increase in deposits .........................................................           20,276            38,434
              Net increase (decrease) in retail repurchase agreements ..........................             (206)              690
              Net increase (decrease) in other borrowings ......................................           (2,028)                4
              Net Proceeds from Stock Issuance .................................................            7,482                 -
              Proceeds from issuance of subordinated debt ......................................            5,155                 -
                                                                                                         --------          --------

Net cash provided by financing activities ......................................................           30,679            39,128
                                                                                                         --------          --------

Net increase in cash and cash equivalents ......................................................           16,796               725

Cash and cash equivalents, beginning ...........................................................            4,462             4,292
                                                                                                         --------          --------

Cash and cash equivalents, ending ..............................................................         $ 21,258          $  5,017
                                                                                                         ========          ========
</TABLE>





                                       6
<PAGE>


                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                  Statements of Changes in Shareholders' Equity
         Year-ended December 31, 2003 and Six Months Ended June 30, 2004
                                   (Unaudited)

(dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                        ACCUMULATED
                                                     SHARES OF                        ACCUMULATED          OTHER           TOTAL
                                                      COMMON             PAID-IN        EARNINGS       COMPREHENSIVE   STOCKHOLDERS'
                                                       STOCK             CAPITAL       (DEFICIT)       INCOME/(LOSS)      EQUITY
                                                       -----             -------       ---------       -------------      ------

<S>                                                   <C>            <C>               <C>              <C>              <C>
Balance at December 31, 2002 ...............          920,780        $   11,145        $    3,121       $       84       $   14,350

Exercised Stock Options ....................              600                 7                                                   7

Three-for-two common stock split ...........          460,660

Net income .................................                                                2,104                             2,104

Net change in
unrealized gain on
available for sale
securities, net of tax .....................                                                                   (52)             (52)

Balance at December 31, 2003 ...............        1,382,040        $   11,152        $    5,225       $      (32)      $   16,409


<CAPTION>
                                                                                                        ACCUMULATED
                                                     SHARES OF                        ACCUMULATED          OTHER           TOTAL
                                                      COMMON             PAID-IN        EARNINGS       COMPREHENSIVE   STOCKHOLDERS'
                                                       STOCK             CAPITAL       (DEFICIT)       INCOME/(LOSS)      EQUITY
                                                       -----             -------       ---------       -------------      ------

<S>                                                 <C>                  <C>                <C>                 <C>          <C>
Balance at December 31, 2003 ...............        1,382,040            11,152             5,225               32           16,409


Net income .................................                                                1,554                             1,554

Private Issuance of Common Stock ...........          300,000             7,482                                               7,482
(300,000 shares @ $25/share)
 Net expense of $17,933

Net change in
unrealized gain on
available for sale
securities, net of tax .....................                                                                   (80)             (80)

Balance at June 30, 2004 ...................        1,682,040        $   18,634        $    6,779       $      (48)       $   25,365
</TABLE>



                                       7
<PAGE>




                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

Notes to Unaudited  Financial Statements

Note 1 - Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted  accounting  principles in the United States for interim
financial  information  and with  instructions to Form 10-QSB and Item 310(b) of
Regulation S-B of the Securities and Exchange Commission.  Accordingly,  they do
not contain all of the  information  and notes  required by  generally  accepted
accounting  principles in the United States for complete  financial  statements.
However, in the opinion of management,  all adjustments considered necessary for
a fair  presentation  have been included.  Operating  results for the six months
ended June 30, 2004 are not  necessarily  indicative  of the results that may be
expected for the year ended December 31, 2004. For further  information,  please
refer to the financial statements and notes thereto for the Corporation's fiscal
year ended December 31, 2003,  contained in the  Corporation's  annual report on
Form 10-KSB.

The  Company  effected a 3 for 2 stock split in March,  2004.  All share and per
share information has been adjusted to reflect the stock split.

In accordance  with SFAS No. 123,  Accounting for Stock-Based  Compensation,  as
amended by SFAS No. 148,  Accounting for  Stock-Based  Compensation - Transition
and Disclosure - An Amendment of FASB Statement No. 123, the Company has adopted
the disclosure-only option and elected to apply the provisions of APB No. 25 for
financial  statement  purposes.  No stock-based  employee  compensation  cost is
reflected in the Company's net income.

Pro forma  information  regarding  net income and  earnings  per share have been
determined as if the Company had accounted for its employee  stock options using
the fair value method, and is presented below.


(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                             Six Months               Six Months
                                                                                               ended                    ended
                                                                                            June 30, 2004           June 30, 2003
                                                                                            -------------           -------------

<S>                                                                                           <C>                     <C>
Net income: As reported ..............................................................        $   1,554               $   898

Deduct:  Total stock-based compensation cost
             determined under the fair value method
             Net of tax ..............................................................               85                    41
                                                                                              ---------               -------

Pro forma ............................................................................        $   1,469               $   857
                                                                                              =========               =======


Basic earnings per share:
             As reported .............................................................        $    0.97               $  0.65
             Pro forma ...............................................................        $    0.91               $  0.62

Diluted earnings per share
            As reported ..............................................................        $    0.91               $  0.62
            Pro forma ................................................................        $    0.86               $  0.59
</TABLE>


The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions  used  for the  six-month  periods  ended  June 30,  2004 and  2003;
dividend yield of 0%, expected  volatility of 50%,  risk-free  interest rates of
4.24% and 4.00% for 2004 and 2003  respectively,  and expected lives of 10 years
for the options.



                                       8
<PAGE>


Note 2 - Earnings per Share

         Earnings  per share has been  determined  under the  provisions  of the
Statement of Financial Accounting Standards No. 128, Earnings Per Share. For the
quarters  ended  June 30,  2004 and  2003,  basic  earnings  per  share has been
computed based upon the weighted average common shares  outstanding of 1,607,245
and 1,381,470, respectively.

         The only  potentially  dilutive  stock of the Company as defined in the
Statement of Financial  Accounting  Standards  No. 128,  Earnings Per Share,  is
stock  options  granted to  various  officers  and  employees  of the Bank.  The
following is a summary of the diluted earnings per share calculation for the six
months ended June 30, 2004 and 2003 (in thousands, except share data):

                                                           Six Months Ended
                                                             June 30, 2004
                                                             -------------
                                                          2004          2003
                                                          ----          ----

Net Income (in thousands) ....................       $    1,554       $      898
Weighted average outstanding shares ..........        1,607,245        1,381,470

Basic Earnings Per Share .....................       $     0.97       $     0.65

Weighted average outstanding shares ..........        1,607,245        1,381,470
Dilutive effect of stock options .............           96,398           65,568
                                                     ----------       ----------

Weighted average diluted shares ..............        1,703,643        1,447,038

Diluted earnings per share ...................       $     0.91       $     0.62

Note 4 - Impact of Recently Issued Accounting Standards

FASB  Interpretation  No. 46,  Consolidation  of Variable  Interest  Entities an
Interpretation  of ARB No. 51, as amended by FASB  Interpretation  No. 46R,  was
issued in January 2003 and addressed  consolidation  by business  enterprises of
variable  interest   entities.   In  accordance  with  the  provisions  of  this
Interpretation,  the Company has not  consolidated  its interest in FSBS Capital
Trust.

In March 2004, the Securities and Exchange  Commission  issued Staff  Accounting
Bulletin No. 105, Application of Accounting Principles to Loan Commitments. This
Staff  Accounting  Bulletin  summarizes  the  views of the staff  regarding  the
application of accounting  principles generally accepted in the United States of
America  to  loan  commitments  accounted  for as  derivative  instruments.  The
provisions of this Staff Accounting Bulletin are effective after March 31, 2004.
The adoption of this Staff Accounting Bulletin did not have a material impact on
the consolidated financial statements of the Company.


Note 5 - Stock Issuance

The Company concluded in May a private sale of 300,000 shares of common stock at
$25.00 per share.  The total cost  associated  with this sale was  approximately
$18,000.


                                       9
<PAGE>


                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                                 Part I - Item 2

Forward Looking Statements

         Statements  included in this Form 10-QSB  which are not  historical  in
nature  are  intended  to be,  and are  hereby  identified  as  "forward-looking
statements"  for  purposes  of the safe  harbor  provided  by Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.  Words  such  as  "estimate",
"project",  "intend",  "expect",  "believe",  "anticipate",  "plan", and similar
expressions  identify forward looking  statements.  The Company cautions readers
that forward looking statements, including without limitation, those relating to
the Company's new offices, future business prospects, revenues, working capital,
liquidity, capital needs, adequacy of allowance for loan losses, interest costs,
and income,  are  subject to certain  risks and  uncertainties  that could cause
actual results to differ from those indicated in forward looking statements, due
to several important factors herein  identified,  among others,  and other risks
and factors identified from time to time in the Company's reports filed with the
Securities and Exchange Commission.  These forward-looking  statements are based
on  current   expectations,   estimates  and  projections  about  our  industry,
management's  beliefs,  and  assumptions  made by management.  Such  information
includes,  without  limitation,   discussions  as  to  estimates,  expectations,
beliefs,  plans,  strategies,  and objectives  concerning  the Company's  future
financial and operating  performance.  These  statements  are not  guarantees of
future performance and are subject to risks,  uncertainties and assumptions that
are difficult to predict,  particularly in light of the fact that the Company is
a relatively  new company  with limited  operating  history.  Therefore,  actual
results may differ from those  expressed or forecasted  in such  forward-looking
statements. The risks and uncertainties include, but are not limited to:

     o    The Company's growth and ability to maintain growth;
     o    government  monetary and fiscal  policies,  as well as legislative and
          regulatory changes;
     o    the effect of interest  rate changes on our level and  composition  of
          deposits,  loan  demand  and the  value  of our  loan  collateral  and
          securities;
     o    the effects of competition from other financial institutions operating
          in the Company's  market areas and elsewhere,  including  institutions
          operating locally, regionally, nationally and internationally;
     o    failure of assumptions  underlying the  establishment of the allowance
          for loan losses, including the value of collateral securing loans; and
     o    loss of consumer  confidence and economic  disruptions  resulting from
          terrorist activities.

         The Company  undertakes no obligation to publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.  In light of these risks,  uncertainties,  and assumptions,
the forward-looking events discussed in this report might not occur.

Management's Discussion and Analysis or Plan of Operation

         This  discussion is intended to assist in  understanding  the financial
condition  and  results  of  operations  of the  Company,  and should be read in
conjunction with the financial  statements and related notes contained elsewhere
herein and in the Company's 2003 annual report on Form 10-KSB.  Because the Bank
is responsible for all of the Company's operations, the discussion will refer to
the results of operations of the Bank.




                                       10
<PAGE>


RESULTS OF OPERATIONS: SIX MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO THE SAME
PERIOD ENDED JUNE 30, 2003.

Net Income

For the first six months of 2004, First South Bancorp,  Inc. earned a net profit
of $1,554,000,  compared to $898,000 for the same period in 2003, an increase of
$656,000,  or 73%.  Basic  earnings  per  share  were  $.97 in the 2004  period,
compared to $.65 for the 2003 period.  There were two major  contributors to the
increase in net income for the period  ending June 30, 2004,  as compared to the
same period last year. Net interest income increased  $900,000,  or 23%, and the
amount charged to operations as a provision for likely loan losses  decreased by
$465,000,  or 90%, in 2004.  The decrease in loan loss provision was due to less
growth in loans  during  the first six  months of 2004,  $9.7  million  or 4.2%,
compared to the same period in 2003 of $45.1 million or 28.3%.

Profitability

Earnings of financial  institutions  are often measured  through ROAA (return on
average assets) and ROAE (return on average equity). Return on average assets is
the income for the period,  annualized,  divided by the  average  assets for the
period.  Return on  average  equity is the income  for the  period,  annualized,
divided by the average equity for the period. As is shown in Table One, ROAA and
ROAE for the first six months of 2004 were 1.19 % and 16.91 %, respectively.



 Table One


                                              Selected Earnings Ratios
                                      at or for the Periods Ending June 30,
                                               2004            2003
                                               ----            ----
Return on Average Assets .................    1.19%           0.87%

Return on Average Equity .................   16.91%          11.87%

Dividend Payout Ratio ....................     N/A             N/A

Average Stockholders Equity
as a Percentage of Average Assets ........    7.05%           7.37%

The changes in ROAE can be primarily attributed to changes in the balance sheet,
volume and  composition,  and the interest  rate  environment.  Details of these
changes are provided in the following discussion of net interest income.


Net Interest Income

Net interest income, the major component of First South Bancorp's income, is the
amount by which interest and fees on earning assets exceeds the interest paid on
interest bearing  liabilities,  primarily deposits.  As was stated earlier,  net
interest income for the first six months of 2004 increased over that of the same
period in 2003 by $900,000, or 23%. A number of factors discussed below combined
to produce the change in net interest income.

Growth in average earning assets of $52.9 million,  or 26.7 %, was a significant
factor in the improvement in net interest income,  and the change in the earning
assets mix also  contributed  to the  improvement.  The segment of total earning
assets with the highest  interest  yield,  loans,  increased as a percentage  of
total  earning  assets  from 89.5% in 2003 to 92.5% in 2004.  Additionally,  the
category of earning assets with the lowest interest yield,  interest-bearing due
from banks, decreased as a percentage of total earning assets from 3.5 % in 2003


                                       11
<PAGE>

to 2.1 % in 2004. The positive  effect on the earning assets yield of the growth
in  earning  assets  and the change in the  earning  assets mix was  diminished,
however,  by the  decrease  in interest  rates  compared to the same period last
year.  The  overall  yield on  earning  assets  for the first six months of 2004
decreased by 47 basis points as compared to the same period in 2003.

For the first six months of 2004, the cost of funds averaged 2.10 %, a reduction
of 35  basis  points  from  the  average  cost of  funds  rate of 2.45% in 2003.
Although the decrease in the earning asset yield,  47 basis points,  was greater
than the  decrease in cost of funds,  35 basis  points,  the increase in average
loans from $177  million in 2003 to $232 million in 2004,  a 31%  increase,  was
enough to result in an increase in net interest income.


Table Two includes a detailed  comparison  of the average  balances,  yields and
rates for the interest  sensitive  segments of the Corporation's  balance sheets
for the six months ended June 30, 2004 and 2003.





























































                                       12
<PAGE>

           Table Two Net Interest Income and Average Balance Analysis
                        for the Six Months Ended June 30,
                                  2004 and 2003
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                          Interest                     Average
                                                             Average Balance           Income/Expense                 Yield/Cost
Interest-Earning Assets                                     2004         2003        2004         2003             2004         2003
                                                            ----         ----        ----         ----             ----         ----

<S>                                                     <C>          <C>           <C>          <C>               <C>          <C>
Int. Bearing Due from Banks .........................   $  5,215     $  6,836      $   25       $   40            0.96%        1.18%
Investments .........................................     13,408       13,878         237          277            3.54%        4.03%
Loans ...............................................    232,077      177,060       6,858        5,735            5.93%        6.53%
                                                        --------     --------      ------       ------            -----        -----
Total Interest Earning Assets .......................    250,700      197,774       7,120        6,052            5.70%        6.17%

Noninterest-Earning Assets
Cash & Due From Banks ...............................      4,650        4,227
Allowance for Loan Losses ...........................     (2,604)      (1,923)
Investments: Fair Value .............................         27          126
Premises & Equipment ................................      5,383        3,414
Investment in unconsolidated subsidiary .............        129            -
Interest Receivable & Other .........................      3,353        3,561
                                                        --------     --------
Total Noninterest-Earning Assets ....................     10,938        9,405
                                                        --------     --------

TOTAL ASSETS ........................................   $261,638     $207,179
                                                        ========     ========

Interest-Bearing Liabilities
NOW Accounts ........................................   $ 34,062     $ 32,891      $  271       $  301            1.60%        1.85%
Money Market & Savings ..............................     47,101       28,146         383          265            1.63%        1.90%
Time Deposits & IRAs ................................    119,104       99,577       1,320        1,325            2.22%        2.68%
Fed Funds Purchased & Repos .........................      4,626        4,663          11           14            0.48%        0.61%
Other borrowed funds ................................     10,670       10,420         231          227            4.34%        4.39%
Subordinated debt ...................................      4,167            -          84            -            4.04%            -
Demand Notes Issued to Treasury .....................        215          213           1            1            0.93%        0.95%
                                                        --------     --------      ------       ------            -----        -----
Total Interest-Bearing Liabilities ..................    219,945      175,910       2,301        2,133            2.10%        2.45%

Noninterest-Bearing Liabilities
Demand Deposits .....................................     21,149       14,880
Interest Payable ....................................        553          498
Other Liabilities ...................................      1,424        1,021
                                                        --------     --------
Total Non Int-Bearing Liabilities ...................     23,126       16,399

Stockholder's Equity ................................     18,567       14,870
                                                        --------     --------

TOTAL LIABILITIES & EQUITY ..........................   $261,638     $207,179
                                                        ========     ========

Net Interest Income .................................                              $4,819       $3,919
                                                                                   ======       ======

  Net Yield on Earning Assets .......................                                                             3.85%        4.00%
  Interest Rate Spread ..............................                                                             3.60%        3.72%
</TABLE>





                                       13
<PAGE>

Other Income

Total other, or noninterest,  income  increased for the first six months of 2004
by $107,000 from $449,000 in 2003.  Although service charges on deposit accounts
increased by $28,000,  or 18%, the most notable increase in non-interest  income
occurred in the commissions and fees category. Commissions and fees increased by
$86,000  primarily  due to a $93,000  increase  in  commissions  from  brokerage
services.  Table  Three  provides a  performance  comparison  of  categories  of
noninterest income for the six month periods ended June 30, 2003 and 2004.

Table Three                                 Summary of Total Noninterest Income
                                             for the Six Months Ended June 30,
                                                       2004 and 2003
                                                  (Amounts in thousands)

                                              2004                  2003
                                              ----                  ----
Service Charges .........................     $185                  $157
Commissions & Fees ......................      339                   253
Other Noninterest Income ................       32                    39
                                              ----                  ----
Total ...................................     $556                  $449

Other Expense

Other,  or  noninterest,  expense for the first six months of 2004  increased by
$443,000 or 18%, over the first six months total in 2003 of $2,446,000. Salaries
& Benefits  increased by $251,000 or 17% and Occupancy & Equipment  increased by
$150,000  or 56%.  These  increases  are  attributed  to the  opening of offices
located  in  Hilton  Head  Island,  SC,  Asheville,  NC  and a new  facility  in
Spartanburg,  SC  and  the  subsequent  hiring  of  four  full  time  equivalent
employees.

Table Four provides a six month 2004 to 2003 performance  comparative of various
categories of noninterest expense.

Table Four                                 Summary of Total Noninterest Expense
                                             For the Six Months Ended June 30,
                                                       2004 and 2003
                                                  (Amounts in thousands)

                                                2004                  2003
                                                ----                  ----

Salaries & Employee Benefits .............    $1,692                $1,441
Occupancy & Equipment ....................       416                   266
Other expense ............................       781                   739
                                              ------                ------
Total ....................................    $2,889                $2,446




                                       14
<PAGE>




Income Taxes

Provision  for  income  taxes for the six months  ended  June 30,  2004 was $879
thousand  as compared to $506  thousand  in 2003 during the same  period,  a 74%
increase.  This increase was due to the overall  increase in income before taxes
of $1 million, or 73%.


CHANGES IN FINANCIAL POSITION

Investment portfolio

During the first six months of 2004,  $3,000,000 in government agency securities
with a weighted  average  rate of 3.75% were  called.  During this same  period,
$8,000,100 in government agency securities with a weighted average rate of 3.92%
were  purchased.  A total of  $9,282,474  (par) of  investment  securities  were
pledged on June 30, 2004.

Table Five              Analysis of Investment Securities
                             (Amounts in thousands)

<TABLE>
<CAPTION>
December 31 ,2003                                                      Available-for-Sale                     Held-for-Investment
                                                                       ------------------                     -------------------
                                                                 Amortized         Estimated             Amortized        Estimated
                                                                   Cost            Fair Value              Cost           Fair Value
                                                                   ----            ----------              ----           ----------


<S>                                                              <C>                 <C>                 <C>                 <C>
Due in one year or less ............................             $     -             $     -             $     -             $     -
Due from one to five years .........................               7,498               7,540               1,011               1,024
Due from five to 10 years ..........................               1,000               1,004                   -                   -
Due after ten years ................................               1,123               1,128                 853                 992
Mortgage backed securities .........................                   -                   -               2,010               2,017
                                                                  ------              ------              ------              ------
                                                                  $9,621              $9,672              $3,874              $4,033
                                                                  ======              ======              ======              ======
</TABLE>


<TABLE>
<CAPTION>
June 30, 2004                                                          Available-for-Sale                     Held-for-Investment
                                                                       ------------------                     -------------------
                                                                 Amortized         Estimated             Amortized        Estimated
                                                                   Cost            Fair Value              Cost           Fair Value
                                                                   ----            ----------              ----           ----------
<S>                                                              <C>                 <C>                 <C>                 <C>
Due in one year or less ............................             $     -             $     -             $     -             $     -
Due from one to five years .........................              11,500              11,441               1,008               1,009
Due from five to 10 years ..........................               1,000                 989                   -                   -
Due after ten years ................................               1,123               1,116                 854                 962
Mortgage backed securities .........................               1,000               1,000               1,800               1,780
                                                                 -------             -------             -------             -------
                                                                 $14,623             $14,546             $ 3,662             $ 3,751
                                                                 =======             =======             =======             =======
</TABLE>

Excludes  equity  securities with no readily  determinable  market value of $700
thousand on December 31, 2003 and $650 thousand on June 30, 2004.





                                       15
<PAGE>







Loan portfolio

From June 30, 2003 to June 30, 2004, loans increased by $33 million,  or 16%. As
is shown in Table Six,  loans  secured by real  estate  continued  to comprise a
substantial  percentage  of the total  loan  portfolio,  79.5%  versus  72.3% in
2003.The  Corporation's loan portfolio on June 30, 2004, as shown in Table Seven
reflects an increase of variable  rate loans as a  percentage  of the  portfolio
from 86.1% in 2003 to 91.5% in 2004.



<TABLE>
<CAPTION>
Table Six                                                                                Analysis of Loans
                                                                                          June 30 Balances
                                                                                       (Amounts in thousands)
Real Estate:                                                                    2004                                2003
                                                                                ----                                ----
<S>                                                                  <C>                   <C>            <C>                <C>
   Construction/Land Development .........................           $ 17,865                7.54%        $  9,253             4.54%
   1-4 Family Residential Properties .....................             60,359               25.47%          44,267            21.70%
   Multifamily Residential Properties ....................                359                0.15%           1,142             0.56%
   Nonfarm Nonresidential Properties .....................            107,964               45.55%          91,172            44.70%
   Other Real Estate
Loans ....................................................              1,903                0.80%           1,693             0.83%
Commercial & Industrial ..................................             48,146               20.31%          51,916            25.45%
Consumer .................................................                413                0.17%           4,524             2.22%
                                                                     --------                             --------

Total ....................................................           $237,009              100.00%        $203,967           100.00%
                                                                     ========              ======         ========           ======
</TABLE>




<TABLE>
<CAPTION>
Table Seven                                                Analysis of Loan Maturities and Repricing Frequency
                                                                           as of June 30, 2004
                                                                          (Amounts in thousands)

                                      Within         >3 Months          >1 Year          >3 Years              Over
                                    3 Months         12 Months          3 Years           5 Years           5 Years            Total
                                    --------         ---------          -------           -------           -------            -----
<S>                                 <C>                 <C>              <C>               <C>               <C>            <C>
Variable Rate Loans .............   $215,711                                                                                $215,711

Fixed Rate Loans ................   $  3,543            $5,062           $4,556            $5,728            $1,147         $ 20,036

Total Loans .....................   $219,254            $5,062           $4,556            $5,728            $1,147         $235,747
</TABLE>

Excludes loans on non-accrural status of $1,262,000











                                       16
<PAGE>


Allowance for loan losses

The  allowance for loan losses is analyzed  monthly in  accordance  with a board
approved  plan.  This  judgmental  analysis is based upon a model that assigns a
risk rating on each  individual  loan and considers the loss risk  categories in
relation to the current and forecasted  economic  environment.  The  Corporation
also monitors the overall portfolio, as well as the level of reserves maintained
by peer banks. The monthly  provision for loan losses may fluctuate based on the
results of this analysis.  Table Eight provides the results of the  year-to-date
analysis for the periods  ending June 30, 2004 and 2003,  as well as the amounts
charged to the allowance as a loss and credited to the allowance as a recovery.






Table Eight                          Analysis of the Allowance for Loan Losses
                                          for the Six Months Ended June 30

                                          2004                        2003
                                          ----                        ----
Balance at Beginning of Year .......   $2,600,000                  $1,750,000
Provision Charged to Operations ....       53,000                     518,000
Loans Charged-Off ..................      (57,000)                   (552,000)
Loan Recoveries ....................       14,000                     522,000
                                       ----------                  ----------
Balance at End Of Period ...........   $2,610,000                  $2,238,000



Interest rate risk

Financial  institutions  are  subject to  interest  rate risk to the degree that
their interest bearing liabilities (consisting principally of customer deposits)
mature or reprice more or less frequently,  or on a different basis,  than their
interest earning assets (generally consisting of intermediate or long-term loans
and  investment  securities).  The match  between the  scheduled  repricing  and
maturities of earning  assets and interest  bearing  liabilities  within defined
time periods is referred to as "gap" analysis.  The  Asset/Liability  Management
Committee  is  responsible  for  managing  the risks  associated  with  changing
interest  rates and their  impact on  earnings.  The regular  evaluation  of the
sensitivity  of net interest  income to changes in interest rates is an integral
part of interest rate risk management. At June 30, 2004, the cumulative one-year
gap was a positive or asset  sensitive  $53.7  million.  At June 30,  2004,  the
cumulative five-year gap was a positive $38.6 million or 13.6 % of total assets.
The  positive  gap is largely  attributable  to the  extent to which  management
prefers to make loans on a variable rate basis. A positive gap means that assets
would  reprice  faster  than   liabilities   if  interest  rates  changed.   The
Corporation's  gap is within policy limits that were  established  to reduce the
adverse impact on earnings which movements in interest rates can cause.  Intense
competition in the Corporation's market continues to pressure quality loan rates
downward  while  conversely   pressuring   deposit  rates  upward.   Table  Nine
demonstrates  how  the   relationship   between   interest-bearing   assets  and
interest-bearing liabilities was calculated for June 30, 2004.


                                       17
<PAGE>


<TABLE>
<CAPTION>
Table Nine                                                  Distribution of Interest-Earning Assets and Interest-Bearing Liabilities
                                                                              Repricing Schedule as of June 30, 2004
                                                                                      (Amounts in thousands)


                                                                         One Year       Over One Year       Over
                                                                          or Less       to Five Years     Five Years         Total
                                                                          -------       -------------     ----------         -----
Interest Earning Assets

<S>                                                                       <C>             <C>              <C>              <C>
Due From Banks ....................................................       $ 17,600        $      -         $      -         $ 17,600
Investment Securities* ............................................          2,800          12,508            2,977           18,285
FHLB Stock ........................................................            650               -                -              650
Loans** ...........................................................        219,254          15,346            1,147          235,747
                                                                          ========        ========         ========         ========

Total .............................................................       $240,304        $ 27,854         $  4,124         $272,282
*Amortized Cost
**Excludes $1,262,000 in loans on non-accrual status.

Interest Bearing
Liabilities

NOW Accounts ......................................................       $ 33,703          $    -         $      -         $ 33,703
Savings & MMIA ....................................................         48,215               -                -           48,215
Time Deposits:$100 & > ............................................         26,248           8,369                -           34,617
Time Deposits: <$100m .............................................         67,347          28,702                -           96,049
Repurchase Agreements .............................................          5,883               -                -            5,883
Subordinated Debt (Trust Preferred Sec.) ..........................          5,000               -                -            5,000
Other Borrowed Funds ..............................................            208               -           10,000           10,208
                                                                          ========        ========         ========         ========

Total .............................................................       $186,604        $ 37,071         $ 10,000         $233,675

Period Gap ........................................................       $ 53,700        $ (9,217)        $ (5,876)        $ 38,607

Cumulative Gap ....................................................       $ 53,700        $ 44,483         $ 38,607

Period Gap Ratios:
  Interest Sensitive Assets to
  Interest Sensitive Liabilities ..................................          128.8%           75.1%            41.2%

Cumulative Gap Ratios:
  Interest Sensitive Assets to
  Interest Sensitive Liabilities ..................................          128.8%          119.9%           116.5%
</TABLE>

<TABLE>
<CAPTION>
                                              3 Months         Over 3 Months         Over One
Time Deposits                                   & Less          to 12 Months            Year           Total
                                                ------          ------------            ----           -----
<S>                                             <C>               <C>                  <C>            <C>
$100,000 and Greater .......................    $9,670            $16,578              $8,369         $34,617
</TABLE>






                                       18
<PAGE>

Liquidity

Liquidity  is the  ability  to  meet  current  and  future  obligations  through
liquidation or the maturity of existing  assets or the acquisition of additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals  in the most timely and  economical
manner.  Some liquidity is ensured by maintaining assets that may be immediately
converted  into cash at minimal cost  (amounts due from banks and federal  funds
sold).  However,  the most  manageable  sources of  liquidity  are  composed  of
liabilities, with the primary focus on liquidity management being the ability to
obtain  deposits  within the Bank's service area.  Core deposits (total deposits
less wholesale time deposits)  provide a relatively stable funding base. At June
30,  2004,  core  deposits  equaled  approximately  83% of total  assets.  Asset
liquidity is provided from several sources, including amounts due from banks and
federal funds sold, and funds from maturing  loans.  The Bank is a member of the
FHLB of Atlanta and, as such,  has the ability to borrow against the security of
its 1-4 family  residential  mortgage loans and commercial  loans. The bank also
has $12  million  available  through  lines of  credit  with  other  banks as an
additional   source  of  liquidity   funding.   Management   believes  that  the
Corporation's  overall  liquidity  sources are  adequate  to meet its  operating
needs.

Capital Resources

Tier 1 capital of the bank increased by $15.2 million  between June 30, 2004 and
2003, and $13.9 million from December 31, 2003 to June 30, 2004. These increases
resulted  from the private sale of $7.5 million in common stock during the first
six months of 2004,  the  issuance of $5 million in trust  preferred  securities
during the first quarter of 2004, and earnings retained during these periods.

The Bank is  subject to  regulatory  capital  adequacy  standards.  Under  these
standards,  financial  institutions  are  required to maintain  certain  minimum
capital  ratios of capital to  risk-weighted  assets and average  total  assets.
Under the provisions of the Federal Deposit Insurance  Corporation  Improvements
Act of 1991, federal financial institutions  regulatory authorities are required
to implement prescribed "prompt corrective action" upon the deterioration of the
capital position of a bank. If the capital  position of an affected  institution
were to fall below certain levels,  increasingly stringent regulatory corrective
actions are mandated.

The Bank's June 30, 2004 capital  ratios are presented in the  following  table,
compared  with  the  "well  capitalized"  and  minimum  ratios  under  the  FDIC
regulatory definitions and guidelines:


<TABLE>
<CAPTION>
                                                                                                                    To Be Well
                                                                                                                Capitalized Under
                                                                                     For Capital                Prompt Corrective
June 30, 2004                                              Actual                  Adequacy Purposes            Action Provisions
                                                           ------                  -----------------            -----------------
                                                 Amount             Ratio       Amount           Ratio       Amount            Ratio
                                                 ------             -----       ------           -----       ------            -----
Total Capital
<S>                                              <C>               <C>         <C>               <C>        <C>               <C>
(To Risk Weighted Assets) ..............         $32,930           14.00%      $18,817           8.00%      $23,522           10.00%
Tier I Capital
(To Risk Weighted Assets) ..............         $30,320           12.89%      $ 9,409           4.00%      $14,113            6.00%
Tier I Capital
(To Average Assets) ....................         $30,320           11.28%      $10,753           4.00%      $13,442            5.00%
</TABLE>




                                       19
<PAGE>


RESULTS OF  OPERATIONS:  THREE MONTH PERIOD ENDED JUNE 30, 2004  COMPARED TO THE
SAME PERIOD ENDED JUNE 30, 2003.

Net income for the second  quarter of 2004  increased by $326,000,  or 70%, over
the same period in 2003. Net interest income for the three months ended June 30,
2004,  was $2.4 million,  a 13.2%  increase over the $2.1 million  amount earned
during the second quarter of 2003. Noninterest income for the three months ended
June 30, 2004,  was $94,000,  or 37%,  greater than the amount  received for the
same period in 2003.  Noninterest  expense of $1.48 million for the three months
was  $180,000,  or 13.8%,  more than the 2003 three  month  period  amount.  Net
interest  income  improved  primarily  due to growth of  earning  assets  and an
increase in the loan portfolio.  Noninterest income increased primarily due fees
generated by  brokerage  services.  Non-interest  expense  increased  due to the
opening  of three new  offices  during  2003 and  subsequent  staffing  of these
offices.

<TABLE>
<CAPTION>
                                                                                             Three Months Ended June 30,
                                                                                               (Amounts in thousands)
Average Balances                                                               2004                   2003                   Change
                                                                               ----                   ----                   ------
<S>                                                                         <C>                     <C>                     <C>
Earning assets ..............................................               $256,952                $208,906                $ 48,046
Earning assets yield ($) ....................................               $  3,585                $  3,236                $    349
Earning assets yield (%) ....................................                   5.60%                   6.21%                 -0.61%
Interest-bearing liabilities ................................               $222,792                $186,310                $ 36,482
Cost of funds ($) ...........................................               $  1,169                $  1,102                $     67
Cost of funds (%) ...........................................                   2.10%                   2.37%                 -0.27%
Interest Spread ($) .........................................               $  2,416                $  2,134                $    282
Interest Spread (%) .........................................                   3.50%                   3.84%                 -0.34%
</TABLE>



Part I Item 3 - Controls and Procedures.


(a)  Based on the  evaluation  required by 17 C.F.R.  Section  240.13a-15(b)  or
     240.15d-15(b)  of the  Company's  disclosure  controls and  procedures  (as
     defined  in  17  C.F.R.  Sections  240.13a-15(e)  and  240.15d-15(e)),  the
     Company's chief executive  officer and chief  financial  officer  concluded
     that the  effectiveness  of such controls and procedures,  as of the end of
     the period covered by this quarterly report, was adequate.

(b)  No disclosure is required under 17 C.F.R. Section 228.308(c).




                                       20
<PAGE>



                           PART II - OTHER INFORMATION

Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity
Securities


In May, 2004, the Corporation sold 300,000 shares of its common stock for $25.00
per  share,  or an  aggregate  of $7.5  million,  to  accredited  investors.  No
underwriters  or selling agents were used. The shares were sold pursuant to Rule
506 and  the  exemption  from  registration  provided  by  Section  4 (2) of the
Securities Act of 1933 based on the fact that no public offering was involved.

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

(a)  The Corporation held its annual meeting of shareholders on May 19, 2004.

(b)  The following persons were elected as directors of the Corporation, each to
     serve a three-year term until the Annual Meeting of Shareholders in 2007.

Name
                                               Shares Voted
                                                                         BROKER
                        FOR           WITHHOLD        ABSTAIN          NON-VOTES
                        ----          --------        -------          ---------

Harold Fleming       1,008,458          0                0                0
Joel C. Griffin      1,008,458          0                0                0
Barry L. Slider      1,008,458          0                0                0



Other directors whose terms continued after the meeting are:

Richard  H.  Brooks;  Roger A. F. Habisreutinger; Ashley F. Houser; Herman E.
Ratchford; Chandrakant V. Shanbhag; and David G. White.

Item 6 - Exhibits and Reports on Form 8-K

     (a)  Exhibits included with this report:

          Exhibit 31-1 - Certifications  of Chief Executive  Officer pursuant to
          Rule 13a-14(a).

          Exhibit 31-2 - Certifications  of Chief Financial  Officer pursuant to
          Rule 13a-14(a).

          Exhibit 32 - Certifications pursuant to 18 U.S.C. Section 1350.

     (b) Reports on Form 8-K : Form 8-K dated April 6, 2004  pursuant to Items 7
and 12 of that form.











                                       21
<PAGE>







SIGNATURE

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                  First South Bancorp, Inc.


                                s/Barry L. Slider
August 11, 2004                 ------------------------------------------------
                                  Barry L. Slider, President and Chief Executive
                                     Officer


                                s/V. Lewis Shuler
                                ------------------------------------------------
                                  V. Lewis Shuler, Executive Vice President
                                            (Principal Accounting Officer)






                                       22
<PAGE>







                                  EXHIBIT INDEX



Exhibit  31-1  Certifications  of  Chief  Executive  Officer  pursuant  to  Rule
               13a-14(a).

Exhibit  31-2  Certifications  of  Chief  Financial  Officer  pursuant  to  Rule
               13a-14(a).

Exhibit 32     Certifications pursuant to 18 U.S.C. Section 1350.











































                                       23