UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

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

                  FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                        Commission File Number 000-28037

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

                                 SOUTH CAROLINA
                            (State of Incorporation)

                                   57-1086258
                      (IRS Employer Identification Number)

                               1450 Reidville Road
                        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 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,  915, 861
shares outstanding on September 30, 1999.

Transitional Small Business Disclosure Format (Check one)  YES [ ]   N0 [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

                  Notes to Unaudited Statements..........................     7


         Item 2.  Management's Discussion and Analysis...................  8-16


Part II -         OTHER INFORMATION


         Item 2.  Changes in Securities and Use of Proceeds..............    17

         Item 6.  Exhibits and Reports on Form 8-K.......................    17


SIGNATURE         .......................................................    18











                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

                          Item 1 - Financial Statements

                            FIRST SOUTH BANCORP, INC.

                           Consolidated Balance Sheet

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                                             September 30               December 31
                                                                                                 1999                      1998
                                                                                                 ----                      ----
Assets
<S>                                                                                          <C>                       <C>
Cash & due from banks ..........................................................             $  1,320,846              $    870,340
Due from banks - interest bearing ..............................................                   12,551                 1,535,000
Federal funds sold .............................................................                5,490,000                 2,815,000
Investment securities ..........................................................               10,449,120                10,585,262
Loans ..........................................................................               49,357,675                35,859,212
     Allowance for loan losses .................................................                 (700,000)                 (575,000)
                                                                                             ------------              ------------
Loans - net ....................................................................               48,657,675                35,284,212
Property & equipment, net ......................................................                2,782,330                 2,894,116
Other assets ...................................................................                1,143,874                   486,883
                                                                                             ------------              ------------

         Total assets ..........................................................             $ 69,856,396              $ 54,470,813
                                                                                             ============              ============

Liabilities
Deposits
Noninterest-bearing ............................................................             $  3,339,199              $  3,213,126
Interest-bearing ...............................................................               52,885,083                38,733,974
                                                                                             ------------              ------------
         Total deposits ........................................................               56,224,282                41,947,100
Other liabilities ..............................................................                2,894,130                 1,958,878
                                                                                             ------------              ------------
         Total liabilities .....................................................               59,118,412                43,905,978

Shareholders' equity
Common stock - no par value;
         20,000,000 authorized - issued 915,861 ................................                4,579,305                 4,578,795
Additional paid-in capital .....................................................                6,488,411                 6,487,737
Accumulated deficit ............................................................                 (198,138)                 (490,801)
Accumulated other comprehensive income/(loss) ..................................                 (131,594)                  (10,896)
                                                                                             ------------              ------------
         Total shareholders' equity ............................................               10,737,984                10,564,835

         Total liabilities and shareholders' equity ............................             $ 69,856,396              $ 54,470,813
                                                                                             ============              ============
</TABLE>



                                       3
<PAGE>


                            FIRST SOUTH BANCORP, INC.

                      Consolidated Statement of Operations

<TABLE>
<CAPTION>
                                                                                                    (Unaudited)
                                                                                            Period ended September 30,
                                                                                            --------------------------
                                                                                 Three Months                      Nine Months
                                                                                 ------------                      -----------
                                                                              1999           1998             1999            1998
                                                                              ----           ----             ----            ----
                                                                                     (Dollars in thousands, except per share)
Interest income
<S>                                                                          <C>              <C>            <C>              <C>
     Loans, including fees .......................................           $1,110           $766           $2,913           $2,070
     Investment securities .......................................              160            140              484              364
     Federal funds sold ..........................................               69             85              153              209

     Total interest income .......................................            1,339            991            3,550            2,643

Interest expense
     Deposits and borrowings .....................................              677            565            1,744            1,447

Net interest income ..............................................              662            426            1,806            1,196

     Provision for loan losses ...................................               60             47              125              175
Net interest income after provision ..............................              602            379            1,681            1,021

Other income
     Service charges on deposit accounts .........................               32             27               94               70
     Other income ................................................               88             19              185               52
                                                                             ------           ----           ------           ------
     Total other income ..........................................              120             46              279              122

Other expenses
     Salaries and benefits .......................................              329            225              893              634
     Occupancy and equipment .....................................               90             68              259              227
     Other expense ...............................................              136             87              364              217
                                                                             ------           ----           ------           ------
     Total other expense .........................................              555            380            1,516            1,078

Income before income taxes .......................................              167             45              444               65
     Income taxes ................................................               68              0              151                0

Net income .......................................................           $   99           $ 45           $  293           $   65

Earnings per common share ........................................           $  .11           $.05           $  .32           $  .07

Diluted earnings per common share ................................           $  .11           $.05           $  .31           $  .07
</TABLE>


                                       4
<PAGE>

                            FIRST SOUTH BANCORP, INC.

                        Statement of Comprehensive Income

<TABLE>
<CAPTION>
                                                                                                             (Unaudited)
                                                                                                    Nine Months Ended September 30
                                                                                                    ------------------------------
                                                                                                    1999                     1998
                                                                                                    ----                     ----

<S>                                                                                              <C>                       <C>
Net Income ......................................................................                $ 292,663                 $ 65,878

Other comprehensive income (loss):
Change in unrealized holdings gains &
      losses on available for sale securities ...................................                 (194,674)                  33,237

Income tax (expense) benefit on other
      comprehensive income (loss) ...............................................                   73,976                  (12,630)
                                                                                                 ---------                 --------

Total other comprehensive income (loss) .........................................                 (120,698)                  20,607

Comprehensive income ............................................................                  171,965                   86,485
                                                                                                 =========                 ========
</TABLE>





















                                       5
<PAGE>


                            FIRST SOUTH BANCORP, INC.

                      Consolidated Statement of Cash Flows
              For the Nine Months ended September 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                                                (Unaudited)
                                                                                                             Nine Months Ended
                                                                                                               September 30,
                                                                                                          1999                 1998
                                                                                                          ----                 ----
                                                                                                           (Dollars in thousands)
Operating Activities
<S>                                                                                                        <C>                   <C>
Net income ...............................................................................                 293                   66

Adjustments to reconcile net income (loss) to net cash
           provided by operating activities
      Provision for loan losses ..........................................................                 125                  175
      Depreciation .......................................................................                 129                  122
      Director fees ......................................................................                  20                   12
      (Accretion) amortization, net ......................................................                   0                    0
      Increase in other assets ...........................................................                (129)                (228)
      Increase in accrued expenses
           and other liabilities .........................................................                 454                   33

Net cash provided by operating activities ................................................                 892                  180

Investing Activities
      Purchase of securities available for sale ..........................................              (1,000)              (6,623)
      Purchase of restricted FHLB stock ..................................................                 (59)                (105)
      Proceeds from call of available for sale securities ................................                 500                4,200
      Proceeds from maturities of held to maturity securities ............................                 500                1,000
      Origination of loans, net of principal collected ...................................             (13,943)             (10,784)
      Purchase of premises and equipment .................................................                 (46)                 (19)

Net cash used in investing activities ....................................................             (14,048)             (12,331)

Financing Activities
      Net increase in deposits ...........................................................              14,277               16,075
      Net increase in retail repurchase agreements .......................................                 482                  262

Net cash provided by financing activities ................................................              14,759               16,337
Net increase in cash and cash equivalents ................................................               1,603                4,186
Cash and cash equivalents, beginning .....................................................               5,220                4,206
Cash and cash equivalents, ending ........................................................               6,823                8,392
</TABLE>



                                       6
<PAGE>

                            FIRST SOUTH BANCORP, INC.

Notes to Unaudited Consolidated  Financial Statements

Note 1.  Basis of Presentation

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and with  instructions to Form 10-QSB and Item 310(b) of Regulation
S-B of the Securities and Exchange Commission.  Accordingly, they do not contain
all of the information and footnotes required by generally  accepted  accounting
principles  for  complete  financial  statements.  However,  in the  opinion  of
management,  all adjustments  considered  necessary for a fair presentation have
been included.  Operating  results for the nine months ended  September 30, 1999
are not necessarily  indicative of the results that may be expected for the year
ended December 31, 1999. For further information,  please refer to the financial
statements  and  footnotes  thereto  for First  South  Bank's  fiscal year ended
December 31, 1998,  contained  in First South Bank's  registration  statement on
Form 10-SB.

Note 2.  Organization

     First South Bancorp,  Inc. (the "Company") is a South Carolina  corporation
organized  in 1999 for the  purpose of being a holding  company  for First South
Bank (the  "Bank").  On  September  30,  1999,  pursuant  to a Plan of  Exchange
approved by the shareholders,  all of the outstanding shares of capital stock of
the Bank were  exchanged for shares of common stock of the Company.  The company
presently  engages in no business  other than that of owning the Bank and has no
employees.



















                                       7
<PAGE>

                            FIRST SOUTH BANCORP, INC.

                                 Part I - Item 2

 Management's Discussion and Analysis or Plan of Operation

Forward Looking Statements

         Statements  included in Management's  Discussion and Analysis which are
not  historical  in nature are  intended  to be, and are  hereby  identified  as
"forward looking statements" for purposes of the safe harbor provided by Section
21E of the  Securities  Exchange Act of 1934, as amended.  The Company  cautions
readers that forward looking  statements,  including without  limitation,  those
relating to the  Company's  new office,  its response to the Year 2000  problem,
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
Company's reports filed with the Securities and Exchange Commission.

General

The  following  discussion  should  be read in  conjunction  with the  financial
statements  and related  notes and more detailed  information  provided in First
South Bank's Annual Report on Form 10-KSB. On September 30, 1999,  pursuant to a
Plan of Exchange approved by the shareholders,  all of the outstanding shares of
common  stock of First South Bank were  exchanged  for shares of common stock of
First South Bancorp,  Inc. First South Bancorp,  Inc.,  presently  engages in no
business  other than that of owning the Bank and has no employees.  Accordingly,
the following discussion and analysis makes reference only to the Bank.

Results of Operations

The  Bank's  primary  source  of  income is net  interest  income,  which is the
difference between interest earned and interest paid. The net interest margin is
net interest  income as a percentage  of average  earning  assets.  Net interest
margin for the nine months period ended  September 30, 1999, was 4.21 %, up from
3.95 % for the same period in 1998. Interest income, primarily interest received
from loans and, to a lesser degree, the interest earned on the Bank's investment
portfolio,  for the nine-month  period ending  September 30, 1999,  increased by
34.3% over the same  period of 1998 while  total  interest  income for the third
quarter of 1999 was 35.1% greater than the third quarter of 1998. Although rates
of return on the various  categories of earning assets were slightly less in the
1999 periods compared to 1998,  increases in the amount of earning assets and an
increase in the  percentage of earning assets in loans,  which  generally have a
greater yield than other categories, resulted in the increases in total interest
income.  Interest  expense,  which is primarily  the amount of interest  paid to
depositors,  also increased in the nine and three month periods ended  September
30, 1999, as compared to the same periods of 1998.  The increases were 20.5% and
19.8%,  respectively,  and were primarily the result of increases in the amounts
of deposits.  The rates earned on interest-earning  assets and the rates paid on
interest-bearing  liabilities  are  expected  to continue  to be  influenced  by
competition for quality loan customers as well as government fiscal and monetary
policies.

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  individual  loans  and  considers  the  loss  risks
associated  with the various risk  categories in relationship to the current and
forecasted economic environment. The Bank also monitors the overall portfolio as
well as the level of reserves  maintained by peer banks.  The monthly  provision
for loan losses may fluctuate based on the results of this analysis.

For the nine and three month  periods  ending  September  30, 1999,  noninterest
income  increased  127.8% and 160.8%,  respectively,  over the amounts  received
during  the same  periods  in  1998.  The most  substantial  component  of these
increases was the additional  commission  and fee income  generated in 1999 with
the  inauguration  of  operations  of First South  Financial  Services,  Inc., a
brokerage  services  subsidiary  of the Bank.  In addition,  amortized  premiums
received from the sale of  government  guaranteed  loans and  increased  service
charges received from a growing deposit customer base contributed to noninterest
income growth.

                                       8
<PAGE>

Though September 30th year-to-date operating expenses as a percentage of average
assets  increased  only  slightly in 1999 from that of 1998,  2.46 % and 2.42 %,
respectively,   total  operating  expenses  for  the  nine-month  period  ending
September 30 increased  in 1999 by $438,000,  or 40.6%.  While a portion of this
increase  can be  attributed  to the growth the Bank  experienced  in 1999,  the
$131,635  cost of  establishing  and  operating a brokerage  subsidiary in 1999,
accounted for 30.1 % of this increase. Management will continue to be challenged
to maintain  operating  expenses at a level  adequate  to support  growth  while
achieving  favorable  operating  efficiency  ratios.  Expenses  associated  with
technology  are  included  in  operating  expense and include the Bank's cost of
assessing  the  possible  effects  of the Year  2000  problem.

Financial  institutions  are  subject to  interest  rate risk to the degree that
their interest bearing liabilities (consisting principally of customer deposits)
mature or reprice more or less frequently,  or on a different basis,  than their
interest earning assets (generally consisting of intermediate or long-term loans
and  investment  securities).  The match  between the  scheduled  repricing  and
maturities of the Bank's earning assets and interest bearing  liabilities within
defined   time   periods  is   referred  to  as  "gap"   analysis.   The  Bank's
Asset/Liability  Management  Committee  is  responsible  for  managing the risks
associated  with  changing  interest  rates and their  impact on  earnings.  The
regular  evaluation  of the  sensitivity  of net  interest  income to changes in
interest  rates  is an  integral  part of  interest  rate  risk  management.  At
September 30, 1999, the  cumulative  one-year gap for the Bank was a negative or
liability sensitive $1,349,000, or 1.9 % of total assets. At September 30, 1999,
the cumulative  three-year gap for the Bank was a negative  $73,000,  or .1 % of
total assets.  A negative gap means that  liabilities  would reprice faster than
assets if interest rates  changed.  The Bank's gap is within policy limits which
were  established to reduce the adverse  impact on earnings  which  movements in
interest rates can cause.  Intense competition in the Bank's market continues to
create downward pressure on quality loan rates while conversely  creating upward
pressure on deposit rates.

For the  nine-month  period  ending  September 30, 1999, as compared to the same
period in 1998, the Bank's  average assets  increased by 38.1 %. Asset growth is
directly  related to  deposit  growth  and the funds  available  to the Bank for
investment.  The growth in average deposits for the first three quarters of 1999
of $ 12.7  million,  or 35.5 % over the average  deposits for the same period in
1998, would not have been allowed to occur, however, had there not been a strong
quality loan demand during the same period.  Average loans  outstanding  through
September  30,  1999  increased  $13.9  million or 50.7% over the same period in
1998.  The  availability  of local deposits in 1999 has allowed the Bank to take
advantage  of the  lending  opportunities  created by the  strength of the local
economy without funding loan growth with other borrowed funds.

From  September  30, 1998, to September 30, 1999,  the Bank's  nonpersonal  loan
portfolio grew by $13.7 million,  or 54.2 %, as the seasoned  commercial lenders
employed by the Bank have  developed  growth  opportunities  in  commercial  and
commercial real estate related  business loans.  While average balances of loans
secured by real estate have increased  significantly,  the Bank believes prudent
real estate lending has provided  excellent  collateral for loans with a variety
of purposes.  Management  believes the Bank is not dependent on any single group
of  customers   concentrated  in  any  particular   industry  whose  decline  in
performance would have a material adverse effect on operations.

                                       9
<PAGE>


The  following  tables are  provided to assist the reader in  understanding  the
results of operations and financial condition.

Table One
                Net interest Income and Average Balance Analysis
                     for the Nine Months Ended September 30
                                  1999 and 1998

<TABLE>
<CAPTION>
                                                                                             Interest                  Average
Interest-Earning Assets (Dollars in thousands)              Average     Balance           Income/Expense             Yield/Cost
                                                            -------     -------           --------------             ----------
                                                            1999          1998           1999          1998       1999         1998

<S>                                                      <C>             <C>            <C>             <C>       <C>          <C>
Federal Funds Sold ...............................       $  4,282        $ 5,144        $  147          209       4.59%        5.43%
Investments ......................................         11,252          7,859           491          364       5.84%        6.19%
Loans ............................................         41,362         27,467         2,896        2,070       9.36%       10.01%
                                                         --------        -------        ------       ------       ----        -----
Total Interest Earning Assets ....................       $ 56,896         40,470        $3,534        2,643       8.30%        8.73%

Noninterest-Earning Assets
Cash & Due From Banks ............................       $  1,299          1,265
Loan Loss Reserve ................................           (620)          (435)
Premises & Equipment .............................          2,833          2,937
Interest Receivable & Other ......................          1,184            356
Total Noninterest-Earning Assets .................       $  4,696          4,123
                                                         --------        -------

TOTAL ASSETS .....................................       $ 61,592         44,593
                                                         =======         =======

Interest-Bearing Liabilities
NOW Accounts .....................................       $ 14,987          9,592        $  500          355       4.46%        4.95%
Money Market & Savings ...........................            951            529            19           12       2.67%        3.03%
Time Deposits & IRA's ............................         29,539         23,227         1,175        1,028       5.32%        5.92%
Fed Funds Purchased & Repos ......................          1,553          1,420            47           47       4.04%        4.42%
Demand Notes Issued to Treasury ..................            108            139             3            5       3.71%        4.81%
                                                         --------        -------        ------       ------       ----        -----
Total Interest-Bearing Liabilities ...............       $ 47,138         34,907        $1,744        1,447       4.95%        5.54%

Noninterest-Bearing Liabilities
Demand Deposits ..................................       $  3,122          2,531
Interest Payable .................................            358            259
Other Liabilities ................................            220            192
                                                         --------        -------
Total Noninterest-Bearing Liabilities ............       $  3,700          2,982

Stockholders' Equity .............................       $ 10,754          6,704
Total Liabilities & Equity .......................       $ 61,592         44,593
                                                         ========        =======
Net Interest Income ..............................                                      $1,790       $1,196
Net Yield on Earning Assets ......................                                                                4.21%        3.95%
Interest Rate Spread .............................                                                                3.35%        3.19%
</TABLE>



                                       10
<PAGE>

Numerous  factors  contributed to an improved net interest margin from the first
three quarters of 1998 to the first three quarters of 1999. Most  significant of
these were:

(1) The category of earning assets with the highest yield, loans, increased as a
percentage of total earning assets from 67.9 % to 72.7 %;

(2)  Earning  assets  were  funded  by a lower  percentage  of  interest-bearing
liabilities, 82.8 % in 1999 versus 86.3 % in 1998;

(3) The category of interest-bearing  liabilities with the highest cost of funds
rate,  time  deposits,  decreased  as a  percentage  of  total  interest-bearing
liabilities from 66.5 % to 62.7%.

Balance sheet changes were not,  however,  the only factors which contributed to
the change in net interest  margin during the period ending  September 30, 1998,
compared to that of 1999, nor were all of the changes positive influences on net
interest  margin.  The 75 basis points  decrease in the Bank's prime rate during
the fourth quarter of 1998 coupled with the Bank's positive interest sensitivity
gap during  that  period  served to temper the  positive  results of the balance
sheet changes which took place in the first three quarters of 1999.

Table Two

                       Summary of Total Noninterest Income
                     for the Nine Months Ended September 30
                                  1999 and 1998
                             (Dollars in thousands)

                                                   1999                  1998
                                                   ----                  ----
Service Charges .............................       $93                   $70
Commissions & Fees* .........................       139                    17
Other Noninterest Income** ..................        46                    35
                                                   ----                  ----
Total .......................................      $279                  $122

*82% of this  $122,000  increase  resulted  from  operations  of the First South
Financial Services subsidiary.

**  Premiums  on  government  guaranteed  loans  sold  in the  secondary  market
accounted for most of this category of noninterest income in both periods.

Table Three

                      Summary of Total Noninterest Expense
                     For the Nine Months Ended September 30
                                  1999 and 1998
                             (Dollars in thousands)

                                                    1999                 1998
                                                    ----                 ----
Salaries & Employee Benefits * ................     $893                 $634
Occupancy & Equipment .........................      259                  227
Other .........................................      364                  217
                                                     ---                  ---
Total .........................................   $1,516               $1,078

* $55,000 of the total  $259,000  increase in  salaries  and  employee  benefits
expense  resulted  from the  operations  of the First South  Financial  Services
subsidiary.



                                       11
<PAGE>

Table Four

                                Analysis of Loans
                  September 30 Balances (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                        1999                                1998
                                                                        ----                                ----
Real Estate:
<S>                                                                   <C>                   <C>            <C>                  <C>
Construction & Land Development ..........................            $ 5,494               11.1%          $   672              2.1%
1-4 Family Residential Properties ........................             10,904               22.1%            6,021             18.8%
Multifamily Residential Properties .......................                742                1.5%              643              2.0%
Nonfarm Nonresidential Properties ........................             17,322               35.1%           13,827             43.2%
Other Real Estate Loans ..................................                575                1.2%              300               .9%
Commercial & Industrial ..................................             13,173               26.7%            9,572             29.9%
Consumer .................................................                590                1.2%            1,000              3.1%
Other ....................................................                558                1.1%                0                0%
                                                                      =======              =====           =======            =====
TOTAL ....................................................            $49,358              100.0%          $32,035            100.0%
</TABLE>

Table Five

               Analysis of Loan Maturities and Repricing Frequency
                 as of September 30, 1999 (Dollars in thousands)

<TABLE>
<CAPTION>
                                                          >3 Months       > 1 Year     >3 Years
                                               Within         to              to          to          Over
                                             3 Months      2 Months        3 Years      5 Years      5 Years          Total
                                             --------     ---------        -------      -------      -------          -----
<S>                                           <C>           <C>              <C>        <C>            <C>         <C>
Variable Rate Loans ....................      $42,353       $                $          $              $           $42,353

Fixed Rate Loans .......................        2,428        1,865            921        1,529          262          7,005

Total Loans ............................      $44,781       $1,865           $921       $1,529         $262        $49,358
</TABLE>

Table Six

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

                                                      1999               1998
                                                      ----               ----
Balance at Beginning of Year ..................     $575,000           $350,000
Provision Charged to Operations ...............      125,290            174,507
Loans Charged-off .............................         (400)            (2,507)
Loan Recoveries ...............................          110                  0
Balance at End of Year ........................     $700,000           $522,000

There was one loan past due between 30 to 89 days on September  30, 1999, in the
amount of $683,000.  This loan has an 80% ($546,000) government guarantee by the
USDA. There were no past due loans on September 30, 1998.

                                       12
<PAGE>

Table Seven

                        Analysis of Investment Securities
                            as of September 30, 1999

<TABLE>
<CAPTION>
                                                   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                   9,000,000          8,826,563                0                    0
Due from five to ten years                   1,000,000            970,938                0                    0
Due After ten years                            122,868            113,119          375,000              355,634
                                           ===========         ==========         ========             ========
                                            10,122,868          9,910,620          375,000              355,634
</TABLE>

At  September  30,  1999,  securities  with a  carrying  value of  approximately
$2,912,346 were pledged to secure retail repurchase  agreements,  Treasury,  tax
and loan deposits,  and public funds. The securities  portfolio at 9/30/99 had a
weighted average yield of 5.76 %.





















                                       13
<PAGE>

Table Eight

    Distribution of Interest-Earning Assets and Interest-Bearing Liabilities
                   Repricing Schedule as of September 30, 1999
                             (Dollars 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>
Federal Funds Sold .........................................           $ 5,490            $     0            $    0          $ 5,490
Due From Banks: Int.-bearing ...............................                13                  0                 0               13
Investment Securities ......................................                 0              8,333             1,953           10,286
FHLB Stock .................................................               164                  0                 0              164
Loans ......................................................            46,646              2,450               262           49,358
                                                                       =======            =======            ======          =======
Total ......................................................            52,313             10,783             2,215           65,311

Interest-Bearing Liabilities
NOW Accounts ...............................................            14,267                  0                 0           14,267
Savings & MMIA .............................................             1,387                  0                 0            1,387
Time Deposits: $100m & > ...................................            10,095                100                 0           10,195
Time Deposits: <$100m ......................................            25,857              1,179                 0           27,036
Repurchase Agreements ......................................             1,808                  0                 0            1,808
TT&L Demand Note Funds .....................................               248                  0                 0              248
                                                                       =======             ======            ======           ======
Total ......................................................            53,662              1,279                 0           54,941


Period  Gap ................................................            (1,349)             9,504             2,215           10,370

Cumulative Gap .............................................            (1,349)             8,155            10,370

Period Gap Ratios:
      Interest Sensitive Assets to
      Interest Sensitive Liabilities .......................              97.5%              8.43%

Cumulative Gap Ratios:
      Interest Sensitive Assets to
      Interest Sensitive Liabilities .......................              97.5%              1.15%
</TABLE>


<TABLE>
<CAPTION>

                                                3 Months           Over 3 Months          Over One
                                                 & Less            to 12 Months             Year         Total
Time Deposits                                    ------            ------------             ----         -----
<S>                                             <C>                  <C>                   <C>         <C>
$100,000 and Greater .....................      $3,289               $6,806                $100        $10,195
</TABLE>




                                       14
<PAGE>

Table Nine

                                 Selected Ratios
                       for the Periods Ending September 30

                                                          1999              1998
                                                          ----              ----
Return on Average Assets .........................       .64 %             .20 %
Return on Average Equity .........................      3.64 %           1.32 %
Dividend Payout Ratio ............................         N/A               N/A
Average Stockholders Equity
as a Percentage of Average Assets ................     17.46 %           15.03 %

                         Year 2000 Readiness Disclosure

A critical issue  affecting  companies  that rely on computer  systems and other
electronic  control  devices  is the Year 2000  (Y2K)  issue.  The Bank  relies,
internally and almost exclusively, on its computer hardware and software systems
in the operation and  monitoring of all major aspects of its business.  The Bank
also relies, externally both directly and indirectly, on the computer systems of
other  companies and  organizations,  such as deposit and loan  customers of the
Bank, third-party service providers,  creditors,  and suppliers.  Because of the
unprecedented  nature of the issues inherent in computer  operations  related to
the  upcoming  century  date  change,  the Bank  instituted  a formal  Year 2000
Compliance  Plan early in 1998 to identify,  assess,  and eliminate the risks to
mission  critical  operations with Year 2000 dating issues.  As of September 30,
1999,  this plan was  approximately  99 %  completed.  All hardware and software
systems  which were  internally  tested and found to be  noncompliant  have been
either upgraded or replaced.  Substantially  all external  hardware and software
systems upon which mission  critical  operations  are performed by a third-party
vendor  have  been  tested by proxy and  determined  to be Year 2000  compliant.
Included in the Bank's planned  process to eliminate the risks  associated  with
Year 2000 issues,  the Bank's Year 2000  Compliance  Plan includes a contingency
plan which,  in the event of some unforeseen  emergency,  provides for alternate
means of completing  operations defined as mission critical. As of September 30,
1999,  the only  remaining  portion  of the Plan to be  completed  is the "live"
testing  of  the  Business   Resumption   Contingency  Plan.  These  tests  were
successfully  completed in October.  Through  September  30, 1999,  the Bank had
spent $16,300 in connection with Y2K. No substantial additional expenditures are
expected to be required. As part of its assessment, the Bank has been evaluating
Year 2000  compliance by those with whom it does  business,  and to date has not
discovered  any Year 2000  problems  with  significant  counter-parties  that it
believes are  reasonably  likely to have a material  adverse effect on the Bank.
However,  no assurance can be given that  potential  Year 2000 problems of those
with  whom the Bank  does  business  will not  occur,  and if they  occur,  what
consequence to the Bank would result.

Although  management believes that the most likely problems to be encountered at
the New Year will not amount to more than an inconvenience,  because the results
of the Bank's  remediation  efforts will not be fully  determined until the year
2000 and thereafter,  management cannot give assurances that the Bank is or will
be immune from Year 2000 problems.




                                       15
<PAGE>



Liquidity

Liquidity  is the  ability  to  meet  current  and  future  obligations  through
liquidation or the maturity of existing  assets or the acquisition of additional
liabilities.  Adequate  liquidity  is  necessary  to meet  the  requirements  of
customers for loans and deposit  withdrawals  in the most timely and  economical
manner. Some liquidity is ensured by maintaining assets which may be immediately
converted  into cash at minimal cost  (amounts due from banks and federal  funds
sold).  However,  the most  manageable  sources of  liquidity  are  composed  of
liabilities, with the primary focus of liquidity management being the ability to
obtain  deposits  within the Bank's service area.  Core deposits (total deposits
less wholesale time deposits) provide a relatively stable funding base, and were
equal to 65.9 % of total  assets at  September  30,  1999.  Asset  liquidity  is
provided  from  several  sources,  including  amounts due from banks and federal
funds sold, and funds from maturing  loans.  The Bank is a member of the FHLB of
Atlanta and, as such,  has the ability to borrow against the security of its 1-4
family  residential  mortgage loans.  The Bank also has $ 3.6 million  available
through  lines of credit with other banks as an  additional  source of liquidity
funding.  Management  believes  that the Bank's  overall  liquidity  sources are
adequate to meet its operating needs.

Capital Resources

The equity capital of the Bank increased  $3,886,597  during 1998 as a result of
profit and the sale of  $3,781,349  of common  stock.  For the nine months ended
September 30, 1999, equity capital of the Bank increased  $293,846 as the result
of profitable operations, $292,663, and the exercising of stock options, $1,183.

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

The Bank's  September  30, 1999 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 September 30, 1999                            Actual           adequacy purposes          action provisions
(Dollars in thousands)                              ------           -----------------          -----------------
                                                                          Minimum                   Minimum
                                                                          -------                   -------
                                               Amount      Ratio        Amount    Ratio           Amount     Ratio
                                               ------      -----        ------    -----           ------     -----
<S>                                          <C>           <C>         <C>         <C>           <C>         <C>
Total Capital (to risk
weighted assets) ........................    $ 11,534      21.7%       $ 4,247     8.0%          $ 5,309     10.0%

Tier 1 Capital (to risk
weighted assets) ........................    $ 10,870      20.5%       $ 2,123     4.0%          $ 3,185      6.0%

Tier 1 Capital (to
average assets) (leverage) ..............    $ 10,870      15.9%       $ 2,730     4.0%          $ 3,413      5.0%
</TABLE>

                                       16
<PAGE>




                           PART II - OTHER INFORMATION


Item 2.  Changes in Securities and Use of Proceeds.

          On September 30, 1999 the issuer issued  915,861  shares of its common
          stock, no par value, in exchange for all of the  outstanding,  915,861
          shares of common  stock of First  South  Bank,  pursuant  to a Plan of
          Exchange approved by the shareholders. The transaction was exempt from
          registration  pursuant to Section  3(a)(12) of the  Securities  Act of
          1933.

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Exhibit No.
                  from Item 601 of
                  Regulation S-B            Description
                  --------------            -----------

                         3.1*               Articles of Incorporation
                         3.2*               By-laws
                        10.1                Plan of Exchange
                          27                Financial Data Schedule


         (b)      Reports on Form 8-K:    None

_______________
*Incorporated by reference to Form 8-A filed November 12, 1999.


























                                       17
<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
November 15, 1999         ------------------------------------------------------
                          Barry L. Slider, President and Chief Executive Officer


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



                                       18