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, 2002

                             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
                            (Bank's Telephone Number)

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

                           COMMON STOCK, NO PAR VALUE

Check  whether the issuer (1) has filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for shorter  period that
the 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,  920,780
shares outstanding on July 30, 2002.

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 1.  Legal Proceedings .....................................     19

         Item 4.  Submission of Matters to 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)
                                                                                                   June 30,                Dec. 31,
                                                                                                    2002                     2001
                                                                                                    ----                     ----
Assets
<S>                                                                                              <C>                      <C>
Cash & due from banks ............................................................               $   2,654                $   3,039
Due from banks - interest bearing ................................................                  10,000                    3,400
Investment securities:
         Securities held to maturity .............................................                   1,950                    1,350
         Securities available for sale ...........................................                  14,328                    8,901
Loans ............................................................................                 138,611                  126,166
      Less, allowance for loan losses ............................................                  (1,550)                  (1,450)
                                                                                                 ---------                ---------
Loans - net ......................................................................                 137,061                  124,716
Property & equipment, net ........................................................                   2,798                    2,876
Other assets .....................................................................                   2,510                    2,328
                                                                                                 ---------                ---------
Total assets .....................................................................               $ 171,301                $ 146,610

Liabilities
Deposits:
      Noninterest-bearing ........................................................               $  15,850                $   9,731
      Interest-bearing ...........................................................                 123,241                  107,552
                                                                                                 ---------                ---------
                  Total deposits .................................................                 139,091                  117,283

Securities sold under repurchase agreements ......................................                   7,238                    5,209
Other borrowed funds .............................................................                  10,000                   10,000
Demand notes issued to the U.S. Treasury .........................................                     325                       41
Other liabilities ................................................................                     966                    1,168
                                                                                                 ---------                ---------
                  Total liabilities ..............................................                 157,620                $ 133,701

Shareholders' equity
Common stock - no par value; 20,000,000 authorized, ..............................                   4,604                    4,589
Outstanding 920,780 and 917,780 respectively
Additional paid-in capital .......................................................                   6,541                    6,508
Undivided profits ................................................................                   2,409                    1,702
Accumulated other comprehensive income/ (loss) ...................................                     127                      110
                                                                                                 ---------                ---------
         Total shareholders' equity ..............................................                  13,681                   12,909
                                                                                                 ---------                ---------
         Total liabilities and shareholders' equity ..............................               $ 171,301                $ 146,610
                                                                                                 =========                =========
</Table>


                                       3
<Page>

                     FIRST SOUTH BANCORP, INC AND SUBSIDIARY

                             Statement of Operations

<Table>
<Caption>
                                                                                                (Unaudited)
                                                                                            Period ended June 30,
                                                                                            ---------------------
                                                                                 Three Months                     Six Months
                                                                                 ------------                     ----------
                                                                           2002             2001            2002              2001
                                                                           ----             ----            ----              ----
                                                                                   (Amounts in thousands, except per share)
Interest income
<S>                                                                      <C>              <C>              <C>              <C>
         Loans, including fees .................................         $ 2,367          $ 2,173          $ 4,533          $ 4,318
         Investment securities .................................             201              225              352              490
         Interest bearing deposits .............................              45               85               78              128
         Federal Funds Sold ....................................               0                0                0                1
                                                                         -------          -------          -------          -------


         Total interest income .................................           2,613            2,483            4,963            4,937

Interest expense
         Deposits and borrowings ...............................           1,080            1,328            2,206            2,684

Net interest income ............................................           1,533            1,155            2,757            2,253
         Provision for loan losses .............................            (181)            (151)            (291)            (206)
                                                                         -------          -------          -------          -------
Net interest income after provision ............................           1,352            1,004            2,466            2,047

Other income
         Service charges on deposit accounts ...................              57               60              117              106
         Other income ..........................................              97               41              347               81
                                                                         -------          -------          -------          -------
         Total noninterest income ..............................             154              101              464              187

Other expenses
         Salaries and benefits .................................             546              479            1,142              972
         Occupancy and equipment ...............................             125              131              250              249
         Other expense .........................................             214              178              408              360
                                                                         -------          -------          -------          -------
         Total other expense ...................................             885              788            1,800            1,581

Income before income taxes .....................................             621              317            1,130              653
         Provision for income taxes ............................             251              114              423              210
                                                                         -------          -------          -------          -------

Net income .....................................................         $   370          $   203          $   707          $   443

         Basic per share earnings ..............................         $   .40          $   .22          $   .77          $   .48
</Table>



                                       4
<Page>

                     FIRST SOUTH BANCORP, INC.AND SUBSIDIARY

                 Consolidated Statement of Comprehensive Income


                                                              (Unaudited)
                                                        Six Months Ended June 30
                                                        ------------------------
                                                          2002            2001
                                                          ----            ----
                                                         (Amounts in Thousands)

Net Income ...........................................   $ 707            $ 443

Other comprehensive income (loss):

Change in unrealized holdings gains &
    losses on available for sale securities ..........      27              154

Income tax (expense) benefit on other
                comprehensive income (loss) ..........     (10)             (58)
                                                         -----            -----
Total other comprehensive income (loss) ..............      17               96

Comprehensive income (loss) ..........................   $ 724            $ 539
                                                         =====            =====




















                                       5
<Page>



                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statement of Cash Flows
                 For the Six Months ended June 30, 2002 and 2001
                             (Amounts in thousands)

<Table>
<Caption>
                                                                                                               (Unaudited)
                                                                                                             Six Months Ended
                                                                                                                 June 30,
                                                                                                        2002                2001
                                                                                                        ----                ----
                                                                                                          (Amounts in thousands)
Operating Activities
<S>                                                                                                  <C>                   <C>
Net income .............................................................................             $    707              $    443

Adjustments to reconcile net income to net cash
  provided by operating activities
         Provision for loan losses .....................................................                  291                   206
         Depreciation ..................................................................                   97                   108
         Director fees .................................................................                   30                    29
         Deferred tax asset ............................................................                  (72)                  (84)
         Increase in other assets ......................................................                 (109)                  266
         (Decrease) in accrued expenses and other liabilities ..........................                 (308)                 (146)
                                                                                                     --------              --------

Net cash provided by operating activities ..............................................                  636                   822


Investing Activities
         Purchase of securities available for sale .....................................              (10,000)               (4,000)
         Purchase of restricted FHLB stock .............................................                    0                  (337)
         Proceeds from call of available for sale securities ...........................                4,000                 6,000
         Origination of loans, net of principal collected ..............................              (12,545)              (21,982)
         Purchase of premises and equipment ............................................                  (45)                  (30)
                                                                                                     --------              --------

Net cash used in investing activities ..................................................              (18,590)              (20,349)

Financing Activities
         Net increase in deposits ......................................................               21,855                   754
         Net increase in retail repurchase agreements ..................................                2,029                 2,502
         Proceeds from other borrowings ................................................                  285                10,000
                                                                                                     --------              --------

Net cash provided by financing activities ..............................................               24,169                13,256

Net increase (decrease) in cash and cash equivalents ...................................                6,215                (6,271)

Cash and cash equivalents, beginning ...................................................                6,439                10,897

Cash and cash equivalents, ending ......................................................               12,654                 4,626
</Table>




                                       6
<Page>



                    FIRST SOUTH BANCORP, INC. AND SUBSIDIARY

                  Statement of Changes in Shareholders' Equity
         Year-ended December 31, 2001 and Six Months Ended June 30, 2002
                                   (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, 2000 ..................            917,180        $11,096,989        $   795,941        $    (2,986)        $11,889,944

Exercised
stock options

Net income .........................                                                  905,845

Net change in
unrealized gain on
available for sale
securities, net of tax .............                                                                     113,174

Comprehensive income ...............                                                                                       1,019,009
                                            -----------        -----------        -----------        -----------         -----------
Balance at
December 31, 2001 ..................            917,780        $11,096,989        $ 1,701,776        $   110,188         $12,908,953
</Table>


<Table>
<Caption>
                                              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, 2001 ...................          917,780        $11,096,989         $ 1,701,776        $   110,188         $12,908,953
Exercised
stock options .......................            3,000             48,000                                                     48,000
Net income ..........................                                                707,127

Net change in
unrealized gain on
available for sale
securities, net of tax ..............                                                                     16,904

Comprehensive income ................                                                                                        724,031
                                           -----------        -----------         -----------        -----------         -----------
Balance at
June 30, 2002 .......................          920,780        $11,144,989         $ 2,408,903        $   127,092         $13,680,984
</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 notes  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, 2002 are not
necessarily  indicative  of the results  that may be expected for the year ended
December  31,  2002.  For further  information,  please  refer to the  financial
statements  and notes thereto for the  Corporation's  fiscal year ended December
31, 2001, 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 of  Financial  Condition  and Results of
Operations

Forward Looking Statements

Statements  included  in  Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results of  Operations  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, 2002 COMPARED TO THE SAME
PERIOD ENDED JUNE 30, 2001.

Net Income

For the first six months of 2002, First South Bancorp,  Inc. earned a net profit
of $707,000,  compared to $443,000  for the same period in 2001,  an increase of
$264,000,  or 60%.  Basic  earnings  per  share  were  $.77 in the 2002  period,
compared  to $.48 for the 2001  period.  The  improvement  in net income for the
period can be largely  attributed to one income component,  net interest income.
Net interest  income  increased  $504,000,  or 22%.  Though less  significant in
relative  terms,  a portion of the 2002  increase in net income  resulted from a
$58,000  reduction  in net  noninterest  expense  compared to the same period in
2001.

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 .87 % and 10.71 %, respectively.


                                       9
<Page>



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

                                                         2002           2001
                                                         ----           ----
Return on Average Assets .......................         .87%           .75%
Return on Average Equity .......................       10.71%          7.31%
Dividend Payout Ratio ..........................         N/A             N/A
Average Stockholders Equity
as a Percentage of Average Assets ..............        8.15%          10.28%

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 six months of 2002 increased over that of the same
period  in 2001 by  $504,000,  or 22%.  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
2002.

Though  growth in earning  assets of $43.8  million,  or 38.9 %, was certainly a
significant  factor in the improvement in net interest income, the change in the
earning  assets mix also  contributed to the  improvement.  The segment of total
earning assets with the highest interest yield, loans, increased as a percentage
of total  earning  assets  from 81.5 % in 2001 to 85.8 % in 2002.  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 475 basis points
decline in the prime rate during 2001 is clearly evident in the 267 basis points
reduction in the 2002 loan yield compared to 2001.

For the first six months of 2002, the cost of funds averaged 3.24 %, a reduction
of 225 basis points from the average cost of funds rate of 5.49% in 2001. Though
there  was only a 19 basis  points  disparity  between  the 2001 to 2002  period
reductions in the earning assets yield and cost of funds rate, the disparity was
amplified  by  a  volume  differential  between   interest-bearing   assets  and
liabilities.  Interest sensitive assets exceeded interest sensitive  liabilities
by $19.3  million.  The net effect of 19 basis points  repricing  disparity  and
volume  differential  are most evident in the decline in the net interest margin
of 48 basis points.


                                       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, 2002 and 2001.

Table Two        Net interest Income and Average Balance Analysis
                        for the Six Months Ended June 30
                                  2002 and 2001
                             (Amounts in thousands)

<Table>
<Caption>
                                                                                                 Interest                Average
Interest-Earning Assets (000)                           Average         Balance              Income/Expense            Yield / Cost
                                                          2002            2001             2002           2001       2002       2001
                                                          ----            ----             ----           ----       ----       ----

<S>                                                 <C>              <C>              <C>            <C>            <C>        <C>
Int. Bearing Due From Banks ..................      $   9,592            5,461               79            129      1.66%      4.76%
Investments ..................................         12,703            5,404              352            490      5.59%      6.36%
Loans ........................................        134,308           91,891            4,533          4,318      6.81%      9.48%
                                                    ---------        ---------        ---------      ---------      ----       ----
Total Interest Earning Assets ................      $ 156,603        $ 112,756        $   4,964      $   4,937      6.39%      8.83%

Noninterest-Earning Assets
Cash & Due From Banks ........................      $   2,760            2,154
Loan Loss Reserve ............................         (1,484)          (1,120)
Investments: Fair value ......................            132               62
Premises & Equipment .........................          2,835            2,858
Interest Receivable & Other ..................          2,352            2,347
Total Noninterest-Earning Assets .............      $   6,595        $   6,301
                                                    ---------        ---------

TOTAL ASSETS .................................      $ 163,198        $ 119,057
                                                    =========        =========

Interest-Bearing Liabilities
NOW Accounts .................................      $  29,658           24,656        $     354            526      2.41%      4.30%
Money Market & Savings .......................          2,833            2,656               18             41      1.28%      3.11%
Time Deposits & IRA's ........................         88,782           61,071            1,574          1,906      3.58%      6.29%
Fed Funds Purchased & Repos ..................          5,681            3,459               35             63      1.24%      3.67%
Other borrowed funds .........................         10,033            6,630              224            144      4.50%      4.38%
Demand Notes Issued to Treasury ..............            258              193                2              4      1.56%      4.18%
                                                    ---------        ---------        ---------      ---------      ----       ----
Total Interest-Bearing Liabilities ...........      $ 137,245        $  98,665        $   2,207      $   2,684      3.24%      5.49%

Noninterest-Bearing Liabilities
Demand Deposits ..............................      $  11,510            6,965
Interest Payable .............................            673              848
Other Liabilities ............................            462              344
                                                    ---------        ---------
Total Non Int-Bearing Liabilities ............      $  12,645        $   8,157

Stockholders' Equity .........................      $  13,308        $  12,235
                                                    ---------        ---------

Total Liabilities & Equity ...................      $ 163,198        $ 119,057
                                                    =========        =========
Net Interest Income ..........................                                        $   2,757      $   2,253

   Net Yield on Earning Assets ...............                                                                      3.55%      4.03%
   Interest Rate Spread ......................                                                                      3.15%      3.34%
</Table>




                                       11
<Page>



Non-Interest Income

Total non-interest income increased for the first six months of 2002 by $277,000
from the $187,000 amount in 2001.  Though service  charges on deposit  accounts,
increased by $11,000,  or 10%, the most notable  increase in noninterest  income
occurred in the commissions and fees category. Commissions and fees increased by
$262,000 as a result of income  derived from the  brokering of loans,  a service
initiated this year.  Table Three provides a six month 2002 to 2001  performance
comparative of categories of non-interest income.

Table Three            Summary of Total Noninterest Income
                        for the Six Months Ended June 30
                                  2002 and 2001
                             (Amounts in thousands)

                                                            2002            2001
                                                            ----            ----
Service Charges ................................            $117            $106
Commissions & Fees .............................             317              55
Other Noninterest Income .......................              30              26
                                                            ----            ----
Total ..........................................            $464            $187

Non-Interest Expense

Non-interest expense for the first six months of 2002 increased by $219,000,  or
14 %, over the first six months total in 2001 of  $1,581,000.  While some of the
operational expense increase  experienced in 2002 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 $170,000, or 78% of the total $219,000 increase.

Table Four provides a six month 2002 to 2001 performance  comparative of various
categories of non-interest expense.

Table Four                For the Six Months Ended June 30
                                  2002 and 2001
                             (Amounts in thousands)

                                                            2002            2001
                                                            ----            ----
Salaries & Employee Benefits ...................          $1,142          $  972
Occupancy & Equipment ..........................             250             249
Other ..........................................             408             360
                                                          ------          ------
Total ..........................................          $1,800          $1,581




                                       12
<Page>


Income Taxes
Through  June 30,  2002,  $72,000  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
$291,000  year-to-date  charge to earnings as a provision for  potential  future
loan losses relative to historical loan losses  continues to increase the amount
carried as a tax deferred benefit.

CHANGES IN FINANCIAL POSITION

Investment portfolio

During the first six months of 2002,  $4,000,000 in government agency securities
with a weighted rate of 4.81%  matured or were called.  During this same period,
$10,000,000  in government  agency  securities  with a weighted  average rate of
4.43% were purchased. A total of $10,000,000 (par) of investment securities were
pledged on 06/30/02.

Table Five                Analysis of Investment Securities
                             (Amounts in thousands)

<Table>
<Caption>
June 30, 2002                                                        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 .........................              13,000              13,198                 500                 528
Due from five to ten years .........................               1,000               1,007                   0                   0
Due After ten years ................................                 123                 123                 850                 936
                                                                 =======             =======             =======             =======
                                                                  14,123              14,328               1,350               1,464
</Table>

<Table>
<Caption>

December 31, 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              $3,011              $    0              $    0
Due from one to five years .........................               4,000               4,138                 500                 531
Due from five to ten years .........................               1,000               1,034                   0                   0
Due After ten years ................................                 123                 119                 850                 912
                                                                  ======              ======              ======              ======
                                                                  $8,123              $8,302              $1,350              $1,443
</Table>




                                       13
<Page>

Loan portfolio

From June 30, 2001 to June 30, 2002, loans increased by $33.8 million, or 32.3%.
As is shown in Table Six,  however,  loans  secured by real estate  continued to
comprise a  substantial  percentage  of the total loan  portfolio,  71.3% versus
71.8% in 2001.  The bank's loan  portfolio on June 30,  2002,  as shown in Table
Seven continued to be comprised of a significant percentage,  91.4%, of variable
rate loans as compared to 86.3% at June 30, 2001.

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

<Table>
<Caption>
                                                                             2002                             2001
                                                                             ----                             ----
Real Estate:
<S>                                                                        <C>                 <C>           <C>               <C>
   Construction / Land Development .............................           $14,092             10.2%         $11,603           11.1%
   1-4 Family Residential Properties ...........................            26,507             19.1%          21,318           20.3%
   Multifamily Residential Properties ..........................             1,246               .9%           1,688            1.6%
   Nonfarm Nonresidential Properties ...........................            55,808             40.3%          40,319           38.5%
   Other Real Estate Loans .....................................             1,167               .8%             301             .3%
Commercial & Industrial ........................................            38,960             28.1%          29,255           27.9%
Consumer .......................................................               831               .6%             295             .3%
                                                                          ========                          ========
TOTAL ..........................................................          $138,611            100.0%        $104,779          100.0%
</Table>

Table Seven          Analysis of Loan Maturities and Repricing Frequency
                               as of June 30, 2002
                             (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 ...........................      $126,670                                                              $126,670*

Fixed Rate Loans ..............................      $  1,903         1,654          1,756         1,892         4,520     $ 11,725
                                                     --------      --------       --------      --------      --------     --------

Total Loans ...................................      $128,573         1,654          1,756         1,892         4,520     $138,395
</Table>
*Excludes nonaccrual loan amount


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 risk categories in
relationship to the current and forecasted economic  environment.  The Bank also
monitors the overall portfolio, as well as the


                                       14
<Page>


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, 2002
and 2001, 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 Six Months Ended June 30

                                                     2002                 2001
                                                     ----                 ----
Balance at Beginning of Year .............       $ 1,450,000        $ 1,055,000
Provision Charged to Operations ..........           290,580            206,023
Loans Charged-off ........................          (190,616)            (1,720)
Loan Recoveries ..........................                36                697
                                                 -----------        -----------
Balance At End Of Period .................       $ 1,550,000        $ 1,260,000

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,
2002, the cumulative one-year gap for the Bank was a positive or asset sensitive
$18.7 million. At June 30, 2002, the cumulative five-year gap for the Bank was a
positive  $27.2 million or 15.9 % 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 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 June
30, 2002.





                                       15
<Page>


Table Nine

    Distribution of Interest-Earning Assets and Interest-Bearing Liabilities
                     Repricing Schedule as of June 30, 2002
                             (Amounts in thousands)

<Table>
<Caption>
                                                               One Year         Over One Year            Over
                                                               or Less          Five Years             Five Years           Total
                                                               -------          ----------             ----------           -----
Interest Earning Assets
<S>                                                           <C>                 <C>                 <C>                 <C>
Due From Banks ...................................            $ 10,000            $      0            $      0            $ 10,000
Investment Securities ............................                   0              13,500               1,973              15,473
FHLB Stock .......................................                 600                   0                   0                 600
Loans** ..........................................             130,227               3,648               4,520             138,395**
                                                              ========            ========            ========            ========
Total ............................................            $140,827            $ 17,148            $  6,493            $164,468

** Excludes $216 in loans on nonaccrual status.

Interest-Bearing Liabilities
NOW Accounts ........................................         $ 31,585            $      0            $      0            $ 31,585
Savings & MMIA ......................................            3,145                   0                   0               3,145
Time Deposits:$100m & > .............................           15,599                 731                   0              16,330
Time Deposits: < $100m ..............................           64,273               7,907                   0              72,180
Repurchase Agreements ...............................            7,238                   0                   0               7,238
Other Borrowed Funds ................................              326                   0              10,000              10,326
                                                              ========            ========            ========            ========
Total ...............................................         $122,166            $  8,638             $10,000            $140,804

Period  Gap .........................................           18,661               8,510              (3,507)             23,664

Cumulative Gap ......................................           18,661              27,171              23,664

Period Gap Ratios:
 Interest Sensitive Assets to
 Interest Sensitive Liabilities .....................           115.3%              198.5%

Cumulative Gap Ratios:
  Interest Sensitive Assets to
  Interest Sensitive Liabilities ....................           115.3%              120.8%
</Table>



                                  3 Months     Over 3 Months  Over One
Time Deposits                      & Less      to 12 Months      Year     Total
-------------                      ------      ------------      ----     -----
 $100,000 and Greater .......      $ 5,006      $10,593      $   731     $16,330


                                       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 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,  2002,  core  deposits  equaled  approximately  65% 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 $1,458,000 between June 30, 2002
and 2001, and $807,000 from December 31, 2001 to June 30, 2002.  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
capital  ratios of capital to  risk-weighted  assets and average  total  assets.
Under the provisions of the Federal Deposit Insurance  Corporation  Improvements
Act of 1991, federal financial institutions  regulatory authorities are required
to implement prescribed "prompt corrective action" upon the deterioration of the
capital position of a bank. If the capital  position of an affected  institution
were to fall below certain levels,  increasingly stringent regulatory corrective
actions are mandated.

The Bank's June 30, 2002 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 June 30, 2002                                          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) .........................         $15,056           10.78%      $11,169          8.0%       $13,961          10.0%

Tier 1 Capital (to risk
weighted assets) .........................         $13,506            9.67%      $ 5,584          4.0%       $ 8,377           6.0%

Tier 1 Capital (to
average assets) (leverage) ...............         $13,506            7.93%      $ 6,813          4.0%       $ 8,516           5.0%
</Table>



                                       17
<Page>


RESULTS OF  OPERATIONS:  THREE MONTH PERIOD ENDED JUNE 30, 2002  COMPARED TO THE
SAME PERIOD ENDED JUNE 30, 2001.

Net income for the second  quarter of 2002  increased by $167,000,  or 82%, over
the same  period in 2001.  Noninterest  expense was  $885,000  during the second
quarter 2002 period and exceeded noninterest expense for the same period in 2001
by $97,000.  Noninterest  income of $154,000 was $53,000 more than that in 2001.
Net interest income in the three months ended June 30, 2002 was $379,000 greater
that net  interest  income  for the same  period of 2001.  Net  interest  income
improved  primarily due to growth of earning assets,  actual and relative to the
growth in interest-bearing liabilities. Noninterest income and expense increased
due primarily to initiating a loan brokerage service in 2002.

                                 Second Quarter
                             (Amounts in thousands)

Average Balances                            2002          2001         Increase
                                            ----          ----         --------

Earning assets ......................     $163,703      $118,835      $ 44,868
Earning assets yield ($) ............     $  2,613      $  2,483      $    130
Earning assets yield (%) ............         6.40%         8.38%        (1.98%)
Interest-bearing liabilities ........     $142,198      $103,780      $ 38,418
Cost of funds ($) ...................     $  1,080      $  1,329      $   (249)
Cost of funds (%) ...................         3.05%         5.13%        (2.08%)
Interest Spread ($) .................     $  1,533      $  1,154      $    379
Interest Spread (%) .................         3.35%         3.25%          .10%













                                       18
<Page>

                           PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

         On May 6, 2002, Lisa Lesavoy,  as successor trustee,  filed a complaint
in the United States  District Court for the District of South Carolina  against
the  Corporation  and an employee  of the  Corporation's  subsidiary  as well as
against eight other entities and individuals.  The complaint alleges that one of
the individual  defendants  (not the employee) was the  plaintiff's  predecessor
trustee and  breached  various  duties to the two trusts in question  all to the
financial  detriment  of the trusts.  The  compliant  further  alleges  that the
Corporation and the employee by lending to and arranging credit transactions for
the  trusts,  together  with the other  defendants,  aided and abetted the prior
trustee's   breaches  and  violated  the   Racketeer   Influenced   and  Corrupt
Organizations Act. The complain seeks monetary damages in an amount to be proven
at trial and punitive and treble  damages and attorneys'  fees. The  Corporation
plans to  vigorously  defend  the  action and is  presently  unable to  reliably
estimate the amount of any loss it may suffer as a result of the litigation.


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

     (a)  The  Corporation  held its annual meeting of  shareholders  on May 15,
          2002.

     (b)  The  following  persons were elected as directors of the  Corporation,
          each  to  serve  a  three-year   term  until  the  Annual  Meeting  of
          Shareholders in 2005.

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

Richard H. Brooks ..........................           559,616            900
Herman E. Ratchford ........................           559,616            900
David G. White .............................           559,616            900


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  has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                   First South Bancorp, Inc.

                                    s/Barry L. Slider
August 13, 2002                    ---------------------------------------------
                                       Barry L. Slider, President and Chief
                                        Executive Officer


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


















                                       20