UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

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

                  FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                             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 Reidville Road
                        Spartanburg, South Carolina 29306
                     (Address of Principal Executive Office)

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




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 Bank 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,  917,780
shares outstanding on November 8, 2001.

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 Sheet .........................................      3

                  Statement of Operations ...............................      4

                  Statement of Comprehensive Income .....................      5

                  Statement of Cash Flows ...............................      6

                  Statement of Changes in Shareholder Equity ............      7

                  Notes to Unaudited Statements .........................      8


         Item 2.  Management's Discussion and Analysis ..................   9-18


Part II -         OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K ......................     19

SIGNATURES ..............................................................     20
















                                       2
<Page>

                         PART I - FINANCIAL INFORMATION

                          Item 1 - Financial Statements

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

<Table>
<Caption>
                                                                                  (Unaudited)        (Unaudited)
                                                                                    Sept. 30,          Sept. 30,            Dec. 31,
                                                                                     2001                2000                 2000
                                                                                     ----                ----                 ----
Assets
<S>                                                                               <C>                 <C>                 <C>
Cash & due from banks ..................................................          $   2,203           $   5,382           $   2,043
Due from banks - interest bearing ......................................              3,800                   5               8,854
Federal funds sold .....................................................                  0              10,100                   0
Investment securities:
         Securities held to maturity ...................................              1,950               3,375               4,349
         Securities available for sale .................................             11,370              10,072              12,282
Loans ..................................................................            111,137              77,102              82,838
      Less, allowance for loan losses ..................................             (1,340)             (1,010)             (1,055)
                                                                                  ---------           ---------           ---------
Loans - net ............................................................            109,797              76,092              81,783
Property & equipment, net ..............................................              2,803               2,925               2,906
Other assets ...........................................................              2,552               2,402               2,504
                                                                                  ---------           ---------           ---------
Total assets ...........................................................          $ 134,475           $ 110,352           $ 114,721

Liabilities
Deposits: Noninterest-bearing ..........................................          $   8,823           $   5,333           $   6,355
             Interest-bearing ..........................................             93,968              90,330              92,231
                                                                                  ---------           ---------           ---------
Total deposits .........................................................            102,791              95,663              98,586

Securities sold under repurchase agreements ............................              5,483               1,678               2,553
Other borrowed funds ...................................................             12,000                   0                   0
Demand notes issued to the U.S. Treasury ...............................                467                 175                 130
Other liabilities ......................................................              1,020               1,337               1,562
                                                                                  ---------           ---------           ---------
                   Total liabilities ...................................            121,761              98,853             102,831

Shareholders' equity
Common stock - no par value; 20,000,000 authorized, ....................              4,589               4,586               4,589
Outstanding 917,180, 915,861, 917,180, respectively
Additional paid-in capital .............................................              6,508               6,504               6,508
Undivided profits / (loss) .............................................              1,464                 542                 796
Accumulated other comprehensive income/(loss) ..........................                153                (133)                 (3)
                                                                                  ---------           ---------           ---------
           Total shareholders' equity ..................................             12,714              11,499              11,890

           Total liabilities and shareholders' equity ..................          $ 134,475           $ 110,352           $ 114,721
</Table>


                                       3
<Page>

                     FIRST SOUTH BANCORP, INC AND SUBSIDIARY

                             Statement of Operations


<Table>
<Caption>
                                                                                                  (Unaudited)
                                                                                          Period ended September 30,
                                                                                          --------------------------
                                                                                Three Months                       Nine Months
                                                                                ------------                       -----------
                                                                            2001            2000             2001              2000
                                                                            ----            ----             ----              ----
                                                                                (Dollars in thousands, except per share)
Interest income
<S>                                                                      <C>              <C>              <C>              <C>
         Loans, including fees .................................         $ 2,119          $ 2,048          $ 6,437          $ 5,345
         Investment securities .................................             233              161              723              462
         Federal funds sold ....................................               0              150                1              294
         Other investments .....................................              26                3              153               10
                                                                         -------          -------          -------          -------
         Total interest income .................................           2,378            2,362            7,314            6,111

Interest expense
         Deposits and borrowings ...............................           1,269            1,331            3,952            3,318

Net interest income ............................................           1,109            1,031            3,362            2,793
         Provision for loan losses .............................            (105)             (80)            (311)            (210)
Net interest income after provision ............................           1,004              951            3,051            2,583

Other income
         Service charges on deposit accounts ...................              71               41              177              108
         Other income ..........................................              44               69              126              257
                                                                         -------          -------          -------          -------
         Total noninterest income ..............................             115              110              303
                                                                                                                                365

Other expenses
         Salaries and benefits .................................             475              451            1,447            1,298
         Occupancy and equipment ...............................             122              128              371              344
         Other expense .........................................             187              163              547              511
                                                                         -------          -------          -------          -------
         Total other expense ...................................             784              742            2,365            2,153

Income before income taxes .....................................             335              319              989              795
         Provision for income taxes ............................             110              122              321              268
                                                                         -------          -------          -------          -------

Net income .....................................................         $   225          $   197          $   668          $   527

Basic per share earnings .......................................         $   .24          $   .21          $   .73          $   .58
</Table>


                                       4
<Page>

                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                        Statement of Comprehensive Income
                             (Amounts in thousands)

                                                                 (Unaudited)
                                                             Nine Months Ended
                                                                September 30
                                                                ------------
                                                              2001          2000
                                                              ----          ----


Net Income ...........................................       $ 668        $ 527

Other comprehensive income (loss):
Change in unrealized holding gains &
    losses on available for sale securities ..........         250          100

Income tax (expense) benefit on other
                comprehensive income (loss) ..........         (94)         (38)
                                                             -----        -----
Total other comprehensive income (loss) ..............         156           62

Comprehensive income .................................         824          589
                                                             =====        =====





















                                       5
<Page>

                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                             Statement of Cash Flows
              For the Nine Months ended September 30, 2001 and 2000


<Table>
<Caption>
                                                                                                                 (Unaudited)
                                                                                                              Nine Months Ended
                                                                                                                September 30,
                                                                                                           2001               2000
                                                                                                           ----             ----
                                                                                                           (Dollars in thousands)
Operating Activities
<S>                                                                                                    <C>                 <C>
Net income .................................................................................           $    668            $    527

Adjustments to reconcile net income to net cash
                    provided by operating activities
         Provision for loan losses .........................................................                311                 210
         Depreciation ......................................................................                158                 149
         Director fees .....................................................................                 43                  29
         Deferred tax asset ................................................................               (126)                (72)
         (Increase) decrease in other assets ...............................................                 19                (582)
         Increase (decrease) in accrued expenses and other liabilities .....................               (265)                305

Net cash provided by operating activities ..................................................                808                 566


Investing Activities
         Purchase of securities available for sale .........................................             (8,000)                  0
         Purchase of securities held for investment ........................................                  0              (3,000)
         Purchase of restricted FHLB stock .................................................               (436)                  0
         Proceeds from call of available for sale securities ...............................              9,000                   0
         Proceeds from maturities of held to maturity securities ...........................              3,000                   0
         Origination of loans, net of principal collected ..................................            (28,340)            (20,100)
         Purchase of premises and equipment ................................................                (61)               (223)

Net cash used in investing activities ......................................................            (24,837)            (23,323)

Financing Activities
         Net increase in deposits ..........................................................              4,205              36,948
         Net increase (decrease) in retail repurchase agreements ...........................              2,930                 (45)
         Proceeds/(Payment)  of other borrowings ...........................................             12,000              (2,500)
Net cash provided by financing activities ..................................................             19,135              34,403

Net increase (decrease) in cash and cash equivalents .......................................             (4,894)             11,646

Cash and cash equivalents, beginning .......................................................             10,897               3,840

Cash and cash equivalents, ending ..........................................................              6,003              15,486
</Table>



                                       6
<Page>


                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                  Statement of Changes in Shareholders' Equity
                      Nine Months Ended September 30, 2001
                                   (Unaudited)

<Table>
<Caption>
                                                                                                       ACCUMULATED
                                                                    ADDITIONAL        ACCUMULATED        OTHER            TOTAL
                                                   COMMON            PAID-IN            EARNINGS      COMPREHENSIVE    STOCKHOLDERS'
                                                    STOCK            CAPITAL           (DEFICIT)      INCOME/(LOSS)       EQUITY
                                                    -----            -------           ---------      -------------       ------
Balance at
<S>                                               <C>               <C>                 <C>            <C>                <C>
December 31, 2000 .......................         4,588,900         6,508,089           795,941            (2,986)        11,889,944

Net income ..............................                                               667,900

Net change in
unrealized gain on
available for sale
securities, net of tax ..................                                                                 156,212

Comprehensive income ....................                                                                                    824,112
                                                 ----------        ----------        ----------        ----------         ----------
Balance at
September 30, 2001 ......................         4,588,900         6,508,089         1,463,841           153,226         12,714,056
</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  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 footnotes  required by generally accepted
accounting principles 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 nine months ended  September 30, 2001
are not necessarily  indicative of the results that may be expected for the year
ended December 31, 2001. For further information,  please refer to the financial
statements  and  footnotes  thereto  for the  Corporation's  fiscal  year  ended
December 31, 2000, contained in the Corporation's Annual Report on Form 10-KSB.


































                                       8
<Page>

                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                                 Part I - Item 2

 Management's Discussion and Analysis or Plan of Operations

Forward Looking Statements
Statements  included  in  Management's  Discussion  and  Analysis  which are not
historical  in nature are intended to be, and are hereby  identified as "forward
looking  statements"  for the purpose of the safe harbor provided by Section 21E
of the Securities  Exchange Act of 1934, as amended.  The  Corporation  cautions
readers that forward looking  statements,  including without  limitation,  those
relating to the  Corporation's  future  business  prospects,  revenues,  working
capital,  liquidity,  capital needs,  interest costs, and income, are subject to
certain  risks and  uncertainties  that  could  cause  actual  results to differ
materially  from those  indicated  in the  forward  looking  statements,  due to
several important factors herein  identified,  among others, and other risks and
factors identified from time to time in the Corporation's reports filed with the
Securities and Exchange Commission.


RESULTS OF  OPERATIONS:  NINE MONTH PERIOD ENDED  SEPTEMBER 30, 2001 COMPARED TO
THE SAME PERIOD ENDED SEPTEMBER 30, 2000.

Net Income

For the first nine months of 2001, First South Bancorp, Inc. earned a net profit
of  approximately  $667,900,  or $ .73  per  share,  compared  to  approximately
$527,450,  or $ .57 per share, for the same period in 2000. This 26.6 % increase
in net income occurred despite (i) a 9.8 % increase in noninterest  expense from
$2.153  million to $ 2.365  million,  (ii) an increase in the provision for loan
losses related to loan growth from $210 thousand to $311  thousand,  and (iii) a
decrease of $ 62 thousand in noninterest  income.  Though the effective tax rate
for 2001 was slightly less than that of 2000,  32.5 % versus 33.7 %, the primary
source of the improved  earnings was net interest  income.  Net interest  income
increased by approximately  $569 thousand the first nine months of 2001, or 20.3
%, over the same period in 2000.

Profitability

Earnings of  financial  institutions  are most  commonly  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 for the period  decreased  by five basis  points,  or 6.4%,  and ROAE
increased by 93 basis points, or 14.8 %.



                                       9
<Page>

Table One                 Selected Earnings Ratios
                 for the Nine Month Periods Ending September 30

                                                         2001           2000
                                                         ----           ----
Return on Average Assets .......................          .73%           .78%

Return on Average Equity .......................         7.22%          6.29%

Average Stockholders' Equity
as a Percentage of Average Assets ..............        10.07%         12.36%

The  changes  in ROAA and 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 nine  months of 2001  increased  over that of the
same  period  in 2000 by $569  thousand,  or  20.3%.  As in  most,  if not  all,
instances of comparing the net interest income performance between two different
time periods, a number of factors combined to produce the change in net interest
income  which First South  Bancorp  experienced  during the first nine months of
2001.

Though growth in earning  assets of $ 31.4  million,  or 36.9 %, was certainly a
major factor in the growth of interest income,  the change in the earning assets
mix was equally  important to increasing  interest income.  The segment of total
earning assets with the highest interest yield, loans, increased as a percentage
of total earning assets from 80.0 % in 2000 to 83.0 % in 2001. However, the full
positive  effect of this  change in the  earning  assets  mix was  significantly
offset by the rapid  decline  in the  bank's  prime  rate  during the first nine
months  of 2001.  Compared  to the same  period  last  year,  the yield on loans
declined by 1.60 %. The net effect of the increase in average loans  outstanding
and the  decline in the yield on loans was an  increase  in the dollar  yield on
loans of $1.092 million,  or 90.8 % of the total increase in interest income for
the first nine months of 2001.

The  magnitude  of the decline in the yield on earning  assets  during the first
nine  months of 2001,  1.21 % compared  to the same  period  last year,  was not
matched by as large a decline in the cost of funds rate,  .78 % compared to last
year.  Though Federal Home Loan Bank advances were utilized to fund a portion of
the loan growth experienced in 2001, the bank's policy of balancing  alternative
funding sources with local deposits necessitated increasing deposits with higher
rate Certificates of Deposit promotions.  This, in turn, resulted in significant
growth in the category of interest-bearing  liabilities with the highest cost of
funds rate, time deposits.


                                       10
<Page>

The results of the balance sheet changes, both in growth and mix, in an economic
environment of declining  rates are clearly evident in the declines from 2000 to
2001 of the bank's interest spread and net interest margin ratios.

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 nine months ended September 30, 2001 and 2000.

Table Two             Net interest Income and Average Balance Analysis
                     for the Nine Months Ended September 30
                                  2001 and 2000

<Table>
<Caption>
                                                                                           Interest                    Average
Interest-Earning Assets (000)                            Average        Balance         Income/Expense               Yield/Cost
                                                         -------        -------         --------------               ----------
                                                          2001           2000         2001           2000          2001        2000
                                                          ----           ----         ----           ----          ----        ----
Interest bearing Due from Bank
<S>                                                    <C>            <C>           <C>           <C>              <C>        <C>
Accounts & Federal Funds Sold ..................       $  4,590          6,156      $    155           294         4.51%       6.38%
Investments ....................................         15,165         10,844           722           472         6.37%       5.81%
Loans ..........................................         96,755         68,062         6,437         5,345         8.89%      10.49%
                                                       --------       --------      --------      --------         ----        ----
Total Interest Earning Assets ..................       $116,510         85,062      $  7,314         6,111         8.39%       9.60%

Noninterest-Earning Assets
Cash & Due From Banks ..........................       $  2,149          1,666
Loan Loss Reserve ..............................         (1,181)          (880)
Investments: Fair value ........................             92           (349)
Premises & Equipment ...........................          2,844          2,979
Interest Receivable & Other ....................          2,309          2,040
                                                       --------       --------
Total Noninterest-Earning Assets ...............       $  6,213          5,456

TOTAL ASSETS ...................................       $122,723         90,518
                                                       ========       ========
Interest-Bearing Liabilities
NOW Accounts ...................................       $ 23,726         18,191      $    706           712         3.98%       5.23%
Money Market & Savings .........................          2,785          1,953            57            58         2.74%       3.97%
Time Deposits & IRA's ..........................         63,071         51,831         2,823         2,459         5.98%       6.34%
Fed Funds Purchased & Repos ....................          4,086          1,643           100            65         3.27%       5.28%
Other borrowed funds ...........................          7,853            398           260            17         4.42%       5.70%
Demand Notes Issued to Treasury ................            211            179             6             7         3.80%       5.22%
                                                       --------       --------      --------      --------         ----        ----
Total Interest-Bearing Liabilities .............       $101,732         74,195      $  3,952         3,318         5.19%       5.97%

Noninterest-Bearing Liabilities
Demand Deposits ................................       $  7,508          4,206
Interest Payable ...............................            823            660
Other Liabilities ..............................            299            264
                                                       --------       --------
Total Noninterest-bearing Liabilities ..........       $  8,630          5,130

Stockholders' Equity ...........................       $ 12,361         11,193

Total Liabilities & Equity .....................       $122,723         90,518
                                                       ========       ========
Net Interest Income ............................                                    $  3,362      $  2,793

Net Yield on Earning Assets ....................                                                               3.86%           4.38%
   Interest Rate Spread ........................                                                               3.20%           3.63%
</Table>


                                       11
<Page>

Non-Interest Income

Non-interest  income for the first nine months of 2001 declined by $ 62,000,  or
17.1 %, from the 2000 amount of $ 365,000.  Service charges on deposit  accounts
was the only category of non-interest income which experienced any increase. The
largest  decline in any one  category  of  non-interest  income was the $ 98,000
reduction in commissions and fees.  Reduced  activity in the brokerage  services
area was largely responsible for this change.  Table Three provides a nine month
2001 to 2000 performance comparison of categories of non-interest income.

Table Three           Summary of Total Noninterest Income
                     for the Nine Months Ended September 30
                                  2001 and 2000
                             (Dollars in thousands)

                                                             2001          2000
                                                             ----          ----
Service Charges ..................................           $177           $108
Commissions & Fees ...............................             87            185
Other Non-interest Income ........................             39             72
                                                             ----           ----
Total ............................................           $303           $365

Non-Interest Expense
Non-interest expense for the first nine months of 2001 increased by $212,000, or
9.8 %,  over the first  nine  months of 2000 of  $2,153,000.  While  some of the
operational  expense  increase  experienced in 2001 resulted from the growth the
bank experienced, some of the increase in non-interest expense can be attributed
to the fact that the 2001  total  contained  a full nine  months of  operational
expenses for the Columbia office, which opened in March of 2000.

Table Four provides a nine month 2001 to 2000 performance  comparison of various
categories of non-interest expense.

Table Four            For the Nine Months Ended September 30
                                  2001 and 2000
                             (Dollars in thousands)

                                                          2001             2000
                                                          ----             ----
Salaries & Employee Benefits ...................          $1,447          $1,298
Occupancy & Equipment ..........................             371             344
Other ..........................................             547             511
                                                          ------          ------
Total ..........................................          $2,365          $2,153





                                       12
<Page>

Income Taxes

Through September 30, 2001,  $126,000 had been accrued as a deferred tax benefit
resulting  from a  deferred  tax  asset  created  by income  transferred  to the
provision for loan losses above the amount deductible for income tax purposes in
the  current  year.  Though  deductible  for  state  income  tax  purposes,  the
non-deductibility  for federal income tax purposes of the $311,000  year-to-date
charge to earnings as a provision  for  potential  future loan losses  created a
significant  increase in 2001 over 2000 of the amount  being  accrued for income
tax payments, 45.2 % and 42.7 %, respectively.

CHANGES IN FINANCIAL POSITION

Investment portfolio

During the first nine months of 2001,  the  investment  portfolio  experienced a
substantial change in both the book and market values. The $12 million in agency
securities  which were called  during this  period as rates  declined  were only
partially replaced with $8 million in agency purchases. Declining interest rates
substantially  changed the market value of the investments held on September 30,
2001.  Table Five  demonstrates  the changes  which  occurred  during the twelve
months which ended September 30, 2001.

Table Five               Analysis of Investment Securities
                            ($ amounts in thousands)

<Table>
<Caption>
September 30, 2000                                                   Available for Sale                     Held for Investment
                                                                     ------------------                     -------------------
                                                                Amortized            Fair               Amortized             Fair
                                                                   Cost              Value                Cost                Value
                                                                   ----              -----                ----                -----
<S>                                                              <C>                 <C>                  <C>                 <C>
Due in one year or less ............................             $     0             $     0              $    0              $    0
Due from one to five years .........................              10,163               9,958                   0                   0
Due from five to ten years .........................                   0                   0               1,000                 988
Due After ten years ................................                 123                 114               2,375               2,325
                                                                  ======              ======              ======              ======
                                                                 $10,286             $10,072              $3,375              $3,313

<Caption>
September 30, 2001                                                   Available for Sale                     Held for Investment
                                                                     ------------------                     -------------------
                                                                Amortized            Fair               Amortized             Fair
                                                                   Cost              Value                Cost                Value
                                                                   ----              -----                ----                -----
<S>                                                              <C>                 <C>                 <C>                 <C>
Due in one year or less ............................             $ 3,000             $ 3,031             $     0             $     0
Due from one to five years .........................               3,000               3,065                 500                 534
Due from five to ten years .........................               3,000               3,140                   0                   0
Due After ten years ................................               2,123               2,134                 850                 896
                                                                 =======             =======             =======             =======
                                                                 $11,123             $11,370             $ 1,350             $ 1,430
</Table>
Excludes $600 FHLB stock



                                       13
<Page>

Loan portfolio

From September 30, 2000 to September 30, 2001, loans increase by $34 million, or
44.2 %. As is shown in Table Six, however, the composition of the loan portfolio
on a percentage  of the total basis  remained  relatively  stable.  The greatest
percentage  change  took  place in the  category  of loans  secured  by  Nonfarm
Nonresidential  Properties,  which  increased  as  a  percentage  of  the  total
portfolio by 6.3 %.

As shown in Table Seven,  variable rate loans continue to comprise a substantial
percentage  of total loans,  85.5 %. This  percentage is down from the September
30, 2000, figure of 91.7 %.

On  September  30,  2001,  there were three loans on  non-accrual  status  which
totaled  $683  thousand.  There were two loans past due over  thirty  days which
totaled $185 thousand.

Table Six                       Analysis of Loans
                              September 30 Balances
                            ($ Amounts in thousands)

<Table>
<Caption>
                                                                        2001                               2000
                                                                        ----                               ----
Real Estate:
<S>                                                                   <C>                  <C>            <C>                 <C>
   Construction / Land Development ........................           $ 12,652              11.4%         $  9,385             12.2%
   1-4 Family Residential Properties ......................             23,718              21.3%           17,816             23.1%
   Multifamily Residential Properties .....................              1,185               1.1%            1,091              1.4%
   Nonfarm Nonresidential Properties ......................             43,332              39.0%           25,245             32.7%
   Other Real Estate Loans ................................                300                .3%              547               .7%
Commercial & Industrial ...................................             29,401              26.4%           22,064             28.6%
Consumer ..................................................                528                .5%              502               .7%
Other .....................................................                 50               <.01%             452               .6%
                                                                      ========                            ========
TOTAL .....................................................           $111,166             100.0%         $ 77,102            100.0%
</Table>

Table Seven      Analysis of Loan Maturities and Repricing Frequency
                            as of September 30, 2001
                            ($ amounts in thousands)

<Table>
<Caption>
                                             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 ...............        $ 95,026                                                                        $ 95,026*

Fixed Rate Loans ..................        $  3,693           4,415            3,048           3,099           1,202       $ 15,457

Total Loans .......................        $ 98,719           4,415            3,048           3,099           1,202       $110,483
</Table>

* Excludes nonaccrual loans of $683



                                       14
<Page>


The Bank's  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 risks  associated
with various  risk  categories  in  relationship  to the current and  forecasted
economic environment.  The Bank 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  September 30,
2001 and 2000,  as well as the  amounts  charged  to this  reserve as a loss and
credited to this reserve as a recovery.

Table Eight
                    Analysis of the Allowance for Loan Losses
                     for the Nine Months Ended September 30

                                                        2001              2000
                                                        ----              ----
Balance at Beginning of Year ................        1,055,000           800,000
Provision Charged to Operations .............          311,003           209,900
Loans Charged-off ...........................          (26,720)                0
Loan Recoveries .............................              717               100
Balance At End Of Period ....................        1,340,000         1,010,000

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 the Bank's earning assets and interest bearing  liabilities within
defined time periods is referred to as "gap"analysis. The Bank's 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 September  30, 2001,  the
cumulative  one-year  gap for the Bank was a positive or asset  sensitive $ 17.7
million. At September 30, 2001, the cumulative  five-year gap for the Bank was a
positive $15.4 million, or 12.5 % of total assets.  These positive positions are
the results of  management's  efforts to limit the risk of loss in earnings over
the long run by extending  loans with variable  interest  rates.  A positive gap
means that assets  would  reprice  faster  than  liabilities  if interest  rates
changed. The Bank's gap is within policy limits which were established to reduce
the adverse  impact on earnings  which  movements  in interest  rates can cause.
Intense  competition  in the Bank'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 September 30, 2001.


                                       15
<Page>

Table Nine

    Distribution of Interest-Earning Assets and Interest-Bearing Liabilities
                   Repricing Schedule as of September 30, 2001
                            ($ Amounts in thousands)

<Table>
<Caption>
                                                                          One Year       Over One Year        Over
                                                                          or Less        To Five Years      Five Years        Total
                                                                          -------        -------------      ----------        -----
Interest Earning Assets
<S>                                                                       <C>              <C>              <C>              <C>
Int-Bearing Due From Banks .....................................            3,800                0                0            3,800
Investment Securities ..........................................            3,000            3,500            5,973           12,473
FHLB Stock .....................................................                0                0              600              600
Loans** ........................................................          103,134            6,147            1,202          110,483
                                                                          =======          =======          =======          =======
Total ..........................................................          109,934            9,647            7,775          127,356

** Excludes $683 in loans on nonaccrual status

Interest-Bearing Liabilities
NOW Accounts ...................................................           23,841                0                0           23,841
Savings & MMIA .................................................            2,020                0                0            2,020
Time Deposits:$100m & > ........................................           11,956              725                0           12,681
Time Deposits: < $100m .........................................           52,900            2,526                0           55,426
Repurchase Agreements ..........................................            5,483                0                0            5,483
Other Borrowings ...............................................            2,467                0           10,000           12,467
                                                                          =======          =======          =======          =======
Total ..........................................................           98,667            3,251           10,000          111,918

Period  Gap ....................................................           11,267            6,396           (2,225)          15,438

Cumulative Gap .................................................           11,267           17,663           15,438

Period Gap Ratios:
 Interest Sensitive Assets to
 Interest Sensitive Liabilities ................................            111.4%          296.7%            (77.8%)

Cumulative Gap Ratios:
  Interest Sensitive Assets to
  Interest Sensitive Liabilities ...............................           111.4%           117.3%            113.8%
</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 ...........................                2,883                9,073                  725               12,681
</Table>


                                       16
<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 which 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, and were
equal to 73.3% of total  assets  at  September  30,  2001.  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.  The Bank also has $5.5 million  available
through  lines of credit with other banks as an  additional  source of liquidity
funding.  Management  believes  that the Bank's  overall  liquidity  sources are
adequate to meet its operating needs.

Capital Resources

The equity capital of the Corporation  increased $ 1,215,000  between  September
30, 2000 and 2001.  An increase in retained  earnings of $921,000  accounted for
75.8 % of this increase.

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  Improvement
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  September  30, 2001 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
                                                                                              For capital    under prompt corrective
As of Sept. 30, 2001                                                     Actual            adequacy purposes   action provisions
                                                                         ------            -----------------   -----------------
                                                                                                 Minimum              Minimum
                                                                                                 -------              -------
                                                                   Amount       Ratio      Amount       Ratio    Amount       Ratio
                                                                   ------       -----      ------       -----    ------       -----
<S>                                                                <C>           <C>      <C>           <C>     <C>           <C>
Total Capital (to risk weighted assets) .....................      $13,901       12.5%    $ 8,892       8.0%    $11,115       10.0%

Tier 1 Capital (to risk weighted assets) ....................      $12,561       11.3%    $ 4,446       4.0%    $ 6,669        6.0%

Tier 1 Capital (to average assets) (leverage) ...............      $12,561        9.7%    $ 5,196       4.0%    $ 6,495        5.0%
</Table>



                                       17
<Page>


RESULTS OF OPERATIONS:  THREE MONTH PERIOD ENDED  SEPTEMBER 30, 2001 COMPARED TO
THE SAME PERIOD ENDED SEPTEMBER 30, 2000.

Net income for the third quarter of 2001 increased $28,000,  or 14.1 %, over the
same period last year.  Non-interest expenses increased $ 41,000, or 5.6 %, over
last year,  and the amount  charged to earnings as a provision  to the loan loss
reserve  increased  $25,000,  or 31.2 %.  Serving as an offset to these  expense
increases were a $ 5,000 increase in non-interest income, a $ 78,000 increase in
net interest income, and an $ 11,000 net benefit in the Corporation's income tax
liability.

Though the growth in  earning  assets  accounted  for a slight  increase  in the
dollar yield on earning assets  relative to the dollar cost of  interest-bearing
liabilities, performance ratios, as shown below, suffered from the rapid decline
in interest rates during the first nine months of this year.


                           Quarter Ended September 30
                            ($ Amounts in thousands)

<Table>
<Caption>
Average Balances                                                                2001                   2000                 Change
                                                                                ----                   ----                 ------

<S>                                                                          <C>                    <C>                    <C>
Earning assets ...............................................               $123,914               $ 95,622               $ 28,292

Earning assets yield ($) .....................................                  2,378                  2,362                     16

Earning assets yield (%) .....................................                   7.61%                  9.80%                (2.19%)


Interest-bearing liabilities .................................               $107,789               $ 84,571               $ 23,218

Cost of funds ($) ............................................                  1,269                  1,331                    (62)

Cost of funds (%) ............................................                   4.67%                  6.24%                (1.57%)


Interest Spread ($) ..........................................               $  1,109               $  1,031               $     78

Interest Spread (%) ..........................................                   2.94%                  3.56%                 (.62%)
</Table>







                                       18
<Page>


                           PART II - OTHER INFORMATION


Item 6 - Exhibits and Reports on Form 8-K

         (a)      No exhibits are included with this report.

         (b)      Reports on Form 8-K :    None




































                                       19
<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
November 13, 2001                     ------------------------------------------
                                      Barry L. Slider, President and Chief
                                         Executive Officer


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





























                                       20