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 QUARTERLY PERIOD ENDED JUNE 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 John B White Sr. Blvd.
                        Spartanburg, South Carolina 29306
                     (Address of Principal Executive Office)

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


Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section  13 or 15(d) of the  Exchange  Act  during  the past 12  months  (or for
shorter period that the 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,  917,780
shares outstanding on July 31, 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 4.  Submission of Matters to a Vote of Security holders .......       19

   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)
                                                                                       June 30,          June 30,           Dec. 31,
                                                                                        2001               2000               2000
                                                                                        ----               ----               ----
Assets
<S>                                                                                 <C>                <C>                <C>
Cash & due from banks .....................................................         $   2,318          $   1,661          $   2,043
Due from banks - interest bearing .........................................             2,310                330              8,854
Fed Funds sold ............................................................                 0              7,500                  0
Investment securities:
         Securities held to maturity ......................................             3,849                375              4,349
         Securities available for sale ....................................            11,274              9,930             12,282
Loans .....................................................................           104,779             72,220             82,838
      Less, allowance for loan losses .....................................            (1,260)              (930)            (1,055)
                                                                                    ---------          ---------          ---------
Loans - net ...............................................................           103,519             71,290             81,783
Property & equipment, net .................................................             2,818              3,018              2,906
Other assets ..............................................................             2,555              1,984              2,504
                                                                                    ---------          ---------          ---------
Total assets ..............................................................         $ 128,643          $  96,088          $ 114,721
                                                                                    =========          =========          =========

Liabilities
Deposits:
      Noninterest-bearing .................................................         $   9,032          $   5,624          $   6,355
      Interest-bearing ....................................................            90,676             76,436             92,231
                                                                                    ---------          ---------          ---------
                  Total deposits ..........................................            99,708             82,060             98,586

Securities sold under repurchase agreements ...............................             5,055              1,497              2,553
Other borrowed funds ......................................................            10,000                  0
                                                                                                                                  0
Demand notes issued to the U.S. Treasury ..................................               450                331                130
Other liabilities .........................................................               999                986              1,562
                                                                                    ---------          ---------          ---------
                  Total liabilities .......................................           116,212             84,874            102,831

Shareholders' equity
Common stock - no par value; 20,000,000 authorized, .......................             4,589              4,586              4,589
     Outstanding 917,780, 917,180, 917,780, respectively
Additional paid-in capital ................................................             6,508              6,504              6,508
Undivided profits .........................................................             1,241                345                796
Accumulated other comprehensive income/(loss) .............................                93               (221)                (3)
                                                                                    ---------          ---------          ---------
         Total shareholders' equity .......................................            12,431             11,214             11,890
                                                                                    ---------          ---------          ---------
         Total liabilities and shareholders' equity .......................         $ 128,643          $  96,088          $ 114,721
                                                                                    =========          =========          =========
</TABLE>



                                       3
<PAGE>


                     FIRST SOUTH BANCORP, INC AND SUBSIDIARY

                             Statement of Operations

<TABLE>
<CAPTION>
                                                                                                  (Unaudited)
                                                                                             Period ended June 30,
                                                                                             ---------------------
                                                                                Three Months                       Six Months
                                                                                ------------                       ----------
                                                                            2001            2000             2001              2000
                                                                            ----            ----             ----              ----
                                                                                  (Dollars in thousands, except per share)
Interest income
<S>                                                                      <C>              <C>              <C>              <C>
         Loans, including fees .................................         $ 2,173          $ 1,793          $ 4,318          $ 3,297
         Investment securities .................................             225              150              490              301
         Interest bearing deposits .............................               0              108                1              145
         Other investments .....................................              85                3              128                6
                                                                         -------          -------          -------          -------

         Total interest income .................................           2,483            2,054            4,937            3,749

Interest expense
         Deposits and borrowings ...............................           1,328            1,120            2,684            1,987

Net interest income ............................................           1,155              934            2,253            1,762
         Provision for loan losses .............................            (151)             (95)            (206)            (130)
                                                                         -------          -------          -------          -------
Net interest income after provision ............................           1,004              839            2,047            1,632

Other income
         Service charges on deposit accounts ...................              60               36              106               67
         Other income ..........................................              40               94               81              188
                                                                         -------          -------          -------          -------

         Total noninterest income ..............................             100              130              187              255

Other expenses
         Salaries and benefits .................................             479              438              972              848
         Occupancy and equipment ...............................             131              117              249              215
         Other expense .........................................             178              166              360              348
                                                                         -------          -------          -------          -------
         Total other expense ...................................             788              721            1,581            1,411

Income before income taxes .....................................             316              248              653              476
         Provision for income taxes ............................             113               89              210          $   146
                                                                         -------          -------          -------          -------

Net income .....................................................         $   203          $   159          $   443          $   330

         Basic per share earnings ..............................         $   .22          $   .17          $   .48          $   .36
</TABLE>



                                       4
<PAGE>


                     FIRST SOUTH BANCORP, INC.AND SUBSIDIARY

                 Consolidated Statement of Comprehensive Income


                                                                (Unaudited)
                                                        Six Months Ended June 30
                                                        ------------------------
                                                             2001           2000
                                                             ----           ----
     (Dollars in Thousands)

Net Income ...........................................       $ 443        $ 330

Other comprehensive income (loss):

Change in unrealized holdings gains &
    losses on available for sale securities ..........         154          (42)

Income tax (expense) benefit on other
                comprehensive income (loss) ..........         (58)          16
                                                             -----        -----
Total other comprehensive income (loss) ..............          96          (26)

Comprehensive income (loss) ..........................       $ 539        $ 304
                                                             =====        =====


















                                       5
<PAGE>




                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statement of Cash Flows

<TABLE>
<CAPTION>
                                                                                                                 (Unaudited)
                                                                                                               Six Months Ended
                                                                                                                   June 30,
                                                                                                          2001                2000
                                                                                                          ----                ----
                                                                                                         (Dollars in thousands)
Operating Activities
<S>                                                                                                   <C>                  <C>
Net income ...............................................................................            $    443             $    330

Adjustments to reconcile net income to net cash
                    provided by operating activities
         Provision for loan losses .......................................................                 206                  130
         Depreciation ....................................................................                 108                   96
         Director fees ...................................................................                  29                   18
         Deferred tax asset ..............................................................                 (84)                 (48)
         Decrease (increase) in other assets .............................................                 266                 (336)
         Decrease in accrued expenses and other liabilities ..............................                (146)              (2,084)
                                                                                                      --------             --------

Net cash provided (used) by operating activities .........................................                 822               (1,894)

Investing Activities
         Purchase of securities available for sale .......................................              (4,000)                   0
         Purchase of restricted FHLB stock ...............................................                (337)                   0
         Proceeds from call of available for sale securities .............................               6,000                    0
         Origination of loans, net of principal collected ................................             (21,982)             (15,219)
         Purchase of premises and equipment ..............................................                 (30)                (356)
                                                                                                      --------             --------

Net cash used in investing activities ....................................................             (20,349)             (15,575)

Financing Activities
         Net increase in deposits ........................................................                 754               23,345
         Net increase (decrease) in retail repurchase agreements .........................               2,502                 (226)
         Proceeds from other borrowings ..................................................              10,000                    0
                                                                                                      --------             --------
Net cash provided by financing activities ................................................              13,256               23,119

Net increase (decrease) in cash and cash equivalents .....................................              (6,271)               5,650

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

Cash and cash equivalents, ending ........................................................               4,626                9,490
</TABLE>







                                       6
<PAGE>



                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                  Statement of Changes in Shareholders' Equity
         Year-ended December 31, 2000 and Six Months Ended June 30, 2001
                                   (Unaudited)

<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, 1999 .......................           917,180       $11,090,139       $    14,211       $  (195,018)       $10,909,332

Exercised
stock options ...........................               600             6,850                                                  6,850

Net income ..............................                                               781,730

Net change in
     unrealized gain on
     available for sale
     securities, net of tax .............                                                                 192,032

Comprehensive income ....................                                                                                    973,762
                                                    -------       -----------       -----------       -----------        -----------
Balance at
December 31, 2000 .......................           917,780        11,096,989           795,941            (2,986)        11,889,944
</TABLE>

<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, 2000 .......................           917,780       $11,096,989       $   795,941       $    (2,986)       $11,889,944


Net income ..............................                                               443,283

Net change in
     unrealized gain on
     available for sale
     securities, net of tax .............                                                                  96,373

Comprehensive income ....................                                                                                    539,656
                                                -----------       -----------       -----------       -----------        -----------
Balance at
June 30, 2001 ...........................           917,780        11,096,989         1,239,224            93,387         12,429,600
</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 SB 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 six months ended June 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 Operation

Forward Looking Statements

Statements included in Management's Discussion and Analysis or Plan of Operation
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: SIX MONTH PERIOD ENDED JUNE 30, 2001 COMPARED TO THE SAME
PERIOD ENDED JUNE 30, 2000.

Net Income

For the first six months of 2001, First South Bancorp,  Inc. earned a net profit
of $443,000,  compared to $330,000  for the same period in 2000,  an increase of
$113,000,  or 34%.  Basic  earnings  per  share  were  $.48 in the 2001  period,
compared  to $.36 for the 2000  period.  The  improvement  in net income for the
period can be  attributed  to one income  component,  net interest  income.  Net
interest income increased $491,000 or 28%. That increase was partially offset by
a $68,000  decrease in noninterest  income,  a $170,000  increase in noninterest
expense, and a $76,000 increase in the loan loss reserve provision amount.

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 and ROAE for the period were .75 % and 7.31 %, respectively.





                                       9
<PAGE>



Table One                   Selected Earnings Ratios
                      at or for the Periods Ending June 30

                                                           2001            2000
                                                           ----            ----
Return on Average Assets .........................           .75%           .78%
Return on Average Equity .........................          7.31%          6.00%
Dividend Payout Ratio ............................           N/A            N/A
Average Stockholders Equity
as a Percentage of Average Assets ................         10.28%         13.03%

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 exceed the interest paid on
interest bearing  liabilities,  primarily deposits.  As was stated earlier,  net
interest income for the first six months of 2001 increased over that of the same
period  in 2000 by  $491,000,  or 28%.  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 six months of
2001.

Though  growth in earning  assets of $33.1  million,  or 41.5 %, was certainly a
significant  factor in the improvement of net interest income, the change in the
earning assets mix also contributed to the improvement experienced.  The segment
of total earning assets with the highest interest yield,  loans,  increased as a
percentage  of total earning  assets from 80.7 % in 2000 to 81.5 % in 2001.  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  declining
interest rates. The negative effect on the earning assets yield of the 275 basis
points  decline in the prime rate during the first six months of 2001 is evident
in the 83 basis points reduction of the 2001 loan yield compared to 2000.

For the first six months of 2001, the cost of funds averaged 5.49 %, a reduction
of only 31 basis  points from the  average  cost of funds rate of 5.80% in 2000.
The  decrease  in the cost of funds rate was  one-half  of the  decrease  in the
earning  assets yield.  This resulted  primarily  from the fact that the largest
segment of interest-bearing  liabilities,  time deposits,  cannot be repriced as
frequently as other  interest-bearing  liability segments. The net effect of the
disparity  between  the  pace  at  which  earning  assets  and  interest-bearing
liabilities  repriced  during  the  first  six  months  of 2001 is  shown in the
decrease from 2000 of both the interest spread and margin ratios.


                                       10
<PAGE>

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, 2001 and 2000.

Table Two        Net interest Income and Average Balance Analysis
                        for the Six Months Ended June 30
                                  2001 and 2000
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                    Interest             Average
Interest-Earning Assets (000)                                      Average     Balance          Income/Expense        Yield / Cost

                                                                   2001         2000            2001        2000      2001      2000
                                                                   ----         ----            ----        ----      ----      ----
Federal Funds Sold/
<S>                                                            <C>               <C>       <C>             <C>        <C>      <C>
Int. Bearing Due From Banks ................................   $   5,461         4,712     $     129         145      4.76%    6.19%
Investments ................................................      15,404        10,661           490         307      6.36%    5.76%
Loans ......................................................      91,891        64,317         4,318       3,297      9.48%   10.31%
                                                               ---------        ------     ---------       -----      ----     ----
Total Interest Earning Assets ..............................   $ 112,756        79,690     $   4,937       3,749      8.83%    9.46%

Noninterest-Earning Assets
Cash & Due From Banks ......................................   $   2,154         1,599
Loan Loss Reserve ..........................................      (1,120)         (839)
Investments: Fair value ....................................          62          (377)
Premises & Equipment .......................................       2,858         2,971
Interest Receivable & Other ................................       2,347         1,961
                                                               ---------        ------
Total Noninterest-Earning Assets ...........................   $   6,301         5,315

TOTAL ASSETS ...............................................   $ 119,057        85,005
                                                               =========        ======
Interest-Bearing Liabilities
NOW Accounts ...............................................   $  24,656        17,499     $     526         444      4.30%    5.10%
Money Market & Savings .....................................       2,656         1,941            41          36      3.11%    3.73%
Time Deposits & IRA's ......................................      61,071        47,055         1,906       1,433      6.29%    6.17%
Fed Funds Purchased & Repos ................................       3,459         1,655            63          43      3.67%    5.22%
Other borrowed funds .......................................       6,630           600           144          17      4.38%    5.70%
Demand Notes Issued to Treasury ............................         193           200             4           4      4.18%    4.02%
                                                               ---------        ------     ---------       -----      ----     ----
Total Interest-Bearing Liabilities .........................   $  98,665        68,950     $   2,684       1,987      5.49%    5.80%

Noninterest-Bearing Liabilities
Demand Deposits ............................................   $   6,965         4,148
Interest Payable ...........................................         848           577
Other Liabilities ..........................................         344           247
                                                               ---------        ------
Total Non Int-Bearing Liabilities ..........................   $ 106,822         4,972

Stockholders' Equity .......................................   $  12,235        11,083

Total Liabilities & Equity .................................   $ 119,057        85,005
                                                               =========        ======
Net Interest Income ........................................                               $   2,253     $   1,762

                          Net Yield on Earning Assets ......                                                          4.03%    4.45%
                             Interest Rate Spread ..........                                                          3.34%    3.66%
</TABLE>







                                       11
<PAGE>



Non-Interest Income

Total non-interest  income decreased for the first six months of 2001 by $68,000
from the $255,000 amount in 2000.  Though one category of  non-interest  income,
service charges on deposit accounts,  increased by $39,000, or 58%, the total of
the other categories declined by $107,000 or 57%. The largest dollar decline was
experienced in the area of commissions and fees,  which recorded an $84,000,  or
60%,  decrease  from 2000.  The  decline  in  revenues  generated  by the bank's
brokerage  services  operations  contributed  significantly  to the  decline  in
commissions  and fee  income.  Table  Three  provides  a six month  2001 to 2000
performance comparison of categories of non-interest income.

Table Three

                                             Summary of Total Noninterest Income
                                              for the Six Months Ended June 30
                                                       2001 and 2000
                                                  (Dollars in thousands)

                                                   2001            2000
                                                   ----            ----
Service Charges ...............................    $106            $ 67
Commissions & Fees ............................      55             139
Other Noninterest Income ......................      26              49
                                                   ----            ----
Total .........................................    $187            $255

Non-Interest Expense

Non-interest expense for the first six months of 2001 increased by $170,000,  or
12 %, over the first six months total in 2000 of  $1,411,000.  While some of the
operational expense increase  experienced in 2001 can be attributed to increases
from  vendors  with  which the bank  contracts  third-party  services,  the most
significant  increase  was  experienced  in  personnel  expenses.  Salaries  and
benefits expense increased $124,000, or 73% of the total $170,000 increase.

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

Table Four
                                                For the Six Months Ended June 30
                                                          2001 and 2000
                                                     (Dollars in thousands)

                                                      2001             2000
                                                      ----             ----
Salaries & Employee Benefits ...................     $  972          $  848
Occupancy & Equipment ..........................        249             215
Other ..........................................        360             348
                                                     ------          ------
Total ..........................................     $1,581          $1,411







                                       12
<PAGE>



Income Taxes

Through  June 30,  2001,  $84,000  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. The  non-deductibility  for federal income tax purposes of the
$206,023  year-to-date  charge to earnings as a provision for  potential  future
loan losses  created a significant  increase in 2001 over 2000 of the percentage
of income being accrued for income tax payments, 45% and 41%, respectively.

CHANGES IN FINANCIAL POSITION

Investment portfolio

During the first six months of 2001,  $6,000,000 in government agency securities
with a weighted rate of 5.66% were called.  During this same period,  $4,000,000
in  government  agency  securities  with a weighted  average  rate of 6.25% were
purchased.  A total of $7,000,000 (par) of investment securities were pledged at
06/30/01.

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

<TABLE>
<CAPTION>
June 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             $ 3,026             $     0             $     0
Due from one to five years .........................               3,000               3,033                 500                 523
Due from five to ten years .........................               5,000               5,092               2,000               2,019
Due After ten years ................................                 123                 123                 849                 890
                                                                 =======             =======             =======             =======
                                                                  11,123              11,274               3,349               3,432
</TABLE>

<TABLE>
<CAPTION>
December 31, 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 ............................             $ 3,664             $ 3,650             $     0             $     0
Due from one to five years .........................               6,500               6,474                 500                 513
Due from five to ten years .........................               2,000               2,036               3,000               3,024
Due After ten years ................................                 123                 122                 849                 896
                                                                 =======             =======             =======             =======
                                                                  12,287              12,282               4,349               4,433
</TABLE>


                                       13
<PAGE>


Loan portfolio

Loans at June 30, 2001 increased by $32.5  million,  or 45.1% from loans at June
30,  2000.  As is shown in Table Six,  however,  loans  secured  by real  estate
continued  to comprise a  substantial  percentage  of the total loan  portfolio,
71.8% versus 70.6% in 2000. The bank's loan portfolio on June 30, 2001, as shown
in Table Seven continued to be comprised of a significant percentage,  86.3%, of
variable rate loans as compared to 88.0% at June 30, 2000.

Table Six
                                Analysis of Loans
                                June 30 Balances
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                2001                               2000
                                                                                ----                               ----
Real Estate:
<S>                                                                    <C>                <C>            <C>                <C>
   Construction / Land Development .........................           $ 11,603            11.1%         $  9,428            13.0%
   1-4 Family Residential Properties .......................             21,318            20.3%           15,408            21.3%
   Multifamily Residential Properties ......................              1,688             1.6%            1,102             1.5%
   Nonfarm Nonresidential Properties .......................             40,319            38.5%           24,479            33.9%
   Other Real Estate Loans .................................                301              .3%              549              .8%
Commercial & Industrial ....................................             29,255            27.9%           20,696            28.7%
Consumer ...................................................                295              .3%              558              .8%
                                                                       ========                          ========
TOTAL ......................................................           $104,779           100.0%         $ 72,220           100.0%
</TABLE>

Table Seven
               Analysis of Loan Maturities and Repricing Frequency
                               as of June 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 ..........................      $ 89,925                                                               $ 89,925*

Fixed Rate Loans .............................      $  2,522         3,920          3,934         1,794         2,183      $ 14,353

Total Loans ..................................      $ 92,447         3,920          3,934         1,794         2,183      $104,278*
</TABLE>
*Excludes nonaccrual loan amount


The Bank's  allowance for loan losses is analyzed  monthly in accordance  with a
board  approved  plan.  This  analysis is based upon a model that assigns a risk
rating  to each  individual  loan and  considers  the loss  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 June 30, 2001 and 2000,  as well as the amounts
charged to this reserve as a loss and credited to this reserve as a recovery.

                                       14
<PAGE>

Table Eight

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

                                                        2001              2000
                                                        ----              ----
Balance at Beginning of Year ................        1,055,000           800,000
Provision Charged to Operations .............          206,023           130,000
Loans Charged-off ...........................           (1,720)                0
Loan Recoveries .............................              697                 0
                                                    ----------        ----------
Balance At End Of Period ....................        1,260,000           930,000

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 June 30, 2001, the cumulative
one-year gap for the Bank was a positive, or asset sensitive,  $ 9.9 million. At
June 30, 2001, the  cumulative  five-year gap for the Bank was a positive $ 15.2
million, or 11.8 % 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 Bank's gap is within policy limits that were  established to
help reduce the adverse impact on earnings which movements in interest rates can
cause.  Intense  competition  in the Bank's market  continues to exert  downward
pressure on quality loan rates 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, 2001.




                                       15
<PAGE>


Table Nine

    Distribution of Interest-Earning Assets and Interest-Bearing Liabilities
                     Repricing Schedule as of June 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>
Due From Banks .................................................        $  2,310         $      0         $      0        $  2,310
Investment Securities ..........................................           3,000            3,500            7,972          14,472
FHLB Stock .....................................................             500                0                0             500
Loans** ........................................................          96,367            5,728            2,183         104,278**
                                                                        ========         ========         ========        ========
Total ..........................................................         102,177            9,228           10,155         121,560

**Excludes $501 in loans on nonaccrual status ..................

Interest-Bearing Liabilities
NOW Accounts ...................................................        $ 23,205 $              0         $      0        $ 23,205
Savings & MMIA .................................................           2,544                0                0           2,544
Time Deposits:$100m & > ........................................          13,552              842                0          14,394
Time Deposits: < $100m .........................................          47,444            3,089                0          50,533
Repurchase Agreements ..........................................           5,055                0                0           5,055
Other Borrowed Funds ...........................................             450                0           10,000          10,450
                                                                        ========         ========         ========        ========
Total ..........................................................          92,250            3,931           10,000         106,181

Period  Gap ....................................................           9,927            5,297              155          15,379

Cumulative Gap .................................................           9,927           15,224           15,379

Period Gap Ratios:
 Interest Sensitive Assets to
 Interest Sensitive Liabilities ................................           110.8%           234.7%

Cumulative Gap Ratios:
  Interest Sensitive Assets to
  Interest Sensitive Liabilities ...............................           110.8%           115.8%
</TABLE>




                                       16
<PAGE>


<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 ...........................              $ 4,509              $ 9,043              $   842              $14,394
</TABLE>

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,  2001,  core  deposits  equaled  approximately  60% 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 $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

Tier 1 and Tier 2 capital of the bank  increased  $903,000  between  the June 30
periods  ending 2001 and 2000,  and $445,000  from December 31, 2000 to June 30,
2001. These increases resulted from the 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
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 June 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:




                                       17
<PAGE>


<TABLE>
<CAPTION>
                                                                                                           To be well capitalized
                                                                                      For capital          under prompt corrective
As of June 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) ..... .................         $13,598         12.83%          $8,480           8.0%       $10,600           10.0%

Tier 1 Capital (to risk
weighted assets) ...... ................         $12,338         11.64%          $4,240           4.0%       $ 6,360            6.0%

Tier 1 Capital (to
average assets) (leverage) .............         $12,338           9.87%         $4,999           4.0%       $ 6,249            5.0%
</TABLE>

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

Net income for the second  quarter of 2001 increased by $44,000,  or 28.%,  over
the same  period in 2000.  Noninterest  expense was  $788,000  during the second
quarter 2001 period and exceeded noninterest expense for the same period in 2000
by $66,000.  Noninterest  income of $100,000 was $30,000 less than that in 2000.
However,  net  interest  income  in the three  months  ended  June 30,  2001 was
$220,000  greater  that net  interest  income for the same  period of 2000.  Net
interest income improved due to growth of earning assets, actual and relative to
the growth in interest-bearing  liabilities, as reflected below despite the fact
that the  interest  spread from June 30, 2000 to June 30,  2001,  declined by 34
basis points.

<TABLE>
<CAPTION>
                                 Second Quarter
                             (Dollars in thousands)

Average Balances                                                            2001                     2000                   Change
----------------                                                            ----                     ----                   ------

<S>                                                                       <C>                     <C>                     <C>
Earning assets ............................................               $118,835                $ 86,209                $ 36,626
Earning assets yield($) ...................................               $  2,483                $  2,054                $    429
Earning assets yield(%) ...................................                   8.38%                   9.56%                  (1.18%)
Interest-bearing liabilities ..............................               $103,780                $ 75,276                $ 28,504
Cost of funds($) ..........................................               $  1,329                $  1,120                $    209
Cost of funds(%) ..........................................                   5.13%                   5.97%                   (.84%)
Interest Spread($) ........................................               $  1,154                $    934                $    220
Interest Spread(%) ........................................                   3.25%                   3.59%                   (.34%)
</TABLE>










                                       18
<PAGE>


                           PART II - OTHER INFORMATION


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

     (a)  The  Corporation  held its annual meeting of  shareholders  on May 16,
          2001.

 (b)-(c)  The following  persons were elected as directors of the Corporation
          to serve for a term of three years each.

Name                                                       Shares Voted
----                                                       ------------
                                                      FOR              WITHHOLD
                                                      ---              --------

Harold E. Fleming, MD ......................         690,453             1,000
Joel C. Griffin ............................         690,453             1,000
Barry L. Slider ............................         690,453             1,000


Item 6 - Exhibits and Reports on Form 8-K

(a)      Exhibits included with this report:None

(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
August 10, 2001                -------------------------------------------------
                                  Barry L. Slider, President and Chief Executive
                                    Officer


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



























                                       20