SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                   of the Securities and Exchange Act of 1934

For the Fiscal year Ended December 31, 1995          Commission File No. 0-19045

                            COMSOUTH BANKSHARES, INC.
             (Exact name of registrant as specified in its charter)

South Carolina                                                        57-0853342
(State of Incorporation)                              (I.R.S. Employer I.D. No.)

1136 Washington Street, Suite 200                                          29201
Columbia, South Carolina 29201                                        (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code:  (803) 343-2144

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class                   Name of each exchange on which registered
Common stock (no par value)           American Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:

                  None.

Indicate by check whether the registrant  (1) has filed all reports  required to
be filed by  section  13 or 15(d) of the  Securities  and  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.
   Yes   [X]     No ____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate  market value of the voting  Common Stock (no par value),  held by
affiliates of the Registrant on March 15, 1996 was approximately  $1,952,000. As
of March 15, 1996, there were 1,385,701 shares of the Registrant's  Common Stock
outstanding.  For purposes of the foregoing  calculation only, all directors and
executive officers of the Registrant have been deemed affiliates.

                      Documents Incorporated by Reference:

(1)  Portions of the  Registrant's  definitive Proxy Statement for its April 30,
     1996 Annual Meeting of stockholders incorporated by reference into Part III
     hereof.


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                                     PART I

Item 1   -        Business

General

ComSouth  Bankshares,  Inc.  (the  "Corporation")  is a registered  bank holding
company  incorporated on May 15, 1987 pursuant to the laws of the state of South
Carolina.  It presently  conducts its business through its two bank subsidiaries
(the "Banks"),  Bank of Columbia,  N.A.  ("BOCL") and Bank of  Charleston,  N.A.
("BOC"). The Corporation employees 53 full time employees.

The Banks

BOCL is a national bank  chartered on July 12, 1988.  BOCL is based in Columbia,
South Carolina,  and engages in the commercial  banking business in the Columbia
area.  BOCL  emphasizes  local  management  and commitment to the industrial and
business growth of Columbia and the central region of South Carolina. BOCL seeks
to attract as  customers  small and  mid-sized  companies  based in the  central
region of South Carolina as well as low to-moderate and high income  individuals
residing in BOCL's extended market area.

BOC is a national bank  chartered on April 12, 1990. BOC is based in Charleston,
South Carolina, and engages in the commercial banking business in the Charleston
area.  BOC seeks to attract as its  primary  customer  base small and  mid-sized
companies   based  in  the  coastal   region  of  South   Carolina  as  well  as
low-to-moderate  and high income  individuals  residing in BOC's extended market
area.

Services. Both Banks offer a full range of deposit services,  including checking
accounts,  NOW accounts,  and savings and other time deposits of various  types,
ranging from daily money market accounts to longer-term certificates of deposit.
The  transaction  accounts and time  certificates  are tailored to the principal
market areas of the Banks at rates  competitive with those offered in the areas.
The Banks also offer individual  retirement  accounts.  All deposit accounts are
insured by the Federal  Deposit  Insurance  Corporation  (the  "FDIC") up to the
maximum  amount  permitted by law.  Although the Banks are  competitive in their
efforts  to  attract  deposit  accounts,  they do not  aggressively  seek  jumbo
certificates of deposit  (certificates  in amounts greater than $100,000) and do
not accept brokered accounts.

The Banks each offer a full range of short-term and intermediate-term commercial
and personal  loans.  The Banks originate  variable-rate,  residential and other
mortgage loans and fixed-rate  mortgage  loans  primarily for resale.  The Banks
also make personal  loans directly to  individuals  for various other  purposes,
including  purchases of automobiles,  mobile homes, boats and other recreational
vehicles,  home  improvements,  education and personal  investments.  Commercial
loans,  secured and unsecured,  are made primarily to individuals  and small and
mid-sized  businesses  operating  in the central  and  coastal  regions of South
Carolina,  principally Richland and Lexington Counties for BOCL, and Charleston,
Colleton,  Dorchester  and Berkeley  Counties for BOC. These loans are available
for general  operating  purposes,  acquisition  of fixed assets,  including real
estate,  purchases  of equipment  and  machinery,  financing  of  inventory  and
accounts  receivable,  and other  business  purposes.  In order to  stress  high
quality  loans,  the  Boards of  Directors  of the Banks  have each  established
lending authority for each loan officer,  but each loan request exceeding a loan
officer's  authority  must be approved by one or more  senior  officers.  A loan
committee of each of the Boards of Directors  reviews  larger loans for approval
when the loan request exceeds established limits for the senior officers.

The Banks  participate in a regional  network of automated  teller machines that
may be used by bank  customers in major cities  throughout  the  Southeast.  The
Banks offer both Visa and Master Card together with related lines of credit. The
lines of credit may be used for overdraft protection as well as a pre-authorized
credit for personal purchases and expenses.

The Banks  also  provide  safe  deposit  boxes,  travelers  checks,  debit  card
services,  direct deposit of payroll and social security  checks,  and automatic
drafts for various accounts,  but do not provide  international or trust banking
services.


<PAGE>




Data Processing.  During 1994 and early 1995, the Corporation  upgraded its data
processing equipment to an IBM AS 400, Model F20 mainframe and a 3892 IBM sorter
in preparation  for anticipated  growth.  This equipment is owned jointly by BOC
and BOCL and is  operated  by  personnel  of the  Corporation  through a service
agreement between both Banks and the Corporation. The capacity of this equipment
is expected to be sufficient to service the current  short-term needs of BOC and
BOCL.

Asset and Liability Management.  The primary assets of each of the Banks consist
of a loan portfolio and investment account.  Efforts are made generally to match
maturities  and  rates  of  loans  in the  investment  portfolio  with  those of
deposits,  although exact  matching is not possible.  The majority of the Banks'
securities  investments  are in  marketable  obligations  of the  United  States
government, federal agencies and state and municipal governments, generally with
varied maturities.

Long-term loans are generally priced to be  interest-rate  sensitive with only a
small  portion of the  Banks'  portfolios  of  long-term  loans at fixed  rates.
Presently,  such fixed-rate loans do not have maturities longer than five years,
except in exceptional cases.

Deposit accounts  represent the majority of the liabilities of the Banks.  These
include  transaction  accounts,  time deposits and certificates of deposit.  The
maturities  of the  majority of  interest-sensitive  accounts  are six months or
less.

Competition.  South  Carolina  law  permits  state-wide  branching  by banks and
savings  and loan  associations,  and many  financial  institutions  have branch
networks.  South Carolina law also permits regional interstate banking, and five
of the larger  commercial  banks in the Columbia  Metropolitan  Statistical Area
("CMSA") are affiliated with regional banking groups.  Approximately thirty-five
financial  institutions are represented in the CMSA,  including  banks,  savings
institutions  and  credit  unions.  Five of the larger  commercial  banks in the
Charleston area are also affiliated with regional banking groups.  Approximately
twenty-eight  financial  institutions  are  represented in the Charleston  area,
including banks, savings institutions and credit unions.

Banks generally  compete with other financial  institutions  through the banking
products and  services  offered,  the pricing of services,  the level of service
provided,  the  convenience  and  availability  of  services,  and the degree of
expertise  and  personal  concern with which  services  are  offered.  The Banks
encounter strong  competition  from most of the financial  institutions in their
respective  extended  market  areas.  In the  conduct of certain  areas of their
banking  business,  the Banks also compete with credit unions,  consumer finance
companies,  insurance  companies,  money market mutual funds and other financial
institutions, some of which are not subject to the same degree of regulation and
restriction imposed upon the Banks. Many of these competitors have substantially
greater  resources and lending limits than the Banks and offer certain services,
such as international banking services and trust services, that the Banks do not
provide.  Moreover,  most of these  competitors  have  numerous  branch  offices
located  throughout the extended  market area, a competitive  advantage that the
Banks do not have at  present.  The Banks  each  believe,  however,  that  their
relatively small sizes permit them to offer more personalized  service than many
of their competitors, which may provide a competitive advantage.

Anticipated Growth. BOCL's initial capitalization was $5.5 million. Although its
capital has been  reduced  somewhat by costs of opening and initial  operations,
BOCL's capital is expected to be adequate to support assets of approximately $84
million, based on normal bank regulatory guidelines and asset mix. BOCL's growth
is expected to come  primarily  from  within its market  area  through  loan and
deposit  business  generated at BOCL's main office and  drive-through  facility,
both  located  in  downtown  Columbia.  BOC's  initial  capitalization  was $5.5
million.  BOC's  capital  is  expected  to be  adequate  to  support  assets  of
approximately  $150 million,  based on current bank  regulatory  guidelines  and
asset mix. Initially, BOC's growth is expected to come primarily from within the
Charleston area through loan and deposit business generated at BOC's main office
and drive-through facility, both located in downtown Charleston.


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<PAGE>



Future  possibilities  for loan and deposit growth include  branching beyond the
Banks'  respective  immediate  market areas,  and beyond the larger market areas
through merger, purchase of existing banks or establishment of new branches.

Premises.  The principal operating facility for BOCL is located in the Barringer
Building, a National Place of Historic Interest, at the corner of Washington and
Main Streets in downtown Columbia, South Carolina. BOCL has leased approximately
6,600 square feet of space  consisting  of the street floor and two other floors
in the  building.  The main  banking  lobby is situated on the street floor with
access from both  Washington and Main Streets.  The initial lease term commenced
on December 1, 1987.  The term of the lease is five years with  options to renew
for two consecutive five-year periods. BOCL exercised the first five year option
period during 1992. Additionally,  BOCL leases approximately 1500 square feet at
2850 Devine Street,  Columbia, South Carolina for its Mortgage Loan Office. This
lease is on a  month-to-month  basis  with a  30-day  written  notification  for
termination.

The  principal  operating  facility for BOC is located at 276 East Bay Street in
downtown Charleston,  South Carolina.  BOC has leased approximately 9,310 square
feet of space  consisting of the street floor in the building.  The main banking
lobby is accessed  from East Bay Street.  The initial  lease term  commenced  on
December 29, 1989.  The term of the lease is ten years with options to renew for
two consecutive five-year periods.

The  Corporation  has leased a drive-up  facility  located at 1313 Lady  Street,
three  blocks  from the  Main  Street  premises.  The  Corporation  and BOCL are
currently leasing this facility on a three year lease which commenced on October
1, 1994.  

Employees.  BOCL  employs 19  full-time  employees  and BOC employs 20
full-time employees. To the extent possible, the Banks employ people experienced
in the  banking  profession.  Efforts  are also  made to employ  people  who are
knowledgeable about the Columbia and Charleston areas.

Federal and State Laws and Regulations

         Bank  holding  companies  and banks  are  extensively  regulated  under
federal and state law. To the extent that the  following  information  describes
statutory  and  regulatory  provisions,  it is  qualified  in  its  entirety  by
reference to such  statutes and  regulations.  Any change in  applicable  law or
regulation may have a material effect on the business of the Corporation and its
subsidiaries.

Bank Holding Corporation Regulation

         The  Corporation  is registered  as a "bank  holding  company" with the
Board of Governors of the Federal  Reserve System  ("Federal  Reserve"),  and is
subject to supervision by the Federal Reserve under the Bank Holding Corporation
Act ("BHC Act").  The  Corporation is required to file with the Federal  Reserve
periodic  reports and such  additional  information  as the Federal  Reserve may
require  pursuant to the BHC Act. The Federal Reserve  examines the Corporation,
and may examine the subsidiary Banks.

         The BHC Act requires  prior Federal  Reserve  approval for, among other
things,  the  acquisition  by a bank  holding  company  of  direct  or  indirect
ownership or control of more than 5% of the voting shares or  substantially  all
the  assets of any  bank,  or for a merger or  consolidation  of a bank  holding
company with another bank holding company. With certain exceptions,  the BHC Act
prohibits a bank holding company from acquiring direct or indirect  ownership or
control  of voting  shares of any  company  which is not a bank or bank  holding
company and from  engaging  directly or  indirectly  in any activity  other than
banking  or  managing  or  controlling  banks  or  performing  services  for its
authorized  subsidiaries.  A bank  holding  company may,  however,  engage in or
acquire an interest in a company  that engages in  activities  which the Federal
Reserve  has  determined  by  regulation  or order to be so  closely  related to
banking or managing or controlling banks as to be a proper incident thereto.


                                        3

<PAGE>



         The Corporation is also registered  under the bank holding company laws
of South  Carolina.  Accordingly,  the  Corporation is subject to regulation and
supervision  by the South Carolina  State Board of Financial  Institutions  (the
"State Board").

         A registered South Carolina bank holding company must provide the State
Board with  information  with respect to the  financial  condition,  operations,
management  and  inter-company  relationships  of the  holding  company  and its
subsidiaries.  The State Board also may  require  such other  information  as is
necessary to keep itself informed about whether the provisions of South Carolina
law and the  regulations  and orders  issued  thereunder by the State Board have
been complied with, and the State Board may examine any bank holding company and
its subsidiaries.

         Under the South Carolina Bank Holding  Corporation  Act (the "SCBHCA"),
it is  unlawful  without  the prior  approval  of the State  Board for any South
Carolina  bank holding  company (i) to acquire  direct or indirect  ownership or
control  of more than 5% of the  voting  shares  of any bank or any  other  bank
holding  company,  (ii) to acquire all or  substantially  all of the assets of a
bank or any other bank holding  company,  or (iii) to merge or consolidate  with
any other bank holding company.

         As  stated  above,  the  Corporation  is a legal  entity  separate  and
distinct  from the  subsidiary  Banks and its other  subsidiary.  Various  legal
limitations place restrictions on the ability of the subsidiary Banks to lend or
otherwise  supply funds to the  Corporation  or its non-bank  subsidiaries.  The
Corporation, BOC and BOCL are subject to Section 23A of the Federal Reserve Act.
Section 23A defines "covered transactions",  which include extensions of credit,
and  limits a bank's  covered  transactions  with any  affiliate  to 10% of such
bank's capital and surplus.  All covered transactions with all affiliates cannot
in the  aggregate  exceed 20% of a bank's  capital and surplus.  All covered and
exempt  transactions  between  a bank and its  affiliates  must be on terms  and
conditions consistent with safe and sound banking practices, and banks and their
subsidiaries are prohibited from purchasing  low-quality  assets from the bank's
affiliates.  Finally,  Section 23A requires  that all of a bank's  extensions of
credit to an  affiliate  be  appropriately  secured  by  acceptable  collateral,
generally United States government or agency  securities.  The Corporation,  BOC
and BOCL also are  subject to Section  23B of the  Federal  Reserve  Act,  which
generally  limits covered and other  transactions  among affiliates to terms and
circumstances, including credit standards, that are substantially the same or at
least as favorable to a bank holding  company,  a bank or a subsidiary of either
as prevailing at the time for transactions with unaffiliated companies.

         In July 1994,  South Carolina  enacted  legislation  which  effectively
provides  that,  after  June  30,  1996,  out-of-state  bank  holding  companies
(including bank holding  companies in the Southern Region,  as defined under the
statute) may acquire  other banks or bank holding  companies  having  offices in
South Carolina upon the approval of the State Board and compliance  with certain
other  conditions,  including  that the  effect of the  transaction  not  lessen
competition  and that the laws of the  state  in  which  the  out-of-state  bank
holding  company  filing the  applications  has its principal  place of business
permit South  Carolina bank holding  companies to acquire banks and bank holding
companies  in that  state.  Although  such  legislation  may  increase  takeover
activity  in  South  Carolina,  the  Corporation  does  not  believe  that  such
legislation will have a material impact on its competitive position. However, no
assurance of such fact may be given.

         Congress  recently  enacted  the  Riegle-Neal  Interstate  Banking  and
Branching  Efficiency  Act of 1994,  which  will  increase  the  ability of bank
holding companies and banks to operate across state lines. Under the Riegle-Neal
Interstate   Banking  and  Branching   Efficiency  Act  of  1994,  the  existing
restrictions on interstate  acquisitions of banks by bank holding companies will
be repealed one year  following  enactment,  such that the  Corporation  and any
other bank holding  company located in South Carolina would be able to acquire a
bank located in any other  state,  and a bank holding  company  located  outside
South  Carolina  could  acquire any South  Carolina-based  bank,  in either case
subject to certain deposit  percentage and other  restrictions.  The legislation
also provides that,  unless an individual state elects  beforehand either (i) to
accelerate  the  effective  date or (ii) to  prohibit  out-of-state  banks  from
operating  interstate  branches within its territory,  on or after June 1, 1997,
adequately  capitalized  and  managed  bank  holding  companies  will be able to
consolidate  their  multistate bank operations into a single bank subsidiary and
to branch interstate through acquisitions.  De novo branching by an out-of-state
bank would be permitted only if it is expressly

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<PAGE>



permitted  by the laws of the host state.  The  authority of a bank to establish
and operate  branches  within a state will  continue to be subject to applicable
state branching laws. The Corporation  believes that this legislation may result
in increased  takeover  activity of South  Carolina  financial  institutions  by
out-of-state financial institutions. However, the Corporation does not presently
anticipate that such  legislation  will have a material impact on its operations
or future plans.

Obligations of Holding Corporation to its Subsidiary Banks

         Under the policy of the  Federal  Reserve,  a bank  holding  company is
required to serve as a source of financial strength to its subsidiary depository
institutions   and  to  commit   resources  to  support  such   institutions  in
circumstances  where it might not do so absent  such  policy.  Under the Federal
Deposit Insurance  Corporation  Improvement Act of 1991 ("1991 Banking Law"), to
avoid  receivership of its insured  depository  institution  subsidiary,  a bank
holding  company  is  required  to  guarantee  the  compliance  of  any  insured
depository  institution subsidiary that may become  "undercapitalized"  with the
terms  of any  capital  restoration  plan  filed  by such  subsidiary  with  its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of  the  institution's   total  assets  at  the  time  the  institution   became
undercapitalized,  or (ii) the  amount  which is  necessary  (or would have been
necessary) to bring the institution into compliance with all applicable  capital
standards  as of the time the  institution  fails to comply  with  such  capital
restoration  plan.  Under the BHCA,  the Federal  Reserve has the  authority  to
require a bank  holding  company to  terminate  any  activity  or to  relinquish
control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon
the Federal Reserve's  determination that such activity or control constitutes a
serious risk to the financial  soundness and stability of any bank subsidiary of
the bank holding company.

         In addition,  the  "cross-guarantee"  provisions of the Federal Deposit
Insurance Act, as amended  ("FDIA"),  require  insured  depository  institutions
under common  control to reimburse  the FDIC for any loss suffered or reasonably
anticipated  by  either  the  Savings  Association  Insurance  Fund or the  Bank
Insurance  Fund of the FDIC as a result of the default of a commonly  controlled
insured depository  institution or for any assistance  provided by the FDIC to a
commonly  controlled  insured depository  institution in danger of default.  The
FDIC may decline to enforce the cross-guarantee provisions if it determines that
a waiver  is in the best  interest  of the SAIF or the BIF or both.  The  FDIC's
claim  for  damages  is  superior  to  claims  of  stockholders  of the  insured
depository  institution  or its holding  company but is subordinate to claims of
depositors,  secured  creditors  and  holders of  subordinated  debt (other than
affiliates) of the commonly controlled insured depository institutions.

         The FDIA also provides that amounts  received from the  liquidation  or
other resolution of any insured  depository  institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit  liabilities of
the  institution  prior to payment  of any other  general  or  unsecured  senior
liability,   subordinated  liability,  general  creditor  or  stockholder.  This
provision  would give  depositors  a preference  over  general and  subordinated
creditors  and  stockholders  in the event a receiver is appointed to distribute
the assets of the Banks.

         Any capital  loans by a bank holding  company to any of its  subsidiary
banks are  subordinate  in right of payment  to  deposits  and to certain  other
indebtedness of such subsidiary  bank. In the event of a bank holding  company's
bankruptcy,  any  commitment  by the bank  holding  company  to a  federal  bank
regulatory  agency to maintain the capital of a subsidiary  bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.

         Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise,  the Office of the  Comptroller of the Currency
("OCC") is authorized to require  payment of the  deficiency by assessment  upon
the bank's  shareholders',  pro rata, and to the extent  necessary,  if any such
assessment is not paid by any shareholder after three months notice, to sell the
stock of such shareholder to make good the deficiency.



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Capital Adequacy

         The various federal bank regulators,  including the Federal Reserve and
the OCC, have adopted risk-based capital requirements for assessing bank holding
company and bank capital  adequacy.  These  standards  define what  qualifies as
capital  and  establish  minimum  capital  standards  in  relation to assets and
off-balance sheet exposures, as adjusted for credit risks. Capital is classified
into two tiers.  For bank holding  companies,  Tier 1 or "core" capital consists
primarily of common shareholders' equity,  perpetual preferred stock (subject to
certain  limitations)  and minority  interests in the common equity  accounts of
consolidated subsidiaries, and is reduced by goodwill and certain investments in
other corporations ("Tier 1 Capital").  Tier 2 capital consists of the allowance
for  possible  loan  losses  (subject  to  certain  limitations),   and  certain
subordinated debt, "hybrid capital instruments", subordinated and perpetual debt
and  intermediate  term and other preferred stock ("Tier 2 Capital").  A minimum
ratio of total capital to risk- weighted  assets of 8.00% is required and Tier 1
capital  must be at least 50% of total  capital.  The Federal  Reserve  also has
adopted  a  minimum  leverage  ratio  of Tier 1  Capital  to total  assets  (not
risk-weighted)  of 3%. The 3% Tier 1 Capital to total assets  ratio  constitutes
the leverage standard for bank holding companies and national banks, and will be
used in conjunction with the risk-based ratio in determining the overall capital
adequacy of banking organizations.

     The  Federal  Reserve  and the  OCC  have  emphasized  that  the  foregoing
standards are supervisory minimums and that an institution would be permitted to
maintain  such levels of capital only if it had a composite  rating of "1" under
the regulatory  rating systems for bank holding  companies and banks.  All other
bank holding  companies are required to maintain a leverage  ratio of 3% plus at
least 1% to 2% of additional  capital.  These rules further provide that banking
organizations  experiencing  internal  growth  or  making  acquisitions  will be
expected  to  maintain  capital  positions   substantially   above  the  minimum
supervisory  levels and comparable to peer group averages,  without  significant
reliance on  intangible  assets.  The Federal  Reserve  continues  to consider a
"tangible  Tier 1 leverage  ratio" in evaluation  proposals for expansion or new
activities.  The  tangible  Tier 1  leverage  ratio is the  ratio  of a  banking
organization's  Tier 1 Capital less all intangibles,  to total assets,  less all
intangibles. The Federal Reserve has not advised the Corporation of any specific
minimum  leverage  ratio  applicable  to  it.  As  of  December  31,  1995,  the
Corporation,  BOC and  BOCL  had  leverage  ratios  of  9.2%;  10.8%;  and  7.3%
respectively,  and total risk adjusted  capital ratios of 13.4%;  15.2%;  11.2%,
respectively.

Payment of Dividends

         If a national  bank's  surplus  fund  equals the amount of its  capital
stock, the directors may declare quarterly,  semi-annual or annual dividends out
of the bank's  net  profits,  after  deduction  of losses and bad debts.  If the
surplus fund does not equal the amount of capital  stock,  a dividend may not be
paid until  one-tenth of the bank's net profits of the  preceding  half year, in
the case of quarterly or semi-annual  dividends,  or the preceding two years, in
the case of an annual dividend, are transferred to the surplus fund.

         The  approval  of the OCC is  required  if the  total of all  dividends
declared by a national  bank in any  calendar  year will exceed the total of its
retained net profits of that year  combined with its retained net profits of the
two preceding  years,  less any required  transfers to surplus or a fund for the
retirement of any preferred stock.  OCC regulations  provide that provisions for
possible credit losses cannot be added back to net income and charge-offs cannot
be deducted from net income in  calculating  the level of net profits  available
for the payment of dividends.

         The payment of  dividends  by the Banks may also be affected or limited
by other factors,  such as the  requirements to maintain  adequate capital above
regulatory guidelines.  In addition, if, in the opinion of the OCC, a bank under
its  jurisdiction  is  engaged  in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends),  the OCC may require,  after notice and hearing, that
such bank cease and desist from such practice. The OCC has indicated that paying
dividends  that deplete a national  bank's  capital base to an inadequate  level
would be an unsafe and unsound banking  practice.  The Federal Reserve,  the OCC
and the FDIC have issued  policy  statements  which  provide  that bank  holding
companies and insured banks should  generally  only pay dividends out of current
operating earnings.

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<PAGE>




Bank Regulation

     BOC and BOCL are subject to supervision and examination by the OCC. The OCC
regulates  and monitors  all areas of the Banks'  operations,  including  loans,
mortgages,  issuance of securities,  capital adequacy, payment of dividends, and
establishment  of branches.  Interest  and certain  other  charges  collected or
contracted  for by the Banks are also  subject to state  usury laws and  certain
federal laws concerning  interest rates. BOC and BOCL are members of the Federal
Reserve  System,  and their  deposits  are insured by the FDIC up to the maximum
permitted by law.

         Under  present  law,  the Banks  currently  may  establish  and operate
branches  throughout the State of South Carolina,  subject to the maintenance of
adequate capital for each branch and the receipt of OCC approval.

Insurance of Deposits

         As  FDIC-insured  institutions,  the Banks  are  subject  to  insurance
assessments imposed by the FDIC. Under current law, the insurance  assessment to
be paid  by  FDIC-insured  institutions  shall  be as  specified  in a  schedule
required  to be issued by the FDIC that  specifies,  at  semi-annual  intervals,
target  reserve ratios  designed to increase the FDIC  insurance  fund's reserve
ratio to 1.25% of estimated  insured  deposits (or such higher ratio as the FDIC
may determine in accordance with the statute) in 15 years.  Further, the FDIC is
authorized  to impose  one or more  special  assessments  in any  amount  deemed
necessary to enable  repayment  of amounts  borrowed by the FDIC from the United
States Department of the Treasury.

         Effective January 1, 1996, the FDIC implemented a risk-based assessment
schedule,  having  assessments  ranging from 0.00% to 0.27% of an  institution's
average  assessment  base  with  a  minimum  annual  assessment  of  $2,000  per
institution.  The actual assessment to be paid by each FDIC-insured  institution
is  based  on  the  institution's  assessment  risk  classification,   which  is
determined  based on whether the institution is considered  "well  capitalized,"
"adequately capitalized" or "undercapitalized",  as such terms have been defined
in applicable  federal  regulations  adopted to implement the prompt  corrective
action  provisions of FDICIA,  and whether such institution is considered by its
supervisory  agency to be  financially  sound or to have  supervisory  concerns.
Under uniform  regulations  defining  such capital  levels issued by each of the
federal banking agencies,  a bank is considered "well capitalized" if it has (i)
a total  risk-based  capital  ratio of 10% or greater,  (ii) a Tier 1 risk-based
capital  ratio of 6% or greater,  (iii) a leverage  ratio of 5% or greater,  and
(iv) is not  subject to any order or written  directive  to meet and  maintain a
specific capital level for any capital measure. An "adequately capitalized" bank
is  defined  as one  that  has (i) a total  risk-based  capital  ratio  of 8% or
greater,  (ii) a Tier 1 risk-based  capital ratio of 4% or greater,  and (iii) a
leverage  ratio of 4% or greater  (or 3% or greater in the case of a bank with a
composite CAMEL rating of 1). A bank is considered  "undercapitalized" if it has
(i) a total  risk-based  capital ratio of less than 8%, (ii) a Tier 1 risk-based
capital ratio of less than 4%, or (iii) a leverage  ratio of less than 4% (or 3%
in the case of a bank with a  composite  CAMEL  rating of 1). As a result of the
current  provisions  of federal  law,  the  assessment  rates on deposits  could
increase  over present  levels.  Based on the current  financial  condition  and
capital levels of the Banks,  the  Corporation  does not expect that the current
FDIC risk-based  assessment  schedule will have a material adverse effect on the
Banks' earnings.  The Banks' risk-based insurance assessments currently are each
set at the minimum $2,000 annual assessment.

Legislation

         In 1989 and again in 1991, Congress enacted  comprehensive  legislation
affecting  the  commercial   banking  and  thrift   industries:   the  Financial
Institutions  Reform,  Recovery and  Enforcement  Act  (FIRREA") and the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA").  FIRREA, among
other things,  abolished the Federal Savings and Loan Insurance  Corporation and
established two new insurance funds under the jurisdiction of the FDIC: the Bank
Insurance Fund ("BIF"),  which insures most commercial banks,  including BOC and
BOCL, and the Savings  Association  Insurance Fund ("SAIF"),  which insures most
thrift institutions.


                                        7

<PAGE>



         FIRREA permitted bank holding companies to acquire savings associations
subject to  appropriate  regulatory  approvals.  The  entities  acquired  may be
operated as separate savings  associations,  converted into banks or, if certain
conditions are satisfied, merged into existing bank affiliates.

         FIRREA   also   imposed,    with   certain   limited   exceptions,    a
"cross-guarantee" on the part of commonly controlled depository institutions, as
discussed  above under  "Obligations  of Holding  Corporation  to its Subsidiary
Banks."

         FDICIA  supplements the federal banking  agencies' broad powers to take
corrective  action to  resolve  problems  of  insured  depository  institutions,
generally  authorizing  earlier  intervention  in the  affairs  of a  particular
institution and imposing express requirements that are tied to the institution's
level of capital.  If a depository  institution fails to meet regulatory capital
requirements specified in FDICIA, regulatory agencies can require submission and
funding of a capital  restoration plan by the  institution,  place limits on its
activities,  require the raising of additional capital and, ultimately,  require
the  appointment  of a  conservator  or receiver  for the  institution.  Where a
capital  restoration plan is required,  the regulatory agency may require a bank
holding company to guarantee as a condition of approval of the plan the lower of
5% of an  undercapitalized  subsidiary's  assets or the amount  required to meet
regulatory capital  requirements.  If the controlling bank holding company fails
to fulfill its  obligations  with respect to such a plan and files (or has filed
against it) a petition  under the federal  Bankruptcy  Code,  the claim would be
entitled to a priority in such bankruptcy  proceeding over third party creditors
of the bank holding company.

         FDICIA  required  each federal  banking  agency,  including the Federal
Reserve,  to revise  its  risk-based  capital  standards  to ensure  that  those
standards take adequate  account of interest rate risk,  concentration of credit
risk and the risks of non-traditional  activities, as well as reflect the actual
performance  and expected risk of loss on  multi-family  mortgages.  The Federal
Reserve,  the FDIC and the OCC have  issued a joint rule  amending  the  capital
standards to specify that the banking agencies will include in their evaluations
of a bank's  capital  adequacy an  assessment of the exposure to declines in the
economic  value of the bank's  capital  due to changes in  interest  rates.  The
agencies  have also issued for comment a proposed  joint policy  statement  that
describes  the process the banking  agencies  will use to measure and assess the
exposure  of a bank's  net  economic  value to changes in  interest  rates.  The
banking  agencies  have also  indicated  that,  through a subsequent  rulemaking
process,  they intend to issue a proposed rule that would  establish an explicit
capital  charge for interest  rate risk based on the level of a bank's  measured
interest rate risk exposure.

         The  Federal  Reserve,  the  FDIC,  the OCC and the  Office  of  Thrift
Supervision  have also  issued a joint  rule  amending  the  risk-based  capital
guidelines  to take  account  of  concentration  of credit  risk and the risk of
non-traditional  activities.  The rule amends each agency's  risk-based  capital
standards by explicitly  identifying  concentration  of credit risk and the risk
arising from other sources, as well as an institution's  ability to manage these
risks, as important  factors to be taken into account by the agency in assessing
an institution's overall capital adequacy.

         FDICIA also  restricts the  acceptance of brokered  deposits by insured
depository  institutions and contains a number of consumer  banking  provisions,
including disclosure  requirements and substantive  contractual limitations with
respect to deposit accounts.

         FDICIA also  required each of the federal  banking  agencies to develop
regulations  addressing  certain  safety and  soundness  standards  for  insured
depository institutions and depository institution holding companies,  including
operational  and  managerial  standards,   asset  quality,  earnings  and  stock
valuation standards, as well as compensation standards (but not dollar levels of
compensation).  On September  23, 1994,  the Riegle  Community  Development  and
Regulatory Improvement Act of 1994 amended the 1991 Banking Law to authorize the
agencies  to  establish  safety and  soundness  standards  by  regulation  or by
guideline.  Accordingly,  the federal  banking  agencies  have  recently  issued
Interagency Guidelines  Establishing  Standards for Safety and Soundness,  which
set forth general operational and managerial  standards in the areas of internal
controls,  information  systems and internal audit systems,  loan documentation,
credit underwriting, interest rate exposure, asset growth and compensation, fees
and benefits. The

                                        8

<PAGE>



Guidelines  also  prohibit  payment of excessive  compensation  as an unsafe and
unsound practice.  Compensation is defined as excessive if it is unreasonable or
disproportionate to the services actually performed.  Bank holding companies are
not subject to the  Guidelines.  The  Guidelines  contemplate  that each federal
agency will determine  compliance with these  standards  through the examination
process, and if necessary to correct weaknesses,  require an institution to file
a written safety and soundness  compliance plan. The Corporation does not expect
the Guidelines to materially change current operations of the Banks.

Enforcement Policies and Actions

         FIRREA  significantly  increased the enforcement powers of the OCC, the
Federal Reserve and the other federal  depository  institution  regulators,  and
authorizes the imposition of civil money  penalties of from $5,000 per day up to
$1,000,000  per day for  violations  of federal  banking  laws and  regulations.
Persons who are affiliated  with depository  institutions  and are found to have
violated  federal  banking laws and  regulations  can be removed from any office
held in such  institution and banned for life from  participating in the affairs
of such an institution. The banking regulators have not hesitated to use the new
enforcement authorities provided them under FIRREA.

Community Reinvestment Act

         The Banks are subject to the requirements of the Community Reinvestment
Act  (the  "CRA").  The  CRA  requires  that  financial   institutions  have  an
affirmative  and  ongoing  obligation  to meet the credit  needs of their  local
communities,  including low- and moderate-income neighborhoods,  consistent with
the safe and sound operation of those institutions. Each financial institution's
efforts in meeting  the  community  credit  needs are  evaluated  as part of the
examination  process pursuant to twelve assessment  factors.  These factors also
are considered in evaluating  mergers,  acquisitions  and applications to open a
branch or facility.  Both Banks received  ratings of  satisfactory in their most
recent evaluations.

         The federal banking agencies, including the OCC, have recently issued a
joint  rule  that  changes  the  method  of  evaluating  an  institution's   CRA
performance.   The  new  rule  evaluates  institutions  based  on  their  actual
performance (rather than efforts) in meeting community credit needs.  Subject to
certain  exceptions,  the OCC assesses the CRA performance of a bank by applying
lending,  investment  and service  tests.  The lending  test  evaluates a bank's
record of helping to meet the credit  needs of its  assessment  area through its
lending activities by considering a bank's home mortgage,  small business, small
farm, community development, and consumer lending. The investment test evaluates
a bank's  record of  helping  to meet the credit  needs of its  assessment  area
through  qualified  investments  that benefit its  assessment  area or a broader
statewide or regional area that includes the bank's assessment area. The service
test  evaluates  a bank's  record of  helping  to meet the  credit  needs of its
assessment area by analyzing both the availability and effectiveness of a bank's
systems for delivering retail banking services and the extent and innovativeness
of its  community  development  services.  The OCC assigns a rating to a bank of
"outstanding," satisfactory," "needs to improve," or "substantial noncompliance"
based on the bank's performance under the lending, investment and service tests.
To evaluate compliance with the tests, subject to certain exceptions, banks will
be  required  to collect and report to the OCC  extensive  demographic  and loan
data.

         For  banks  with  total  assets  of less  than  $250  million  that are
affiliates  of a holding  company with banking and thrift assets of less than $1
billion, such as the Banks and Corporation,  the OCC evaluates the bank's record
of helping to meet the  credit  needs of its  assessment  area  pursuant  to the
following criteria:  (1) the bank's loan-to-deposit ratio, adjusted for seasonal
variation and, as appropriate,  other lending-related  activities,  such as loan
originations for sale to the secondary markets,  community development loans, or
qualified  investments;  (2) the percentage of loans and, as appropriate,  other
lending-related activities located in the bank's assessment area; (3) the bank's
record of lending to and,  as  appropriate,  engaging  in other  lending-related
activities for borrowers of different  income levels and businesses and farms of
different  sizes;  (4) the geographic  distribution of the bank's loans; and (5)
the  bank's  record of taking  action,  if  warranted,  in  response  to written
complaints  about  its  performance  in  helping  to meet  credit  needs  in its
assessment  area.  Small banks may also elect to be assessed under the generally
applicable  standards  of the rule,  but to do so a small bank must  collect and
report extensive data.

                                        9

<PAGE>




         A bank may also submit a strategic  plan to the OCC and be evaluated on
its performance under the plan.

Other Laws and Regulations

         Interest and certain other charges  collected or contracted  for by the
Banks are  subject  to state  usury laws and  certain  federal  laws  concerning
interest rates.  The Banks'  operations are also subject to certain federal laws
applicable  to credit  transactions,  such as the federal  Truth-In-Lending  Act
governing  disclosures  of credit  terms to consumer  borrowers,  CRA  requiring
financial institutions to meet their obligations to provide for the total credit
needs of the communities they serve,  including  investing their assets in loans
to low- and moderate-income  borrowers, the Home Mortgage Disclosure Act of 1975
requiring financial institutions to provide information to enable the public and
public officials to determine whether a financial  institution is fulfilling its
obligation to help meet the housing needs of the community it serves,  the Equal
Credit Opportunity Act prohibiting discrimination on the basis of race, creed or
other prohibited  factors in extending credit,  the Fair Credit Reporting Act of
1978  governing  the  use and  provision  of  information  to  credit  reporting
agencies,  the Fair Debt  Collection  Act governing the manner in which consumer
debts may be collected by collection agencies,  and the rules and regulations of
the various federal  agencies  charged with the  responsibility  of implementing
such federal laws.  The deposit  operations of the Banks also are subject to the
Right to Financial Privacy Act, which imposes a duty to maintain confidentiality
of consumer  financial  records and  prescribes  procedures  for complying  with
administrative subpoenas of financial records, and the Electronic Funds Transfer
Act and Regulation E issued by the Federal  Reserve to implement that act, which
govern  automatic   deposits  to  and  withdrawals  from  deposit  accounts  and
customers'  rights and  liabilities  arising  from the use of  automated  teller
machines and other electronic banking services.

         From time to time,  bills are pending before the United States Congress
which contain wide-ranging proposals for altering the structure,  regulation and
competitive  relationships of the nation's  financial  institutions.  Among such
bills are proposals to prohibit banks and bank holding companies from conducting
certain  types of  activities,  to subject  banks to  increased  disclosure  and
reporting  requirements,  to alter the statutory  separation  of commercial  and
investment  banking,  and to further  expand the powers of banks,  bank  holding
companies and  competitors of banks.  It cannot be predicted  whether or in what
form any of these  proposals  will be  adopted  or to the  extent  to which  the
business of the Corporation and its subsidiaries may be affected thereby.

Fiscal and Monetary Policy

         Banking is a business which depends on interest rate differentials.  In
general,  the difference between the interest paid by a bank on its deposits and
its  other  borrowings,  and the  interest  received  by a bank on its loans and
securities holdings,  constitutes the major portion of a bank's earnings.  Thus,
the earnings and growth of the  Corporation  will be subject to the influence of
economic  conditions  generally,  both  domestic  and  foreign,  and also to the
monetary and fiscal policies of the United States and its agencies, particularly
the Federal Reserve.  The Federal Reserve  regulates the supply of money through
various  means,  including  open-market  dealings  in United  States  government
securities,  the  discount  rate at which  banks  may  borrow  from the  Federal
Reserve, and the reserve requirements on deposits.  The nature and timing of any
changes  in  such  policies  and  their  impact  on the  Corporation  cannot  be
predicted.

Item 2  -  Properties

The principal  operating  facility for the  Corporation is currently  located at
1136 Washington Street, Suite 200, Columbia, South Carolina. The Corporation has
leased  approximately  5,700 square feet of space at that address on a five year
lease  commencing  on  February  1,  1995  with one five  year  renewal  option.
Information relating to the premises leased by the Banks is set forth under Item
1 - "Business - General - The Banks - "Premises." The Corporation  considers all
properties leased by the Banks suitable and adequate for their intended purpose.



                                       10

<PAGE>



Item 3  -  Legal Proceedings

On January 24, 1994, a former  director of the  Corporation and Bank of Columbia
and a current stockholder of the Corporation brought suit in the Court of Common
Pleas of Richland  County against the Corporation and eight of its directors and
former  directors  alleging  that the  defendant  directors  had breached  their
fiduciary  duties in not  pursuing  proposals  by third  parties to acquire  the
Corporation  in  1992.  The  Corporation  is named as a  defendant  because  the
plaintiff  asserts that the suit is, in part, a  derivative  action,  which is a
claim brought by a stockholder that belongs to the Corporation  against officers
and directors of the  Corporation.  The  Corporation has answered the Complaint.
Management  believes that the suit is without merit and is vigorously  defending
the suit.

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

No matter was submitted  during the fourth quarter of 1995 to a vote of security
holders.

                                     Part II

Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters

There has been only a limited trading market for the  Corporation's  stock since
inception.  Since the completion of the Corporation's two common stock offerings
in 1987 and 1988 and its Bank of Charleston  Series  Preferred Stock offering in
1990, management has knowledge of only limited stock transactions. The Preferred
Stock  converted to Common Stock in 1992.  During 1995,  management was aware of
limited  transactions  in its  stock  with  the  majority  of  the  transactions
occurring at  approximately  $8.50 per share.  Because  there is no  established
market for the Corporation's stock, these transactions may not be representative
of  all  transactions,  may  not be  arm's  length  transactions,  and  are  not
necessarily   indicative,   therefore,   of  prices  at  which   shares  of  the
Corporation's  stock could be bought or sold. On March 21, 1996, the Corporation
listed its common stock on the American  Stock  Exchange under the ticker symbol
CSB.

As of March 12,  1996,  there  were  approximately  600  record  holders  of the
Corporation's common stock.

The  Board of  Directors  of the  Corporation,  BOCL and BOC  intend to follow a
policy of retaining earnings to provide funds to operate and expand the business
of  the  Corporation.   Consequently,   the  Corporation  has  not  declared  or
distributed any cash dividends to its shareholders.

The future  dividend  policy of the  Corporation is subject to the discretion of
the Board of Directors and will depend upon a number of factors including future
earnings,  financial condition, cash needs, and general business conditions. The
Corporation's  initial ability to distribute cash dividends will depend entirely
on the Bank's ability to distribute dividends to the Corporation. The Banks must
comply with the requirements of the National Bank Act and may have to obtain the
approval of the OCC before paying any dividend. The Banks may not declare or pay
a dividend if the effect of the payment  would cause the minimum  capital of the
Banks to be reduced below the minimum capital requirements imposed by the OCC.

Item 6 -  Selected Financial and Other Data

The following table sets forth certain  information  concerning the consolidated
financial  position  and  results  of  operations  of the  Corporation  and  its
subsidiaries.  This information  should be read in conjunction with Management's
Discussion and Analysis of Financial Conditions and Results of Operations and is
qualified  in its  entirety  by  reference  to the  more  detailed  consolidated
financial statements and notes thereto contained elsewhere in this report.


                                       11

<PAGE>


<TABLE>

TABLE 1 - FINANCIAL SUMMARY
<CAPTION>

SUMMARY OF OPERATIONS
(thousands, except per share data)                      1995               1994              1993            1992              1991
                                                        ----               ----              ----            ----              ----
<S>                                                 <C>                <C>               <C>             <C>              <C>
Interest income                                     $  9,234           $  6,786          $  6,537        $  7,392          $  6,999
Interest expense                                       4,125              2,570             2,690           3,562             4,109
                                                    --------           --------          --------           -----           -------
Net interest income                                    5,109              4,216             3,847           3,830             2,890
Provision for loan losses                                195                 75               135           1,548               178
                                                    --------           --------          --------           -----           -------
Net interest income after provision
  for loan losses                                      4,914              4,141             3,712           2,282             2,712
Noninterest income                                     1,469                771               690           1,083               562
Noninterest expense                                    4,576              3,927             3,836           3,991             3,032
                                                    --------           --------          --------           -----           -------
Income before income taxes                             1,807                985               566            (626)              242
Applicable income (taxes) benefit                       (426)                62               (43)            (33)              (16)
                                                    -------            --------          --------             ---           -------
Net income (loss)                                   $  1,381           $  1,047          $    523         $  (659)          $   226
                                                    ========           ========          ========         =======           =======

Net income (loss) per Common share (1)              $   1.00           $    .76          $    .38         $  (.48)        $    .16
Book value (year-end) per Common share              $   8.57           $   7.38          $   6.75         $  6.37         $   6.98

Selected year-end assets and liabilities
Total assets                                        $133,423            $96,920           $95,008         $94,162          $88,751
Interest-earning assets                              119,429             89,179            87,105          86,698           82,258
Investment securities                                 22,135             21,878            23,323          21,769           19,231
Loans (net)                                           91,024             67,301            59,883          61,614           60,657
Deposits                                             117,763             82,908            82,898          83,087           75,607
Noninterest-bearing deposits                          24,246             13,392            11,430          10,823            6,514
Interest-bearing deposits                             93,517             69,516            71,468          72,264           69,093
Interest-bearing liabilities                           2,193              3,422             2,513           1,727            3,004
Stockholders' equity                                  11,879             10,104             9,238           8,715            9,353
Ratios (average)
Loans to deposits                                      80.62%             71.87%            73.58%          79.28%           79.78%
Return on assets                                        1.22%              1.13%             0.58%          (0.69%)           0.29%
Return on interest-earning assets                       1.30%              1.20%             0.62%          (0.74%)           0.32%
Return on stockholders' equity                         12.74%             11.12%             5.68%          (7.03%)           2.44%
Net interest income to interest-earning assets          4.81%              4.84%             4.53%           4.27%            4.00%
Net charge-offs (recoveries) to loans                   0.01%             (0.11%)            0.66%           0.74%            0.06%
Stockholders' equity to assets                          9.55%             10.13%            10.21%           9.84%           11.88%
Stockholders' equity to deposits                       10.94%             11.69%            11.60%          11.36%           14.21%
Risk-based capital ratio                               13.43%             16.23%            15.27%          14.20%           11.88%
Tier 1 leverage ratio                                  12.17%             14.96%            14.00%          13.00%           12.27%

</TABLE>

(1)  See  Note  1 to  consolidated  financial  statements  regarding  per  share
     calculation.


Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations

Management's  Discussion  and Analysis  should be read in  conjunction  with the
consolidated  financial statements and accompanying notes thereto as well as the
supplementary financial, tabular, and historical information presented elsewhere
in this Annual Report.

                                       12

<PAGE>





Results of Operations

The Corporation continued to improve its earnings performance during 1995 as net
income for the year ended  December  31, 1995  totaled  $1,381,000  or $1.00 per
share,  compared to  $1,047,000  or $.76 per share for 1994 and $523,000 or $.38
per share for 1993. Net interest income  increased  primarily as a result of the
strong loan growth in both banks. Significant improvement in non-interest income
was primarily due to increased  fees for deposit  services  resulting from a 42%
growth in deposits from the prior year and fees derived from the origination and
sale of  residential  mortgage  loans as a result of an  expansion  in  mortgage
lending operations during the latter part of 1994.

The Corporation had total revenues of $10,703,000, $7,557,000 and $7,227,000 for
the three years ending 1995,  1994, and 1993,  respectively.  Total expenses for
the same periods were $9,322,000, $6,510,000 and $6,704,000.

The  increase  in revenue  provided  by  interest  on loans in 1995 over 1994 is
primarily  the result of the strong  loan growth  realized by both banks  during
1995,  coupled with several  prime rate  increases in 1994,  which  impacted the
yields  realized  during 1995. A  significant  portion of the loan  portfolio is
indexed to the prime  lending rate for pricing  purposes.  The growth in revenue
related to temporary investments is due to the steady growth of deposits.  Funds
provided by this deposit growth were generally invested in temporary investments
so that funding for loan growth would be readily available as needed.

The growth in  noninterest  income was partially due to the success  achieved by
the management of both banks in the acquisition of transaction  deposit accounts
during 1994 and 1995. The growth in deposit  relationships was responsible for a
23% increase in revenue  derived from deposit  service  categories  during 1995.
Also,  BOCL  restructured  its  mortgage  lending  operations  during the second
quarter of 1994,  resulting in an additional $457,000 in fees generated from the
origination and sale of residential mortgages during 1995.

BOC introduced a new product  "Business  Manager" in the second quarter of 1994.
This  product  provides  immediate  cash flow to small  businesses  through  the
purchase by the Banks of the related company's receivables. The Banks are paid a
fee for the  billing  and  collection  of these  receivables  and  retain  full
recourse  against the seller of the  purchased  receivables  in case of default.
BOCL also began to offer this  service in the first  quarter of 1995.  Fees from
this  product,  coupled  with the lending  fees  realized  from the  residential
activities  mentioned  above,  accounted  for the major  portion of the $698,000
increase in non-interest income during 1995.

The change in interest  paid on deposits is  principally  due to a 42% growth in
deposits from 1994 to 1995 as a result of management's  emphasis on developing a
strong deposit customer base to support its asset growth and the impact on rates
paid on deposits  in 1995 due to changes in market  rates as a result of several
prime rate increases in 1994. The increase in salaries and employee  benefits is
primarily  due to  commissions  paid  to loan  originators  as a  result  of the
restructuring  of the  mortgage  lending  operation  of BOCL  during  the second
quarter of 1994 along with  normal  merit  increases.  Furniture  and  equipment
expenses are up over 1994 due to the relocation of the data processing  facility
in February  1995 and the upgrade of most of the hardware  and software  used by
the data processing facility during 1995.

     Although the total change in other expenses did not vary significantly from
1994 to 1995, certain classifications did have noticeable variances (see Note 12
to the consolidated financial  statements).  Legal,  accounting,  regulatory and
insurance  expenses  declined  from  the  prior  year by  approximately  $42,000
primarily  as the result of a reduction  by the FDIC in  insurance  rates during
1995. Postage and freight expenses  increased by approximately  $26,000 due to a
postage rate increase and a 42% growth in deposits  which resulted in additional
postage for statement  rendering.  Dues and subscriptions  were up approximately
$34,000 due to asset  growth as certain  dues are  charged  based on asset size,
coupled with the accrual of a fee by the Corporation during 1995 for application
for membership on the American Stock Exchange (AMEX).  Directors' fees increased
by  $12,000  due to the  implementation  of  directors'  fees  for  BOCL and the
Corporation during 1995. Temporary employment services increased by $25,000 as a
result of

                                       13

<PAGE>



temporary  support  for the  strong  asset  growth  during  the  year as well as
temporary  coverage for vacant  positions  due to employee  turnover  throughout
1995.  The increase in losses other than bad debt of  approximately  $12,000 was
the result of an increase in routine losses on deposit  accounts  related to the
overall growth in deposits, coupled with a robbery at BOCL during 1995.

Income tax expenses  increased over the prior year by approximately  $488,000 as
the Corporation  fully liquidated its net operating loss carry forward (NOL) for
federal income tax purposes during the first half of 1995. Management decided to
reduce  its  reserve  on net  deferred  tax assets by  $200,000  during  1995 in
addition to the  $113,000 in 1994 due to its third  consecutive  year of profit,
the liquidation of the NOL and the belief that profits will continue in 1996 and
beyond. See Note 13 to the consolidated financial statements for further details
concerning income tax expenses for 1995, 1994 and 1993.

Summarized  in Table 2 is an analysis of the  composition  of the  Corporation's
revenues and expenses for 1995, 1994 and 1993.
<TABLE>

TABLE 2 - REVENUES AND EXPENSES
<CAPTION>

                                                                          Year ended December 31,
                                                                          -----------------------                                
                                                       1995                            1994                            1993
                                                       ----                            ----                            ----
                                                 Amount           %             Amount            %             Amount           %
                                                 ------          ---            ------           ---            ------          ---
Revenues
<S>                                         <C>                 <C>         <C>                <C>          <C>                <C>
Interest on loans                           $ 7,723,855         72.2%       $5,503,179         72.8%        $5,064,730         70.1%
Interest on investment securities             1,361,008         12.7%        1,209,414         16.0%         1,381,471         19.1%
Interest on temporary investments               148,778          1.4%           73,463          1.0%            90,663          1.3%
Noninterest income                            1,469,342         13.7%          770,700         10.2%           689,622          9.5%
                                            -----------        -----        ----------        -----         ----------        ----- 
Total revenues                              $10,702,983        100.0%       $7,556,756        100.0%        $7,226,486        100.0%
                                            ===========        =====        ==========        =====         ==========        ===== 

Expenses
Interest on deposits                         $4,008,427         43.0%       $2,475,804         38.0%        $2,630,196         39.2%
Interest on note payable and
    securities sold under
    agreements to repurchase                    116,136          1.2%           93,979          1.4%            59,535          0.9%
Provision for loan losses                       195,000          2.1%           75,000          1.2%           135,000          2.0%
Salaries and employee benefits                2,481,335         26.6%        2,053,878         31.6%         1,939,723         28.9%
Occupancy expenses                              429,183          4.6%          384,133          5.9%           391,211          5.9%
Furniture and equipment expenses                341,966          3.7%          281,216          4.3%           241,955          3.6%
Advertising and marketing                        78,643          0.8%           83,735          1.3%            51,067          0.8%
Other                                         1,244,695         13.4%        1,124,005         17.3%         1,211,657         18.1%
Taxes                                           426,127          4.6%          (61,742)        (1.0%)           43,525          0.6%
                                             ----------        -----        ----------        -----         ----------        ----- 
Total expenses                               $9,321,512        100.0%       $6,510,008        100.0%        $6,703,869        100.0%
                                             ==========        =====        ==========        =====         ==========        ===== 
</TABLE>

Discussion of the Corporation's  financial  condition and expanded discussion of
its operating results are presented in the following narratives and tables.

Net Interest Income

Net interest income represents the differences between interest earned on assets
and the interest paid on liabilities.  It traditionally  constitutes the largest
source of a financial institution's earnings.

For the years 1995,  1994 and 1993,  net  interest  income  totaled  $5,109,000,
$4,216,000 and $3,847,000,  respectively. The increase in net interest income in
1995 from 1994 was principally due to a significant increase in loans

                                       14

<PAGE>



outstanding as loans increased by thirty-five percent (35%), or $23,900,000. The
increase  of net  interest  income in 1994 from  1993 was  principally  due to a
rising interest rate  environment in 1994 and a twelve percent (12%) increase in
loans  outstanding,  which  replaced lower yielding  temporary  investments  and
investment securities.

The average yield on earning assets for 1995, 1994 and 1993 was 8.69%, 7.79% and
7.70%, the average rate paid was 4.84%,  3.65% and 3.78%, and the annualized net
yield on average  earnings  (net  interest  income  divided  by average  earning
assets) was 4.81%, 4.84% and 4.53%, respectively.

The  change in yields on  earning  assets  and rates  paid on  interest  bearing
deposits from 1994 to 1995 is primarily due to several prime rate changes, which
occurred  periodically  during 1994.  Even though rates paid on deposits are not
tied to the prime lending rate,  changes in the prime lending rate traditionally
impact the market rate paid on  deposits.  In an effort to minimize any earnings
impact as a result of rate changes,  management  concentrated  on  maintaining a
relatively stable net interest margin during 1995, as can be seen by the minimal
change in the margin between 1995 and 1994.

Table 3  shows  the  yields  and  costs  on  average  balances  for the  periods
discussed.



                                       15

<PAGE>


<TABLE>

TABLE 3 -                      COMPARATIVE AVERAGE BALANCE SHEETS - YIELD AND COSTS
                           (Average balances for years ended December 31, in thousands)
<CAPTION>

                                                   1995                           1994                           1993  
                                                  ------                         ------                          -----

                                       Average   Revenue/               Average  Revenue/              Average  Revenue/
                                       Balance   expense   Yield/Rate   Balance  expense  Yield/Rate   Balance  expense   Yield/Rate
                                       -------   -------   ----------   -------  -------  ----------   -------  -------   ----------
Interest earning assets:
<S>                                    <C>        <C>        <C>        <C>       <C>        <C>      <C>       <C>           <C>
Loans (1)                              $ 79,881   $ 7,724    9.67%      $62,568   $5,503     8.79%    $58,349   $ 5,065       8.68%
Investment securities (taxable)          23,902     1,361    5.69%       22,648    1,209     5.34%     23,481     1,381       5.88%
Federal funds sold                        2,532       149    5.88%        1,842       74     4.00%      3,041        91       2.98%
                                       --------   -------    ----       -------   ------     ----     -------   -------       ---- 
Total interest-earning assets           106,315     9,234    8.69%       87,058    6,786     7.79%     84,871     6,537       7.70%
                                       --------   -------    ----       -------   ------     ----     -------   -------       ---- 
Noninterest earning assets
Cash and due from banks                   5,763                           4,543                         3,838
Premises and equipment                    1,321                           1,178                         1,189
Other, less allowance for loan losses        64                             197                           153
                                       --------                         -------                       -------
Total noninterest earning assets          7,148                           5,918                         5,180
                                       --------                         -------                       -------  
Total assets                           $113,463                         $92,976                       $90,051
                                       ========                         =======                       =======
Interest-bearing liabilities:
Interest-bearing deposits
   NOW, money market and savings       $ 41,363   $ 1,653    4.00%      $33,699   $1,078     3.20%    $32,192     1,024       3.18%
   Time deposits                         41,329     2,356    5.70%       34,314    1,398     4.07%     37,156     1,606       4.32%
                                       --------   -------    ----       -------   ------     ----     -------    ------       ---- 
Total interest-bearing deposits          82,692     4,009    4.85%       68,013    2,476     3.64%     69,348     2,630       3.79%
Short-term borrowings                     1,915        83    4.33%        1,856       65     3.50%        930        29       3.07%
Note payable and US Treasury tax and
   loan accounts                            641        33    5.15%          622       29     4.66%        833        31       3.72%
                                       --------   -------    ----       -------   ------     ----     -------    ------       ---- 
Total interest-bearing liabilities       85,248     4,125    4.84%       70,491    2,570     3.65%     71,111     2,690       3.78%
Noninterest-bearing liabilities
Demand deposits                          16,387                          12,535                         9,133
Other liabilities                           985                             536                           612
                                       --------                         -------                       -------
                                        102,620                          83,562                        80,856
Stockholders' equity                     10,843                           9,414                         9,195
                                       --------                         -------                       -------  
Total liabilities and
   stockholders' equity                $113,463                         $92,976                       $90,051
                                       ========                         =======                       =======
Net interest income                               $ 5,109                         $4,216                         $3,847
                                                  =======                         ======                         ======
Margin analysis
Interest income/earning assets                               8.69%                           7.79%                            7.70%
Interest expense/earning assets                              3.88%                           2.95%                            3.17%
                                                             ----                            ----                             ---- 
Net interest income/earning assets(2)                        4.81%                           4.84%                            4.53%
                                                             ====                            ====                             ==== 
</TABLE>

(1) Nonaccrual  loan balances have been excluded.
(2)  Net interest income divided by total interest earning assets.

                                       16

<PAGE>




Table 4 analyses changes in net interest income resulting from changes in volume
and rates in the period discussed.
<TABLE>

TABLE 4 - VOLUME AND RATE VARIANCE ANALYSIS
         (Tax equivalent basis)
<CAPTION>
                                                         1995 Compared to 1994                   1994 Compared to 1993
                                                         ---------------------                   ---------------------
                                                 Change in      Change in                     Change in     Change in
                                                 Volume (1)     Rate (1)         Total        Volume (1)     Rate (1)     Total
                                                 ----------     --------         -----        ----------     --------     -----
Interest income:
<S>                                                <C>            <C>         <C>              <C>         <C>         <C>
Loans                                              $1,671,059     $ 549,617   $2,220,676       $368,867    $  69,582   $438,449
Investment securities (2)                              71,825        79,769      151,594        (44,700)    (127,357)  (172,057)
Federal funds sold and securities
   purchased under agreements to resell                40,640        34,675       75,315        (48,074)      30,874    (17,200)
                                                   ----------     ---------   ----------       --------    ---------   --------
Total interest-earning assets                       1,783,524       664,061    2,447,585        276,093      (26,901)   249,192
                                                   ----------     ---------   ----------       --------    --------    --------
Interest expense:
   NOW, money market and savings                      305,910       269,001      574,911         47,706        6,370     54,076
   Time deposits                                      399,270       558,442      957,712       (115,616)     (92,852)  (208,468)
Federal funds purchased and securities
   sold under agreements to repurchase                  2,568        15,353       17,921         32,369        3,915     36,284
Note payable and US Treasury tax and
   loan accounts                                        1,012         3,224        4,236         (9,807)       7,967     (1,840)
                                                   ----------     ---------   ----------       --------     ---------   -------- 

Total interest-bearing liabilities                    708,760       846,020    1,554,780        (45,348)     (74,600)  (119,948)
                                                   ----------     ---------   ----------       --------    ---------   -------- 
Net interest income                                $1,074,764     ($181,959)  $  892,805       $321,441    $  47,699   $369,140
                                                   ==========     =========   ==========       ========    =========   ========
</TABLE>

(1)  Volume - rate changes have been  allocated  to each  category  based on the
     percentage of each to the total change.
(2)  Interest income is presented on a fully taxable  equivalent basis using the
     federal income tax rate of 34% and state tax rate of 4.5%.

Rate Sensitivity

The management of the  composition  and maturities of rate sensitive  assets and
liabilities  is vital to the  optimization  of net  interest  income as interest
rates earned on assets and paid on  liabilities  fluctuate in periods  where the
rate environment is unstable.  Management  constantly reviews interest rate risk
exposure and the expected rate  environment  so that timely  adjustments  can be
made as appropriate.



                                       17

<PAGE>



Table  5 sets  forth  the  Corporation's  interest  sensitivity  position  as of
December 31, 1995.

<TABLE>

TABLE 5 - INTEREST  SENSITIVITY  GAP  ANALYSIS  (December  31, 1995  balances in
thousands) 
<CAPTION>
                                                                                     One
                                                                 One year          through           Over five
                                                                 or less         five years            years          Total
                                                                 -------         ----------            -----          -----
<S>                                                             <C>              <C>                <C>             <C>
Interest-earning assets
  Investment securities                                         $   6,303        $ 14,988           $   844         $ 22,135
  Loans receivable (1)                                             64,851          24,353             3,538           92,742
                                                                ---------        --------           -------           ------
                                                                   71,154          39,341             4,382          114,877
                                                                ---------        --------           -------          -------

Interest-bearing liabilities
  Deposits
   NOW, money market and savings                                   49,321                                             49,321
   Time deposits (2)                                               38,885           5,311                             44,196
Federal funds purchased and  
  securities sold under agreements to repurchase                    1,755                                              1,755
  Note payable                                                          0                                                  0
  US Treasury tax and loan accounts                                   438                                                438
                                                                ---------                                           --------
                                                                   90,399           5,311                 0           95,710
                                                                ---------        --------           -------         --------
Interest-sensitive gap                                           ($19,245)       $ 34,030           $ 4,382         $ 19,167
                                                                =========        ========           =======         ========
                                                         
Cumulative interest-sensitivity gap                              ($19,245)       $ 14,785           $19,167
                                                                =========        ========           =======
                                                         
Ratio of interest-earning assets to
interest-bearing liabilities                                         78.7%          740.7%
                                                                =========        ======== 
                                                         
Cumulative gap to total interest-earning assets                     (16.8%)          12.9%             16.7%
                                                                =========        ========            ====== 
</TABLE>

(1) Excludes nonaccrual loans.
(2) Includes  accounts with balances  $100,000 or more totaling  $18,785,241 and
    maturing as follows: within 3 months - $8,655,623;  over 3 months but within
    6 months - $3,580,547;  over 6 months but within 12 months - $5,286,675; and
    over 12 months - $1,262,396.

At December 31, 1995,  approximately 62% of the  Corporation's  interest-earning
assets  will  reprice  within  one  year,  compared  to 94% of  interest-bearing
liabilities.  Based on the $19,245,000 or 17% negative  interest-sensitivity gap
position  at year end,  if a 1% change in  interest  rates  were to  immediately
impact  all  interest-sensitive   assets  and  liabilities  of  the  Corporation
repricing  within  one  year,  management  would  expect a change  in  income of
approximately  $192,000.  This impact to income would typically be positive in a
declining rate environment and negative in a rising rate environment.

Investment Securities

Investment  securities represent the second largest component of earning assets,
comprising 19% and 24% of total earning  assets in 1995 and 1994,  respectively.
Note 4 to the accompanying  consolidated  financial statements presents the book
value of investment  securities by category as of December 31, 1995 and 1994. As
shown in Table 6, the Corporation  primarily invests in U.S. Treasury securities
and  securities of other U.S Government  agencies with  maturities of up to five
years.

                                       18

<PAGE>




     The Corporation  adopted SFAS No. 115 "Accounting for Certain Investment in
Debt and  Equity  Securities,"  on  January 1,  1994.  Management  reviewed  the
investment  securities  portfolio and classified  securities as either  held-to-
maturity  or  available-for-sale.  Securities  which  the  Corporation  has  the
positive   intent  and  ability  to  hold  to  maturity   were   classified   as
held-to-maturity,  and are carried at amortized cost while all other  securities
were classified as available-for-sale  and recorded at estimated fair value with
any unrealized gain or loss recorded in  stockholders'  equity net of taxes. See
Note 4 to the consolidated financial statements for further details.
<TABLE>

TABLE 6 - ANALYSIS OF INVESTMENT SECURITIES
<CAPTION>
                                                                                                                 Weighted
                                                                                                                  Average
                                                                                                                  Taxable
                                                               Par           Amortized           Fair           Equivalent
                                                              Value            Value             Value           Yield(1)
                                                              -----            -----             -----           --------
Held to Maturity
<S>                                                          <C>               <C>              <C>                <C>
US Treasuries
  Within one year                                            $ 1,500,000       $ 1,494,316      $ 1,492,740        4.85%
  One to five years                                            2,500,000         2,544,654        2,532,580        4.97%
                                                             -----------       -----------      -----------        ---- 
   Total                                                       4,000,000         4,038,970        4,025,320        4.93%
                                                             -----------       -----------      -----------        ---- 
US Government Agencies
  Within one year                                              3,300,000         3,299,809        3,290,160        4.69%
  One to five years                                            1,756,767         1,756,530        1,778,542        6.36%
  Five to ten years                                               92,561            90,489           95,801        8.63%
  After ten years                                                135,797           134,041          143,776        8.58%
                                                             -----------       -----------      -----------        ---- 
   Total                                                       5,285,125         5,280,869        5,308,279        5.42%
                                                             -----------       -----------      -----------        ---- 
Total Held to Maturity                                       $ 9,285,125       $ 9,319,839      $ 9,333,599        5.20%
                                                             ===========       ===========      ===========        ==== 
Available for Sale
US Treasuries
  Within one year                                              1,500,000         1,499,829        1,508,400        6.22%
  One to five years                                            3,250,000         3,290,116        3,339,300        6.15%
                                                             -----------       -----------      -----------        ---- 
   Total                                                       4,750,000         4,789,945        4,847,700        6.17%
                                                             -----------       -----------      -----------        ---- 
 US Government Agencies
  One to five years                                            7,300,000         7,262,046        7,347,844        6.17%
                                                             -----------       -----------      -----------        ---- 
   Total                                                       7,300,000         7,262,046        7,347,844        6.17%
                                                             -----------       -----------      -----------        ---- 
Other Securities
  After ten years (2)                                            619,850           619,850          619,850        6.69%
                                                             -----------       -----------      -----------        ---- 
   Total                                                         619,850           619,850          619,850        6.69%
                                                             -----------       -----------      -----------        ---- 
Total Available for Sale                                     $12,669,850       $12,671,841      $12,815,394        6.20%
                                                             ===========       ===========      ===========        ==== 

Average Maturity in Years of Total
  Investment Securities                                             2.02
                                                             ===========  
</TABLE>

(1)  Computed using a federal tax rate of 34%.

(2)  Includes Federal Reserve Bank stock and Federal Home Loan Bank stock. These
     stocks are excluded from the calculation of average maturity in years.



                                       19

<PAGE>



Loans and Allowance for Loan Losses

     Total  loans  outstanding  at  December  31,  1995 were $92.8  million,  an
increase of 35% over the December 31, 1994 balance of $68.9 million.  Both Banks
realized strong loan growth during 1995 as each  experienced  strong loan demand
due to  improved  economic  conditions  in their  market area and the efforts of
management to service the needs of the Banks' respective  communities as well as
increase  market share.  BOCL's  outstanding  loans  increased  $12.9 million or
42.2%, while BOC's outstanding loans increased $11.0 million or 28.6% in 1995.

Management  continuously monitors business and geographic  concentrations of its
loan portfolio and believes that the loan  portfolio is adequately  diversified.
There were no significant  concentrations in any industry or with any individual
borrower at years ending December 31, 1995 and 1994.

The mortgage loan division of each bank  originates  loans primarily for sale to
others  and does not  generally  service  such  loans;  however,  certain  older
mortgage loans are held and serviced.

Management  has policies and  procedures  in place to reduce any risk related to
environmental issues in its lending activity.  As of December 31, 1995 and 1994,
management  was not  aware of any  environmental  risk or  exposure  in its loan
portfolio or any other assets of the Corporation.

Table 7 shows the maturity or repricing distribution of selected loan categories
at December 31, 1995.


TABLE 7 - SELECTED LOAN MATURITIES AND INTEREST RATE  SENSITIVITY  
(December 31, 1995 balances in thousands)
<TABLE>
<CAPTION>

                                                         One              One to                  Over
                                                        Year                Five                  Five
                                                     or less               Years                 Years               Total
Types of loans:
<S>                                                  <C>                 <C>                    <C>                <C>
  Commercial                                         $59,183             $22,241                $2,792             $84,216
  Consumer                                             1,471               1,797                   600               3,868
  Real Estate - Mortgage                               4,197                 315                   146               4,658
                                                     -------             -------                ------             -------
   Total                                             $64,851             $24,353                $3,538             $92,742(1)
                                                     =======             =======                ======             ======= 

Total of loans above with:
  Predetermined interest rates                       $12,819             $24,157                $3,498             $40,474
  Adjustable interest rates                           52,032                 196                    40              52,268
                                                     -------             -------                ------             -------
   Total                                             $64,851             $24,353                $3,538             $92,742
                                                     =======             =======                ======             =======
</TABLE>

(1) Excludes nonaccrual loans totalling $66,739.

Because  extending  credit involves a certain degree of risk-taking,  management
has established loan and credit policies  designed to control both the types and
amounts  of  risk  assumed  and  to  minimize  losses.   Such  policies  include
limitations  on  loan-to-collateral  values  for  various  types of  collateral,
requirements for appraisals of real estate  collateral,  problem loan management
practices,  collection procedures,  and nonaccrual and charge-off guidelines. In
addition,  both BOCL and BOC  maintain a loan  classification  system to monitor
exposure to potential  loan losses.  Management  believes that the December 1995
allowance  levels  at both  BOCL  and  BOC are  sufficient  to  absorb  expected
charge-offs  and provide  adequately  for the inherent  losses that exist in the
loan portfolio, assuming more or less normal conditions exist.


                                       20

<PAGE>



Management  continues  to  closely  monitor  the  levels  of  nonperforming  and
potential  problem loans to address any weaknesses in credits and to enhance the
amount of ultimate  collection or recovery of problem loans. Should increases in
the overall level of nonperforming  and potential  problem loans accelerate from
current  trends,  management  will adjust the  methodology  for  determining the
allowance  for loan losses to increase  the  provision  and  allowance  for loan
losses.

     The allowance for loan losses is increased by direct charges to operations.
Among other  factors,  management  considers the state of the economy,  industry
trends,  conditions  affecting  individual  borrowers and regulatory concerns in
determining  whether the amount of the allowance for loan losses is  sufficient.
Losses  on loans  are  charged  against  the  allowance  in the  period in which
management determines that such loans have become  uncollectible.  Recoveries of
previously  charged-off  loans are  credited to the  allowance.  At December 31,
1995,  the  consolidated  allowance  for loan losses was  $1,785,000 or 1.92% of
total loans as compared to  $1,594,000  or 2.31% of total loans at December  31,
1994.  The  Corporation  recorded  net  charge-offs  of  $4,000  for  1995,  net
recoveries  of  $68,000  for 1994 and net  charge-offs  of  $383,000  for  1993.
Additional  data  covering  net  charge-offs/recoveries,  ratios of net  charge-
offs/recoveries to average loans, and other charges to operations is provided in
Note 5 to the consolidated financial statements as well as Table 1.

The provision for loan losses for the year ended December 31, 1995 was $195,000,
an increase of $120,000 over the 1994 provision of $75,000.  The reason for this
increase in the  provision  for loan losses was due to the strong  growth in the
loan portfolio.

Table 8  includes  an  allocation  of the  allowance  for  loan  losses  to loan
categories.  Although  the  allowance  is  primarily  general in  character  and
available to absorb expected losses regardless of loan category,  the allocation
is provided to offer an indication of the relative risk  characteristics  of the
indicated categories of the loan portfolio.

     Effective  January 1, 1995, the Corporation  adopted Statement of Financial
Accounting  Standards No. 114,  "Accounting by Creditors for the Impairment of a
Loan" ("SFAS 114") and  Statement of  Financial  Accounting  Standards  No. 118,
"Accounting  by Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosure"  ("SFAS 118").  These  statements  require  creditors to account for
impaired loans,  except for those collateral  dependent loans that are accounted
for at fair value or at the lower of cost or fair value, at the present value of
the expected future cash flows discounted at the loan's effective interest rate.
Specific reserves are being maintained on impaired loans in accordance with SFAS
114 and SFAS 118. The  Corporation  has no loans  classified as impaired  during
1995. The adoption of these  accounting  standards has not had a material effect
on the financial position and results of operations of the Corporation. See Note
1 to the consolidated financial statements for further details.
<TABLE>

TABLE 8 - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
                  (December 31 balances)
<CAPTION>

                                           1995                              1994                               1993
                                           ----                              ----                               ----
                                                      Percent                           Percent                            Percent
                                                     of Loans                          of Loans                           of Loans
                                                     in each                           in each                            in each
                                                     category                          category                           category
                                                     to Total                          to Total                           to Total
                                       Amount         Loans              Amount         Loans              Amount          Loans
                                       ------        --------            ------        --------            ------         --------
<S>                                <C>                 <C>           <C>                 <C>           <C>                  <C>
Commercial                         $1,248,740           90.8%        $1,184,343           85.3%        $  973,492            82.7%
Real Estate - Mortgage                272,919            5.0%           224,774            8.5%           193,194            12.4%
Consumer and other                     89,366            4.2%            65,478            6.2%            67,170             4.9%
Unallocated                           173,483                           119,176                           216,920
                                   ----------          -----         ----------          -----         ----------           -----
Total                              $1,784,508          100.0%        $1,593,771          100.0%        $1,450,776           100.0%
                                   ==========          =====         ==========          =====         ==========           ===== 
                            
</TABLE>


                                       21

<PAGE>




Problem Assets

When a loan  becomes 90 days past due as to  interest  or  principal  or serious
doubt exists as to collectibility,  the accrual of income is discontinued unless
the loan is well  secured  and in  process  of  collection.  Previously  accrued
interest on loans  transferred to nonaccrual  status is reversed against current
earnings and any  subsequent  interest is recognized on the cash basis.  Problem
assets include nonaccrual loans,  restructured loans and foreclosed  properties.
At December 31, 1995,  $67,000 of loans were on a nonaccrual  status as compared
to $526,500 at December  31,  1994.  Interest  income of $57,370 and $50,332 was
recognized  during 1995 and 1994,  respectively,  for loans  either  returned to
accrual  status  from  nonaccrual  or paid in full from  nonaccrual  status.  No
interest income was recognized  during 1993 on nonaccrual loans. For those loans
classified as nonaccrual as of December 31, 1995, 1994 and 1993, interest income
of $9,798,  $69,764 and $53,697  would have been  recognized  in the  respective
period if those loans had performed  under the original  terms.  The Corporation
realized a gain of  approximately  $8,100 and  $18,000 on the sale of Other Real
Estate Owned  ("OREO")  property in 1995 and 1994,  respectively.  There were no
gains or losses recognized during 1993 related to property  write-downs or sales
of OREO. <TABLE>

TABLE 9 - PROBLEM ASSETS
              (Balance at December 31)

<CAPTION>
                                                     1995             1994              1993              1992              1991
                                                     ----             ----              ----              ----              ----
<S>                                              <C>             <C>              <C>                 <C>               <C>
Nonaccrual Loans                                 $ 66,739        $ 526,500        $  602,786          $311,000          $ 68,000
Loans past due ninety days or more                 15,853           28,703             8,000           468,000                 0
Trouble debt restructuring                              0                0                 0                 0                 0
Other real estate owned                           172,500          191,100           474,996            40,000           224,100
                                                 --------         --------        ----------          --------          --------
                                                 $255,092         $746,303        $1,085,782          $819,000          $292,100
                                                 ========         ========        ==========          ========          ========

Nonperforming assets to total loans
  and other real estate owned                       0.27%            1.08%             1.78%             1.29%             0.48%
                                                 =======          =======         =========           =======           ======= 
</TABLE>


All accruing loans 90 days or more past due were in the process of collection at
each year end. At December 31, 1995,  total  classified loans were $2,262,000 or
2.4% of total loans,  compared to $2,958,000 or 4.3% at December 31, 1994. While
it is difficult to determine the impact of these  potential  problem loans,  the
future  impact is not  expected to be  material as an estimate of the  potential
impact has been  considered in determining  the amount of the allowance for loan
losses at December 31, 1995.

Liquidity and Capital Resources

Liquidity  is the  ability  to  meet  current  and  future  obligations  through
liquidation  or maturity of existing  assets or the  acquisition  of  additional
liabilities. The Corporation's primary source of liquidity is funds derived from
the deposit-gathering operations of the Corporation's two subsidiary banks, BOCL
and BOC, with  additional  funds  provided from  maturing  loans and  investment
securities,  sales of temporary  investments,  or sales of investment securities
classified as available-for-sale. These funds are primarily used to pay interest
on deposits and to fund deposit  outflows.  Any remaining funds are utilized for
investments and to fund loan commitments and  disbursements,  to repay debt, and
to  fund  operating  expense.  Negative  funds  positions  are  dealt  with by a
combination of actions  including  borrowings from other banks or  rediscounting
qualifying  loans with the Federal  Reserve Bank. At December 31, 1995, BOCL had
approximately  $8.9 million while BOC had approximately  $9.5 million in standby
credit available to them from other financial institutions.  Management believes
that a sufficient  liquidity balance is maintained  through the operation of its
asset  and  liability  management  program.  Additionally,  the  standby  credit
facilities provide adequate protection in the event of negative cash flows.


                                       22

<PAGE>



At December 31, 1995 and 1994, liquid assets of approximately  $39.4 million and
$27.0  million,  respectively,  were  available  to  meet  demands  for  deposit
withdrawals,  undisbursed  amounts on lines of credit  ("loan  commitments")  of
$18,148,000  and  $13,882,000  and  letters of credit  totaling  $1,775,000  and
$1,437,000,  respectively. The amount of liquid assets available on December 31,
1995  includes  cash  and  cash  equivalents  of  $17,250,000,  an  increase  of
$12,143,000  over the December 31, 1994 amount of  $5,107,000.  This increase in
cash and cash  equivalents is attributable to the strong deposit growth realized
during 1995.

Reliance is being placed upon continued  deposit growth as the principal  source
of funds.  Management is committed to pay competitive market rates for deposits.
Deposits were  approximately  $117.8  million at December 31, 1995,  compared to
$82.9 million at December 31, 1994. Of the total deposit base of the Corporation
at  December  31,  1995,   approximately  $18.8  million,or  16%,  consisted  of
Certificates   of   Deposit  in  amounts   of   $100,000   and  higher   ("Jumbo
Certificates").  These Jumbo Certificates are issued to local customers and none
are brokered deposits.

While most of the large time deposits are acquired from  customers with standing
relationships  with the Banks, it is a common industry  practice not to consider
these types of deposits as core deposits because their retention can be expected
to be  heavily  influenced  by  rates  offered,  and  they  therefore  have  the
characteristics  of  shorter-term  purchased  funds.   Certificates  of  deposit
$100,000 and over involve the maintenance of an appropriate matching of maturity
distribution and a diversification of sources to achieve an appropriate level of
liquidity.  Management  believes that the  Corporation's  liquidity  position is
relatively  strong and is adequate to meet the withdrawal  demand of these Jumbo
Certificates.

One of the  principal  uses of funds is to meet loan  demand at BOCL and BOC. As
mentioned in the loan sections of this  discussion,  at December 31, 1995, total
loans outstanding were approximately $92.8 million, as compared to $68.9 million
at December 31, 1994.

The Comptroller of the Currency ("OCC"),  the Bank's primary regulator  requires
national banks to maintain a Tier 1 (primarily  stockholder's equity) risk-based
capital ratio of 4.0% and a total risk-based  capital ratio of 8.0%. At December
31, 1995, the Tier 1 capital ratio for BOCL was 9.9% and the total capital ratio
was 11.2%,  while BOC had a Tier 1 ratio of 13.9% and a total  capital  ratio of
15.1%.

The  Corporation's  primary  regulator,  the Board of  Governors  of the Federal
Reserve Board (the "Board") has issued guidelines requiring a minimum risk based
capital  ratio of 8.0%,  of which at least 4.0% must  consist of Tier 1 capital.
The  Corporation's  Tier 1 capital ratio was  approximately  12.2% and its total
capital  ratio was  approximately  13.4% at December 31, 1995.  These ratios are
well within guidelines established by the Corporation's primary regulator.

Impact of Inflation and Changing Prices

The  financial  statements  and related  data  presented  have been  prepared in
accordance  with generally  accepted  accounting  principles,  which require the
measurement of financial  position and operating  results in terms of historical
dollars without  considering  changes in the relative  purchasing power of money
over time due to inflation.

The impact of inflation is reflected in the increased cost of the  Corporation's
operations.  Since the primary  assets and  liabilities of the  Corporation  are
monetary in nature, to the extent that inflation impacts interest rates, it will
impact the net income of the Corporation.

Stock Data and Dividends

There has been only a limited trading market for the  Corporation's  stock since
inception.  Since the completion of the Corporation's two common stock offerings
in 1987 and 1988 and its Bank of Charleston  Series  Preferred Stock offering in
1990, management has knowledge of only limited stock transactions. The Preferred
Stock was converted to common stock in 1992.  During 1995,  management was aware
of limited transactions in its common stock with

                                       23

<PAGE>



the majority of the  transactions  occurring at  approximately  $8.50 per share.
Because there is no established market for the Corporation's common stock, these
transactions may not be  representative  of all  transactions,  may not be arm's
length transactions, and are not necessarily indicative, therefore, of prices at
which shares of the  Corporation's  stock could be bought or sold.  On March 21,
1996,  the  Corporation  listed its common stock on the American  Stock Exchange
under the ticker symbol CSB.

As of March 15,  1996,  there  were  approximately  600  record  holders  of the
Corporation's common stock.

The  Board of  Directors  of the  Corporation,  BOCL and BOC  intend to follow a
policy of retaining earnings to provide funds to operate and expand the business
of  the  corporation.   Consequently,   the  Corporation  has  not  declared  or
distributed any cash dividends to its shareholders.

The future  dividend  policy of the  Corporation is subject to the discretion of
the Board of Directors and will depend upon a number of factors including future
earnings,  financial condition, cash needs, and general business conditions. The
Corporation's  initial ability to distribute cash dividends will depend entirely
on the Banks' ability to distribute dividends to the Corporation. All Banks must
comply with the requirements of the National Bank Act and may have to obtain the
approval of the OCC before paying any dividend. The Banks may not declare or pay
a dividend if the effect of the payment  would cause the minimum  capital of the
Banks to be reduced below the minimum capital requirements imposed by the OCC.

Fourth Quarter Earnings

Net income for the fourth  quarter of 1995 was  $426,000  or $.31 per share,  up
$102,000 or 31% from the  $324,000 or $.24 per share  earned for the same period
of 1994.  This increase in earnings is primarily  the result of higher  interest
income due to the strong loan  growth  realized  by both  banks;  average  loans
outstanding  grew  by  36%  or  $23.7  million  between  the  two  periods.  The
improvement  in the  non-interest  income  category  was due to an  increase  in
deposit  fee  income  as a result  of the  acquisition  of  transaction  deposit
accounts during the period,  the implementation of the Business Manager Program,
which has previously  been discussed and mortgage loan  origination  fees due to
expanded services offered in the mortgage lending function.

Table 10  summarizes  the  financial  results and selected  average  balances by
quarter for 1995 and 1994.



                                       24

<PAGE>


<TABLE>

TABLE 10 - QUARTERLY FINANCIAL RESULTS
<CAPTION>

                                          1995 Quarter ended                                   1994 Quarter ended
                                          ------------------                                   ------------------
                                Dec. 31     Sept. 30       June 30     March 31      Dec. 31     Sept. 30      June 30     March 31
                                -------     --------       -------     --------      -------     --------      -------     --------
<S>                        <C>          <C>           <C>          <C>           <C>          <C>          <C>          <C>
Summary Income
 Statement     
Interest income            $  2,571,056 $  2,444,550  $  2,211,822 $  2,006,213  $ 1,824,659  $ 1,739,224  $ 1,632,916  $ 1,589,257
Interest expense              1,158,991    1,121,589     1,021,258      822,725      678,968      643,654      624,055      623,106
                           ------------ ------------  ------------ ------------  -----------  -----------  -----------  -----------
Net interest income           1,412,065    1,322,961     1,190,564    1,183,488    1,145,691    1,095,570    1,008,861      966,151
Provision for loan losses        90,000       65,000        30,000       10,000       50,000       25,000            0            0
                           ------------ ------------  ------------ ------------  -----------  -----------  -----------  -----------
Net interest income after
  provision for loan losses   1,322,065    1,257,961     1,160,564    1,173,488    1,095,691    1,070,570    1,008,861      966,151
Noninterest income              424,341      433,680       340,711      270,610      224,000      205,876      174,226      166,598
Noninterest expense           1,227,237    1,104,785     1,164,971    1,078,829    1,041,563      970,520    1,001,692      913,192
                           ------------ ------------  ------------ ------------  -----------  -----------  -----------  -----------
Net income before
  income taxes                  519,169      586,856       336,304      365,269      278,128      305,926      181,395      219,557
Current income tax
  (expense) benefit             (93,340)    (271,670)      (20,727)     (40,390)      45,600       40,964      (12,666)     (12,156)
                           ------------ ------------  ------------ ------------  -----------  -----------  -----------  ----------- 
Net income                 $    425,829 $    315,186  $    315,577 $    324,879  $   323,728  $   346,890  $   168,729  $   207,401
                           ============ ============  ============ ============  ===========  ===========  ===========  ===========

Net income per
  common share             $       0.31 $       0.23  $       0.23 $       0.24  $      0.24  $      0.25  $      0.12  $      0.15
                           ============ ============  ============ ============  ===========  ===========  ===========  ===========
Selected Average Balances
Assets                     $128,809,830 $118,029,630  $109,564,352 $100,180,644  $93,577,738  $93,625,708  $95,567,183  $93,819,267
Earning assets              118,658,508  111,240,972   102,629,944   93,376,535   87,828,788   87,290,092   87,958,086   87,203,405
Investment securities        27,329,081   24,500,565    21,801,428   21,917,870   21,962,192   21,932,565   22,723,448   24,006,710
Loans                        88,951,954   83,816,488    76,813,011   70,667,943   65,214,096   63,404,536   62,036,708   61,645,473
Deposits                    110,804,300  103,829,414    95,916,366   85,462,389   79,799,739   80,407,545   81,048,166   80,922,195
Stockholders' equity         11,409,050   11,027,613    10,594,504   10,143,204    9,872,694    9,592,700    9,480,336    9,228,474

</TABLE>

Change in Independent Auditors

     On February 21, 1995, the management of the  Corporation,  after  receiving
approval of members of the Corporation's Audit Committee and Board of Directors,
informed  its  independent   accountants,   Price  Waterhouse  LLP  (the  "Prior
Accountants"),  that such  accounting  firm would not be retained for the fiscal
year ending  December 31, 1995.  On January 26,  1995,  the Board of  Directors,
after  receiving  proposals from other  accounting  firms,  formally  elected to
engage J. W. Hunt and Company,  LLP to serve as independent  accountants for the
year ending December 31, 1995.  Prior to their  engagement on February 21, 1995,
the firm of J. W. Hunt and Company, LLP was not consulted by the Corporation for
any financial or accounting matters.

     In connection with the audit of the  Corporation's  consolidated  financial
statements  for the year ended  December 31, 1994,  and any  subsequent  interim
period  preceding the dismissal of the Prior  Accountants  and the engagement of
the new accountants,  there were no disagreements  with the Prior Accountants on
any  matter  of  accounting   principles  or  practices,   financial   statement
disclosure, or auditing scope or procedure,  which disagreements if not resolved
to the  satisfaction  of the Prior  Accountants  would have  caused them to make
reference  in  connection  with  their  report  to  the  subject  matter  of the
disagreements.

     The audit report of the Prior Accountants on the Corporation's consolidated
financial statements for the year ended December 31, 1994 was unqualified. There
have not been any adverse,  disclaimer or modified  opinions issued by the Prior
Accountants,  except as to  inclusion  of an  "emphasis  of a matter"  paragraph
included in their reports addressing uncertainties related to a Formal Agreement
entered into with the Comptroller of the Currency

                                       25

<PAGE>



with respect to their 1992 and 1993 report,  the filing of a notice of intent to
effect a change in the  composition  of the Board of  Directors  with respect to
their 1992  report,  and the filing of a  shareholder  lawsuit  against  certain
members of the Board of Directors with respect to their 1993 report.

     The Board of Directors, upon the recommendation of the Audit Committee, has
appointed J. W. Hunt and Company, LLP, independent certified public accountants,
as independent auditors for the Corporation and its subsidiaries for the current
fiscal  year  ending   December  31,  1996,   subject  to  ratification  by  the
shareholders.  J. W. Hunt and  Company,  LLP has  advised the  Corporation  that
neither the firm nor any of its  partners  has any direct or  indirect  material
interest  in the  Corporation  and  its  subsidiaries  except  as  auditors  and
independent   certified   public   accountants  of  the   Corporation   and  its
subsidiaries.



Item 8 -  Financial Statements and Supplementary Data

Index to Financial Statements

Financial Statements
     Report of Independent Accountants.......................................27
     Report of Predecessor Accountants.......................................28
     Consolidated Balance Sheets at December 31, 1995 and 1994...............29
     Consolidated Statements of Operations for the three years ended
         December 31, 1995...................................................30
     Consolidated Statements of Changes in Stockholders' Equity
         for the three years ended December 31, 1995.........................31
     Consolidated Statements of Cash Flows for the three years ended
         December 31, 1995...................................................32
     Notes to Consolidated Financial Statements..............................33


All other  schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.



                                       26

<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
  of ComSouth Bankshares, Inc.


We have audited the consolidated balance sheet of ComSouth Bankshares, Inc. (the
"Corporation")  and its  subsidiaries  as of December 31, 1995,  and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial  statements  based on our audit.  The consolidated
financial  statements of the Corporation and its subsidiaries as of December 31,
1994 and 1993,  were audited by other auditors whose report dated March 3, 1995,
expressed an unqualified opinion on those statements and included an explanatory
paragraph  that  referred  to  Notes  1 and  14 to  the  consolidated  financial
statements  describing the Corporation's change in the methods of accounting for
income taxes during 1993 and certain  investments in debt and equity  securities
in 1994.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the 1995 consolidated  financial  statements  referred to above
present  fairly,  in  all  material  respects,  the  financial  position  of the
Corporation  and its  subsidiaries  as of  December  31, 1995 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.



                                       J. W. Hunt and Company, LLP

Columbia, South Carolina
January 31, 1996






                                       27

<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
  of ComSouth Bankshares, Inc.

     In our opinion, the consolidated balance sheet and the related consolidated
statements of inome, of cash flows and of changes in stockholders'  equity as of
and for each of the two years in the period ended  December 31, 1994  (appearing
on pages 28 through 31 of the ComSouth Bankshares Inc. and its subsidiaries 1995
Annual  Report to  Shareholders  and in this Form 10-K  Annual  Report)  present
fairly, in all material respects, the financial position,  results of operations
and cash flows of ComSouth  Bankshares,  Inc. and its subsidiaries as of and for
each of the two years in the period ended December 31, 1994, in conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable  basis for the opinion  expressed above. We have not
audited the consolidated  financial statements of ComSouth Bankshares,  Inc. for
any period subsequent to December 31, 1994.

         As  discussed  in  Notes  1  and  13  to  the  consolidated   financial
statements,  the Corporation  changed its methods of accounting for income taxes
during 1993 and certain investments in debt and equity securities in 1994.



Price Waterhouse LLP

Columbia, South Carolina
March 3, 1995






                                       28

<PAGE>


<TABLE>
<CAPTION>

                                                                                   COMSOUTH BANKSHARES, INC.
                                                                                     CONSOLIDATED BALANCE
                                                                                            SHEETS

                                                                                          December 31,
                                                                                -------------------------------   
                                                                                   1995                   1994
                                                                                  -----                  -----    
<S>                                                                            <C>                    <C>
Cash and due from banks                                                        $ 10,979,878           $ 5,106,898
Federal funds sold                                                                6,270,000
                                                                               ------------           -----------
  Total cash and cash equivalents                                                17,249,878             5,106,898
Investment securities:
Held to maturity, at amortized cost
  (fair value of $9,333,599 in 1995
  and $15,530,301 in 1994)                                                        9,319,839            16,110,175
Available-for-sale, at fair value
  (amortized cost of $12,671,841 in 1995
  and $6,041,455 in 1994)                                                        12,815,394             5,767,879
Loans
  (less allowance for loan losses
  1995 - $1,784,508; 1994 - $1,593,771)                                          91,024,087            67,300,821
Premises and equipment, net                                                       1,287,558             1,260,403
Accrued interest receivable                                                       1,104,905               800,413
Other assets                                                                        620,967               573,064
                                                                               ------------           -----------
Total Assets                                                                   $133,422,628           $96,919,653
                                                                               ============           ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
  Noninterest bearing demand                                                     24,246,101            13,392,536
  NOW, money market and savings                                                  49,321,293            38,835,216
  Time deposits of $100,000 or more                                              18,785,241            12,552,279
  Time deposits less than $100,000                                               23,255,643            16,477,232
  Other time                                                                      2,154,512             1,651,146
                                                                               ------------           -----------
Total deposits                                                                  117,762,790            82,908,409
Federal funds purchased and securities sold under
  agreements to repurchase                                                        1,754,912             2,945,749
Note payable                                                                                              125,000
U.S. Treasury tax and loan accounts                                                 438,486               351,558
Other liabilities                                                                 1,587,302               484,961
                                                                               ------------           -----------
Total Liabilities                                                               121,543,490            86,815,677
                                                                               ------------           -----------
Stockholders' Equity:
Preferred stock
  (no par value, 50,000,000 shares authorized;
  no shares issued or outstanding)
Special stock
  (no par value, 50,000,000 shares authorized;
  no shares issued or outstanding)
Common stock
  (no par value, 50,000,000 shares authorized;
  shares issued and outstanding - 1,385,701 in
  1995 and 1,368,456 in 1994)                                                    11,830,145            11,711,421
Accumulated deficit                                                                 (45,752)           (1,426,885)
Unrealized gain (loss) on investment
  securities available-for-sale, net of applicable
  deferred income taxes                                                              94,745              (180,560)
                                                                               ------------           -----------
Total Stockholders' Equity                                                       11,879,138            10,103,976
                                                                               ------------           -----------
Commitments and contingencies
  (Notes 2, 9, and 16)
                                                                               ------------           -----------  
Total Liabilities and Stockholders' Equity                                     $133,422,628           $96,919,653
                                                                               ============           ===========
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       29

<PAGE>


<TABLE>
<CAPTION>

                                                                                          COMSOUTH BANKSHARES, INC
                                                                                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                           Year ended December 31,
                                                                                           -----------------------
                                                                                  1995                 1994                 1993
                                                                                  ----                 ----                 ----
Interest income:
<S>                                                                          <C>                  <C>                   <C>
Interest and fees on loans                                                   $ 7,723,855          $ 5,503,179           $5,064,730
Investment securities                                                          1,361,008            1,209,414            1,381,471
Federal funds sold                                                               148,778               73,463               90,663
                                                                             -----------          -----------           ----------
  Total Interest income                                                        9,233,641            6,786,056            6,536,864
                                                                             -----------          -----------           ----------
Interest expense:
Interest on deposits                                                           4,008,427            2,475,804            2,630,196
Federal funds purchased and securities sold
  under agreements to repurchase                                                  82,783               64,862               28,578
U.S. Treasury tax and loan accounts                                               33,120               20,124               15,977
Note payable                                                                         233                8,993               14,980
                                                                             -----------          -----------           ----------
  Total Interest expense                                                       4,124,563            2,569,783            2,689,731

Net interest income                                                            5,109,078            4,216,273            3,847,133
Provision for loan losses                                                        195,000               75,000              135,000
                                                                             -----------          -----------           ----------
Net interest income after provision for loan losses                            4,914,078            4,141,273            3,712,133
                                                                             -----------          -----------           ----------
Noninterest income:
Lending operations and services                                                  957,418              320,921              307,057
Service charges on deposit accounts                                              442,397              360,436              319,088
Gain on sale of real estate owned                                                  8,063               17,551
Gain on sale of mortgage loans                                                                         24,309               18,173
Gain on sale of securities                                                                                                   2,867
Other                                                                             61,464               47,483               42,437
                                                                             -----------          -----------           ----------
                                                                               1,469,342              770,700              689,622
                                                                             -----------          -----------           ----------
Noninterest expense:
Salaries and employee benefits                                                 2,481,335            2,053,878            1,939,723
Occupancy expenses                                                               429,183              384,133              391,211
Furniture and equipment expenses                                                 341,966              281,216              241,955
Advertising and marketing                                                         78,643               83,735               51,067
Other                                                                          1,244,695            1,124,005            1,211,657
                                                                             -----------          -----------           ----------
                                                                               4,575,822            3,926,967            3,835,613
                                                                             -----------          -----------           ----------

Income before provision for income taxes                                       1,807,598              985,006              566,142
Income tax (expense) benefit                                                    (426,127)              61,742              (43,525)
                                                                             -----------          -----------           ----------
Net income                                                                   $ 1,381,471          $ 1,046,748           $  522,617
                                                                             ===========          ===========           ==========

Earnings per common share:
Net income per weighted average number of
  common shares outstanding                                                  $      1.00          $      0.76           $     0.38
                                                                             ===========          ===========           ==========


</TABLE>




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       30

<PAGE>


<TABLE>

                                                      COMSOUTH BANKSHARES, INC
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<CAPTION>


                                                                                                    Unrealized
                                                                                                  Gain (loss) on        Total
                                                       Common Stock              Accumulated        Investment      Stockholders'
                                                       Shares   Amount             Deficit          Securities          Equity
                                                       ------   ------             -------          ----------          ------
<S>                                               <C>            <C>               <C>               <C>            <C>
Balance at December 31, 1992                      1,368,456      $11,711,421       ($2,996,250)                     $ 8,715,171
Net income                                                                             522,617                          522,617
                                                  ---------      -----------       -----------       ---------      -----------

Balance at December 31, 1993                      1,368,456       11,711,421        (2,473,633)                       9,237,788
Unrealized loss on investment securities
  available-for-sale, net of applicable
  deferred income taxes at January 1, 1994                                                            ($17,371)         (17,371)
Net income                                                                           1,046,748                        1,046,748
Change in unrealized loss on investment
  securities available-for-sale, net of
  applicable deferred income taxes                                                                    (163,189)        (163,189)
                                                  ---------      -----------       -----------       ---------      ----------- 
                                                                                                      (180,560)      10,103,976
Round adjustment                                         45              338              (338)
Change in unrealized gain on investment
  securities available-for-sale, net of
  deferred income taxes                                                                                275,305          275,305
Issuance of common stock                             17,200          118,386                                            118,386
Net Income                                                                           1,381,471                        1,381,471
                                                  ---------      -----------       -----------       ---------      -----------

Balance at December 31, 1995                      1,385,701      $11,830,145          ($45,752)      $  94,745      $11,879,138
                                                  =========      ===========       ===========       =========      ===========

</TABLE>





















The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       31

<PAGE>
<TABLE>
<CAPTION>
                                                                                          COMSOUTH BANKSHARES, INC
                                                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                           Year ended December 31,
                                                                                           -----------------------
                                                                                 1995                  1994                  1993
                                                                                 ----                  ----                  ----
Cash flows from operating activities:
<S>                                                                          <C>                   <C>                 <C> 
Net income                                                                   $ 1,381,471           $1,046,748          $   522,617
Adjustments to  reconcile  net income to cash  provided by (used for)
  operating activities:
Depreciation and amortization                                                    288,565              240,620              220,573
Provision for loan losses                                                        195,000               75,000              135,000
Gain on sale of investment securities                                                                                       (2,867)
Deferred tax benefit                                                            (200,000)            (113,000)
Amortization of premium and accretion of
  discount on investment securities                                               17,726               30,467               28,847
Gain on sales of mortgage loans                                                                       (24,309)             (18,173)
Gross amount of loans originated for resale                                                        (1,749,050)          (4,902,925)
Proceeds from loans originated for resale                                                           1,773,359            4,121,898
(Increase) decrease in interest receivable                                      (304,492)             (49,771)             136,882
Decrease (increase) in other assets                                               43,489              263,450             (445,548)
Increase (decrease) in interest payable                                          340,014               31,534             (125,659)
Increase (decrease) in other liabilities                                         713,520               94,319             (148,044)
                                                                             -----------           ----------          -------------
Cash provided by (used for) operating activities                               2,475,293            1,619,367             (477,399)
                                                                             -----------           ----------          -------------
Cash flows from investing activities:
Purchases of investment securities, held-to-maturity                            (493,906)          (1,504,219)         (11,105,163)
Purchases of investment securities, available-for-sale                       (11,556,551)          (2,780,729)
Maturities of investment securities, held-to-maturity                          7,273,578            1,921,698            8,017,942
Maturities of investment securities, available-for-sale                        4,919,100            3,503,800
Proceeds from sale of investment securities                                                                              1,507,500
Net (increase) decrease in loans                                             (23,918,265)          (7,493,018)           2,395,314
Purchases of premises and equipment                                             (308,190)            (299,524)            (144,618)
Proceeds from sale of other real estate owned                                      8,063               17,551
                                                                             -----------           ----------          -----------
Cash (used for) provided by investing activities                             (24,076,171)          (6,634,441)             670,975
                                                                             -----------           ----------          -----------
Cash flows from financing activities:
Net increase (decrease) in deposits                                           34,854,381               10,063             (188,835)
(Maturities of) increase in federal funds purchased                           (1,190,837)           1,500,288            1,028,867
  and securities sold under agreement to repurchase
Payment of note payable                                                         (125,000)                                 (125,000)
Increase (decrease) in U.S. treasury, tax and loan                                86,928            (590,523)             (118,394)
  accounts
Proceeds from issuance of common stock                                           118,386
                                                                             -----------           ----------          -----------  
Cash provided by financing activities                                         33,743,858              919,828              596,638
                                                                             -----------           ----------          -----------  
Increase (decrease) in cash and cash equivalent                               12,142,980           (4,095,246)             790,214
Cash and cash equivalents at beginning of year                                 5,106,898            9,202,144            8,411,930
                                                                             -----------           ----------          -----------  
Cash and cash equivalents at end of year                                     $17,249,878           $5,106,898           $9,202,144
                                                                             ===========           ==========          ===========  
Supplemental disclosures of cash flow information:
Cash paid for interest                                                        $3,784,548           $2,538,249           $2,815,389
Cash paid for taxes                                                             $107,995              $33,000              $42,000

Supplemental schedule of noncash investing and
  financing activities:
Loans transferred to other real estate owned                                          $0                   $0             $434,997

Noncash adjustments to report investment securities,  available-for-sale at fair
  value:
Investment securities, available-for-sale                                       $143,553            ($273,576)
Other (liabilities) assets                                                       (48,808)              93,016
Unrealized gain (loss) on investment securities,
  available-for-sale, net of applicable deferred
  income taxes                                                                   $94,745            ($180,560)
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       32
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1   - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Organization  -  ComSouth   Bankshares,   Inc.  (the  "Corporation")   commenced
organizational activities on January 1, 1987, and was chartered on May 15, 1987,
as a South Carolina  corporation.  The  Corporation  was formed to become a bank
holding  company  and its  wholly-owned  subsidiaries,  Bank of  Columbia,  N.A.
("BOCL") and Bank of Charleston,  N.A.  ("BOC") opened for business in Columbia,
South Carolina on July 12, 1988, and in Charleston, South Carolina, on April 12,
1990,  respectively.  BOCL and BOC provide general banking services in the State
of South Carolina.

Organization  Costs - Organization  costs were deferred and were amortized using
the  straight-line  method  over  five  years.  Organization  costs  were  fully
amortized at December 31, 1995.

Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of the Corporation and its wholly-owned  subsidiaries.  All
significant intercompany accounts and transactions have been eliminated.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amounts of assets and liabilities at
the date of the  financial  statements  and the reported  amounts of revenue and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Statements of Cash Flows - For purposes of reporting  cash flows,  cash and cash
equivalents  include cash and federal funds sold.  Generally,  federal funds are
sold for one-day periods.

Investment   Securities  -  The  subsidiaries  adopted  Statement  of  Financial
Accounting  Standards No. 115,  "Accounting for Certain  Investments in Debt and
Equity Securities" ("SFAS 115"), on January 1, 1994. Management has reviewed the
investment   securities   portfolio   and   classified   securities   as  either
held-to-maturity  or  available-for-sale.  In determining  such  classification,
securities  that the  subsidiaries  have both the positive intent and ability to
hold to maturity are  classified  as  held-to-maturity  and are carried at cost,
adjusted for  amortization  of premiums and accretion of discounts using methods
approximating  the interest  method.  All other  securities  are  classified  as
available-for-sale and are carried at estimated fair value with unrealized gains
and losses  included  in  stockholders'  equity on an after tax basis.  Gains or
losses on sales of investments are reported as a component of noninterest income
using the specific identification method.

Prior to the adoption of SFAS 115,  investment  securities  were carried at cost
adjusted for amortization of premium and accretion of discount.

Mortgage  Loans Held for  Resale - Mortgage  loans held for resale are valued at
the  lower of  aggregate  cost or  market  value.  At  December  31,  1993,  the
Corporation had $799,200,  with a fair value of $799,200, in mortgage loans held
for resale.  There were no mortgage  loans held for resale at December  31, 1995
and 1994.

Loans - Loans are reported at their principal  amount  outstanding.  Interest is
recognized  over the term of the loan on the loan  balance  outstanding.  When a
loan  becomes 90 days past due as to  interest  or  principal  or serious  doubt
exists as to collectibility,  the accrual of interest is discontinued unless the
loan is well secured and in process of collection.  Previously  accrued interest
on loans  transferred to nonaccrual  status is reversed against current earnings
and any subsequent interest is recognized on the cash basis.

Allowance for Loan Losses - The  provision for loan losses  charged to operating
expense is based on management's  evaluation of various factors  influencing the
collectibility of loans and is intended to maintain an allowance for loan

                                       33

<PAGE>



     losses at an amount  estimated  to be  adequate  to cover  inherent  losses
related to loans  outstanding.  Factors  considered by management in determining
the amount of an adequate  allowance  include  past loan loss  experience,  loan
portfolio composition, and current and anticipated economic conditions including
effects on industries and specific borrowers.

     Effective  January 1, 1995, the Corporation  adopted Statement of Financial
Accounting  Standards No. 114,  "Accounting by Creditors for the Impairment of a
Loan" ("SFAS  114"),  and Statement of Financial  Accounting  Standards No. 118,
"Accounting  by Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosure"  ("SFAS 118").  These  statements  require  creditors to account for
impaired loans,  except for those collateral  dependent loans that are accounted
for at fair value or at the lower of cost or fair value, at the present value of
the expected future cash flows discounted at the loan's effective interest rate.

The  Corporation  does not apply SFAS 114 to "large  groups of  smaller  balance
homogeneous loans that are collectively  evaluated for impairment." These groups
include the Corporation's  consumer loan portfolio,  overdraft protection loans,
residential  mortgage loans,  and home equity loans. The major category of loans
to which SFAS 114 is applied are commercial loans.

The Corporation  determines  when loans become impaired  through its normal loan
administration  and  review  functions.  Loans  that  are on  the  Corporation's
classified loan report are potentially  impaired loans.  Management  considers a
loan to be  impaired  when,  based on  current  information  and  events,  it is
probable  that the  Corporation  will be unable to  collect  all  principal  and
interest amounts due according to the contractual terms of the agreement.

Nonaccrual  loans  that  fall  under  the  provisions  of  SFAS  114 and 118 are
evaluated for impairment. A nonaccrual loan may not be considered impaired if it
is expected that the delay in payment is minimal. As a matter of general policy,
the Corporation  considers a minimal delay to be within 90 days of when the loan
was placed in nonaccrual status. A loan is not impaired during a period of delay
if the Corporation  expects to collect all the amounts due,  including  interest
due at the contractual interest rate, for the period of the delay.

As a matter of general policy,  the  Corporation  either  commences  foreclosure
proceedings  or charges off an impaired loan within 90 days of placing a loan in
such status. As of December 31, 1995, the Corporation had no impaired loans.

In accordance  with SFAS 114,  historical  information  has not been restated to
reflect the application of this accounting standard. Management does not believe
that SFAS 114 has a material  effect on the  comparability  of any  credit  risk
measures previously disclosed.

The accrual of interest on impaired loans is  discontinued  when, in the opinion
of  management,  the borrower may be unable to meet payments as they become due.
When interest accrual is discontinued,  all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent that cash payments
are received.  However, if ultimate repayment of principal is not expected,  all
payments received will be applied to principal.

The adoption of these accounting  standards has not had a material effect on the
financial position and results of operations of the Corporation.

Premises  and  Equipment  -  Premises  and  equipment  are  stated  at cost less
accumulated  depreciation.  Additions and major  replacements  or betterments of
premises  and  equipment  are  capitalized.   Maintenance,   repairs  and  minor
improvements are expensed as incurred.

Depreciation   of  premises  and   equipment  and   amortization   of  leasehold
improvements  are computed  using the  straight-line  method over the  estimated
useful lives  (generally  three to fifteen  years) of the assets or, if shorter,
the lease term for leasehold improvements.


                                       34

<PAGE>



     Other Real Estate Owned  (OREO) - Real estate  acquired by  foreclosure  is
initially recorded at estimated fair value less estimated disposal costs and are
included in other assets.  As of December 31, 1995 and 1994, the Corporation had
$172,500 and $191,000, respectively,  recorded as OREO property. Gains or losses
on sales  of  other  real  estate  owned,  writedowns  resulting  from  periodic
evaluation  of the fair market  values of other real  estate  owned and costs of
maintaining and operating other real estate owned are charged to other operating
expense. The Corporation  realized net gains of $8,063,  $17,551 and $0 recorded
as other  income from the sale of OREO  property for the years 1995,  1994,  and
1993, respectively. No expenses were recognized for the years presented.

Loan Fees - Statement of Financial  Accounting Standards No. 91, "Accounting for
Nonrefundable  Fees and Costs Associated with Originating or Acquiring Loans and
Initial  Direct  Costs of  Leases"  ("SFAS  91"),  became  effective  for annual
financial  statements for fiscal years  beginning after January 1, 1986. SFAS 91
requires that net nonrefundable fees and direct costs of loan  originations,  if
material, be deferred and amortized over the lives of the underlying loans as an
adjustment to interest income. The Corporation has elected not to implement SFAS
91 since the net effect of  implementation  would not have a material  effect on
the Corporation's financial position or results of operations.

Advertising  and  Marketing  Expenses - The  Corporation  expenses  the costs of
advertising and marketing as incurred.

Stock-Based  Compensation - Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), encourages, but does not
require  companies  to  record  compensation  cost  for  stock-  based  employee
compensation  plans at fair  value.  The  Corporation  has chosen to continue to
account for stock-based compensation using the intrinsic value method prescribed
in Accounting  Principles Board Opinion No. 25,  "Accounting for Stock Issued to
Employees,"  and related  interpretations.  Accordingly,  compensation  cost for
stock  options is measured as the excess,  if any, of the quoted market price of
the  Corporation's  stock at the date of the grant over the  amount an  employee
must pay to acquire the stock.  Compensation cost for stock appreciation  rights
and  performance  equity units is recorded  annually  based on the quoted market
price of the Corporation's stock at the end of the period.

Retirement  Plan - The  Corporation established a contribution 401-K plan during
1995 covering  substantially  all employees.  Plan  participants  may contribute
annually up to 12% of their compensation. Additionally, the Corporation may make
profit  sharing   contributions   to  the  Plan  annually.   The   Corporation's
contributions to the Plan are determined annually by the Board of Directors. The
Corporation contributed approximately $25,300 to the Plan in 1995.

Income Taxes - The Corporation and its  subsidiaries  are subject to federal and
state income taxes. (See Note 13).

Reclassification - Certain amounts in the prior year consolidated financial
statements have been  reclassified to conform with the manner of presentation in
1995.

Earnings Per Share - For purposes of calculating earnings per share, outstanding
stock  options have been excluded  from the per share  calculations  because the
effect of exercising the options is either  anti-dilutive  or does not result in
material dilution of net income per share in any year presented.

NOTE 2 - STOCKHOLDER LEGAL ACTION

On January 24, 1994, a former  director of the Corporation and Bank of Columbia,
who is a current  stockholder  of the  Corporation  brought suit in the Court of
Common  Pleas of  Richland  County  against  the  Corporation  and  eight of its
directors  and  former  directors  alleging  that the  defendant  directors  had
breached their  fiduciary  duties in not pursuing  proposals by third parties to
acquire the Corporation in 1992. The Corporation is named as a defendant because
the plaintiff asserts that the suit is, in part, a derivative action, which is a
claim brought by a stockholder

                                       35

<PAGE>

that  belongs  to  the  Corporation   against  officers  and  directors  of  the
Corporation.  The  Corporation has answered the complaint.  Management  believes
that the suit is without merit and is vigorously defending the suit.

NOTE 3 - RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS

BOCL and BOC are required to maintain  average reserve balances with the Federal
Reserve,  or in vault cash. The average daily reserve  balance  requirement  for
December 31, 1995 was met by vault cash held in the two banks.

At  December  31,  1995,  the two banks had due from bank  balances in excess of
federally insured limits in the amount of $7,025,273.

NOTE 4 - INVESTMENT SECURITIES

The  amortized   cost  and  estimated   fair  value  of  investment   securities
held-to-maturity at December 31, 1995 and 1994, are presented below:
<TABLE>
<CAPTION>
                                                     1995                                                1994
                                                     ----                                                ----
                                              Gross        Gross       Estimated                 Gross         Gross     Estimated
                              Amortized     Unrealized   Unrealized      Fair       Amortized  Unrealized   Unrealized     Fair
                                Cost          Gains        Losses        Value        Cost       Gains        Losses       Value
                                ----          -----        ------        -----        ----       -----        ------       -----
<S>                          <C>             <C>          <C>          <C>         <C>            <C>        <C>         <C>
U. S. Treasury Securities    $ 4,038,970     $ 4,001      $17,651      $4,025,320  $ 5,059,394               $300,081    $ 4,759,313
U. S. Government Agencies      4,999,809      20,196        9,649       5,010,356   10,698,166    $  844      281,641     10,417,369
Mortgage-backed Securities       281,060      16,863                      297,923      352,615     2,198        1,194        353,619
                             -----------     -------      -------      ----------  -----------    ------     --------    -----------
  Total                      $ 9,319,839     $41,060      $27,300      $9,333,599  $16,110,175    $3,042     $582,916    $15,530,301
                             ===========     =======      =======      ==========  ===========    ======     ========    ===========
</TABLE>
The  amortized   cost  and  estimated   fair  value  of  investment   securities
available-for-sale at December 31, 1995 and 1994, are presented below:
<TABLE>
<CAPTION>
                                                     1995                                                1994
                                                     ----                                                ----
                                              Gross        Gross       Estimated                 Gross        Gross      Estimated
                              Amortized     Unrealized   Unrealized      Fair       Amortized  Unrealized  Unrealized      Fair
                                Cost          Gains        Losses        Value        Cost       Gains       Losses        Value
                                ----          -----        ------        -----        ----       -----       ------        -----
<S>                          <C>            <C>            <C>       <C>           <C>          <C>          <C>        <C>
U. S. Treasury Securities    $ 4,789,945    $ 66,013       $8,258    $ 4,847,700   $3,789,375                $182,406   $ 3,606,969
U. S. Government Agencies      7,262,046      85,798                   7,347,844    1,800,180                  91,170     1,709,010
Other                            619,850                                 619,850      451,900                               451,900
                             -----------    --------       ------    -----------   ----------   ------       --------    ----------
  Total                      $12,671,841    $151,811       $8,258    $12,815,394   $6,041,455                $273,576    $5,767,879
                             ===========    ========       ======    ===========   ==========   ======       ========    ==========
</TABLE>

The  amortized   cost  and  estimated   fair  value  of  investment   securities
held-to-maturity  at December 31, 1995, based on their  contractual  maturities,
are shown below:
<TABLE>
<CAPTION>
                                                                                             Estimated
                                                                     Amortized                  Fair
                                                                        Cost                   Value
                                                                    ------------             ---------- 
<S>                                                                 <C>                      <C>
Due in one year or less                                             $4,794,125               $4,782,900
Due after one year through five years                                4,301,184                4,311,122
Due after five years through ten years                                  90,489                   95,801
Due after ten years                                                    134,041                  143,776
                                                                    ------------             ---------- 
                                                                    $9,319,839               $9,333,599
                                                                    ============             ==========
</TABLE>

The  mortgage-backed  securities  held at December  31, 1995,  mature  generally
between  one and twelve  years.  The  actual  lives of these  securities  may be
shorter as a result of prepayments.

                                       36

<PAGE>

The  amortized   cost  and  estimated   fair  value  of  investment   securities
available-for-sale at December 31, 1995, based on their contractual  maturities,
are shown below:
<TABLE>
<CAPTION>
                                                                                      Estimated
                                                            Amortized                   Fair
                                                              Cost                     Value
                                                          ------------               ------------ 
<S>                                                       <C>                        <C>
Due in one year or less                                   $  1,499,829               $  1,508,400
Due after one year through five years                       10,552,162                 10,687,144
Due after ten years                                            619,850                    619,850
                                                           -----------                ----------- 
                                                           $12,671,841                $12,815,394
                                                           ===========                =========== 
</TABLE>

Securities  with book values of $15,784,928 and $14,709,428 at December 31, 1995
and 1994,  respectively,  were pledged to secure  public  deposits and for other
purposes as required by law.

There were no sales of  securities  during 1995 or 1994.  Proceeds from sales of
investment  securities  during 1993 were  $1,507,500  and resulted in a realized
gain of $2,867.

NOTE 5 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans were composed of the following:
<TABLE>
<CAPTION>
                                                                December 31,
                                                                ------------
                                                        1995                      1994
                                                       ----                      ----
<S>                                                 <C>                        <C>
Commercial                                          $84,216,406                $59,564,663
Real estate-mortgage                                  4,658,041                  5,797,527
Consumer and other                                    3,867,409                  3,005,902
Nonaccrual                                               66,739                    526,500
                                                    -----------                ----------- 
  Total                                             $92,808,595                $68,894,592
                                                    ===========                =========== 
</TABLE>

At December 31, 1995, the total loan portfolio  included  adjustable  rate loans
totaling  approximately $52 million and fixed rate loans totaling  approximately
$41 million.

Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                        -----------------------
                                                                  1995             1994            1993
                                                                  ----             ----            ----
<S>                                                              <C>             <C>              <C>
Balance at beginning of year                                     $1,593,771      $1,450,776       $1,698,327
Provision for loan losses                                           195,000          75,000          135,000
Loan charged off:
  Commercial                                                        (46,704)        (43,565)        (488,282)
  Real estate - mortgage                                                  0            (142)        (103,513)
  Consumer and other                                                (47,167)        (53,393)         (94,842)
                                                                 ----------      ----------       ----------
  Total                                                             (93,871)        (97,100)        (686,637)
                                                                 ----------      ----------       ----------
Recoveries:
  Commercial                                                         85,738         135,955          159,920
  Real estate - mortgage                                                  0             550           97,390
  Consumer and other                                                  3,870          28,590           46,776
                                                                 ----------      ----------       ----------
   Total                                                             89,608         165,095          304,086
                                                                 ----------      ----------       ----------
Balance at end of year                                           $1,784,508      $1,593,771       $1,450,776
                                                                 ==========      ==========       ==========
                                                           
</TABLE>
                                       37

<PAGE>




Interest  income of $57,370  and $50,932  was  recognized  during 1995 and 1994,
respectively,  for loans either  returned to accrual status or paid in full from
nonaccrual  status.  No interest income was recognized during 1993 on nonaccrual
loans.  For those loans  classified as nonaccrual as of December 31, 1995, 1994,
and 1993,  interest  income of  $9,798,  $69,784,  and  $53,697  would have been
recognized  in the  respective  period if those  loans had  performed  under the
original terms. No loans were classified as impaired during 1995.

Commercial   loans  include   investments   of  $9,213,386   and  $2,060,916  in
participating  interests of loans originated by other financial  institutions as
of December 31, 1995 and 1994, respectively.

Commercial  loans exclude loans serviced for others of $9,048,406 and $7,860,477
as of December  31, 1995 and 1994,  respectively.  Real  estate  mortgage  loans
exclude  loans  serviced  for others of $862,193 and $872,750 as of December 31,
1995 and 1994,  respectively,  Servicing loans for others generally  consists of
collecting  payments,  maintaining  escrow  accounts and disbursing  payments to
investors.  Loan servicing  income is recorded on the accrual basis and includes
servicing fees from investors and certain charges collected from borrowers, such
as late payment fees.

NOTE 6 - TRANSACTIONS WITH RELATED PARTIES

Directors and officers of the Corporation and its  subsidiaries are customers of
and borrow from the  subsidiaries  in the ordinary  course of  business.  All of
these loans were made on substantially the same terms,  including interest rates
and collateral,  as those prevailing at the time in comparable transactions with
unrelated  third  parties,  and did  not  involve  more  than a  normal  risk of
collectibility.

Directors  and  principal  officers'  direct and  indirect  indebtedness  to the
subsidiaries aggregated $5,024,908 and $4,644,825 at December 31, 1995 and 1994,
respectively.  During 1995, $2,867,041 of new loans were made to related parties
and repayments totaled $2,486,958.  Additionally, unfunded commitments to extend
credit to directors and officers  totaled  $1,027,789  for 1995 and $708,279 for
1994,  and standby  letters of credit  totaled  $35,000 at December 31, 1995 and
1994.

NOTE 7 - PREMISES AND EQUIPMENT

Premises and equipment included the following:
<TABLE>
<CAPTION>

                                                                                     December 31,
                                                                                     ------------                    
                                                                            1995                      1994
                                                                            ----                      ----          
<S>                                                                      <C>                        <C>
Leasehold improvements                                                   $ 1,084,820                 $1,032,445
Equipment and furnishings                                                  1,324,175                  1,072,997
                                                                         -----------                 ----------
                                                                           2,408,995                  2,105,442
Less accumulated depreciation and amortization                            (1,121,437)                  (845,039)
                                                                         -----------                 ----------
  Total                                                                  $ 1,287,558                 $1,260,403
                                                                         ===========                 ========== 

</TABLE>

Depreciation and amortization expenses for 1995, 1994 and 1993 totaled $281,034,
$210,503. and $178,794, respectively.


NOTE 8 - NOTE PAYABLE

At December 31, 1994, the Corporation had an outstanding  balance of $125,000 on
a $350,000 revolving line of credit with a financial  institution.  Interest was
variable at the lender's prime rate (8.50% at December 31, 1994).
The line of credit was fully paid in January 1995.

                                       38

<PAGE>




During 1995,  the  corporation  established a $500,000  revolving line of credit
with another financial institution.  The line of credit expires August 15, 1996.
Interest  is  variable  at the  lender's  prime  rate.  The  line of  credit  is
collateralized  by  200,000  shares  of  BOCL's  common  stock.  There  were  no
borrowings under the line of credit during 1995.

The  line of  credit  agreement  contains  covenants.  The  principal  financial
covenants  require the  Corporation to maintain a  nonperforming  asset ratio of
less than or equal to three percent of total consolidated  assets, to maintain a
capital ratio of not less than seven percent,  to maintain a debt coverage ratio
equal to 100 percent and  requires  that each of the  subsidiary  banks record a
return  on  average  total  assets  of at least  .85%.  The  Corporation  was in
compliance with the covenants at December 31, 1995.

At  December  31,  1995,  BOCL  had  approximately  $8.9  million  and  BOC  had
approximately  $9.5  million in standby  credit  available  from other banks for
short-term borrowings.

NOTE 9 - COMMITMENTS

The corporation  leases its office  facilities under various  operating  leases.
Original  lease terms  typically  range from one to five years and normally have
options that permit renewals for additional periods.

The aggregate future minimum lease payments under all  noncancellable  leases at
December 31, 1995 were as follows:
<TABLE>
<CAPTION>

<S>                                        <C>          <C>
                                           1996         $266,804
                                           1997          253,064
                                           1998          182,364
                                           1999          178,364
                                                        --------
                                                        $880,596
                                                        ========

</TABLE>

Total  rental  expense  under  the  above  leases  for  1995,  1994 and 1993 was
approximately $274,000, $257,000 and $266,000, respectively.

NOTE 10 - STOCK OPTIONS

The  Corporation  has reserved 46,000 shares of common stock for issuance to key
employees under an Incentive Stock Option Plan (the "Qualified Option Plan") and
46,000  shares of common  stock for  issuance to key  employees,  officers,  and
directors  under a nonqualified  stock option plan (the  "Non-Qualified  Plan").
During  1995,  the  Corporation  reserved  100,000  shares of  common  stock for
issuance  to  employees  under a  nonqualified  stock  option  plan  (the  "1995
Non-Qualified Plan"). Additionally, as part of the 1995 Non-Qualified Plan, each
non-employee  director of the  Corporation  will  receive 25 options to purchase
common  stock for each board of  directors  meeting  attended.  The  options are
exercisable after six months from date of the grant and expire at the earlier of
termination of director status or ten years after the date of grant.  The option
price will be at fair market value at the date of grant. No options were granted
in 1995 under this section of the 1995 Non-Qualified Plan as the options are not
considered granted until March 1996.



                                       39

<PAGE>



The following table summarizes activity of each plan:
<TABLE>
<CAPTION>

                                                                                     Options
                                                                                    Price Per       Expiration
                                                                    Options           Shares          Dates
                                                                    -------           ------          -----
Qualified Plan
<S>                                                                  <C>            <C>              <C>      
January 1, 1991                                                      43,325         $5.88-$8.70      07/23/00
Exercised during 1992                                                (2,000)              $6.50
Exercised during 1995                                               (16,500)        $5.88-$8.70
Expired during 1995                                                  (4,300)        $5.88-$8.70
                                                                    -------         -----------      --------
December 31, 1995                                                    20,525         $5.88-$8.70      07/23/00
                                                                     ======         ===========      ========

Non-Qualified Plan
January 1, 1991                                                      18,875         $5.88-$8.70      12/31/00
Granted during 1991                                                  23,525               $6.95      12/31/96
Exercised during 1992                                                  (800)              $5.88
Exercised during 1992                                                (1,300)              $6.95
Expired during 1994                                                    (500)              $6.95
Expired during 1995                                                    (700)              $5.88
                                                                     ------         -----------      ---------
December 31, 1995                                                    39,100         $5.88-$8.70
                                                                     ======         ===========      =========

1995 Non-Qualified Plan
Granted during 1995                                                  40,000               $8.50      12/01/00
                                                                     ======               =====      ========
</TABLE>

No options were granted  during 1992,  1993 or 1994.  Since all options  granted
during 1991 and 1995, in  management's  option,  were issued at exercise  prices
equal to or  greater  than the market  value of the common  stock at the time of
grant,  compensation  expense related to the grant of these options is not being
recognized.

As an inducement to the President of BOCL to enter into an employment  agreement
in January 1992, the  Corporation  granted total stock options for 22,222 shares
of stock at a purchase price of $4.00 per share.  The President of BOCL's rights
in these options vested as follows:
 <TABLE>
 <CAPTION>

                                                                                     Number of
                                                           Vesting Date               Shares
                                                           ------------               ------
<S>                                                        <C>                           <C>
                                                           January 1993                  7,407
                                                           January 1994                  7,407
                                                           January 1995                  7,408
</TABLE>

The Corporation expensed $8,800 and $44,000 during 1994 and 1993,  respectively,
since the options were granted at a price  estimated by  management  to be below
fair market value. No expenses were recorded in 1995 for these options.

NOTE 11 - REGULATORY REQUIREMENTS

National banks are subject to certain  restrictions  regarding  their ability to
transfer  funds  to the  Corporation  in the  form of cash  dividends,  loans or
advances. The approval of the Office of the Comptroller of the Currency (OCC) is
required to pay  dividends  in excess of each Bank's net profits for the current
year plus  retained  net  profits  (net  profits  less  dividends  paid) for the
preceding two years, less any required transfers to surplus. As of December 31,

                                       40

<PAGE>



1995,  approximately  $749,000 and  $2,255,000 of Bank of Columbia's and Bank of
Charleston's retained earnings, respectively, were available for distribution to
the Corporation as dividends without prior regulatory approval.

Under Federal  Reserve  regulation,  the Banks are also limited as to the amount
they may  lend to the  corporation  unless  such  loans  are  collateralized  by
specified  obligations.  Since the assets of the  Corporation  do not qualify as
assets  which  may be  pledged  as  collateral  to  its  subsidiary  banks,  the
Corporation is not eligible to obtain loans from its bank subsidiaries.

Current  federal  regulations  require  that a bank  maintain  a Tier 1 ratio of
risk-based  capital to assets of 4.00% and a total  risk-based  capital ratio of
8.00%.  As of December  31, 1995 BOCL had a Tier 1 capital  ratio of 9.95% and a
total risk-based  capital ratio of 11.21%,  while BOC had a Tier 1 capital ratio
of 13.86% and a total risk-based capital ratio of 15.12%.

NOTE 12 - OTHER NONINTEREST EXPENSE

Components of other noninterest expense were as follows:
<TABLE>
<CAPTION>


                                                                         Year Ended December 31,
                                                                         -----------------------
                                                                    1995                1994                 1993
                                                                    ----                ----                 ----
<S>                                                            <C>                 <C>                  <C>
Legal, accounting, regulatory and insurance                    $   481,428         $   523,156          $   561,862
Supplies and printing                                              125,914             125,660              125,657
Postage and freight                                                 95,385              69,230               60,447
Dues and subscriptions                                              78,538              45,028               59,068
Loan servicing                                                      78,154              55,327               68,551
Consulting                                                          75,377              33,670               46,320
Telephone                                                           58,217              51,136               52,677
Outside services                                                    52,364              45,863               46,346
Training and other employee expense                                 47,214              42,354               48,193
Directors' fees                                                     28,140              15,510               15,760
Temporary employment service                                        27,035               2,103                   80
Data communications                                                 23,700              20,639               16,163
Travel - nonofficer                                                 17,538              19,295               13,515
Losses - other than bad debt                                        15,112               3,270               30,247
Amortization - organization expense                                  7,530              30,118               41,778
Other                                                               33,049              41,646               24,993
                                                                ----------          ----------           ----------
                                                                $1,244,695          $1,124,005           $1,211,657
                                                                ==========          ==========           ==========

</TABLE>


                                       41

<PAGE>

NOTE 13 - INCOME TAXES

The components of consolidated income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                        -----------------------
                                                                      1995            1994             1993
                                                                      ----            ----             ----
Taxes currently payable:
<S>                                                                <C>              <C>              <C>
  Federal                                                          $552,598        $ 13,000
  State                                                              73,529          38,258          $43,525
                                                                   --------        --------          -------
                                                                    626,127          51,258           43,525
                                                                   --------        --------          -------
   Deferred income taxes:
   Federal                                                         (200,000)       (113,000)
                                                                   --------        --------          -------
                                                                   $426,127        ($61,742)         $43,525
                                                                   ========        ========          =======
</TABLE>

The Corporation  adopted  Statement of Financial  Accounting  Standards No. 109,
"Accounting  for Income  Taxes" ("SFAS 109"),  effective  January 1, 1993.  SFAS
109's method of accounting for income taxes is an asset and liability  approach.
The asset and  liability  approach  requires  the  recognition  of deferred  tax
liabilities  and assets for the expected  future tax  consequences  of temporary
differences  between  the  carrying  amounts  and the tax  bases of  assets  and
liabilities.  A valuation allowance is required for net deferred tax assets when
it is "more likely than not" that such net deferred tax assets will not be fully
realized.

The Corporation  reported its third  consecutive  profitable year as of December
31, 1995, and prior federal tax net operating loss  carryforwards  were utilized
in 1995,  1994  and  1993.  As a  result  of  these  changes  in  circumstances,
management  reconsidered  its prior policy of fully  reserving  net deferred tax
assets concluding that as of December 31, 1995 and 1994, it is "more likely than
not" that  approximately  $200,000 and $113,000,  respectively,  of deferred tax
assets will be realized.  To the extent that the  Corporation  generates  future
taxable earnings on a consistent basis,  management would reassess the valuation
allowance  and release  appropriate  amounts to  earnings.  The  decrease in the
valuation  allowance was due to the realization of loss carryforwards  which are
reflected in the 1995 and 1994 income tax expense (benefit).

Deferred tax assets and (liabilities) and related valuation  allowances  arising
in accordance with SFAS 109 at December 31, 1995 and 1994, were as follows:
<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                             ------------
                                                                                       1995                1994
                                                                                       ----                ----
<S>                                                                                 <C>                   <C>
Allowance for loan losses                                                           $467,986              $406,569
Federal tax net operating loss carryforward                                                                116,754
State tax net operating loss carryforward                                             95,302                78,313
Excess tax over book depreciation                                                     88,727                71,021
Unrealized loss on available-for-sale securities - SFAS 115                                                 93,016
Alternative minimum tax credit                                                                              13,000
Other                                                                                                          428
                                                                                    --------              --------
                                                                                     652,015               779,101
                                                                                    --------              --------

Accretion of discounts on bonds                                                      (17,864)              (46,671)
Adjustment from accrual to cash basis for tax reporting                              (34,737)              (65,790)
Unrealized gain on available-for-sale securities - SFAS 115                          (48,808)
                                                                                    --------              --------
Gross deferred tax liability                                                        (101,409)             (112,461)
                                                                                    --------              -------- 
Net deferred tax asset before valuation allowance                                    550,606               666,640
Less valuation allowance                                                            (260,624)             (460,624)
                                                                                    --------              -------- 
Net deferred tax asset                                                              $289,982              $206,016
                                                                                    ========              ========
</TABLE>
                                       42
<PAGE>
Total  income tax expense  (benefit) is  different  than if it were  computed by
applying the federal tax rate due to the following:
<TABLE>
<CAPTION>
                                                                                        Percentage of
                                     For the Year Ended December 31,                    Pre-tax income
                                         1995         1994         1993             1995        1994         1993
                                         ----         ----         ----             ----        ----         ----
<S>                                  <C>          <C>          <C>                  <C>         <C>          <C>
Tax expense at statutory rate        $614,583     $334,902     $192,488              34.0        34.0         34.0
Net operating loss carryforwards                  (324,746)    (179,026)                        (33.0)       (31.6)
Release of deferred tax asset
  valuation allowance                (200,000)    (113,000)                         (11.1)      (11.5)
State tax, net of federal benefit      48,529       25,250       28,727               2.7         2.6          5.1
Alternative minimum tax expenses      (13,000)      13,000                           (1.0)        1.3
Nondeductible expenses                 12,622                                         1.0
Other, net                            (36,607)       2,852        1,336              (2.0)        0.3          0.2
                                     --------     --------      -------              ----         ---          ---
                                     $426,127     ($61,742)     $43,525              23.6        (6.3)         7.7
                                     ========     ========      =======              ====        ====          ===
</TABLE>

At December 31, 1995 the  Corporation had net operating loss  carryforwards  for
state income tax  purposes of  approximately  $1.9  million  available to offset
future state taxable income.

NOTE 14 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION

Condensed  financial  data for ComSouth  Bankshares,  Inc.  (parent only) was as
follows:
<TABLE>
<CAPTION>
                                                                              December 31,
                                                                              ------------
                                                                     1995                     1994
                                                                     ----                     ----
Balance Sheet Data
<S>                                                              <C>                       <C>
Cash and short-term investments                                  $      48,971              $   163,647
Investments in subsidiaries, at equity                              11,756,369                9,817,487
Other assets                                                           502,472                  290,678
                                                                   -----------              -----------
  Total assets                                                     $12,307,812              $10,271,812
                                                                   ===========              ===========
Note payable                                                                                   $125,000
Other liabilities                                                  $   428,674                  135,852
Stockholders' equity                                                11,879,138               10,010,960
                                                                   -----------              -----------
  Total liabilities and stockholders' equity                       $12,307,812              $10,271,812
                                                                   ===========              ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                                            -----------------------
                                                                     1995             1994             1993
                                                                     ----             ----             ----
<S>                                                                 <C>              <C>                <C>
Results of Operations Data
Revenues:
  Management fees                                                   $  878,193       $  844,770         $774,107
  Research fees                                                          1,184            2,309
  Interest income                                                                                             53
                                                                    ----------       ----------         --------
                                                                       879,377          847,079          774,160
                                                                    ----------       ----------         --------
Expenses:
  Interest expense                                                         233            8,993           14,980
  Other expenses                                                     1,068,234          615,130          726,458
                                                                    ----------       ----------         --------
                                                                     1,068,467          624,123          741,438
                                                                    ----------       ----------         --------
Income (loss) before equity in undistributed income
  of subsidiaries                                                     (189,090)         222,956           32,722
Equity in undistributed income of subsidiaries                       1,570,561          823,792          489,895
                                                                    ----------       ----------         --------
Net income                                                          $1,381,471       $1,046,748         $522,617
                                                                    ==========       ==========         ========
</TABLE>
                                       43

<PAGE>


<TABLE>
<CAPTION>

                                                                            Year ended December 31,
                                                                            -----------------------
                                                                     1995             1994             1995
                                                                     ----             ----             ----
<S>                                                               <C>               <C>               <C>
Cash Flow Data
Cash flows from operating activities:
  Net income                                                      $1,381,471        $1,046,748        $522,617
Adjustments to reconcile net income to net cash
  (used for) provided by operating activities:
  Equity in income of subsidiaries                                (1,570,561)        (823,792)        (489,895)
  Depreciation and amortization                                       34,110           18,592           20,174
  Increase in other assets                                          (174,641)        (120,654)         (34,902)
  Increase in other liabilities                                      292,822           64,791           48,708
                                                                   ---------        ---------         --------
Cash (used for) provided by operating activities                     (36,799)         185,685           66,702
                                                                   ---------        ---------         --------

Cash flow from investing activities:
  Purchase of premises and equipment                                 (71,263)         (42,070)         (23,686)
                                                                   ---------         --------         -------- 
Cash used for investing activities                                   (71,263)         (42,070)         (23,686)
                                                                   ---------         --------         -------- 
 
Cash from financing activities:
  Net payments of note payable                                      (125,000)                         (125,000)
  Proceeds from issuance of common stock                             118,386
                                                                   ---------         --------         --------
Cash used for financing activities                                    (6,614)               0         (125,000)
                                                                   ---------         --------         --------  

Decrease (increase) in cash and cash equivalents                    (114,676)         143,615          (81,984)
Cash and cash equivalents at beginning of year                       163,647           20,032          102,016
                                                                   ---------         --------         --------
Cash and cash equivalents at end of year                           $  48,971         $163,647         $ 20,032
                                                                   =========         ========         ========
Supplemental disclosures of cash flow information:

Cash paid for interest                                             $     233         $  8,993         $ 14,980

</TABLE>


NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

BOCL and BOC are parties to financial instruments with off-balance sheet risk in
the normal  course of business to meet the financing  needs of their  customers.
These  financial  instruments  include  commitments to extend credit and standby
letters of credit.  These instruments  involve, to varying degrees,  elements of
credit  and  interest  rate  risk in  excess  of the  amount  recognized  in the
statement of financial  position.  The contractual  amounts of those instruments
reflect the extent of involvement the subsidiaries have in particular classes of
financial instruments.

BOCL's and BOC's exposure to credit loss in the event of  nonperformance  by the
other party to the financial  instrument  for  commitments  to extend credit and
standby  letters of credit is  represented by the  contractual  amounts of those
instruments. The subsidiaries use the same credit policies in making commitments
and conditional obligations as they do for on-balance sheet instruments.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require payment of a fee. At December 31, 1995 and 1994,  BOCL's and BOC's total
commitments to extend credit were  approximately  $18,148,000  and  $13,882,000,
respectively,  including  related  party  amounts  (see  Note  6).  BOCL and BOC
evaluate each customer's creditworthiness on a case-by-case basis. The amount of
collateral  obtained,  if deemed  necessary  by BOCL and BOC upon  extension  of
credit,  is  based on  management's  credit  evaluation  of the  counter  party.
Collateral held varies but may include accounts receivable, inventory, property,
plant, and equipment, and income-producing commercial properties.

                                       44

<PAGE>




Standby letters of credit are conditional  commitments issued by BOCL and BOC to
guarantee  the   performance  of  a  customer  to  a  third  party  and  totaled
approximately   $1,775,000  and  $1,437,000  at  December  31,  1995  and  1994,
respectively.  The  credit  risk  involved  in  issuing  letters  of  credit  is
essentially the same as that involved in extending loan facilities to customers.
Collateral  held  varies  but  may  include  accounts   receivable,   inventory,
equipment,  marketable  securities,  and property.  Since most of the letters of
credit are expected to expire without being drawn upon,  they do not necessarily
represent future cash requirements.

In October,  1994, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments' ("SFAS 119"), effective for
fiscal years beginning  after December 15, 1995. This statement  amends existing
requirements  of SFAS  No.  105,  "Disclosure  of  Information  about  Financial
Instruments  with  Off-Balance   Sheet  Risk  and  Financial   Instruments  with
Concentrations  of Credit  Risk" to  require  disaggregation  information  about
financial instruments with  off-balance-sheet  risk of accounting loss by class,
business activity,  risk, or other category that is consistent with the entity's
management of those instruments.  As of December 31, 1995, the Corporation holds
derivative  financial  instruments  in the  amount of  $281,060  which have been
reported  on  the  balance  sheet.   Such  on-balance   sheet   instruments  are
specifically excluded from the scope of SFAS 119.

Most of BOCL's and BOC's business  activity is with customers located within the
Columbia and Charleston metropolitan areas, respectively.  Although BOCL and BOC
have  diversified  loan  portfolios,  a  substantial  portion of their  debtors'
ability to honor their contracts is dependent upon the economies of Columbia and
Charleston and the surrounding areas.

NOTE 16 - CONTINGENCIES

In addition to the matter  discussed  in Note 2, BOCL and BOC are parties to and
defendants in other litigation arising from their normal banking activities.  In
the opinion of  management,  the ultimate  resolution  of these matters will not
have a material  effect on the  Corporation's  financial  position or results of
operations.

NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

INVESTMENT SECURITIES:

For securities  held as  investments,  fair value equals quoted market price, if
available.  If a quoted price is not  available,  fair value is estimated  using
quoted market prices for similar securities.

LOAN RECEIVABLES:

The fair value of loans is estimated by discounting  the future cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.

DEPOSIT LIABILITIES:

The fair value of demand deposits,  savings  accounts,  and certain money market
deposits is the amount  payable on demand at the reporting  date. The fair value
of fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.



                                       45

<PAGE>



COMMITMENTS  TO  EXTEND  CREDIT,   STANDBY  LETTERS  OF  CREDIT,  AND  FINANCIAL
GUARANTEES WRITTEN:

The fair value of commitments is estimated  using the fees currently  charged to
enter into similar  agreements,  taking into account the remaining  terms of the
agreements  and  the  present   creditworthiness  of  the  counterparties.   For
fixed-rate loan  commitments,  fair value also considers the difference  between
current  levels of interest  rates and the  committed  rates.  The fair value of
guarantees and letters of credit is based on fees currently  charged for similar
agreements or on the estimated  costs to terminate them or otherwise  settle the
obligations with the counterparties at the reporting date.

The estimated fair value of the Corporation's consolidated financial instruments
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(balances in thousands)

                                                            CARRYING        FAIR
                                                             AMOUNT         VALUE
Financial assets:
<S>                                                          <C>           <C>
  Cash and cash equivalents                                  $ 17,250      $ 17,250
  Investment securities                                        22,135        22,148
  Loans:
   Loans                                                       92,809        95,753
    Less, allowance for loan losses                            (1,785)       (1,785)
                                                             --------       -------  
      Net loans                                                91,024        93,968
Financial liabilities:
  Deposits                                                    117,763       118,016
  Federal funds purchased and securities
   sold under agreements to repurchase                          1,755         1,755

Unrecognized financial instruments:
  Commitments to extend credit                                  1,775         1,775
  Standby letters of credit                                    18,148        18,735

</TABLE>

Item 9 -  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

         On  February  21,  1995,  the  management  of  the  Corporation,  after
receiving approval of members of the Corporation's  Audit Committee and Board of
Directors,  informed its  independent  accountants,  Price  Waterhouse  LLP (the
"Prior  Accountants"),  that such  accounting firm would not be retained for the
fiscal  year  ending  December  31,  1995.  On January  26,  1995,  the Board of
Directors,  after  receiving  proposals from other  accounting  firms,  formally
elected  to  engage  J.  W.  Hunt  and  Company,  LLP to  serve  as  independent
accountants for the year ending December 31, 1995.  Prior to their engagement on
February 21, 1995, the firm of J. W. Hunt and Company,  LLP was not consulted by
the Corporation for any financial or accounting matters.

         In  connection  with  the  audit  of  the  Corporation's   consolidated
financial  statements  for the year ended  December 31, 1994, and any subsequent
interim  period  preceding  the  dismissal  of the  Prior  Accountants  and  the
engagement of the new accountants,  there were no  disagreements  with the Prior
Accountants  on any matter of  accounting  principles  or  practices,  financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of the Prior  Accountants would have caused them to
make  reference in  connection  with their  report to the subject  matter of the
disagreements.


                                       46

<PAGE>



         The  audit  report  of  the  Prior  Accountants  on  the  Corporation's
consolidated  financial  statements  for the year ended  December  31,  1994 was
unqualified.  There have not been any adverse,  disclaimer or modified  opinions
issued by the Prior  Accountants,  except as to  inclusion  of an "emphasis of a
matter" paragraph included in their reports addressing  uncertainties related to
a Formal  Agreement  entered  into with the  Comptroller  of the  Currency  with
respect  to their  1992 and 1993  report,  the  filing  of a notice of intent to
effect a change in the  composition  of the Board of  Directors  with respect to
their 1992  report,  and the filing of a  shareholder  lawsuit  against  certain
members of the Board of Directors with respect to their 1993 report.

         The Board of Directors, upon the recommendation of the Audit Committee,
has  appointed  J. W.  Hunt  and  Company,  LLP,  independent  certified  public
accountants,  as independent  auditors for the Corporation and its  subsidiaries
for the current fiscal year ending December 31, 1996, subject to ratification by
the shareholders.  J. W. Hunt and Company,  LLP has advised the Corporation that
neither the firm nor any of its  partners  has any direct or  indirect  material
interest  in the  Corporation  and  its  subsidiaries  except  as  auditors  and
independent   certified   public   accountants  of  the   Corporation   and  its
subsidiaries.

                                    PART III

Item 10 - Directors and Executive Officers of the Registrant

The information required by this item is set forth under "Election of Directors"
on pages 4 through 7 of the  Registrant's  Proxy  Statement  filed in connection
with the 1996 Annual Meeting of Shareholders (the "1996 Proxy Statement"), which
information is incorporated herein by reference.

Item 11 -  Executive Compensation

The information required by this item is set forth under "Executive Officers" on
pages  7  through  11  of  the  1996  Proxy  Statement,   which  information  is
incorporated herein by reference.

Item 12 -  Security Ownership of Certain Beneficial Owners and Management

The information required by this item is set forth under "Security Ownership . .
Management"  on  pages 3 and 4 of the  Proxy  Statement,  which  information  is
incorporated herein by reference.

Item 13 -  Certain Relationships and Related Transactions

The information required by this item is set forth under "Certain  Relationships
and  Related  Transactions"  on  page  11 of the  1996  Proxy  Statement,  which
information is incorporated herein by reference.

                                     Part IV

Item 14 - Exhibits, Financial Statements, Schedules and Reports on Form 8-K

         (a)      Financial Statements and Exhibits

               1.   See item 8 for a listing  of all  financial  statements  and
                    supplementary data.

               2.   Financial   Statement   Schedules   are   included   in  the
                    consolidated  financial statements referenced in Item 14(a)1
                    above.

               3.   Exhibits


                                       47

<PAGE>



               3(a) Articles of Incorporation of the Registrant (incorporated by
                    reference   to   exhibits   filed   with  the   Registrant's
                    Registration Statement on Form S-1, File No. 33- 29091)

               3(b) Bylaws  of the  Registrant  (incorporated  by  reference  to
                    exhibits filed with the  Registrant's  Annual Report on Form
                    10-K for the Year Ended December 31, 1993, File No. 0-19045)

               10(a)Lease  Agreement  dated  May  15,  1987   (incorporated   by
                    reference   to   exhibits   filed   with  the   Registrant's
                    Registration Statement on Form S-1, File No. 33-29091)

               10(d)Lease  Agreement  dated  May  19,  1987   (incorporated   by
                    reference to exhibits filed with  Registrant's  Registration
                    Statement on Form S-1, File No. 33-29091)

               10(e)Incentive  Stock Option Plan  (incorporated  by reference to
                    exhibits filed with the Registrant's  Registration Statement
                    on Form S-1, File No. 33-29091)

               10(f)1995  Stock  Option  Plan   (incorporated  by  reference  to
                    exhibits filed with proxy statement relating to Registrant's
                    1995 Annual Meeting of Shareholders).

               10(g)Employment   Agreement  between  Registrant  and  Arthur  M.
                    Swanson  (incorporated  by reference to exhibits  filed with
                    the  Registrant's  Registration  Statement on Form S-1, File
                    No. 33-29091)

               10(h)Employment  Agreement  between  Bank of  Columbia,  NA.  and
                    Michael Kapp  (incorporated  by reference to exhibits  filed
                    with the  Registrant's  Annual  Report  on Form 10-K for the
                    Year Ended December 31, 1993, File No. 0-19045)

               10(i)Lease  Agreement  dated November 10, 1994  (incorporated  by
                    reference  to exhibits  filed with the  Registrant's  Annual
                    Report on Form 10-K for the Year Ended  December  31,  1994,
                    File No. 0-19045)

               21   List of Subsidiaries  (incorporated by reference to exhibits
                    filed with the  Registrant's  Annual Report on Form 10-K for
                    the Year Ended December 31, 1993, File No. 0-19045)

               24   Power of Attorney

               27   Financial Data Schedule

               (b)  No current  Reports on Form 8-K were filed during the fourth
                    quarter of 1995

               (c)  Exhibits  - The  response  to  this  portion  of  Item 14 is
                    submitted as a separate section of this Item.


                                       48

<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned,  thereunto duly authorized,  in the City of Columbia,
State of South Carolina, on the 22nd day of March, 1996.


                                           COMSOUTH BANKSHARES, INC.

                                                /s/Arthur M. Swanson
                                           By:----------------------------------
                                               Arthur M. Swanson
                                           President and Chief Executive Officer

Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

Signatures                             Titles                       Date


/s/Arthur M. Swanson
----------------------------   President and Director          March 22, 1996
Arthur M. Swanson           (Principal Executive Officer)


/s/Harry R. Brown
---------------------------    Chief Financial Officer         March 22, 1996
Harry R. Brown                & Chief Operating Officer
                              (Principal Financial and
                                 Accounting Officer)

 /s/Mason R. Chrisman
*                               Chairman of the Board          March 22, 1996
----------------------------
Mason R. Chrisman                   and Director


 /s/W. Carlyle Blakeney, Jr.
*                                     Director                 March 22, 1996
----------------------------
W. Carlyle Blakeney, Jr.

 /s/R. Lee Burrows, Jr.
*
----------------------------          Director                 March 22, 1996
R. Lee Burrows, Jr.


 /s/Charles R. Jackson
*                                     Director                 March 22, 1996
----------------------------
Charles R. Jackson


 /s/J. Michael Kapp
*                                     Director                 March 22, 1996
----------------------------
J. Michael Kapp


 /s/LaVonne N. Phillips
*                                     Director                 March 22, 1996
----------------------------
LaVonne N. Phillips


                                       49

<PAGE>



 /s/John C. B. Smith, Jr.
*                                     Director                 March 22, 1996
----------------------------
John C. B. Smith, Jr.


 /s/Arthur P. Swanson
*                                     Director                 March 22, 1996
----------------------------
Arthur P. Swanson


/s/Harry R. Brown

Harry R. Brown
*  By:  (Attorney in Fact
   for each of the persons
   indicated)







                                       50

<PAGE>



                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>
                                                                                                            
           Description                                                                                 
<S>        <C>                                                                            <C>
 3(a) -    Articles of Incorporation of the Registrant (incorporated by reference to      Previously Filed
           exhibits filed with the Registrant's Registration Statement on Form S-1,
           File No. 33-29029).

 3(b)      - Bylaws of the  Registrant  (incorporated  by  reference to exhibits          Previously Filed
           filed with Previously  Filed the  Registrant's  Annual Report on Form
           10-K for the Year Ended December 31, 1993, File No. 0-19045).

10(a) -    Lease Agreement dated May 15, 1987 (incorporated by reference to               Previously Filed
           exhibits filed with the Registrant's Registration Statement on Form S-1,
           File No. 33-29091).

10(b) -    Lease Agreement dated May 17, 1987 (incorporated by reference to               Previously Filed
           exhibits filed with the Registrant's Registration Statement on Form S-1,
           File No. 33-29091).

10(e) -    Incentive Stock Option Plan (incorporated by reference to exhibits filed       Previously Filed
           with the Registrant's Registration Statement on Form S-1, File No. 3-
           29091).

10(f)      1995 Stock Option Plan  (incorporated  by reference to exhibits filed          Previously Filed
           with Previously Filed proxy statement  relating to Registrant's  1995
           Annual Meeting of Shareholders).

10(g) -    Employment agreement between Registrant and Arthur M. Swanson                  Previously Filed
           (incorporated by reference to exhibits filed with the Registrant's
           Registration Statement on Form S-1, File No. 33-29091).

10 (h) -   Employment agreement between Bank of Columbia, N.A., and J. Michael            Previously Filed
           Kapp (incorporated by reference to exhibits filed with the Registrant's
           Annual Report on Form 10-K for the Year Ended December 31, 1993,
           File No. 0-19045).

10(i) -    Lease Agreement dated November 10, 1994 (incorporated by reference to          Previously Filed
           exhibits filed with the Registrant's Annual Report on Form 10-K for the
           Year Ended December 31, 1994, File No. 0-19045).

21         List of Subsidiaries (incorporated by reference to exhibits filed with the     Previously Filed
           Registrant's Annual Report on Form 10-K for the Year Ended December
           31, 1993, File No. 0-19045).

24         Power of Attorney                                                              Attached

27         Financial Data Schedule                                                        Attached


</TABLE>


                                       51

<PAGE>