SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB
(Mark One)

 X     Annual Report under Section 13 or 15(d) of the Securities Exchange Act
----   of 1934 For the fiscal year ended December 31, 2002

       or

       Transition Report under Section 13 or 15(d) of the Securities Exchange
----   Act of 1934

               For the transition period from          to
                                              --------    --------
                        Commission file number 333-66734

                             First Southern Bancorp
                             ----------------------
                 (Name of Small Business Issuer in Its Charter)


       Georgia                          6021                     58-2635782
---------------------         ------------------------       ----------------
(State or other Jurisdiction  (Primary Standard Industrial   (I.R.S. Employer
of Incorporation or           Classification Code Number)    Identification No.)
Organization)


            201 South Main Street
            Statesboro, Georgia                                    30458
            --------------------                                  --------
    (Address of Principal Executive Offices)                     (Zip Code)

                                  912-489-7600
                                  ------------
                 Issuer's Telephone Number, Including Area Code

        Securities registered pursuant to Section 12(b) of the Act: None.
        Securities registered pursuant to Section 12(g) of the Act: None.

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 past 90 days.
Yes X    No
   ---     ---

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B in this form, and no disclosure will 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-KSB or any  amendment to
this Form 10-KSB. [X]

     The issuer's  revenues (total interest income plus noninterest  income) for
its most recent fiscal year was $1,101,684.

     The aggregate  market value of the Common Stock held by  non-affiliates  of
the Company on March 26, 2003 was $9,195,470.  This calculation is based upon an
estimate of the fair market value of the Common Stock of $10.00 per share, which
was the price of the last trade of which management is aware prior to this date.
There  is not an  active  trading  market  for the  Common  Stock  and it is not
possible to identify precisely the market value of the Common Stock.

     Transitional Small Business Disclosure Format. (Check one): Yes      No X
                                                                    ---     ---




<PAGE>

Item 1.    Description of Business
----------------------------------

     This Report contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and the
Securities Exchange Act of 1934. These statements are based on many assumptions
and estimates and are not guarantees of future performance. Our actual results
may differ materially from those projected in any forward-looking statements, as
they will depend on many factors about which we are unsure, including many
factors which are beyond our control. The words "may," "would," "could," "will,"
"expect," "anticipate," "believe," "intend," "plan," and "estimate," as well as
similar expressions, are meant to identify such forward-looking statements.
Potential risks and uncertainties include, but are not limited to:

     o   significant increases in competitive pressure in the banking and
         financial services industries;

     o   changes in the interest rate environment which could reduce anticipated
         or actual margins;

     o   changes in political conditions or the legislative or regulatory
         environment;

     o   general economic conditions, either nationally or regionally and
         especially in primary service area, becoming less favorable than
         expected resulting in, among other things, a deterioration in credit
         quality;

     o   changes occurring in business conditions and inflation;

     o   changes in technology;

     o   changes in monetary and tax policies;

     o   the level of allowance for loan loss;

     o   the rate of delinquencies and amounts of charge-offs;

     o   the rates of loan growth;

     o   adverse changes in asset quality and resulting credit risk-related
         losses and expenses;

     o   changes in the securities markets; and

     o   other risks and uncertainties detailed from time to time in our filings
         with the Securities and Exchange Commission.

General

     First Southern Bancorp was incorporated to operate as a bank holding
company in April 2001 pursuant to the Federal Bank Holding Company Act of 1956
and the Financial Institutions Code of Georgia, and to purchase 100% of the
issued and outstanding stock of First Southern National Bank, an association
organized under the laws of the United States, to conduct a general banking
business in Statesboro, Georgia.

     On September 13, 2001, we commenced our initial public offering and
completed the sale of 919,547 shares of our common stock at $10.00 per share on
January 31, 2002. The offering raised $9,195,470 before deducting estimated
sales expenses of $70,500. Our directors and executive offices purchased 387,750
shares of common stock at $10.00 per share, for a total of $3,877,500. Upon
purchase of these shares, we issued stock warrants to the organizers to purchase
an additional 193,875 shares of common stock for $10.00 per share.

     Since our formation as a Georgia corporation in April 2001, we have engaged
in organizational and pre-opening activities necessary to obtain regulatory
approvals and to prepare our subsidiary, First Southern National Bank, to
commence business as a financial institution. On February 5, 2002, we opened the
bank for business. Of the net proceeds from the offering, we used $6.7 million
to capitalize the bank.


                                       2
<PAGE>

Marketing Focus

     First Southern National Bank positions itself as "the hometown bank" that
cares about its clients. We provide professional and personalized service to our
clients by employing well trained, seasoned bankers who are familiar with our
market area and our clients' individual needs. Our primary target market
includes individuals and small- to medium-sized businesses who desire a
consistent and professional relationship with a local banker. Because there is
only one other locally owned bank left in Statesboro, we believe we offer a
unique banking alternative for the market by offering a higher level of customer
service and a management team more focused on the needs of the community than
most of our competitors. We believe that this approach is enthusiastically
supported by the community. In order to achieve the level of prompt, responsive
service that is necessary to attract customers and to develop First Southern
National Bank's image as a local bank with an individual focus, we leverage our
community-oriented board of directors, convenient branch locations, and local
services and decision making to attract and retain customers.

Location and Service Area

     Our primary service area consists of an area within a 20 mile radius of our
main office in Statesboro, Georgia, with a primary focus on Bulloch County. Our
main office is located in downtown Statesboro and provides excellent visibility
for the bank. Our expansion plans include the opening of an additional branch
strategically located within our service area in our third year of operation.
The branch would extend the market reach of our bank, and it will increase our
personal delivery capabilities in this area to more efficiently market the
services of the bank.

     Bulloch County has a growing and dynamic economic environment centered
around educational services, manufacturing, and agriculture that we believe will
support our bank. The largest employer in the county is Georgia Southern
University, which has helped to support a stable business and educational
foundation. The business environment in the county has also benefited recently
from the location of the Briggs & Stratton manufacturing facility, Viracon, and
a Wal-Mart distribution center in the area. Bulloch County is also the largest
row-crop county in Georgia. We believe that there is an opportunity in Bulloch
County for a new locally managed bank focused on the community and personalized
service to individuals and local businesses.

Lending Activities

     General. We emphasize a range of lending services, including real estate,
commercial, and equity-line and consumer loans to individuals, small- to
medium-sized businesses and professional concerns that are located in or conduct
a substantial portion of their business in the bank's market area. We compete
for these loans with competitors who are well established in the Bulloch County
area and have greater resources and lending limits. As a result, we may have to
charge lower interest rates to attract borrowers.

     Loan Approval and Review. The bank's loan approval policies provide for
various levels of officer lending authority. When the amount of aggregate loans
to a single borrower exceeds that individual officer's lending authority, the
loan request will be considered and approved by an officer with a higher lending
limit or the board of directors' loan committee. The bank does not make any
loans to any director of the bank unless the loan is approved by the board of
directors of the bank and is made on terms not more favorable to the person than
would be available to a person not affiliated with the bank. The bank currently
adheres to Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation guidelines in its mortgage loan review process, but may choose to
alter this policy in the future. The bank expects to sell residential mortgage
loans that it originates on the secondary market.

     Lending Limits. The bank's lending activities are subject to a variety of
lending limits imposed by federal law. In general, the bank is subject to a
legal limit on loans to a single borrower equal to 15% of the bank's capital and
unimpaired surplus. Different limits may apply in certain circumstances based on
the type of loan or the nature of the borrower, including the borrower's
relationship to the bank. These limits increase or decrease as the bank's
capital increases or decreases. Unless the bank is able to sell participations
in its loans to other financial institutions, the bank is not be able to meet
all of the lending needs of loan customers requiring aggregate extensions of
credit above these limits.

     Credit Risk. The principal credit risk associated with each category of
loans is the creditworthiness of the borrower. Borrower creditworthiness is
affected by general economic conditions and the strength of


                                       3
<PAGE>

the manufacturing, services, and retail market segments. General economic
factors affecting a borrower's ability to repay include interest, inflation, and
employment rates and the strength of local and national economy, as well as
other factors affecting a borrower's customers, suppliers, and employees.

     Real Estate Loans. Loans secured by first or second mortgages on real
estate make up 74% of the bank's loan portfolio. These loans generally fall into
one of two categories: commercial real estate loans or construction and
development loans. We make residential real estate loans secured by first or
second mortgages on real estate. Each of these categories is discussed in more
detail below, including their specific risks. Interest rates for all categories
may be fixed or adjustable, and will more likely be fixed for shorter-term
loans. The bank generally charges an origination fee for each loan.

     Real estate loans are subject to the same general risks as other loans.
Real estate loans are also sensitive to fluctuations in the value of the real
estate securing the loan. On first and second mortgage loans we do not advance
more than regulatory limits. We require a valid mortgage lien on all real
property loans along with a title lien policy which insures the validity and
priority of the lien. We also require borrowers to obtain hazard insurance
policies and flood insurance if applicable. Additionally, certain types of real
estate loans have specific risk characteristics that vary according to the
collateral type securing the loan and the terms and repayment sources for the
loan.

     We have the ability to originate some real estate loans for sale into the
secondary market. We limit our interest rate and credit risk on these loans by
locking the interest rate for each loan with the secondary investor and
receiving the investor's underwriting approval prior to originating the loan.

     o   Commercial Real Estate Loans. Commercial real estate loans generally
         have terms of five years or less, although payments may be structured
         on a longer amortization basis. Inherent in commercial real estate
         loans' credit risk is the risk that the primary source of repayment,
         the operating commercial real estate company, will be insufficient to
         service the debt. If a real estate loan is in default, we also run the
         risk that a the value of a commercial real estate loan's secured real
         estate will decrease, and thereby be insufficient to satisfy the loan.
         To mitigate these risks, we evaluate each borrower on an individual
         basis and attempt to determine its business risks and credit profile.
         We attempt to reduce credit risk in the commercial real estate
         portfolio by emphasizing loans on owner-occupied office and retail
         buildings where the loan-to-value ratio, established by independent
         appraisals. We typically review all of the personal financial
         statements of the principal owners and require their personal
         guarantees. These reviews generally reveal secondary sources of payment
         and liquidity to support a loan request.

     o   Construction and Development Real Estate Loans. We offer adjustable and
         fixed rate residential and commercial construction loans to builders
         and developers and to consumers who wish to build their own home. The
         term of construction and development loans is generally limited to 18
         months, although payments may be structured on a longer amortization
         basis. Most loans mature and require payment in full upon the sale of
         the property. Construction and development loans generally carry a
         higher degree of risk than long term financing of existing properties.
         Repayment usually depends on the ultimate completion of the project
         within cost estimates and on the sale of the property. Specific risks
         include:

             o   cost overruns;
             o   mismanaged construction;
             o   inferior or improper construction techniques;
             o   economic changes or downturns during construction;
             o   a downturn in the real estate market;
             o   rising interest rates which may prevent sale of the property;
                 and
             o   failure to sell completed projects in a timely manner.

     We attempt to reduce risk by obtaining personal guarantees where possible,
and by keeping the loan-to-value ratio of the completed project below specified
percentages. We may also reduce risk by selling participations in larger loans
to other institutions when possible.

     o   Residential Real Estate Loans. These loans generally have longer terms
         up to 30 years. We offer fixed and adjustable rate mortgages, and we
         sell some or all of the residential real estate loans that we generate




                                       4
<PAGE>

         in the secondary market. Inherent in residential real estate loans'
         credit risk is the risk that the primary source of repayment, the
         residential borrower, is insufficient to service the debt. If a real
         estate loan is in default, we also run the risk that a the value of a
         residential real estate loan's secured real estate will decrease, and
         thereby be insufficient to satisfy the loan. To mitigate these risks,
         we evaluate each borrower on an individual basis and attempt to
         determine its credit profile. By selling these loans in the secondary
         market, we significantly reduce our exposure to credit risk because the
         loans are underwritten through a third party agent without any recourse
         against the bank.

     Commercial Loans. The bank makes loans for commercial purposes in various
lines of businesses. Equipment loans are typically made for a term of five years
or less at fixed or variable rates, with the loan fully amortized over the term
and secured by the financed equipment. We focus our efforts on commercial loans
of less than $1,000,000. Working capital loans typically have terms not
exceeding one year and are usually secured by accounts receivable, inventory, or
personal guarantees of the principals of the business. For loans secured by
accounts receivable or inventory, principal is typically repaid as the assets
securing the loan are converted into cash, and in other cases principal is
typically due at maturity. Trade letters of credit, standby letters of credit,
and foreign exchange are handled through a correspondent bank as agent for the
bank. Commercial loans primarily have risk that the primary source of repayment,
the borrowing business, isisficient to service the debt. Often this occurs as
the result of changes in local economic conditions or in the industry in which
the borrower operates which impact cash flow or collateral value.

     We expect to also offer small business loans utilizing government
enhancements such as the Small Business Administration's 7(a) program and SBA's
504 programs. These loans are typically partially guaranteed by the government
which may help to reduce the bank's risk. Government guarantees of SBA loans
does not exceed 80% of the loan value, and is generally less.

     Consumer Loans. The bank makes a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
loans and revolving lines of credit such as credit cards. Installment loans
typically carry balances of less than $50,000 and are amortized over periods up
to 60 months. Consumer loans may be offered on a single maturity basis where a
specific source of repayment is available. Revolving loan products typically
require monthly payments of interest and a portion of the principal. Consumer
loans are generally considered to have greater risk than first or second
mortgages on real estate because they are often dependent on the borrower's
employment status as the sole source of repayment and some of them are
unsecured.

     We also offer home equity loans. Our underwriting criteria for and the
risks associated with home equity loans and lines of credit is generally the
same as those for first mortgage loans. Home equity lines of credit typically
have terms of 15 years or less, typically carry balances less than $125,000, and
may extend up to 100% of the available equity of each property.

     Relative Risks of Loans. Each category of loan has a different level of
credit risk. Real estate loans are generally safer than loans secured by other
assets because the value of the underlying security, real estate, is generally
ascertainable and does not fluctuate as much as some other assets. Certain real
estate loans are less risky than others. Residential real estate loans are
generally the least risky type of real estate loan, followed by commercial real
estate loans and construction and development loans. Commercial loans, which can
be secured by real estate or other assets, or which can be unsecured, are
generally more risky than real estate loans, but less risky than consumer loans.
Finally, consumer loans, which can also be secured by real estate or other
assets, or which can also be unsecured, are generally considered to be the most
risky of these categories of loans. Any type of loan which is unsecured is
generally more risky that secured loans. These levels of risk are general in
nature, and many factors including the creditworthiness of the borrower or the
particular nature of the secured asset may cause any type of loan to be more or
less risky than another.

     Allowance for Loan Losses. We maintain an allowance for loan losses, which
we establish through a provision for loan losses charged against income. We
charge loans against this allowance when we believe that the collectibility of
the principle is unlikely. The allowance is an estimated amount that we believe
is adequate to absorb losses inherent in the loan portfolio based on evaluations
of its collectibility. As of December 31, 2002 our allowance for loan losses is
1.55% of loans. Over time, we will continue to base the loan loss reserves on
our evaluation of factors including; changes in the nature and volume of the
loan portfolio, overall portfolio quality, and specific problem loans and
commitments that may affect the borrower's ability to pay. We have not
experienced any charge-offs in 2002. We had




                                       5
<PAGE>

no past due loans past 30 days, and no non-accrual loans or other real estate
and repossessions as of December 31, 2002.

Deposit Services

     We offer a full range of deposit services that are typically available in
most banks and savings and loan associations, including checking accounts, NOW
accounts, commercial accounts, savings accounts, 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 our principal market area at rates competitive to those offered in
the Bulloch County area. In addition, we offer certain retirement account
services, including IRAs. We solicit these accounts from individuals,
businesses, and other organizations.

Other Banking Services

     The bank offers other bank services including cash management services such
as sweep accounts for commercial businesses. In addition, lines of credit,
24-hour telephone banking and PC/internet delivery are being considered for
development. We offer safe deposit boxes, direct deposit of payroll and social
security checks, U.S. Savings Bonds, travelers checks, and automatic drafts for
various accounts. The bank is associated with the Honor and Cirrus ATM networks
so that its customers may access their funds throughout the country. We believe
that by being associated with a shared network of ATMs, we are better able to
serve our clients and we are able to attract clients who are accustomed to the
convenience of using ATMs, although we do not believe that maintaining this
association is critical to our success. We began offering these services shortly
after opening the bank. We also offer debit card and credit card services
through a correspondent bank as an agent for the bank. We do not expect the bank
to exercise trust powers during its initial years of operation.

Market Share

     In 2002, deposits in Bulloch County were $573 million. Our deposits were
approximately 4% of the total deposits in the county in 2002.

Employees

     As of March 26, 2003, the bank had approximately 17 full time employees and
four part time employees. First Southern Bancorp, as the holding company for the
bank, does not have any employees other than its officers, who are also bank
employees.


                           SUPERVISION AND REGULATION

     We are subject to extensive state and federal banking laws and regulations
which impose specific requirements or restrictions on, and provide for general
regulatory oversight of, virtually all aspects of our operations. These laws and
regulations are generally intended to protect depositors, not shareholders. The
following summary is qualified by reference to the statutory and regulatory
provisions discussed. Changes in applicable laws or regulations may have a
material effect on our business and prospects. Our operations may be affected by
legislative changes and the policies of various regulatory authorities. We
cannot predict the effect that fiscal or monetary policies, economic control, or
new federal or state legislation may have on our business and earnings in the
future.

USA Patriot Act of 2001

     In October 2001, the USA Patriot Act of 2001 was enacted in response to the
terrorist attacks in New York, Pennsylvania and Washington D.C. which occurred
on September 11, 2001. The Patriot Act is intended to strengthen U.S. law
enforcement's and the intelligence communities' abilities to work cohesively to
combat terrorism on a variety of fronts. The potential impact of the Patriot Act
on financial institutions of all kinds is significant and wide ranging. The
Patriot Act contains sweeping anti-money laundering and financial transparency
laws and imposes various regulations, including standards for verifying client
identification at account opening, and rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.



                                       6
<PAGE>

Gramm-Leach-Bliley Act

     The Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999, was signed into law on November 12, 1999. Among other
things, the Act repeals the restrictions on banks affiliating with securities
firms contained in sections 20 and 32 of the Glass-Steagall Act. The Act also
permits bank holding companies that become financial holding companies to engage
in a statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities.

     The Act is intended, in part, to grant to community banks certain powers as
a matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, the Act may have the result of increasing the amount of
competition that we face from larger institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have on
us. From time to time other changes are proposed to laws affecting the banking
industry, and these changes could have a material effect on our business and
prospects.

     The Gramm-Leach-Bliley Act also contains provisions regarding consumer
privacy. These provisions require financial institutions to disclose their
policy for collecting and protecting confidential information. Customers
generally may prevent financial institutions from sharing personal financial
information with nonaffiliated third parties except for third parties that
market an institution's own products and services. Additionally, financial
institutions generally may not disclose consumer account numbers to any
nonaffiliated third party for use in telemarketing, direct mail marketing, or
other marketing to the consumer.

First Southern Bancorp

     Because it owns the outstanding capital stock of the bank, First Southern
Bancorp is a bank holding company under the federal Bank Holding Company Act of
1956 and the Financial Institutions Code of Georgia.

     The Bank Holding Company Act. Under the Bank Holding Company Act, First
Southern Bancorp is subject to periodic examination by the Federal Reserve and
required to file periodic reports of its operations and any additional
information that the Federal Reserve may require. Our activities at the bank and
holding company level are limited to:

     o   banking and managing or controlling banks;
     o   furnishing services to or performing services for its subsidiaries; and
     o   engaging in other activities that the Federal Reserve determines to be
         so closely related to banking and managing or controlling banks as to
         be a proper incident thereto.

         Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:

     o   acquiring substantially all of the assets of any bank;
     o   acquiring direct or indirect ownership or control of any voting shares
         of any bank if after the acquisition it would own or control more than
         5% of the voting shares of such bank (unless it already owns or
         controls the majority of such shares); or
     o   merging or consolidating with another bank holding company.

     In addition, and subject to certain exceptions, the Bank Holding Company
Act and the Change in Bank Control Act, together with regulations thereunder,
require Federal Reserve approval prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and no other person owns a greater percentage of that class of voting
securities immediately after the transaction. Our common stock is registered
under Section 15(d) of the Securities Exchange Act of 1934. The regulations
provide a procedure for challenge of the rebuttable control presumption.

     Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking



                                       7
<PAGE>

activities unless the Federal Reserve Board, by order or regulation, has found
those activities to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. Some of the activities that the
Federal Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:

     o   making or servicing loans and certain types of leases;
     o   engaging in certain insurance and discount brokerage activities;
     o   performing certain data processing services;
     o   acting in certain circumstances as a fiduciary or investment or
         financial adviser;
     o   owning savings associations; and
     o   making investments in certain corporations or projects designed
         primarily to promote community welfare.

     The Federal Reserve Board imposes certain capital requirements on First
Southern Bancorp under the Bank Holding Company Act, including a minimum
leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted
assets. These requirements are described below under "Capital Regulations."
Subject to its capital requirements and certain other restrictions, First
Southern Bancorp is able to borrow money to make a capital contribution to the
bank, and these loans may be repaid from dividends paid from the bank to First
Southern Bancorp. Our ability to pay dividends is subject to regulatory
restrictions as described below in "The Bank - Dividends." First Southern
Bancorp is also able to raise capital for contribution to the bank by issuing
securities without having to receive regulatory approval, subject to compliance
with federal and state securities laws. As a bank holding company registered
under the Financial Institutions Code of Georgia, we must provide the Georgia
Department of Banking and Finance with information regarding the financial,
management, and operation condition of First Southern Bancorp and First Southern
National Bank.

     Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, First Southern Bancorp is expected to act as a source of financial
strength to the bank and to commit resources to support the bank in
circumstances in which First Southern Bancorp might not otherwise do so. Under
the Bank Holding Company Act, the Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that such activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory authorities have
additional discretion to require a bank holding company to divest itself of any
bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.

The Bank

     The bank operates as a national banking association incorporated under the
laws of the United States and subject to examination by the Office of the
Comptroller of the Currency. Deposits in the bank are insured by the FDIC up to
a maximum amount, which is generally $100,000 per depositor subject to
aggregation rules.

     The Office of the Comptroller of the Currency and the FDIC regulates or
monitors virtually all areas of the bank's operations, including:

     o   security devices and procedures;
     o   adequacy of capitalization and loss reserves;
     o   loans;
     o   investments;
     o   borrowings;
     o   deposits;
     o   mergers;
     o   issuances of securities;
     o   payment of dividends;
     o   interest rates payable on deposits;
     o   interest rates or fees chargeable on loans;
     o   establishment of branches;
     o   corporate reorganizations;


                                       8
<PAGE>

     o   maintenance of books and records; and
     o   adequacy of staff training to carry on safe lending and deposit
         gathering practices.

     The Office of the Comptroller of the Currency requires the bank to maintain
specified capital ratios and imposes limitations on the bank's aggregate
investment in real estate, bank premises, and furniture and fixtures. The Office
of the Comptroller of the Currency also requires the bank to prepare quarterly
reports on the bank's financial condition and to conduct an annual audit of its
financial affairs in compliance with its minimum standards and procedures.

     Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:

     o   internal controls;
     o   information systems and audit systems;
     o   loan documentation;
     o   credit underwriting;
     o   interest rate risk exposure; and
     o   asset quality.

     National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Office of the Comptroller of the Currency or the
Federal Reserve Board to be troubled institutions must give the Office of the
Comptroller of the Currency or the Federal Reserve Board 30 days prior notice of
the appointment of any senior executive officer or director. Within the 30 day
period, the Office of the Comptroller of the Currency or the Federal Reserve
Board, as the case may be, may approve or disapprove any such appointment.

     Deposit Insurance. The FDIC establishes rates for the payment of premiums
by federally insured banks and thrifts for deposit insurance. A separate Bank
Insurance Fund and Savings Association Insurance Fund are maintained for
commercial banks and savings associations with insurance premiums from the
industry used to offset losses from insurance payouts when banks and thrifts
fail. In 1993, the FDIC adopted a rule which establishes a risk-based deposit
insurance premium system for all insured depository institutions. Under this
system, until mid-1995 depository institutions paid to Bank Insurance Fund or
Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semiannual basis. Once the Bank Insurance Fund
reached its legally mandated reserve ratio in mid-1995, the FDIC lowered
premiums for well-capitalized banks, eventually eliminating premiums for
well-capitalized banks, with a minimum semiannual assessment of $1,000. However,
in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which
eliminated even this minimum assessment. It also separated the Financial
Corporation assessment to service the interest on its bond obligations. The
amount assessed on individual institutions, including the bank, by Financial
Corporation assessment is in addition to the amount paid for deposit insurance
according to the risk-related assessment rate schedule. Increases in deposit
insurance premiums or changes in risk classification increases the bank's cost
of funds, and we may not be able to pass these costs on to our customers.

     Transactions With Affiliates and Insiders. The bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which places limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.



                                       9
<PAGE>

     The bank is also subject to the provisions of Section 23B of the Federal
Reserve Act which, among other things, prohibits an institution from engaging in
certain transactions with certain affiliates unless the transactions are on
terms substantially the same, or at least as favorable to such institution or
its subsidiaries, as those prevailing at the time for comparable transactions
with nonaffiliated companies. The bank is subject to certain restrictions on
extensions of credit to executive officers, directors, certain principal
shareholders, and their related interests. Such extensions of credit (i) must be
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with third parties
and (ii) must not involve more than the normal risk of repayment or present
other unfavorable features.

     The Federal Reserve Board has recently issued Regulation W, which codifies
prior regulations under Sections 23A and 23B of the Federal Reserve Act and
interpretative guidance with respect to affiliate transactions. Regulation W
incorporates the exemption from the affiliate transaction rules but expands the
exemption to cover the purchase of any type of loan or extension of credit from
an affiliate. In addition, under Regulation W:

     o   a bank and its subsidiaries may not purchase a low-quality asset from
         an affiliate;
     o   covered transactions and other specified transactions between a bank or
         its subsidiaries and an affiliate must be on terms and conditions that
         are consistent with safe and sound banking practices; and
     o   with some exceptions, each loan or extension of credit by a bank to an
         affiliate must be secured by collateral with a market value ranging
         from 100% to 130%, depending on the type of collateral, of the amount
         of the loan or extension of credit.

     Regulation W generally excludes all non-bank and non-savings association
subsidiaries of banks from treatment as affiliates, except to the extent that
the Federal Reserve Board decides to treat these subsidiaries as affiliates.
Concurrently with the adoption of Regulation W, the Federal Reserve Board has
proposed a regulation which would further limit the amount of loans that could
be purchased by a bank from an affiliate to not more than 100% of the bank's
capital and surplus. Comments on the proposed rule were due by January 13, 2003.

     Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.

     Branching. National banks are required by the National Bank Act to adhere
to branch office banking laws applicable to state banks in the states in which
they are located. Under current Georgia law, the bank may open branch offices
throughout Georgia with the prior approval of the Office of the Comptroller of
the Currency. In addition, with prior regulatory approval, the bank is able to
acquire existing banking operations in Georgia. Furthermore, federal legislation
has recently been passed which permits interstate branching. The new law permits
out-of-state acquisitions by bank holding companies, interstate branching by
banks if allowed by state law, and interstate merging by banks.

     Community Reinvestment Act. The Community Reinvestment Act requires that,
in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose additional requirements
and limitations on the bank.

     Other Regulations. Interest and other charges collected or contracted for
by the bank are subject to state usury laws and federal laws concerning interest
rates. The bank's loan operations are also subject to federal laws applicable to
credit transactions, such as:



                                       10
<PAGE>

     o   the federal Truth-In-Lending Act, governing disclosures of credit terms
         to consumer borrowers;
     o   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;
     o   the Equal Credit Opportunity Act, prohibiting discrimination on the
         basis of race, creed or other prohibited factors in extending credit;
     o   the Fair Credit Reporting Act of 1978, governing the use and provision
         of information to credit reporting agencies;
     o   the Fair Debt Collection Act, governing the manner in which consumer
         debts may be collected by collection agencies; and
     o   the rules and regulations of the various federal agencies charged with
         the responsibility of implementing such federal laws.

The deposit operations of the bank also are subject to:

     o   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
     o   the Electronic Funds Transfer Act and Regulation E issued by the
         Federal Reserve Board to implement that act, which governs 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.

     Capital Regulations. The federal bank regulatory authorities have adopted
risk-based capital guidelines for banks and bank holding companies that are
designed to make regulatory capital requirements more sensitive to differences
in risk profiles among banks and bank holding companies and account for
off-balance sheet items. The guidelines are minimums, and the federal regulators
have noted that banks and bank holding companies contemplating significant
expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios in excess of the minimums. We have not received any
notice indicating that either First Southern Bancorp or First Southern National
Bank is subject to higher capital requirements. The current guidelines require
all bank holding companies and federally-regulated banks to maintain a minimum
risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1
capital. Tier 1 capital includes common shareholders' equity, qualifying
perpetual preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, but excludes goodwill and most other intangibles and
excludes the allowance for loan and lease losses. Tier 2 capital includes the
excess of any preferred stock not included in Tier 1 capital, mandatory
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to 1% of risk-weighted assets.

     Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight applies. These computations result
in the total risk-weighted assets. Most loans are assigned to the 100% risk
category, except for first mortgage loans fully secured by residential property
and, under certain circumstances, residential construction loans, both of which
carry a 50% rating. Most investment securities are assigned to the 20% category,
except for municipal or state revenue bonds, which have a 50% rating, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have a 0% rating.

     The federal bank regulatory authorities have also implemented a leverage
ratio, which is equal to Tier 1 capital as a percentage of average total assets
less intangibles, to be used as a supplement to the risk-based guidelines. The
principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital
base. The minimum required leverage ratio for top-rated institutions is 3%, but
most institutions are required to maintain an additional cushion of at least 100
to 200 basis points.

     The FDIC Improvement Act established a new capital-based regulatory scheme
designed to promote early intervention for troubled banks which requires the
FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no




                                       11
<PAGE>

less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total
risk-based capital ratio of no less than 10%, and the bank must not be under any
order or directive from the appropriate regulatory agency to meet and maintain a
specific capital level. We qualify as "well capitalized."

     Under the FDIC Improvement Act regulations, the applicable agency can treat
an institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution increases, and the
permissible activities of the institution decreases, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to do some or all of the following:

     o   submit a capital restoration plan;
     o   raise additional capital;
     o   restrict their growth, deposit interest rates, and other activities;
     o   improve their management;
     o   eliminate management fees; or
     o   divest themselves of all or a part of their operations.

Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.

     These capital guidelines can affect us in several ways. If we grow at a
rapid pace, our capital may be depleted too quickly, and a capital infusion from
the holding company may be necessary, which could impact our ability to pay
dividends. Our capital levels are more than adequate; however, rapid growth,
poor loan portfolio performance, poor earnings performance, or a combination of
these factors could change our capital position in a relatively short period of
time.

     The FDIC Improvement Act requires the federal banking regulators to revise
the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.

     Failure to meet these capital requirements would mean that a bank would be
required to develop and file a plan with its primary federal banking regulator
describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.

     Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such violations. Criminal penalties for some financial
institution crimes have been increased to 20 years. In addition, regulators are
provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, banking agencies'
power to issue cease-and-desist orders were expanded. Such orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.

     Recent Legislative Developments. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Some of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. We cannot
predict whether any of these proposals will be adopted or, if adopted, what
effect these would have.



                                       12
<PAGE>

     Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.

Item 2.  Description of Property
--------------------------------

     Our main office is located at 201 South Main Street, Statesboro, Georgia
30458, in downtown Statesboro. We have moved out of our temporary facility at
this location and opened up for business in our new permanent building as of
December 30, 2002. We completed construction of this building at a cost of $2.4
million.

Item 3.    Legal Proceedings.
----------------------------

     None.

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

     No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

Item 5.    Market for Common Equity and Related Stockholder Matters.
-------------------------------------------------------------------

     We completed our initial offering in February 2002. There is no public
trading market for our common stock, and there is no source of the high and low
bid price for these shares.

The following table sets forth equity compensation plan information at December
31, 2002.

<TABLE>
<CAPTION>
                      Equity Compensation Plan Information
                                                                                                  Number of securities
                                     Number of securities                                        remaining available for
                                         to be issued                 Weighted-average            future issuance under
                                     upon exercise of                 exercise price of        equity compensation plans (c)
                                    outstanding options,            outstanding options,          (excluding securities
Plan Category                      warrants and rights(a)         warrants and rights (b)        reflected in column(a))
-------------                      -------------------            -------------------            -----------------------

<S>                                        <C>                             <C>                         <C>
Equity compensation                        137,932                         $10.00                      43,578
plans approved by
security holders(1)

Equity compensation                        190,109                         $10.00                           0
plans not approved
by security holders(2)

         Total                             328,041                                                     43,578

<FN>
(1)    The number of shares of common stock available under the First Southern
       Bancorp, Inc. 2002 Stock Incentive Plan is currently 137,932, and it will
       automatically increase each time we issue additional shares so that it
       continues to equal 15% of our total outstanding shares.

(2)    In connection with our initial public offering in 2001, we issued 190,109
       warrants to our organizing directors at an exercise price of $10.00 per
       share with a term of 10 years.
</FN>
</TABLE>



                                       13
<PAGE>


     After closing our offering on February 5, 2002 and issuing 919,547 shares
of common stock in return for net proceeds of $9,124,970, we capitalized the
bank with $6,700,000. The remainder of the amount we raised will be used for
general working capital purposes.

Item 6.  Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operation
--------------------





                                      14
<PAGE>



                             First Southern Bancorp

                                Table of Contents



                                                                          Page

Selected Financial Data................................................... A-2
Management's Discussion and Analysis of Financial Condition
     and Results of Operations............................................ A-3
Report of Independent Certified Public Accountants........................ A-12
Consolidated Financial Statements......................................... A-13
Notes to Consolidated Financial Statements................................ A-18
Corporate and Shareholder Information..................................... A-28










                                       A-1
<PAGE>


                          FIRST SOUTHERN NATIONAL BANK

                             SELECTED FINANCIAL DATA
                      (in thousands except per share data)

                                                        2002              2001

FOR THE YEAR
     Net interest income (expense)              $     724,802           (19,122)
     Provision for loan losses                        375,000                 -
     Noninterest income                               217,650                 -
     Noninterest expense                            1,533,875           380,210
     Net loss                                   $    (966,423)         (399,332)

PER COMMON SHARE
     Basic earnings (loss)                      $       (1.05)             (.43)
     Diluted earnings (loss)                            (1.05)             (.43)
     Cash dividends declared                                -                 -
     Book value                                 $        8.45                 -

AT YEAR END
     Loans, net                                 $  23,772,372                 -
     Earnings assets                               28,769,761                 -
     Assets                                        31,913,765                 -
     Deposits                                      24,063,029                 -
     Stockholders' equity                       $   7,768,369                 -
     Common shares outstanding                        919,547                 -

AVERAGE BALANCES
     Loans                                      $  10,625,401                 -
     Earnings assets                               15,898,866                 -
     Assets                                        18,024,602                 -
     Deposits                                      10,478,073                 -
     Stockholders' equity                       $   8,058,708                 -
     Weighted average shares
        outstanding                                   919,547                 -

KEY PERFORMANCE RATIOS
     Return on average assets                           (5.93%)               -
     Return on average stockholders'
        equity                                         (13.26%)               -
     Net interest margin                                 4.07%                -
     Dividend payout ratio                                  -                 -
     Average equity to average assets                   44.71%                -




                                       A-2
<PAGE>


<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                                     General

First Southern  Bancorp is a bank holding company  headquartered  in Statesboro,
Georgia  organized to own all of the common stock of its bank subsidiary,  First
Southern National Bank. The principal activity of the bank is to provide banking
services to domestic markets,  principally in Bulloch County,  Georgia. The bank
is primarily  regulated by the Office of the Comptroller of the Currency ("OCC")
and undergoes periodic  examinations by this regulatory agency. Our bank holding
company is regulated by the Federal Reserve Bank and also is subject to periodic
examinations.

In 2001, we commenced an initial  public  offering of up to 1,000,000  shares of
our common stock. The stock sale resulted in the issuance of 919,547 shares at a
price of $10.00 per share. The offering  resulted in capital of $9,124,970,  net
of offering  expenses of  $70,500.  The bank opened for  business on February 5,
2002 at 201 South Main Street, Statesboro, Georgia 30458.

The  following  discussion  focuses  on  significant  changes  in the  financial
condition  and results of  operations  during the year ended  December 31, 2002.
Since our bank did not open until  February 5, 2002,  comparison of 2002 amounts
to  prior  periods  would  not  be  meaningful.   We  reported  our  company  as
developmental  stage  entity as of December 31, 2001.  This  discussion  and the
financial  information  contained  herein are  presented to assist the reader in
understanding and evaluating our financial condition, results of operations, and
future  prospects and should be read as a supplement to and in conjunction  with
the Consolidated Financial Statements and Related Notes.

                           Forward-Looking Statements

This Report contains  statements  which  constitute  forward-looking  statements
within  the  meaning  of  Section  27A of the  Securities  Act of  1933  and the
Securities  Exchange Act of 1934. These statements are based on many assumptions
and estimates and are not guarantees of future  performance.  Our actual results
may differ materially from those projected in any forward-looking statements, as
they will  depend on many  factors  about which we are  unsure,  including  many
factors which are beyond our control. The words "may," "would," "could," "will,"
"expect," "anticipate,"  "believe," "intend," "plan," and "estimate," as well as
similar  expressions,  are meant to identify  such  forward-looking  statements.
Potential risks and uncertainties include, but are not limited to:

     o   significant  increases  in  competitive  pressure  in the  banking  and
         financial services industries;

     o   changes in the interest rate environment which could reduce anticipated
         or actual margins;

     o   changes  in  political  conditions  or the  legislative  or  regulatory
         environment;

     o   general  economic  conditions,  either  nationally  or  regionally  and
         especially  in primary  service  area,  becoming  less  favorable  than
         expected  resulting in, among other things,  a deterioration  in credit
         quality;

     o   changes occurring in business conditions and inflation;

     o   changes in technology;

     o   changes in monetary and tax policies;

     o   the level of allowance for loan loss;

     o   the rate of delinquencies and amounts of charge-offs;

     o   the rates of loan growth;

     o   adverse  changes in asset  quality and  resulting  credit  risk-related
         losses and expenses;

     o   changes in the securities markets; and

     o   other risks and uncertainties detailed from time to time in our filings
         with the Securities and Exchange Commission.


                                       A-3
<PAGE>


                              Results of Operations

A comparison between 2002 and 2001 is not relevant due to the fact that the bank
was only open for  business  for a portion of the year  during  2002 and was not
open during 2001.

Net loss for 2002 was  $966,000  or $1.05  per  common  share.  Our  operational
results depend to a large degree on net interest income, which is the difference
between the interest income received from investments (such as loans, investment
securities, federal funds sold, etc.) and the interest expense, which is paid on
deposit  liabilities.  Net  interest  income  was  $725,000  for the year  ended
December 31, 2002.

The  provision  for loan losses in 2002 was  $375,000.  The  provision  for loan
losses reflects  management's  estimate of potential losses inherent in the loan
portfolio  and the creation of an allowance  for loan losses  adequate to absorb
such losses.


Other operating income for the year ended December 31, 2002,  totaled  $218,000.
Other  operating  income  includes  services  charges  on deposit  accounts  and
mortgage  origination fee income.  Declining interest rates during 2002 provided
us with an  opportunity  to derive  significant  income from the  origination of
mortgage loans.  Other operating  expenses in 2002 were $1,534,000.  The largest
component of other  operating  expenses is salaries and benefits,  which totaled
$752,000 for the year ended December 31, 2002.


In 2002, we recognized no income tax benefit due to the fact that realization of
such a benefit is dependent upon future earnings or our company.

Net Interest Income

For the year ended  December 31, 2002,  net interest  income  totaled  $725,000.
Interest income from loans, including fees was $729,000, representing a yield of
7.61%.  Interest  expense totaled $159,000 for the year ended December 31, 2002.
The net interest  margin realized on earning assets and the interest rate spread
were 5.06% and 4.20%, respectively, for the year ended December 31, 2002.




                                       A-4
<PAGE>



Average Balances and Interest Rates

The table below  shows the  average  balance  outstanding  for each  category of
interest  earning  assets  and  interest-bearing  liabilities  for  2002 and the
average rate of interest  earned or paid  thereon.  Average  balances  have been
derived from the daily  balances  throughout  the period  indicated.  Yields and
rates have been annualized  based on the date that the bank opened,  February 5,
2002. A rate volume  analysis is not presented due to the fact that the bank was
not open in 2001.

<TABLE>
<CAPTION>
                                                                                    Average                       Yield/
                                                                                    Balance         Interest       Rate
                                                                                    -------         --------       ----
<S>                                                                         <C>                      <C>          <C>
Assets:
   Interest earning assets:
     Loans (including loan fees)                                            $     10,625,401         728,700      7.61%
     Investment securities                                                         2,521,640          81,119      3.57%
     Federal funds sold                                                            2,751,825          74,215      2.99%
                                                                                  ----------         -------
  Total interest earning assets                                                   15,898,866         884,034      6.17%
  Other non-interest earning assets                                                2,125,736
                                                                                  ----------
           Total assets                                                     $     18,024,602
                                                                                  ==========

Liabilities and stockholders' equity:
    Interest-bearing liabilities:
     Deposits:
       Interest-bearing demand                                              $      4,292,979          46,619      1.20%
       Savings                                                                       345,839           3,753      1.20%
       Time                                                                        4,301,916         108,043      2.79%
     Other                                                                            33,208             817      2.73%
                                                                                  ----------         -------
           Total interest-bearing liabilities                                      8,973,942         159,232      1.97%

    Other non-interest bearing liabilities                                           991,952
    Stockholders' equity                                                           8,058,708
                                                                                  ----------

           Total liabilities and stockholders' equity                       $     18,024,602
                                                                                  ==========

Excess of interest-earning assets over interest-bearing liabilities         $      6,924,924
                                                                                  ==========

Ratio of interest-earning assets to interest-bearing liabilities                     177%

Net interest income                                                                                  724,802
                                                                                                     =======

Net interest spread                                                                                               4.20%
                                                                                                                  =====

Net interest margin                                                                                               5.06%
                                                                                                                  ====
</TABLE>

There were no non-accrual loans during 2002.

Interest Rate Sensitivity and Asset Liability Management

Interest rate sensitivity  measures the timing and magnitude of the repricing of
assets  compared with the repricing of  liabilities  and is an important part of
asset/liability management of a financial institution. The objective of interest
rate sensitivity management is to generate stable growth in net interest income,
and to control the risks  associated  with interest rate  movements.  Management
constantly  reviews  interest rate risk exposure and the expected  interest rate
environment so that adjustments in interest rate sensitivity can be timely made.
Since the assets and  liabilities  of a bank are  primarily  monetary  in nature
(payable in fixed,  determinable amounts), the performance of a bank is affected
more by changes in interest rates than by inflation.  Interest  rates  generally
increase as the rate of inflation increases,  but the magnitude of the change in
rates may not be the same.

Net  interest  income is the  primary  component  of net  income  for  financial
institutions.  Net  interest  income is affected by the timing and  magnitude of
repricing of as well as the mix of interest sensitive and noninterest  sensitive
assets and liabilities.  "Gap" is a static measurement of the difference between
the contractual  maturities or repricing dates of interest  sensitive assets and
interest  sensitive  liabilities  within the following twelve months.  Gap is an
attempt to predict  the  behavior of the bank's net  interest  income in general
terms during periods of movement in interest rates.  In general,  if the bank is
asset sensitive,  more of its interest  sensitive assets are expected to reprice
within  twelve  months than its  interest  sensitive  liabilities  over the same
period. In a rising



                                       A-5
<PAGE>

interest rate environment,  assets repricing more quickly is expected to enhance
net interest income. Alternatively,  decreasing interest rates would be expected
to  have  the  opposite  effect  on  net  interest  income  since  assets  would
theoretically  be repricing at lower  interest  rates more quickly than interest
sensitive liabilities.  Although it can be used as a general predictor, Gap as a
predictor of movements in net interest  income has limitations due to the static
nature of its definition and due to its inherent assumption that all assets will
reprice immediately and fully at the contractually  designated time. At December
31,  2002,  the bank,  as measured by Gap,  is in an asset  sensitive  position.
Management  has several  tools  available to it to evaluate and affect  interest
rate risk,  including deposit pricing policies and changes in the mix of various
types of assets and liabilities.

The  following  table  summarizes  the  amounts of  interest-earning  assets and
interest-bearing liabilities outstanding at December 31, 2002, that are expected
to mature,  prepay, or reprice in each of the future time periods shown.  Except
as stated  below,  the amount of assets or  liabilities  that  mature or reprice
during a particular  period was  determined in accordance  with the  contractual
terms of the asset or  liability.  Adjustable  rate  loans are  included  in the
period in which  interest  rates are next scheduled to adjust rather than in the
period  in  which  they  are due,  and  fixed  rate  loans  and  mortgage-backed
securities  are  included  in the  periods in which they are  anticipated  to be
repaid  based  on  scheduled   maturities.   The  Bank's  savings  accounts  and
interest-bearing demand accounts (NOW and money market deposit accounts),  which
are generally subject to immediate withdrawal, are included in the "Three Months
or Less" category,  although historical  experience has proven these deposits to
be more stable over the course of a year.

<TABLE>
<CAPTION>
                              At December 31, 2002
                            Maturing or Repricing in
                            ------------------------
                             (dollars in thousands)

                                                       3 Months or     4 Months to       1 to 5         Over 5
                                                          Less          12 Months        Years          Years        Total
                                                          ----          ---------        -----          ------       -----

<S>                                                       <C>            <C>             <C>               <C>       <C>
Interest-earning assets:
   Federal funds sold                                 $   1,378              -               -               -        1,378
   Investment securities                                      -              -           3,048             197        3,245
   Loans                                                 13,085          3,880           6,629             553       24,147
                                                         ------          -----           -----           -----       ------

Total interest-bearing assets:                           14,463          3,880           9,677             750       28,770
                                                         ------          -----           -----           -----       ------

Interest-bearing liabilities:
   Deposits:
      Savings and demand                                  7,805              -               -               -        7,805
      Time deposits                                         896          7,512           4,410               -       12,818
                                                         ------          -----           -----           -----       ------

Total interest-bearing liabilities                        8,701          7,512           4,410               -       20,623
                                                         ------          -----           -----           -----       ------

Interest sensitive difference per period              $   5,762         (3,632)          5,267             750        8,147
                                                         ======          =====           =====           =====       ======
Cumulative interest sensitivity difference            $   5,762          2,130           7,397           8,147
                                                         ======          =====           =====           =====
Cumulative difference to total assets                       18%             7%             23%             26%
                                                         ======          =====           =====           =====
</TABLE>



At December 31, 2002, the difference  between the bank's  liabilities and assets
repricing or maturing within one year was $2,130,000. Due to an excess of assets
repricing or maturing  within one year, a drop in interest rates would cause the
bank's net interest income to decline.

Certain  shortcomings  are  inherent in the method of analysis  presented in the
foregoing table.  For example,  although certain assets and liabilities may have
similar  maturities or periods of repricing,  they may reflect changes in market
interest   rates   differently.    Additionally,   certain   assets,   such   as
adjustable-rate  mortgages,  have  features  that  restrict  changes in interest
rates, both on a short-term basis and over the life of the asset.  Other factors
which may affect the  assumptions  made in the table include changes in interest
rates,  pre-payment rates, early withdrawal levels, and the ability of borrowers
to service their debt.




                                       A-6
<PAGE>



Provision and Allowance for Loan Losses

The  provision  for  loan  losses  is the  charge  to  operating  earnings  that
management believes is necessary to maintain the allowance for loan losses at an
adequate level. The provision charged to expense was $375,000 for the year ended
December 31, 2002.  The provision has been a result of  management's  efforts to
increase the allowance to match the growth in the loan portfolio.  The allowance
for loan losses was 1.55% of gross loans at December 31,  2002.  There are risks
inherent in making all loans, including risks with respect to the period of time
over which loans may be repaid,  risks  resulting  from  changes in economic and
industry conditions,  risks inherent in dealing with individual borrowers,  and,
in the case of a collateralized  loan, risks resulting from uncertainties  about
the future value of the collateral.  We anticipate  maintaining an allowance for
loan losses based on, among other things,  historical experience,  an evaluation
of economic conditions,  and regular reviews of delinquencies and loan portfolio
quality. Our judgment about the adequacy of the allowance is based upon a number
of assumptions about future events, which we believe to be reasonable, but which
may not prove to be accurate.  Thus,  there is a risk that charge-offs in future
periods  could  exceed  the  allowance  for  loan  losses  or  that  substantial
additional  increases  in the  allowance  for loan  losses  could  be  required.
Additions to the allowance for loan losses would result in a decrease of our net
income and,  possibly,  our capital.  We have not experienced any charge-offs in
2002.  We had  no  past  due  and  non-accrual  loans,  other  real  estate  and
repossessions as of December 31, 2002.

Nononinterest Income and Expense

Noninterest  income for the year ended December 31, 2002 totaled  $218,000.  The
largest  component of other income is  residential  mortgage  origination  fees,
which  totaled  $166,000  during  2002.  Lower  market  interest  rates  created
significant  refinancing volume in the residential  mortgage market, and we were
able to facilitate the origination of a substantial  amount of mortgage loans in
2002. If interest rates increase this year over mortgage  volume,  the amount of
our  origination  fees,  consequently  may decrease.  Service charges on deposit
accounts totaled $51,000 during the year ended December 31, 2002.

Total  noninterest  expense for the year ended December 31, 2002 was $1,533,000.
Salaries and benefits,  the largest  component of noninterest  expense,  totaled
$752,000 for the year ended  December  31, 2002.  Net  occupancy  and  equipment
expense was $119,000 during 2002 and other operating  expenses  totaled $662,000
during  2002.  We  completed  construction  of and moved into our main office in
January of 2003. Through December of 2002, we occupied an office adjacent to our
main office, while the main office was under construction.


                               Financial Condition

Total assets were  $31,914,000  as of December 31, 2002.  The primary  source of
growth in assets was net loans, which totaled $23,772,000 or 75% of total assets
as of  December  31,  2002.  Investment  securities  available-for-sale  totaled
$3,048,000 at December 31, 2002. Total deposits were $24,063,000 or 75% of total
assets as of December 31, 2002.

Interest-Earning Assets

Loans

Gross loans totaled $24,147,000 at December 31, 2002. The largest classification
of loans was in real estate mortgage loans, which totaled  $13,702,000 or 56.74%
at December 31, 2002.  Balances within the major loans receivable  categories as
of December 31, 2002 are as follows:


Commercial, financial and agricultural                 $   3,787,776     15.69%
Real estate - mortgage                                    13,702,189     56.74%
Real estate - construction                                 4,297,996     17.80%
Consumer and other                                         2,359,411      9.77%
                                                          ----------    -------

                                                       $  24,147,372    100.00%
                                                          ==========    =======




                                       A-7
<PAGE>



As of December 31, 2002,  maturities of loans in the  indicated  classifications
were as follows:

                                            Real Estate
                         Commercial        Construction           Total
                         ----------        ------------           -----
Maturity

Within 1 year           $ 2,797,410           3,662,484           6,459,894
1 to 5 years                966,905             635,512           1,602,417
Over 5 years                 23,461                   -              23,461
                          ---------           ---------           ---------
        Totals          $ 3,787,776           4,297,996           8,085,772
                          =========           =========           =========

As of  December  31,  2002,  the  interest  terms  of  loans  in  the  indicated
classification  for the indicated  maturity  ranges are as follows  (amounts are
presented in thousands):

                                   Fixed            Variable
                                   Interest         Interest
                                   Rates            Rates             Total
                                   --------         --------          -----

Commercial
     1 to 5 years                  $ 935,226         31,679          966,905
     Over 5 years                     23,461              -           23,461

Real estate - construction
     1 to 5 years                          -        635,512          635,512
                                     -------        -------        ---------
                                   $ 958,687        667,191        1,625,878
                                     =======        =======        =========

Investment Securities

Investment  securities  available-for-sale  totaled  $3,048,000  at December 31,
2002. All of the bank's  marketable  investment  securities  were  designated as
available-for-sale   at  December  31,  2002  and  consisted  of  United  States
Government  agencies.  The amortized  cost of these  investment  securities  was
$3,034,000 at December 31, 2002.

The following table presents the maturities of investment securities at carrying
value and the weighted average yields for each range of maturities presented.


                                         U S Government         Weighted Average
                                            Agencies                  Yields
                                            --------                  ------
Maturities at December 31, 2002

Within 1 year                              $          -                    -
After 1 through 5 years                       3,047,889                 2.55%
After 5 through 10 years                              -                    -
After 10 years                                        -                    -
                                              ---------                 ----
Totals                                     $  3,047,889                 2.55%
                                              =========                 ====




                                       A-8
<PAGE>



Deposits

At December 31, 2002, deposits totaled $24,063,000.  Noninterest-bearing  demand
deposits were $3,439,000 or 14% of total deposits and interest-bearing  deposits
were $20,624,000 or 86% of total deposits.

Balances  within the major  deposit  categories  as of December  31, 2002 are as
follows:


Noninterest-bearing demand deposits              $  3,439,172            14.29%
Interest-bearing demand deposits                    7,068,434            29.37%
Savings deposits                                      736,440             3.06%
Certificates of deposit $100,000 and over           4,696,766            19.53%
Other time deposits                                 8,122,217            33.75%
                                                   ----------           ------
                                                 $ 24,063,029           100.00%
                                                   ==========           ======

The average  balance of deposits and the average rates paid on such deposits are
summarized for 2002 in the following table.  Interest costs have been annualized
based on the bank's opening date of February 5, 2002.


                                            Amount               Rate

Noninterest-bearing demand              $ 1,537,339                 -
Interest-bearing demand                   4,292,979              1.20%
Savings                                     345,839              1.20%
Time deposits                             4,301,916              2.79%
                                         ----------
     Totals                             $10,478,073
                                         ==========


Maturities of time  certificates  of deposit of $100,000 or more  outstanding at
December 31, 2002, are summarized as follows:


       Within 3 months                                   $    500,000
       After 3 through 12 months                            2,623,624
       After 12 months                                      1,573,142
                                                            ---------
       Total                                             $  4,696,766
                                                            =========


Capital Resources

Shareholders'  equity totaled $7,768,000 at December 31, 2002. We raised capital
in the  amount of  $9,124,970  during our  initial  public  offering,  which was
completed in February  2002.  Our net loss for the year ended  December 31, 2002
was $966,000 and other comprehensive income, net of tax, increased $9,000.

Bank holding companies,  such as us, and their banking subsidiaries are required
by banking regulators to meet certain minimum levels of capital adequacy,  which
are expressed in the form of certain  ratios.  Capital is separated  into Tier 1
capital  (essentially  common  shareholders'  equity less intangible assets) and
Tier 2 capital  (essentially  the allowance for loan losses  limited to 1.25% of
risk-weighted  assets).  The first two ratios,  which are based on the degree of
credit risk in our assets,  provide the  weighting  of assets  based on assigned
risk factors and include  off-balance  sheet items such as loan  commitments and
stand-by letters of credit. The ratio of Tier 1 capital to risk-weighted  assets
must be at least 4.0% and the ratio of total capital (Tier 1 capital plus Tier 2
capital) to  risk-weighted  assets must be at least 8.0%.  The capital  leverage
ratio supplements the risk-based capital guidelines.

Banks and bank holding  companies  are  required to maintain a minimum  ratio of
Tier 1 capital to adjusted quarterly average total assets of 3.0%.




                                       A-9
<PAGE>



The following table summarizes the bank's risk-based  capital ratios at December
31, 2002:

   Tier 1 capital (to risk-weighted assets)                            20.65%
   Total capital (to risk-weighted assets)                             22.00%
   Tier 1 capital (to total average assets)                            20.87%

Liquidity

The bank  must  maintain,  on a daily  basis,  sufficient  funds  to  cover  the
withdrawals from depositors' accounts and to supply new borrowers with funds. To
meet these obligations,  the bank keeps cash on hand, maintains account balances
with its  correspondent  banks,  and purchases and sells federal funds and other
short-term  investments.  Asset and  liability  maturities  are  monitored in an
attempt to match the maturities to meet liquidity needs. It is the policy of the
bank to monitor its liquidity to meet  regulatory  requirements  and their local
funding requirements.

We are a party  to  financial  instruments  with  off-balance-sheet  risk in the
normal course of business to meet the financing  needs of our  customers.  These
financial  instruments  consist of  commitments  to extend  credit  and  standby
letters of credit.  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.  Standby letters of credit are written conditional  commitments issued
by the Bank to guarantee the  performance of a customer to a third party.  Those
guarantees  are  primarily  issued  to  support  public  and  private  borrowing
arrangements.  Most letters of credit extend for less than one year.  The credit
risk  involved  in  issuing  letters of credit is  essentially  the same as that
involved in extending loan facilities to customers.  Commitments  generally have
fixed expiration dates or other termination clauses and may require payment of a
fee. A commitment involves, to varying degrees,  elements of credit and interest
rate risk in excess of the amount recognized in the balance sheets. Our exposure
to  credit  loss in the  event  of  non-performance  by the  other  party to the
instrument is represented by the contractual notional amount of the instrument.

Since certain  commitments  are expected to expire without being drawn upon, the
total commitment amounts do not necessarily  represent future cash requirements.
We use the same credit policies in making  commitments to extend credit as we do
for  on-balance-sheet  instruments.  Collateral  held for  commitments to extend
credit varies but may include accounts receivable,  inventory,  property, plant,
equipment, and income-producing commercial properties.

The following table summarizes our off-balance-sheet financial instruments whose
contract amounts represent credit risk as of December 31, 2002:

         Commitments to extend credit                       $  4,351,000
         Standby letters of credit                          $     19,000


Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
Although the bank's loan portfolio is diversified,  a substantial portion of its
borrowers'  ability  to  honor  the  terms of their  loans is  dependent  on the
economic conditions in Bulloch County and surrounding areas.

The bank maintains relationships with correspondent banks that can provide funds
to it on short notice,  if needed.  Presently,  the bank has  arrangements  with
commercial banks for short term unsecured advances up to $4,000,000.

Cash and cash  equivalents  as of December 31, 2002  increased  $2,448,000  from
December 31, 2001. Cash used by operating activities totaled $1,108,000 in 2002,
while  inflows  from  financing  activities  totaled  $32,077,000,   which  were
attributable to net deposit increases and raising of our initial capital.

During  2002,  investing  activities  used  $28,520,000.   Investing  activities
included net loans made to customers of approximately $23,772,000,  purchases of
investment securities available-for-sale of $6,052,000 and purchases of premises
and  equipment of  $1,500,000,  partially  offset by  maturities  of  investment
securities available-for-sale of approximately $3,000,000.

Inflation

Inflation  impacts the growth in total assets in the banking industry and causes
a need to increase  equity  capital at higher than normal  rates to meet capital
adequacy  requirements.  We cope  with the  effects  of  inflation  through  the
management of interest rate sensitivity gap position, by periodically  reviewing
and  adjusting  its pricing of services  to consider  current  costs and through
managing our level of net income relative to our dividend payout policy.





                                      A-10
<PAGE>


Selected Ratios

The  following  table sets out certain  ratios of the Company for the year ended
December 31, 2002.


    Net loss to:
         Average stockholders' equity                               13.26%
         Average assets                                              5.93%
    Dividends to net income                                             -
    Average equity to average assets                                44.71%

Recent Accounting Pronouncements

Accounting  standards  that  have  been  issued  or  proposed  by the  Financial
Accounting  Standards  Board and other  standard  setting  entities  that do not
require  adoption until a future date are not expected to have a material impact
on our consolidated financial statements upon adoption.




                                      A-11
<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





To the Board of Directors
First Southern Bancorp
Statesboro, Georgia

We have audited the accompanying consolidated balance sheets of First Southern
Bancorp and subsidiary as of December 31, 2002 and 2001, and the related
statements of operations, changes in shareholders' equity, comprehensive income
and cash flows for the years then ended. 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 in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Southern
Bancorp and subsidiary as of December 31, 2002 and 2001 and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.





/s/ PORTER KEADLE MOORE, LLP



Atlanta, Georgia
February 7, 2003




                                      A-12
<PAGE>



<TABLE>
<CAPTION>
                             FIRST SOUTHERN BANCORP

                           Consolidated Balance Sheets

                           December 31, 2002 and 2001

                                                                                          2002               2001
                                                                                          ----               ----
                                                       Assets
                                                       ------
<S>                                                                                  <C>                        <C>
Cash and due from banks                                                                $    1,122,089           51,628
Federal funds sold                                                                          1,378,000                -
                                                                                            ---------        ---------

         Cash and cash equivalents                                                          2,500,089           51,628

Restricted cash                                                                                     -        7,088,830
Investment securities available-for-sale                                                    3,047,889                -
Other investments                                                                             196,500                -
Deferred offering costs                                                                             -           69,472
Loans, net                                                                                 23,772,372                -
Premises and equipment, net                                                                 2,130,980          659,705
Accrued interest receivable and other assets                                                  265,935                -
                                                                                           ----------        ---------

                                                                                       $   31,913,765        7,869,635
                                                                                           ==========        =========

                                    Liabilities and Shareholders' Equity (Deficit)
                                    ----------------------------------------------

Liabilities:
      Deposits:
         Noninterest-bearing demand                                                    $    3,439,172                -
         Interest-bearing demand                                                            7,068,434                -
         Savings                                                                              736,440                -
         Time                                                                              12,818,983                -
                                                                                           ----------        ---------

            Total deposits                                                                 24,063,029                -

      Accrued interest payable and other liabilities                                           82,367
      Subscribers' deposits                                                                         -        7,088,830
      Line of credit                                                                                -        1,180,037
                                                                                           ----------        ---------

             Total liabilities                                                             24,145,396        8,268,867
                                                                                           ----------        ---------

Shareholders' equity (deficit):
        Preferred stock, $.01 par value; 10,000,000 shares authorized;
           no shares issued and outstanding                                                         -                -
        Common stock, $.01 par value; 10,000,000 shares authorized; 919,547
           and 10 shares issued and outstanding in 2002 and 2001, respectively                  9,195                -
        Additional paid-in capital                                                          9,115,775              100
        Accumulated deficit                                                                (1,365,755)        (399,332)
        Accumulated other comprehensive income                                                  9,154                -
                                                                                           ----------        ---------

             Total shareholders' equity (deficit)                                           7,768,369         (399,232)
                                                                                           ----------        ---------

                                                                                       $   31,913,765        7,869,635
                                                                                           ==========        =========
</TABLE>




See accompanying notes to consolidated financial statements.



                                      A-13
<PAGE>



<TABLE>
                             FIRST SOUTHERN BANCORP

                      Consolidated Statements of Operations

                 For the Years Ended December 31, 2002 and 2001




                                                                                         2002           2001
                                                                                         ----           ----
<S>                                                                                 <C>                 <C>
Interest income:
      Interest and fees on loans                                                    $   728,700              -
      Interest and dividends on investment securities                                    81,119              -
      Interest on Federal funds sold                                                     74,215              -
                                                                                      ---------       --------

      Total interest income                                                             884,034              -
                                                                                      ---------       --------

Interest expense:
      Interest expense on deposits                                                      158,415              -
      Other interest expense                                                                817         19,122
                                                                                      ---------       --------

      Total interest expense                                                            159,232         19,122
                                                                                      ---------       --------

      Net interest income (expense)                                                     724,802        (19,122)

Provision for loan losses                                                               375,000              -
                                                                                      ---------       --------

      Net interest income (expense) after provision for loan losses                     349,802        (19,122)
                                                                                      ---------       --------

Other income:
      Service charges on deposit accounts                                                51,465              -
      Residential mortgage origination fees                                             166,185              -
                                                                                      ---------       --------

             Total other income                                                         217,650              -
                                                                                      ---------       --------

Other expense:
      Salaries and benefits                                                             752,091         87,285
      Net occupancy and equipment                                                       119,358         75,614
      Other operating                                                                   662,426        217,311
                                                                                      ---------       --------

             Total other expense                                                      1,533,875        380,210
                                                                                      ---------       --------

             Net loss                                                               $  (966,423)      (399,332)
                                                                                      =========       ========

             Basic and diluted loss per share                                       $     (1.05)          (.43)
                                                                                      =========       ========

</TABLE>







See accompanying notes to consolidated financial statements.



                                      A-14
<PAGE>



<TABLE>
<CAPTION>
                             FIRST SOUTHERN BANCORP

           Consolidated Statements of Changes in Shareholders' Equity

                 For the Years Ended December 31, 2002 and 2001



                                                                                           Accumulated
                                                         Additional                           Other
                                           Common         paid-in        Accumulated      Comprehensive
                                           Stock          Capital          Deficit           Income            Total
                                           -----          -------          -------           ------            -----

<S>                                      <C>                  <C>           <C>               <C>             <C>
Issuance of common stock
  to organizer                           $     -              100                -                -                100

Net loss                                       -                -         (399,332)               -           (399,332)
                                           -----        ---------       ----------            -----          ---------

Balance, December 31, 2001                     -              100         (399,332)               -           (399,232)

Redemption of stock to organizer               -             (100)               -                -               (100)

Sale of common stock, net of
   offering expenses of $70,500            9,195        9,115,775                -                -          9,124,970

Net loss                                       -                -         (966,423)               -           (966,423)

Change in unrealized gain/loss
on securities available for sale,
net of tax                                     -                -                -            9,154              9,154
                                           -----        ---------       ----------            -----          ---------

Balance, December 31, 2002               $ 9,195        9,115,775       (1,365,755)           9,154          7,768,369
                                           =====        =========       ==========            =====          =========

</TABLE>








See accompanying notes to consolidated financial statements.



                                      A-15
<PAGE>


                             FIRST SOUTHERN BANCORP

             Consolidated Statements of Comprehensive Income (Loss)

                 For the Years Ended December 31, 2002 and 2001

                                                             2002         2001
                                                             ----         ----

Net loss                                               $  (966,423)    (399,332)
                                                          --------     --------
Other comprehensive income, net of tax:
  Unrealized gains on investment
    securities available-for-sale:
      Unrealized gains arising during the period           14,303            -
      Income tax expense related to
       investment securities available-for-sale            (5,149)           -
                                                         --------     --------

Other comprehensive income                                  9,154            -
                                                         --------     --------

Comprehensive loss                                    $  (957,269)    (399,332)
                                                         ========     ========











See accompanying notes to consolidated financial statements.




                                      A-16
<PAGE>

<TABLE>
<CAPTION>
                             FIRST SOUTHERN BANCORP

                      Consolidated Statements of Cash Flows

                 For the Years Ended December 31, 2002 and 2001

                                                                                               2002             2001
                                                                                               ----             ----
<S>                                                                                      <C>                  <C>
Cash flows from operating activities:
      Net loss                                                                           $   (966,423)        (399,332)
         Adjustments to reconcile net loss to
            net cash used by operating activities:
               Provision for loan losses                                                      375,000                -
               Depreciation, amortization and accretion                                        46,648                -
               Change in:
                  Other assets                                                               (271,084)               -
                  Other liabilities                                                            82,367                -
                                                                                          -----------        ---------

                      Net cash used by operating activities                                  (733,492)        (399,332)
                                                                                          -----------        ---------

Cash flows from investing activities:
      Proceeds from maturities and paydowns
         of investment securities available-for-sale                                        3,000,000                -
      Purchases of investment securities available-for-sale                                (6,051,866)               -
      Purchases of other investments                                                         (196,500)               -
      Net change in loans                                                                 (24,147,372)               -
      Purchases of premises and equipment                                                  (1,499,643)        (659,705)
                                                                                          -----------         --------

                      Net cash used by investing activities                               (28,895,381)        (659,705)
                                                                                          -----------        ---------

Cash flows from financing activities:
      Net change in deposits                                                               24,063,029                -
      Proceeds from sale of common stock                                                    9,195,470              100
      Repayment of organizational share of stock                                                 (100)               -
      Deferred offering costs                                                                  (1,028)         (69,472)
      Change in line of credit                                                             (1,180,037)       1,180,037
                                                                                          -----------        ---------

                      Net cash provided by financing activities                            32,077,334        1,110,665
                                                                                          -----------        ---------

Net change in cash and cash equivalents                                                     2,448,461           51,628

Cash and cash equivalents at beginning of the period                                           51,628                -
                                                                                          -----------        ---------

Cash and cash equivalents at end of the period                                           $  2,500,089           51,628
                                                                                          ===========        =========

Noncash investing and financing activities:
      Change in unrealized gain/loss on securities
         available-for-sale, net of tax                                                  $      9,154                -
      Change in restricted assets and subscribers' deposits                              $ (7,088,830)       7,088,830

Supplemental information of amounts paid for
      interest, net of amounts capitalized                                               $    119,811           19,122


</TABLE>



See accompanying notes to consolidated financial statements.



                                      A-17
<PAGE>

                             FIRST SOUTHERN BANCORP

                   Notes to Consolidated Financial Statements

(1)    Summary of  Significant  Accounting  Policies Basis of  Presentation  The
       consolidated  financial statements include the accounts of First Southern
       Bancorp (the "Company") and its wholly owned  subsidiary,  First Southern
       National Bank (the "Bank").  All  significant  intercompany  accounts and
       transactions have been eliminated in consolidation.

       The  Company  raised  $9,124,970,  net of  offering  expenses of $70,500,
       through the sale of 919,547  shares of its $.01 par value common stock at
       $10.00 per share and was  incorporated for the purpose of becoming a bank
       holding  company.  The Bank  commenced  business on February 5, 2002 upon
       receipt of its  banking  charter  from the Office of the  Comptroller  of
       Currency  ("OCC").  The  Bank  is  primarily  regulated  by the  OCC  and
       undergoes periodic examinations by this regulatory agency. The Company is
       regulated  by the  Federal  Reserve  Bank and also is subject to periodic
       examinations.  The Bank provides a full range of commercial  and consumer
       banking services throughout Bulloch County in Georgia.

       Operations  through February 5, 2002 related primarily to expenditures by
       the organizers for incorporating and organizing the Company.  The Company
       was reported on as a development  stage  corporation for the period ended
       December 31, 2001.

       The accounting  principles  followed by the Company and the Bank, and the
       methods of applying these principles,  conform with accounting principles
       generally  accepted  in the  United  States of  America  (GAAP)  and with
       general  practices in the banking  industry.  In preparing  the financial
       statements  in  conformity  with GAAP,  management  is  required  to make
       estimates  and  assumptions  that  affect  the  reported  amounts  in the
       financial  statements.  Actual  results could differ  significantly  from
       these estimates.  Material  estimates common to the banking industry that
       are  particularly  susceptible  to  significant  change  in the near term
       include,  but are not limited to, the  determination of the allowance for
       loan losses,  the valuation of real estate acquired in connection with or
       in lieu of foreclosure on loans, and valuation allowances associated with
       the realization of deferred tax assets, which are based on future taxable
       income.

       Cash and Cash Equivalents
       -------------------------
       Cash  equivalents  include amounts due from banks and federal funds sold.
       Generally, federal funds are sold for one-day periods.

       Investment Securities
       ---------------------
       The  Company  classifies  its  securities  in  one of  three  categories:
       trading, available-for-sale, or held-to-maturity.  Trading securities are
       bought and held  principally  for the purpose of selling them in the near
       term.  Held-to-maturity  securities  are those  securities  for which the
       Company has the ability and intent to hold until maturity. All securities
       not  included  in  trading  or   held-to-maturity   are   classified   as
       available-for-sale.  At December 31, 2002,  all securities are classified
       as available-for-sale.

       Available-for-sale    securities    are    recorded    at   fair   value.
       Held-to-maturity  securities  are  recorded  at  cost,  adjusted  for the
       amortization  or accretion of premiums or discounts.  Unrealized  holding
       gains  and  losses,   net  of  the  related  tax  effect,  on  securities
       available-for-sale  are  excluded  from  earnings  and are  reported as a
       separate component of shareholders'  equity until realized.  Transfers of
       securities  between  categories are recorded at fair value at the date of
       transfer.

       A   decline   in  the   market   value  of  any   available-for-sale   or
       held-to-maturity  security below cost that is deemed other than temporary
       is charged to earnings and establishes a new cost basis for the security.

       Premiums and  discounts  are  amortized or accreted  over the life of the
       related securities as adjustments to the yield. Realized gains and losses
       for securities classified as available-for-sale  and held-to-maturity are
       included in earnings and are derived  using the  specific  identification
       method for determining the cost of securities sold.

       Other Investments
       -----------------
       Other investments include equity securities with no readily  determinable
       fair value. These investments are carried at cost.



                                      A-18
<PAGE>

                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(1)    Summary of Significant Accounting Policies, continued
       Loans and  Allowance  for Loan Losses
       -------------------------------------
       Interest on loans is  calculated by using the simple  interest  method on
       daily balances of the principal amount outstanding.

       A loan is considered  impaired  when,  based on current  information  and
       events,  it is probable that all amounts due according to the contractual
       terms of the loan  agreement  will not be collected.  Impaired  loans are
       measured  based  on the  present  value of  expected  future  cash  flows
       discounted  at the  loan's  effective  interest  rate,  or at the  loan's
       observable  market price,  or at the fair value of the  collateral of the
       loan  if the  loan  is  collateral  dependent.  Accrual  of  interest  is
       discontinued  on a  loan  when  management  believes,  after  considering
       economic  and  business  conditions  and  collection  efforts,  that  the
       borrower's  financial  condition is such that  collection  of interest is
       doubtful.

       The allowance for loan losses is established through a provision for loan
       losses  charged to expense.  Loans are charged  against the allowance for
       loan losses  when  management  believes  that the  collectibility  of the
       principal is unlikely.  The  allowance  represents  an amount  which,  in
       management's  judgment,  will be  adequate to absorb  probable  losses on
       existing loans that may become uncollectible.

       Management's  judgment in  determining  the adequacy of the  allowance is
       based on evaluations of the  collectibility  of loans.  These evaluations
       take into  consideration such factors as changes in the nature and volume
       of the loan portfolio,  current  economic  conditions that may affect the
       borrower's  ability  to pay,  overall  portfolio  quality  and  review of
       specific problem loans.

       Management believes that the allowance for loan losses is adequate. While
       management  uses  available  information  to  recognize  losses on loans,
       future  additions to the allowance  may be necessary  based on changes in
       economic  conditions.  In addition,  various regulatory  agencies,  as an
       integral  part of their  examination  process,  periodically  review  the
       Bank's  allowance for loan losses.  Such agencies may require the Bank to
       recognize  additions to the allowance  based on judgments  different than
       those of management.

       Premises and Equipment
       ----------------------
       Premises and equipment are stated at cost less accumulated  depreciation.
       Depreciation  is  provided  using  the  straight-line   method  over  the
       estimated useful lives of the assets.  Costs incurred for maintenance and
       repairs are expensed currently.

       Depreciation  expense is computed  over the  following  estimated  useful
       lives:

            Furniture and equipment        5 - 10 years

       Income Taxes
       ------------
       Deferred tax assets and  liabilities  are  recognized  for the future tax
       consequences  attributable to differences between the financial statement
       carrying  amounts of existing assets and liabilities and their respective
       tax bases and operating loss and tax credit  carryforwards.  Deferred tax
       assets and  liabilities  are measured using enacted tax rates expected to
       apply to taxable income in the years in which those temporary differences
       are  expected  to be  recovered  or settled.  The effect on deferred  tax
       assets and  liabilities  of a change in tax rates is recognized in income
       in the period that includes the enactment date.

       In the event the future  tax  consequences  of  differences  between  the
       financial reporting bases and the tax bases of the assets and liabilities
       results in deferred tax assets, an evaluation of the probability of being
       able to realize the future benefits  indicated by such asset is required.
       A valuation  allowance  is provided  for the portion of the  deferred tax
       asset  when it is more  likely  than not that some  portion or all of the
       deferred tax asset will not be realized.  In assessing the  realizability
       of the deferred tax assets,  management considers the scheduled reversals
       of deferred tax  liabilities,  projected  future taxable income,  and tax
       planning strategies.





                                      A-19
<PAGE>


                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(1)    Summary of Significant Accounting Policies, continued
       Line of Credit
       --------------
       Organization,  offering  and  pre-opening  costs,  as well as  costs  for
       modification  of the  buildings,  incurred  prior to opening for business
       were  funded  under a line of  credit.  The  line of  credit,  which  was
       guaranteed by the organizers,  was repaid upon  consummation of the stock
       offering.

       Net Earnings (Loss) Per Share
       -----------------------------
       Earnings  (loss) per share are based on the  weighted  average  number of
       common  shares  outstanding  during  the  period  while  the  effects  of
       potential  common  shares  outstanding  during the period are included in
       diluted  earnings per share.  The  presentation  of earnings per share is
       required on the face of the statement of operations  with and without the
       dilutive  effects of potential  common stock  issuances from  instruments
       such as options, convertible securities and warrants.  Additionally,  the
       reconciliation  of the amounts used in the  computation of both "earnings
       per share" and "diluted earnings per share" is required.

       For  2002,  the  potential   effect  of  outstanding   options  would  be
       anti-dilutive,  and therefore is not presented.  Anti-dilutive  potential
       stock issuances totaled 283,262 at December 31, 2002.

       For 2002 and 2001,  net loss per share is calculated by dividing net loss
       by the  number of  common  shares  sold in the  initial  public  offering
       (919,547), which are considered outstanding for all periods presented.

       Stock-Based Compensation
       ------------------------
       At December  31,  2002,  the Company  sponsors  stock-based  compensation
       plans, which are described more fully in Note 8. The Company accounts for
       these plans  under the  recognition  and  measurement  principles  of APB
       Opinion No. 25,  "Accounting for Stock Issued to Employees",  and related
       Interpretations.  No stock-based employee  compensation cost is reflected
       in net earnings, as all options granted under those plans had an exercise
       price equal to the market  value of the  underlying  common  stock on the
       date of grant. The following table illustrates the effect on net loss and
       loss per share if the  Company  had  applied  the fair value  recognition
       provisions of Statement of Financial  Accounting  Standards  ("SFAS") No.
       123, "Accounting for Stock-Based  Compensation",  to stock-based employee
       compensation for the year ended December 31, 2002.

          Net loss as reported                                  $     (966,423)

          Deduct: Total stock-based employee compensation
            expense determined under fair-value based method
            for all awards                                            (203,084)
                                                                    ----------

          Pro forma net loss                                    $   (1,169,507)
                                                                    ==========
          Basic and diluted loss per share:

            As reported                                         $        (1.05)
                                                                    ==========

            Pro forma                                           $        (1.27)
                                                                    ==========
       Restricted Assets and Subscribers' Deposits
       -------------------------------------------
       Restricted  assets of $7,088,830  at December 31, 2001  consisted of cash
       and represent  amounts  deposited by the Company in  connection  with its
       initial offering.  Subscribers'  deposits  represented  amounts deposited
       with the Company by potential common stockholders.










                                      A-20
<PAGE>


                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(2)    Investment Securities
       Investment  securities  available-for-sale  at  December  31, 2002 are as
       follows:
<TABLE>
<CAPTION>

                                                                         Gross              Gross           Estimated
                                                    Amortized         Unrealized         Unrealized           Fair
                                                       Cost              Gains             Losses             Value
                                                       ----              -----             ------             -----
<S>                                              <C>                     <C>                  <C>           <C>
         U.S. government agencies                $  3,033,586            15,004               701           3,047,889
                                                    =========            ======               ===           =========
</TABLE>


       These U.S.  government  agency securities mature within one to five years
       from December 31, 2002.  Expected  maturities may differ from contractual
       maturities because borrowers have the right to call or prepay obligations
       with or  without  call or  prepayment  penalties.  There were no sales of
       securities available-for-sale during 2002.

 (3)   Loans
       Major  classifications  of loans at December 31, 2002 are  summarized  as
       follows:

              Commercial, financial and agricultural           $     3,787,776
              Real estate - mortgage                                13,702,189
              Real estate - construction                             4,297,996
              Consumer                                               2,359,411
                                                                    ----------
                                                                    24,147,372
              Less:   Allowance for loan losses                        375,000
                                                                    ----------

                                                               $    23,772,372
                                                                    ==========

       The Bank  grants  loans and  extensions  of credit to  individuals  and a
       variety of businesses and corporations  located in its general trade area
       of Bulloch  County,  Georgia.  Although the Bank has a  diversified  loan
       portfolio,  a substantial portion of the loan portfolio is collateralized
       by improved and  unimproved  real estate and is  dependent  upon the real
       estate market.

       The Bank  provided  $375,000 for the year ended  December 31, 2002 to the
       allowance for loan losses for potential problem loans.

(4)    Premises and Equipment
       Major  classifications  of premises and equipment as of December 31, 2002
       and 2001 are summarized as follows:

                                                            2002           2001
                                                            ----           ----
           Land                                       $    604,500       604,500
           Furniture and equipment                         129,247            -
           Construction in process                       1,425,601        55,205
                                                         ---------       -------
                                                         2,159,348       659,705
           Less: Accumulated depreciation                   28,368            -
                                                         ---------       -------

                                                      $  2,130,980       659,705
                                                         =========       =======

      Depreciation expense amounted to $28,368 in 2002.





                                       A-21
<PAGE>



                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(5)    Deposits
       Time deposits in excess of $100,000 totaled $4,697,000 as of December 31,
       2002.

       At  December  31,  2002,  contractual  maturities  of time  deposits  are
       summarized as follows:

               2003                                          $  8,407,515
               2004                                             3,791,739
               2005                                               613,704
               2007                                                 6,025
                                                               ----------
                                                             $ 12,818,983
                                                               ==========

 (6)   Income Taxes
       The  components  of income  tax  expense  (benefit)  for the years  ended
       December 31, 2002 and 2001, are as follows:

                                                             2002         2001
                                                             ----         ----

               Current                                   $        -           -
               Deferred                                     364,575     151,072
               Change in valuation allowance               (364,575)   (151,072)
                                                           --------    --------
                                                         $        -           -
                                                           ========    ========


       The  difference  between  income  tax  expense  (benefit)  and the amount
       computed by applying the statutory federal income tax rate to loss before
       taxes for the years ended December 31, 2002 and 2001, is as follows:

                                                             2002         2001
                                                             ----         ----

               Pretax loss at statutory rate             $ (328,584)   (135,773)
               Change in valuation allowance                364,575     151,072
               Other                                        (35,991)    (15,299)
                                                           --------    --------
                                                         $        -           -
                                                           ========    ========

       The following summarizes the components of deferred taxes at December 31,
       2002 and 2001.

<TABLE>
<CAPTION>
                                                                           2002                 2001
                                                                           ----                 ----
<S>                                                                    <C>
        Deferred income tax assets:
          Allowance for loan losses                                    $   135,530                   -
          Pre-opening expenses                                             136,061              144,480
          Operating loss carryforwards                                     240,044                6,593
          Other                                                              5,191                    -
                                                                          --------              -------

                  Total gross deferred income tax assets                   516,826              151,072
                  Less valuation allowance                                (516,826)            (151,072)
                                                                          --------              -------
                                                                                 -                    -
                                                                          --------              -------

        Deferred income tax liabilities consisting of unrealized
          gains on investment securities available-for-sale                  5,149                    -
                                                                          --------              -------

                  Net deferred income tax liability                    $     5,149                    -
                                                                          ========              =======
</TABLE>



                                      A-22
<PAGE>



                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(6)    Income Taxes, continued
       The future tax  consequences  of the  differences  between the  financial
       reporting and tax basis of the Company's assets and liabilities  resulted
       in a net deferred tax asset. A valuation  allowance was  established  for
       the net  deferred tax asset,  as the  realization  of these  deferred tax
       assets is  dependent  on  future  taxable  income.  The  Company  has net
       operating  loss  carryforwards  totaling  approximately  $628,000  as  of
       December 31, 2002. These net operating loss  carryforwards  will begin to
       expire in 2017.

(7)    Commitments
       The Company has entered into employment agreements with its President and
       Chief Executive Officer, its Chief Financial Officer and its Chief Credit
       Officer,  providing  for initial  terms of three  years.  The  agreements
       provide  for base  salaries,  incentive  bonuses  based on the  Company's
       performance, stock options, and other perquisites commensurate with their
       employment.

       The Bank is a party to financial  instruments with off-balance sheet risk
       in the  normal  course of  business  to meet the  financing  needs of its
       customers and to manage its cost of funds.  These  financial  instruments
       include commitments to extend credit and standby letters of credit. These
       instruments  involve,  to varying  degrees,  elements  of credit  risk in
       excess of the amounts recognized in the consolidated  balance sheets. The
       contract amounts of these  instruments  reflect the extent of involvement
       the Bank has in particular classes of financial 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. Since many of the  commitments
       are expected to expire  without  being drawn upon,  the total  commitment
       amounts do not necessarily  represent future cash requirements.  The Bank
       evaluates each customer's  creditworthiness  on a case-by-case basis. The
       amount  of  collateral  obtained,  if deemed  necessary  by the Bank upon
       extension of credit,  is based on management's  credit  evaluation of the
       counterparty.   The  Bank's  loans  are   primarily   collateralized   by
       residential and other real  properties,  automobiles,  savings  deposits,
       accounts receivable, inventory and equipment.

       Standby letters of credit are written  conditional  commitments issued by
       the Bank to  guarantee  the  performance  of a customer to a third party.
       Those  guarantees  are  primarily  issued to support  public and  private
       borrowing  arrangements.  Most letters of credit extend for less than one
       year.  The  credit  risk  involved  in  issuing   letters  of  credit  is
       essentially  the same as that  involved in extending  loan  facilities to
       customers.

       The Bank'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 amount of
       those  instruments.  The Bank  uses the same  credit  policies  in making
       commitments and conditional  obligations as it does for on-balance  sheet
       instruments.  All standby  letters of credit are secured at December  31,
       2002.

            Financial instruments whose contract amounts
               represent credit risk:
                 Commitments to extend credit                       $ 4,326,000
                 Standby letters of credit                          $    19,000

(8)    Employee and Director Benefit Plans
       The Company  sponsors  an employee  stock  incentive  plan.  The plan was
       adopted for the benefit of directors, key officers and employees in order
       that they may purchase  Company stock at a price equal to the fair market
       value on the date of grant.  A total of 137,770  shares were reserved for
       possible  issuance under the plan. The options vest over one to five-year
       periods and expire after ten years.

       In connection with the Company's formation and initial offering,  188,708
       warrants  for shares were issued to the  organizers.  The  warrants  were
       issued at the  initial  offering  price of $10 per share and vest  evenly
       over a five-year period. The warrants will be exercisable for a period of
       ten years  following  issuance,  but generally no later than three months
       after the holder ceases to serve as a director.







                                      A-23
<PAGE>

                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(8)    Employee and Director Benefit Plans, continued
       The fair value of each  option and  warrant is  estimated  on the date of
       grant  using  the  Minimum   Value   pricing  model  with  the  following
       assumptions:  dividend  yield of 0%; risk free interest rate of 4% and an
       expected life of ten years.

       A summary of activity in the  directors'  warrants and stock option plans
       for the year ended December 31, 2002 is presented below:

                                                                Weighted Average
                                                     Shares      Price Per Share
                                                     ------     ----------------
          Outstanding, beginning of year                   -        $       -
          Granted during the year                    283,262            10.00
                                                     -------            -----

          Outstanding, end of year                   283,262        $   10.00
                                                     =======            =====

       As of December 31,  2002,  no options or warrants  are  exercisable.  The
       weighted average grant-date fair value of warrants and options granted in
       2002  was  $3.19.   Such  options  have  a  weighted  average   remaining
       contractual life of approximately nine years as of December 31, 2002.

 (9)   Shareholders' Equity
       Shares of preferred  stock may be issued from time to time in one or more
       series as  established  by  resolution  of the Board of  Directors of the
       Company,  up to a maximum of 10,000,000  shares.  Each  resolution  shall
       include  the number of shares  issued,  preferences,  special  rights and
       limitations as determined by the Board.

(10)   Related Party Transactions
       The Bank conducts  transactions  with  directors and officers,  including
       companies in which they have a beneficial interest,  in the normal course
       of business.  It is the Bank's policy to comply with federal  regulations
       that  require  that loan and  deposit  transactions  with  directors  and
       executive  officers  be made on  substantially  the  same  terms as those
       prevailing  at the time made for  comparable  loans and deposits to other
       persons. As of December 31, 2002, there were approximately  $5,382,000 of
       related  party  deposits,   including  one  director  with  approximately
       $1,825,000 in deposits. Following is a summary of related party loans:

          New Loans/Advances                                 $   1,550,197
          Less: Repayments                                         509,231
                                                                 ---------

          Balance at December 31, 2002                       $   1,040,966
                                                                 =========

       The Bank is  constructing  its main office  building under a construction
       contract with one of its  directors.  The total amount of the contract is
       $1,681,000  of which  $1,252,000  has been paid or accrued as of December
       31, 2002.  Management  believes that this contract has been negotiated on
       terms competitive in its market.

(11)   Miscellaneous Operating Expenses
       Components  of other  operating  expenses  which are  greater  than 1% of
       interest income and other operating income are as follows:

                                               2002            2001
                                               ----            ----
           Advertising                      $ 70,713               -
           Audits & examinations              34,218          17,289
           Business development               28,734               -
           Mortgage expenditures              23,241               -
           Consulting                         72,000         114,266
           Courier                            15,837               -
           Data processing                   102,739               -
           Dues & memberships                 15,329           4,027
           Legal & professional               32,097          26,277
           Stationery & supplies              42,077           9,341
           Telephone                          18,922           1,004




                                      A-24
<PAGE>

                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(12)   Regulatory Matters
       The  Company  and the Bank are  subject  to  various  regulatory  capital
       requirements  administered  by the federal banking  agencies.  Failure to
       meet minimum  capital  requirements  can initiate  certain  mandatory and
       possibly  additional   discretionary   actions  by  regulators  that,  if
       undertaken,  could  have  a  direct  material  effect  on  the  financial
       statements.   Under  certain  adequacy   guidelines  and  the  regulatory
       framework for prompt corrective action,  specific capital guidelines that
       involve  quantitative  measures of the assets,  liabilities,  and certain
       off-balance  sheet  items  as  calculated  under  regulatory   accounting
       practices must be met. The capital amounts and  classifications  are also
       subject to qualitative judgments by the regulators about components, risk
       weightings, and other factors.

       Quantitative   measures  established  by  regulation  to  ensure  capital
       adequacy require the Company and the Bank to maintain minimum amounts and
       ratios  (set  forth in the table  below) of Total and Tier 1 Capital  (as
       defined in the regulations) to risk-weighted assets (as defined),  and of
       Tier 1 Capital (as defined) to average  assets (as  defined).  Management
       believes, as of December 31, 2002, that the Company and the Bank meet all
       capital adequacy requirements to which they are subject.

       As of December 31, 2002,  the most recent  notification  from the Federal
       Deposit  Insurance  Corporation  categorized the Bank as well capitalized
       under the  regulatory  framework  for  prompt  corrective  action.  To be
       categorized  as well  capitalized,  the Bank must maintain  minimum total
       risk-based,  Tier 1 risk-based and Tier 1 leverage ratios as set forth in
       the  table  below.   There  are  no   conditions  or  events  since  that
       notification that management believes have changed the Bank's category.

       The actual  capital  amounts (in thousands) and ratios as of December 31,
       2002 are also presented in the table below.
<TABLE>
<CAPTION>
                                                                                                        To Be Well
                                                                                                     Capitalized Under
                                                                               For Capital           Prompt Corrective
                                                  Actual                  Adequacy Purposes          Action Provisions
                                                  ------                  -----------------          -----------------
                                            Amount        Ratio          Amount          Ratio       Amount      Ratio
                                            ------        -----          ------          -----       ------      -----
<S>                                      <C>              <C>           <C>                <C>        <C>        <C>
       Total Capital
       (to Risk Weighted Assets)
         Consolidated                    $  8,129         29.23%        $  2,225           8%            N/A       N/A
         Bank                            $  6,117         22.00%        $  2,225           8%       $  2,781       10%

       Tier 1 Capital
       (to Risk Weighted Assets)
         Consolidated                    $  7,754         27.88%        $  1,112           4%            N/A       N/A
         Bank                            $  5,742         20.65%        $  1,112           4%       $  1,669        6%

       Tier 1 Capital
       (to Average Assets)
         Consolidated                    $  7,754         28.18%        $  1,101           4%            N/A       N/A
         Bank                            $  5,742         20.87%        $  1,101           4%       $  1,376        5%
</TABLE>


       Dividends paid by the Bank are the primary  source of funds  available to
       the Company.  Banking  regulations limit the amount of dividends that may
       be paid  without  prior  approval of the  regulatory  authorities.  These
       restrictions are based on the level of regulatory  classified assets, the
       prior  years'  net  earnings,  and the ratio of equity  capital  to total
       assets. The Bank is currently not allowed to pay dividends to the Company
       until it becomes cumulatively profitable.






                                      A-25
<PAGE>


                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued


(13)   First Southern Bancorp (Parent Company Only) Financial Information

<TABLE>
<CAPTION>
                                 Balance Sheets

                           December 31, 2002 and 2001


                                                                                                     2002           2001
                                                                                                     ----           ----
                                                             Assets
                                                             ------
<S>                                                                                            <C>                   <C>
Cash and interest-bearing deposits                                                              $  2,011,978         51,628
Restricted cash                                                                                            -      7,088,830
Deferred offering costs                                                                                    -         69,472
Premises and equipment                                                                                     -        659,705
Investment in Bank                                                                                  5,756,441             -
                                                                                                    ---------     ---------

                                                                                                $   7,768,419     7,869,635
                                                                                                    =========     =========

                                        Liabilities and Shareholders' Equity (Deficit)
                                        ----------------------------------------------
Other liabilities                                                                               $          50             -
Subscribers deposits                                                                                        -     7,088,830
Line of credit                                                                                              -     1,180,037
Shareholders' equity (deficit)                                                                      7,768,369      (399,232)
                                                                                                    ---------     ---------

                                                                                                $   7,768,419     7,869,635
                                                                                                    =========     =========
</TABLE>


<TABLE>
<CAPTION>
                            Statements of Operations

                 For the Years Ended December 31, 2002 and 2001


                                                                                                     2002           2001
                                                                                                     ----           ----

<S>                                                                                                    <C>          <C>
Interest expense                                                                                $           -        19,122
Other operating expense                                                                                13,710       380,210
                                                                                                    ---------     ---------

Loss before equity in
   undistributed loss of Bank                                                                          13,710       399,332

Equity in undistributed loss of Bank                                                                  952,713             -
                                                                                                    ---------     ---------

Net loss                                                                                        $     966,423       399,332
                                                                                                    =========     =========
</TABLE>










                                      A-26
<PAGE>


                             FIRST SOUTHERN BANCORP

              Notes to Consolidated Financial Statements, continued

(13)    First Southern Bancorp (Parent Company Only) Financial Information,
        continued

<TABLE>
<CAPTION>
                            Statements of Cash Flows

                 For the Years Ended December 31, 2002 and 2001

                                                                                                     2002           2001
                                                                                                     ----           ----

<S>                                                                                             <C>                <C>
Cash flows from operating activities:
   Net loss                                                                                     $    (966,423)     (399,332)
   Adjustments to reconcile net loss to net cash
     used by operating activities:
       Equity in undistributed loss of Bank                                                           952,713             -
       Change in other                                                                                     50             -
                                                                                                   ----------     ---------

                Net cash used by operating activities                                                 (13,660)     (399,332)
                                                                                                   ----------     ---------

Cash flows from investing activities:
   Capital infusion into Bank                                                                      (6,040,295)            -
   Purchase of premises and equipment                                                                       -      (659,705)
                                                                                                   ----------     ---------

                Net cash used by investing activities                                              (6,040,295)     (659,705)
                                                                                                   ----------     ---------

Cash flows from financing activities:
      Proceeds from sale of common stock                                                            9,195,470           100
      Repayment of organizational share of stock                                                         (100)            -
      Deferred offering costs                                                                          (1,028)      (69,472)
      Change in line of credit                                                                     (1,180,037)    1,180,037
                                                                                                   ----------     ---------

                Net cash provided by financing activities                                           8,014,305     1,110,665
                                                                                                   ----------     ---------

Net increase in cash                                                                                1,960,350        51,628

Cash at beginning of period                                                                            51,628             -
                                                                                                   ----------     ---------

Cash at end of year                                                                             $   2,011,978        51,628
                                                                                                   ==========     =========

Supplemental schedule of noncash financing and investing activities:
   Change in net unrealized gain on securities available-for-sale                               $       9,154             -
   Transfer of building and equipment to Bank                                                   $     659,705             -

Supplemental disclosures of cash flow information:
   Cash paid during the year for interest                                                       $           -        19,122


</TABLE>








                                      A-27
<PAGE>


                      CORPORATE AND SHAREHOLDER INFORMATION

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                     DIRECTORS
----------------------------------------------------------------------------------------------------------------------------------


<S>                                                  <C>                                          <C>
Michael R. Anderson                                  Charles A. Deal                             William I. Griffis
President                                            Owner and Senior Partner                    President
Bulloch Fertilizer Company, Inc.                     Cross Creek Farms                           Georgia Southern University
                                                                                                  Foundation, Inc.
                                                                                                 Director of Development
                                                                                                 Georgia Southern University

Tracy D. Ham                                         James A. High, DDS                          W. Pratt Hill, III
Head Football Coach                                  Orthodontist                                Partner
Clark Atlanta University                                                                         Lee, Hill & Johnston, Insurers
President
Hambone Enterprises

Michael R. Kennedy                                   R. Whitman Lord, O.D.                       Laura T. Marsh
President                                            President                                   Partner
Kennedy Industries, Inc.                             Lord Eye Centers, Inc.                      Franklin, Taulbee, Rushing,
                                                                                                  Snipes & Marsh, P.C.

Jeffrey D. Pope                                      Ronnie J. Pope                              Hudson J. Powell, Sr., DMD
President and Co-Owner                               President                                   General Dentistry
Pope Construction Co., Inc.                          R.J. Pope Traditional Menswear, Inc.
                                                      and Cobblers Bench, Inc.

Lamar O. Reddick                                     Devra P. Walker, CPA                        L. Anthony Waters, III
Retired Business Owner                               Business Owner                              Business Owner
Lamar O. Reddick & Associates                        Walker Pharmacy & Gift Shop,                L.A. Waters Furniture, Co., Inc.
                                                      Little Doses Children's Wear,
                                                      The Wash Room and
                                                      The Triple Play Cafe, LLC
F. Thomas David
President and Chief Executive Officer
First Southern Bancorp
President and Chief Executive Officer
First Southern National Bank
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                      OFFICERS
----------------------------------------------------------------------------------------------------------------------------------

OFFICERS

<S>                                                  <C>                                          <C>
F. Thomas David                                      Charles R. Fennell, Jr.                     Christopher T. Cliett
President and Chief Executive Officer                Chief Financial Officer                     Chief Credit Officer

</TABLE>



A copy of Company's 2002 Annual Report on Form 10-KSB, filed with the Securities
and Exchange  Commission,  is available  at no charge to each  shareholder  upon
written request to F. Thomas David,  President and CEO, First Southern  Bancorp,
201 South Main Street, Statesboro, Georgia 30458.



                                      A-28


<PAGE>

Item 7.  Financial Statements
-----------------------------

     In response to this Item, the information is contained under Item 6 of this
report for the year ended December 31, 2002.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------

     None.

Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
---------------------------------------------------------------------------
Compliance  with Section 16(a) of the Exchange Act
--------------------------------------------------

     The following sets forth certain information regarding First Southern
Bancorp's executive officers and directors as of March 26, 2003. Our articles of
incorporation provide for a classified board of directors, so that, as nearly as
possible, one-third of the directors are elected each year to serve three-year
terms. The terms of office of the classes of directors expire as follows: Class
II at the 2003 annual meeting of shareholders, Class III at the 2004 annual
meeting of shareholders, and Class I at the 2005 annual meeting of shareholders.
Our executive officers serve at the discretion of our board of directors.

Name                               Age         Position
----                               ---         --------

Michael R. Anderson                38          Class II Director
Christopher T. Cliett              42          Chief Credit Officer
F. Thomas David                    53          Class I Director, President, and
                                               Chief Executive Officer
Charles A. Deal                    62          Class II Director
Charles R. Fennell, Jr.            34          Chief Financial Officer
William I. Griffis                 56          Class I Director
Tracy D. Ham                       39          Class III Director
James A. High                      56          Class II Director
W. Pratt Hill, III                 53          Class III Director
Michael R. Kennedy                 62          Class II Director
R. Whitman Lord                    50          Class I Director
Laura T. Marsh                     32          Class I Director
Jeffrey D. Pope                    40          Class I Director
Ronnie J. Pope                     59          Class III Director
Hudson J. Powell, Sr.              49          Class II Director
Lamar O. Reddick                   63          Class III Director
Devra P. Walker                    42          Class II Director
L. Anthony Waters, III             44          Class III Director

     Michael R. Anderson, Class II director since our inception in April 2001,
is a Bulloch County native. For the past 10 years, he has served as the
President of Bulloch Fertilizer Company, Inc., a company which supplies
fertilizer and farm supplies to persons involved in agricultural businesses in
Bulloch and surrounding counties. Mr. Anderson graduated from the University of
Georgia in 1988 with a B.S.A. in Agricultural Economics and a B.B.A. in Finance.
Mr. Anderson presently serves on the Board of Directors of the Development
Authority of Bulloch County and on the Board of Directors of Excelsior Electric
Membership Corporation. He is the Past President of the Statesboro/Bulloch




                                       15
<PAGE>

County Chamber of Commerce and is a past member of the Board of Directors of
Bulloch Academy. Mr. Anderson is also an active member of the Statesboro Rotary
Club and First Baptist Church of Statesboro.

     Christopher T. Cliett, Organizer, is the Senior Vice President and Chief
Credit Officer of First Southern Bancorp and First Southern National Bank. He
has over 18 years of banking experience, most recently serving as City President
of BB&T Swainsboro, Georgia from November 1994 until June 2001. During his
employment with BB&T, Mr. Cliett was responsible for loan portfolio management,
asset and liability management, and the overall performance of the office. Prior
to employment with BB&T, he was employed by Bank South, Macon from May 1996
until November 1994 in numerous operational, management, and lending capacities.
Prior to employment with Bank South, Macon, he was employed by the Farm Credit
Service in Vidalia, Georgia from March 1983 until May 1986 in numerous
operational, management, and lending capacities.

     Mr. Cliett graduated from the University of Georgia in 1983 with a Bachelor
of Science in Agricultural Economics degree. He is also a graduate of the
Louisiana State University Bankers School of the South and the Georgia Banking
School. Mr. Cliett served as a director of the Emanuel County Chamber of
Commerce, Trustee of the East Georgia College Foundation, and he is also a Past
Chairman of the Emanuel County United Way. Mr. Cliett has also been involved in
many civic organizations and work with many youth sports programs as a coach.
Mr. Cliett is a member of the Holy Family Catholic Church of Metter, Georgia.

     F. Thomas David, Class I director since our inception in April 2001, is the
Chief Executive Officer and President of First Southern Bancorp and the First
Southern National Bank. He has over 25 years of banking experience with Synovus
Financial Corp. where he retired from Sea Island Bank in 1997. He served as Vice
Chairman of Sea Island Bank in Statesboro from 1993 until 1996 and was President
from 1996 until his retirement in December of 1997. From 1972 until 1993, he was
employed with Columbus Bank & Trust Company, beginning as a Management Associate
and spending his career in lending and sales. In 1984, he was appointed
Executive Vice President over all Retail and Commercial Banking Operations,
which included all areas of the bank except Trust and Finance. His
responsibilities included the supervision and oversight of the bank's corporate
banking, correspondent and affiliate banking, marketing, commercial lending,
loan administration, branch operations and credit cards. During his career, Mr.
David has served on the Board of Directors of six different banks.

     Mr. David graduated from the University of Georgia in 1972 with a Bachelor
of Business Administration degree. He is also a graduate of the Louisiana State
University Bankers School of the South and was an instructor of the Georgia
Bankers Association Commercial Lending School. Mr. David presently serves on the
Board of Trustees of Georgia Southern University Foundation and the Ogeechee
Technical College Foundation. He is the Chairman of the Board of East Georgia
Regional Medical Center, serves as a governing Board member of Ogeechee
Technical College, and is on the Board of the Rotary Club of Statesboro. Mr.
David is the immediate Past President and founder of the Technical College
Foundation Association of Georgia, a statewide organization. Mr. David is a
recipient of the Deen Day Smith Service to Mankind Award and is an active member
of the First United Methodist Church of Statesboro, where he serves on the
Staff/Parish Committee and is an Alpha Team coordinator. He is a past member of
the church's Administrative Board and Finance Committee.

     Charles A. Deal, Class II director since our inception in April 2001, is a
lifelong resident of Bulloch County, Georgia. Since 1973, Mr. Deal has owned and
operated a livestock feed business and is presently owner and senior partner of
Cross Creek Farms, an agricultural family partnership. Mr. Deal was instrumental
in organizing Bulloch Gin, Inc., a large cotton gin, and serves as a charter
member of its Board of Directors. Mr. Deal also helped organize and presently
serves as the charter Vice President of FiberMax Cotton Association, a national
cotton marketing cooperative. For the past five years, Mr. Deal has served as a
director for Coastal Conservation of Georgia and on the Bulloch County Zoning
Board. He has been an active member in numerous civic organizations and has
served as President of the Bulloch County Farm Bureau, President of the Bulloch
County Livestock Association, Charter President of Bulloch County Young Farmers
and director of State of Georgia Young Farmers Association. He has also served
on the Board of Trustees for Pinewood Christian Academy, on the Board of the
Bulloch County Twenty-Year Land Use Planning Commission and advisor for the
Bulloch County-Statesboro Chamber of Commerce Agri-Business Committee. Mr. Deal
attended Georgia Southern College. Mr. Deal has been married for 41 years and
has four children and 10 grandchildren. He has been a member of the Nevils
United Methodist Church for 42 years where he has served as Chairman of the
Administrative Board, Chairman of Trustees and Sunday School Superintendent. Mr.
Deal was selected as State of Georgia Young Farmer of the Year in 1971, Bulloch
County Farmer of the Year in 1971, and Bulloch County Farm Family of the Year in
1989.



                                       16
<PAGE>

     Charles R. ("Bo") Fennell, Jr., is the Chief Financial Officer of First
Southern Bancorp and First Southern National Bank. Mr. Fennell graduated
Statesboro High School in 1987 with honors and graduated Georgia Southern
University in 1992 with a BBA in public accounting. While at Georgia Southern,
Mr. Fennell was the captain of the golf team in 1990 - 1991 and was an
All-American in 1990. After college, he played professional golf until 1995.
From 1996 until 2001 he was with Eagle Bank and Trust, where he most recently
served as its Chief Financial Officer. Mr. Fennell remains active in the
community where he has worked with the Georgia Southern Boosters, Statesboro
High School Boosters, the GSU golf committee (chairman), Relay for Life, the
Community Bankers Association Leadership Division, and First Baptist Church.

     William I. Griffis, CPA, CSRP, Class I director and Chairman of the Board
since our inception in April 2001, is the President of Georgia Southern
Foundation, Inc., and he is also Director of Development at Georgia Southern
University. Mr. Griffis is a Certified Public Accountant, Certified Specialist
in Retirement Planning and a Registered Investment Advisor. In 1998, Mr. Griffis
retired as President and Chief Executive Officer from the T.J. Morris Company
following 25 years of service. He graduated in 1969 from Georgia Southern
University with a BBA in Accounting and received the Georgia Southern University
College of Business Alumnus of the Year Award in 1993. Mr. Griffis has served as
the President of the Statesboro Rotary Club, President of Forest Heights Country
Club, President of the Georgia Wholesale Grocers Association, Chairman of the
Georgia Food Industry Association, President of the Georgia Southern University
National Alumni Association, Chairman of the Georgia Southern University
Athletic Boosters Association, and Vice President and executive member of the
local Chamber of Commerce. Mr. Griffis is also a past member of the Board of
Directors of Habitat for Humanity and currently works with the local Habitat
Home Shop. He also serves as Chairman of the Schenkel EZ/Go Collegiate Golf
Invitational, one of the top collegiate golf tournaments in the country. Mr.
Griffis attends First Baptist Church of Statesboro.

     Tracy D. Ham, Class III director since our inception in April 2001, is the
head football coach at Clark Atlanta University. Since 1994, Mr. Ham has served
as the President of Hambone Enterprises, a marketing firm. Since 1995, Mr. Ham
has also served as the Vice President of TNT Enterprises, an entity specializing
in the ownership, development and management of commercial property. In 1986,
Mr. Ham received a Bachelor of Science degree in Recreation from Georgia
Southern University. In 1985 and 1986, Mr. Ham served as quarterback of Georgia
Southern University's two-time National Championship collegiate football team.
He played professional football in the Canadian Football League (CFL) from 1987
until 1999. During his time in the CFL, Mr. Ham was a member of the CFL Players'
Association from 1992 until 1999 and was a member of the CFL Pension Board from
1994 until 1999. Mr. Ham donates his time to several charitable organizations,
including the Children's Hospital in Macon, Georgia, Bethesda Home for Boys in
Savannah, Georgia, the Special Olympics, and the March of Dimes. Mr. Ham is a
member of the Whitesville Full Gospel Baptist Church where he serves as a
deacon, teacher, and member of the church Financial Committee.

     James A. High, D.D.S., Class II director since our inception in April 2001,
has been in the private practice of orthodontics in Statesboro since 1975. He
graduated from Emory University as a member of the class of 1968 with a B.S. in
Biology and received his D.D.S. degree from Emory University School of Dentistry
in 1971. After two years in the private practice of general dentistry in Millen,
Georgia, he entered the orthodontic residency program at Medical College of
Georgia where he received his orthodontic training from 1973 until 1975. Dr.
High is active in local, state and national dental and orthodontic organizations
and is board certified in the specialty of orthodontics. At the Medical College
of Georgia School of Dentistry, where he has taught part time since 1987, he
holds the rank of Assistant Clinical Professor of Orthodontics. Dr. High is Past
President of the Statesboro Rotary Club and is a 1990 recipient of the Deen Day
Smith Service to Mankind Award. Dr. High is active in numerous civic and
community affairs and is a member of Statesboro United Methodist Church where he
serves as a lay liturgist, Sunday School teacher, member of Methodist Men, and
promoter of the Alpha program. He is a member of the Schenkel EZ/Go Collegiate
Golf Invitational Tournament Committee and he is also a part of the Dayspring
Emmaus Community.

     Walker Pratt Hill, III, Class III director since our inception in April
2001, is a partner in the insurance agencies Lee, Hill & Johnston in Statesboro
and Lee, Hill & Rowe in Savannah, Georgia. From 1973 until 1980, Mr. Hill worked
with the C & S National Bank in Savannah. Mr. Hill was then employed by First
Bulloch Bank & Trust Co. in Statesboro from 1980 until 1982, prior to entering
the insurance business. Mr. Hill is a 1972 graduate of Georgia Southern College
and attended Banking School at the University of Oklahoma. Mr. Hill served as a
founding member and Past President of Joseph's Home for Boys in Statesboro and
has also been an active member of the Red Cross Board of Directors, the Bulloch
County Chamber of Commerce, the Georgia Chamber of Commerce, and the



                                       17
<PAGE>

Statesboro Rotary Club. He is a Past President of Forest Heights Country Club
and has served on the club's board for the past 10 years. Mr. Hill is past
Chairman of the Statesboro High School Capital Fund Drive and is a member of the
Statesboro High School Hall of Fame. Mr. Hill is currently a member of the Sigma
Chi Alumni Association and serves on the Board of Directors for the Georgia
Southern University Athletic Boosters and the Schenkel E-Z/Go Collegiate Golf
Invitational Tournament. He attends St. Matthew's Catholic Church in Statesboro.

     Michael R. Kennedy, Class II director since our inception in April 2001,
has served for the last 20 years as President of Kennedy Industries, Inc., a
multi-faceted masonry supply and trucking company with ownership interests in 12
ready-mixed concrete plants. Mr. Kennedy is past president of the Georgia
Concrete and Products Association and served as chairman of the Southeastern
United States Promotion Committee for the National Ready Mixed Concrete
Association. Mr. Kennedy attended Emory at Oxford College and graduated from
Georgia Southern College in 1963. He has been an active member and has served on
the Board of Directors of the Rotary Club of Statesboro, Statesboro-Bulloch
County Chamber of Commerce, Forest Heights Country Club, Southeast Georgia
United Way, Homebound Services, Bulloch Academy, Georgia Southern University
Foundation, Georgia Southern University Boosters, and the Statesboro Georgia
Southern Symphony Association. Mr. Kennedy has also served on the advisory
boards of Georgia Southern University's College of Science and Technology,
Department of Building and Construction Technology, and Georgia Southern
University's Botanical Garden. He has also served on the board of trustees for
Ogeechee Technical College. He is a member and elected elder of the First
Presbyterian Church of Statesboro.

     R. Whitman Lord, O.D., Class I director since our inception in April 2001,
is an optometrist and President of Lord Eye Centers, Inc., a five-location
optometric/optical business with locations in Statesboro, Savannah, Rincon and
Brunswick, Georgia. Lord Eye Centers, Inc. is the largest privately held
business in the optometric/optical field in the State of Georgia and has been in
operation since 1978. Dr. Lord serves on the editorial board of "Optometric
Management Magazine," the nation's most widely read optometric business
publication, and is on advisory panels to some of the nation's largest contact
lens manufacturers. He has served on the Georgia State Board of Examiners in
Optometry since being appointed by Governor Zell Miller in 1992. He was a
principal in Peach State Eye Care, LLC, formerly known as Southern States Eye
Care, LLC, a limited liability company based in Atlanta that contracted with
HMO's for vision care for covered lives. At the time the company sold
substantially all of its assets in April of 2000, Peach State Eye Care, LLC, had
contracts covering more than 400,000 persons. Dr. Lord is a member of the
Statesboro Rotary Club and the Chatham Club in Savannah. He is a member of First
United Methodist Church of Statesboro.

     Laura Taulbee Marsh, Class I director since our inception in April 2001, is
a partner with the law firm of Franklin, Taulbee, Rushing, Snipes & Marsh, P.C.,
in Statesboro, Georgia. She is admitted to practice law in the State of Georgia
and the State of New York. She graduated from Florida State University in 1992
with a Bachelor of Science degree in Finance. In 1995, Mrs. Marsh obtained her
juris doctorate degree, magna cum laude, from the University of Georgia School
of Law, where she served on the Editorial Board of the Georgia Law Review and
was a member of the school's championship Intrastate and National Moot Court
Teams. She was also a member of the Moot Court Executive Board, Order of the
Coif, Order of Barristers, Phi Kappa Phi, and Blue Key. Prior to returning to
Statesboro in 1998, Mrs. Marsh was employed from 1995 until 1997 as a corporate
attorney specializing in mergers and acquisitions with the New York City law
firm of Sullivan & Cromwell. She then spent a year as an investment banker and
counsel to the capital markets trading group at Lehman Brothers Inc. in New
York. Mrs. Marsh is a member of First United Methodist Church of Statesboro and
a board member and fundraising chairman of the Statesboro Service League. She
was a 2000 recipient of the Deen Day Smith Service to Mankind Award, is a member
of the local alumni chapter of Delta Delta Delta and currently serves on the
board of directors for the local chapter of the American Heart Association. Mrs.
Marsh is a founding director of The Boys & Girls Club of Bulloch County, Inc.

     Jeffrey D. Pope, Class I director since our inception in April 2001, is
President and co-owner of Pope Construction Co., Inc., a general contracting
firm engaged in commercial construction and having its principal place of
business in Statesboro. Mr. Pope graduated from Georgia Southern University in
1985 with a Bachelor of Science degree in Civil Engineering Technology. From
1988 until 1997, Mr. Pope served as Vice President of Pope Construction Co.,
Inc., prior to his appointment to President in 1997. As an officer of Pope
Construction Co., Inc., he has been involved in numerous real estate development
projects including the development of retail, office, industrial, educational,
and religious facilities. Mr. Pope has served on the Georgia Southern University
advisory board for the Department of Building and Construction Technology and
serves on several state and local game and fish boards. Mr. Pope is also a youth
softball coach. Jeffrey D. Pope is the nephew of one of our directors, Ronnie J.
Pope.



                                       18
<PAGE>

     Ronnie J. Pope, Class III director since our inception in April 2001,
established R.J. Pope Traditional Menswear, Inc. and Cobblers Bench, Inc. in
1978. Mr. Pope presently serves as President of both corporations, which engage
in the operation of retail specialty stores. Mr. Pope has served as President of
the Georgia Southern University Athletic Boosters Association, President of the
Downtown Merchants Association, and President of Bulloch Academy Boosters Club.
He has served as a member of the Georgia Southern University Foundation Board,
the Statesboro-Bulloch County Recreation Department, the Statesboro Downtown
Development Authority, the Statesboro/Bulloch County Chamber of Commerce, the
Board of Trustees of Bulloch Academy, and an officer of the Statesboro High
School Quarterback Club. Mr. Pope is an active supporter of youth sports and
serves as both a coach and sponsor. He is also a participant in the
Statesboro-Bulloch County Empty Stocking Drive. Mr. Pope is a member of Pittman
Park United Methodist Church, where he formerly served as Chairman of the
Pastor-Parish Relations Committee and presently serves on the Finance Committee.
Ronnie J. Pope is the uncle of one of our directors, Jeffrey D. Pope.

     Hudson J. Powell, Sr., D.M.D., Class II director since our inception in
April 2001, has been engaged in the private practice of general dentistry in
Statesboro for the past 23 years. Dr. Powell is a lifelong resident of Bulloch
County. He graduated magna cum laude from Georgia Southern College in 1975, with
a B.S. in Biology. Dr. Powell was a member of Phi Delta Theta fraternity and, in
1975, was named Greek Man of the Year by the G.S.C. Interfraternity Council. In
1978, Dr. Powell was awarded his Doctorate of Medicine in Dentistry from the
Medical College of Georgia School of Dentistry. During his senior year, he
received the International College of Dentists Award. Dr. Powell is a member of
the American Dental Association and various other local, state, and national
dental groups. He has served as a delegate to the Georgia Dental Association
from the Southeastern District Dental Society. In 1992, Dr. Powell was selected
as a member of the Georgia Academy of Dental Practice and now serves on its
Executive Board of Directors. He is actively involved in the Statesboro United
Methodist Church, where he has held several leadership positions including
Chairman of the Administrative Board. He has also attended the Dayspring Emmaus
Community. Dr. Powell is also active in several local civic and community
groups, as a member of the Statesboro Rotary Club and the Bulloch
County/Statesboro Chamber of Commerce. He served on the Executive Board of
Georgia Southern University Athletic Boosters. Dr. Powell has served as
Co-Chairman of the Statesboro High School Academic Booster Club and is currently
Vice President of the Statesboro High School Athletic Booster Club. In 1992, he
was selected for the Statesboro High School Athletic Hall of Fame. Mr. Powell is
the brother-in-law of one of our directors, L. Anthony Waters, III.

     Lamar O. Reddick, Class III director since our inception in April 2001, has
been the owner of Lamar O. Reddick & Associates, a land surveying firm, since
1963. Mr. Reddick is a registered land surveyor in Georgia and South Carolina.
He has extensive real estate experience and holds an interest in several real
estate properties in Statesboro and Bulloch County. Mr. Reddick graduated from
Southern Technical Institute in 1960 with a degree in Civil Engineering
Technology. He has been elected County Surveyor every term since 1965. Mr.
Reddick has been active in numerous business and civic activities, having served
as State President of the Surveying and Mapping Society of Georgia and President
of the Statesboro Rotary Club. Mr. Reddick in an active member of the Statesboro
Rotary Club, the Statesboro Homebuilder's Association, the Statesboro/Bulloch
County Chamber of Commerce, Georgia Southern University Athletic Boosters, the
Surveying and Mapping Society of Georgia, the American Congress on Surveying and
Mapping, the National Association of County Surveyors, the National Society of
Professional Surveyors, and 1906 Society of Georgia Southern University. He is a
recipient of the Deen Day Smith Service to Mankind Award and is an active member
of Pittman Park United Methodist Church, where he has served on several
committees, including most recently as Chairman of the Administrative Board.

     Devra P. Walker, CPA, Class II director since our inception in April 2001,
is co-owner of Walker Pharmacy & Gift Shop, Little Doses Children's Wear, The
Wash Room, and The Triple Play Cafe, LLC in Statesboro. In 1983, Mrs. Walker
graduated from the University of Georgia, summa cum laude, with a Bachelor of
Business Administration degree in Accounting. She received her Master of
Accountancy degree with an emphasis in taxation from the University of Georgia
in 1984, and was awarded the Tax Research Award. Mrs. Walker is a Certified
Public Accountant and practiced with the accounting firm of Dabbs, Hickman, Hill
& Cannon from 1984 until 1993, where she was a tax manager. From 1993 until the
present time, she has worked with her husband in the operation of Walker
Pharmacy & Gift Shop, Little Doses Children's Wear, The Wash Room, and The
Triple Play Cafe, LLC, and handles the financial and purchasing aspects of all
four businesses. She is Past President of the Southeast Georgia Chapter of the
Georgia Society of Certified Public Accountants, and is a member of the American
Institute of CPAs and the Georgia Society of CPAs. She serves on the board of
the Ogeechee Soccer League and is the treasurer of the local Delta Delta Delta
alumni chapter. She is a member of the Statesboro Service League and is involved
in numerous



                                       19
<PAGE>

school, community, and civic organizations. Mrs. Walker is an active member of
the Statesboro Primitive Baptist Church.

     L. Anthony Waters, III, Class III director since our inception in April
2001, is a Bulloch County native and co-owner of L.A. Waters Furniture Co.,
Inc., a 67 year old furniture retailer with two retail stores in Statesboro.
L.A. Waters Furniture Co., Inc. also operates seven furniture and appliance
rental stores in south Georgia doing business under the name Rentown. Mr. Waters
is a partner in Waters Properties, LLP and L.A. Waters Partnership, LLP,
respectively, both of which are Georgia limited liability partnerships which own
and lease residential, farm, and commercial property. Mr. Waters is presently
Chairman of the Board and Past President of the Georgia Home Furnishing
Association. Mr. Waters is also a member of the Board of Directors of the
Georgia Retail Association and was recently named as the 2000-2001 Georgia
Retailer of the Year. Mr. Waters is a graduate of Georgia Southern University
where he received a BBA degree in Accounting in 1982. He is very active in
community affairs and serves on the Board of Trustees of the Georgia Southern
University Foundation and the Statesboro Regional Library. In addition, Mr.
Waters is a member and former Director of the Statesboro Rotary Club and the
Statesboro/Bulloch County Chamber of Commerce. Mr. Waters is an active member of
the First United Methodist Church of Statesboro where he serves on the
Administrative Board, the church's Financial Committee, and as a lay liturgist.
Mr. Waters is the brother-in-law of one of our directors, Hudson J. Powell, Sr.

     We do not have a class of securities registered under Section 12 of the
Securities Exchange Act of 1934, therefore our directors, executive officers,
promoters and control persons are not required to comply with Section 16(a) of
the Exchange Act.


Item 10.  Executive Compensation
--------------------------------

     The following table shows the cash compensation we paid to our Chief
Executive Officer and President for the years ended December 2002 and 2001. None
of our other executives earned total annual compensation, including salary and
bonus, in excess of $100,000 in 2002.

<TABLE>
<CAPTION>
                           Summary Compensation Table

                                                                            Long Term
                                                                            ---------
                                                                          Compensation
                                                                          ------------
                                                                              Awards
                                           Annual Compensation (1)            ------
                                           -------------------
                                                                         Number of Securities
Name and Principal Position           Year     Salary       Bonus         Underlying Options
---------------------------           ----     ------       -----       ---------------------
<S>                                   <C>     <C>            <C>               <C>
F. Thomas David                       2002    $115,200          -              45,977 (2)
   Chief Executive Officer            2001    $ 72,000 (3)      -                   -
     and President

<FN>
(1) Executive officers of the company also received indirect compensation in
the form of certain perquisites and other personal benefits. The amount of such
benefits received in the fiscal year by each named executive officer did not
exceed the lesser of either $50,000 or 10% of the executive's annual salary and
bonus.

(2) In addition to his stock options, Mr. David received an additional 25,050
warrants as an organizer in connection with his purchase of common stock in our
initial offering.

(3) We paid a company wholly owned by our President and Chief Executive Officer,
F. Thomas David, to provide consulting and organizational services $72,000 in
2001.
</FN>
</TABLE>




                                       20
<PAGE>

Employment Agreements

     F. Thomas David We entered into an employment agreement with F. Thomas
David for a three-year term which is extended automatically at the end of each
year for an additional year so that the remaining term continues to be three
years, pursuant to which he serves as the president, chief executive officer,
and a director of both our company and our subsidiary bank. Mr. David is paid an
initial salary of $115,200, plus his yearly medical insurance premium. He shall
receive an annual increase in his salary equal to the previous year's salary
times the increase in the Consumer Price Index during the previous year. The
board of directors may increase Mr. David's salary above this level, but not
below it. He is entitled to receive an annual bonus of up to 5% of the net
pre-tax income of our bank, if the bank meets performance goals set by the
board. He is eligible to participate in any management incentive program of the
bank or any long-term equity incentive program and is eligible for grants of
stock options and other awards thereunder. At our first annual meeting of
shareholders held on September 26, 2002, we adopted the First Southern Bancorp
2002 Stock Incentive Plan. Under this plan, Mr. David was granted options to
purchase a number of shares of common stock equal to 5% of the number of shares
sold in this offering, or 45,977 shares. These options vest over a five-year
period beginning on the first anniversary of our bank's opening date of February
5, 2002 and have a term of ten years. Additionally, Mr. David participates in
the bank's retirement, welfare, and other benefit programs and is entitled to a
life insurance policy and an accident liability policy and reimbursement for
automobile expenses, club dues, and travel and business expenses.

     Mr. David's employment agreement also provides that following termination
of his employment and for a period of 24 months thereafter, he may not (a)
compete with the company, the bank, or any of its affiliates by, directly or
indirectly, forming, serving as an organizer, director or officer of, or
consultant to, or acquiring or maintaining more than 1% passive investment in, a
depository financial institution or holding company thereof if such depository
institution or holding company has one or more offices or branches within radius
of thirty miles from the main office of the company or any branch office of the
company, (b) solicit major customers of the bank for the purpose of providing
financial services, or (c) solicit employees of the bank for employment. If Mr.
David terminates his employment for good cause as that term is defined in the
employment agreement or if he is terminated following a change in control of the
bank as defined in the agreement, he will be entitled to severance compensation
of his then current monthly salary for a period of 24 months, plus accrued
bonus, and all outstanding options and incentives shall vest immediately.

Director Compensation

     We do not intend to pay our directors fees until the bank is profitable.
However, following completion of our initial public offering in February 2002,
we granted an option to our Chairman of the Board, William I. Griffis, to
purchase 9,195 shares of common stock. This option has an exercise price of
$10.00 per share and vests equally over a five year period. We reserve the right
to pay our directors' fees or compensate them through other means such as stock
options.

Option Grants In Last Fiscal Year

     Pursuant to the First Southern Bancorp 2002 Stock Incentive Plan, approved
by our shareholders on September 26, 2002, we may grant options for up to
137,932 shares to our officers, directors, and employees. The following options
were issued to named executive officers in 2002.

<TABLE>
<CAPTION>
                                        Number of          Percent of
                                        Securities        Total Options     Exercise or
                                        Underlying         Granted to        Base Price
                                          Options         Employees in      (Dollars per    Expiration
                                          Granted          Fiscal Year         Share)          Date
                                        ----------        ------------      ------------    -----------

<S>                                       <C>                 <C>              <C>           <C>
         F. Thomas David                  45,977              48.7%            $10.00        02/2012

</TABLE>



                                       21
<PAGE>

<TABLE>
<CAPTION>
Aggregated Option Exercises and Year-End Option Values

                                   Number of Unexercised Securities            Value of Unexercised In-the-Money
                              Underlying Options at Fiscal year End (#)        Options at Fiscal Year End ($)(1)
                              -----------------------------------------        ---------------------------------
Name                            Exercisable           Unexercisable            Exercisable          Unexercisable
----                            -----------           -------------            -----------          -------------
<S>                                <C>                    <C>                       <C>                   <C>
F. Thomas David                    20,336                 50,691                   -0-                   -0-


<FN>
(1) The values shown equal the difference between the exercise price of
unexercised in-the-money options and the closing market price ($10.00) of the
underlying common stock at December 31, 2002. If the closing market price is
less than the exercise price, we assume that the value is zero. Options are
in-the-money if the fair market value of the common stock exceeds the exercise
price of the option.
</FN>
</TABLE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

     The following table shows how much of our common stock is owned by the
directors, certain executive officers, and owners of more than 5% of the
outstanding common stock, as of March 26, 2003. In addition, each organizer
received a warrant to purchase one share of common stock at a purchase price of
$10.00 per share for every two shares purchased by that organizer in the
offering, or 193,875 shares. The warrants, which will be represented by separate
warrant agreements, will vest over a three year period beginning one year from
the date of completion of the offering and will be exercisable in whole or in
part during the ten year period following that date. The mailing address for
each beneficial owner is care of First Southern Bancorp, 201 South Main Street,
Statesboro, Georgia 30158.

<TABLE>
<CAPTION>
                                             Amount and Nature of                                 Percentage of
       Name                                Beneficial Ownership(1)       Right to Acquire             Class
       ----                                -----------------------       ----------------         -------------
<S>                                                 <C>                      <C>                        <C>
       Michael R. Anderson                          10,300                   1,030                      1.23%
       Christopher T. Cliett                        25,140                   5,346                      3.30%
       F. Thomas David                              50,300                  20,336                      7.52%
       Charles A. Deal                              22,500                   2,250                      2.68%
       Bo Fennell                                    2,000                   3,879                         *%
       William I. Griffis                           25,000                   3,506                      3.09%
       Tracy D. Ham                                 10,750                   1,075                      1.28%
       James A. High                                12,500                   1,250                      1.49%
       W. Pratt Hill, III                           25,000                   2,500                      2.98%
       Michael R. Kennedy                           12,500                   1,250                      1.49%
       R. Whitman Lord                              40,000                   4,000                      4.76%
       Laura T. Marsh                                8,000                     800                         *%
       Jeffrey D. Pope                              67,000                   6,700                      7.95%
       Ronnie J. Pope                               27,500                   2,750                      3.28%
       Hudson J. Powell, Sr.                        10,000                   1,000                      1.19%
       Lamar O. Reddick                             13,500                   1,350                      1.61%
       Devra P. Walker                              10,500                   1,050                      1.25%
       L. Anthony Waters, III                       16,400                   1,640                      1.96%

       All directors and executive
       officers as a group (18 persons)            388,890                  61,712                     45.92%

---------------------------------
* Indicates less than 1% ownership


                                       22
<PAGE>
<FN>
(1)   Includes shares for which the named person: o has sole voting and
      investment power,

      o has shared voting and investment power with a spouse or other person, or

      o holds in an IRA or other retirement plan program, unless otherwise
        indicated in these footnotes.

      The table does not include shares that may be acquired by exercising
      options or warrants because no options or warrants are exercisable within
      the next 60 days.

(2)   Includes shares that may be acquired within the next 60 days by
      exercising stock options or warrants that vest during that time, but
      does not include any other stock options or warrants.

(3)   Determined by assuming the named person exercises all options and
      warrants which he or she has the right to acquire within 60 days, but
      that no other persons exercise any options or warrants.
</FN>
</TABLE>


Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

     We have entered into a construction contract with Pope Construction Co.,
Inc., a company affiliated with Mr. Jeffrey D. Pope, one of our
directors, to construct our main office building. The total amount of the
contract is $1,681,000, of which $1,252,000 has been paid or accrued as of
December 31, 2002. We believe that this contract has been negotiated on terms
competitive in our market. This contract was approved by the disinterested
members of our board of directors.

     We enter into banking and other transactions in the ordinary course of
business with our directors, and officers and their affiliates. It is our
policy, that these transactions be on substantially the same terms (including
price, or interest rates and collateral) as those prevailing at the time for
comparable transactions with unrelated parties. We do not expect these
transactions to involve more than the normal risk of collectibility or present
other unfavorable features to us. Loans to individual directors and officers
must also comply with our bank's lending policies, regulatory restrictions, and
statutory lending limits, and directors with a personal interest in any loan
application will be excluded from the consideration of such loan application. We
intend for all of our transactions with organizers or other affiliates to be on
terms no less favorable than could be obtained from an unaffiliated third party
and to be approved by a majority of our disinterested directors.

Item 13. Exhibits, List and Reports on Form 8-K
-----------------------------------------------

(a)    The following documents are filed as part of this report:

3.1.   Articles of Incorporation (incorporated by reference as Exhibit 3.1 to
       the Company's Form SB-2 filed with the SEC, File No. 333-66734).

3.2.   Bylaws (incorporated by reference as Exhibit 3.2 to the Company's Form
       SB-2 filed with the SEC, File No. 333-66734).

4.1.   See Exhibits 3.1 and 3.2 for provisions in First Southern Bancorp's
       Articles of Incorporation and Bylaws defining the rights of holders of
       the common stock (incorporated by reference as Exhibit 4.1 to the
       Company's Form SB-2 filed with the SEC, File No. 333-66734).

4.2.   Form of certificate of common stock (incorporated by reference as Exhibit
       34.2 to the Company's Form SB-2 filed with the SEC, File No. 333-66734).

10.1.  Employment Agreement between First Southern Bancorp and F. Thomas David
       effective as of the opening date of First Southern National Bank
       (incorporated by reference as Exhibit 10.1 to the Company's Form SB-2
       filed with the SEC, File No. 333-66734).

10.2.  Employment Agreement between First Southern Bancorp and Christopher T.
       Cliett effective as of June 1, 2001 (incorporated by reference as Exhibit
       10.2 to the Company's Form SB-2 filed with the SEC, File No. 333-66734).

10.3.  Employment Agreement between First Southern Bancorp and Charles R.
       Fennell effective as of June 1, 2001 (incorporated by reference as
       Exhibit 10.3 to the Company's Form SB-2 filed with the SEC, File No.
       333-66734).

10.4.  Form of Stock Warrant Agreement (incorporated by reference as Exhibit
       10.4 to the Company's Form SB-2 filed with the SEC, File No. 333-66734).

21.1   Subsidiaries of the Company



                                       23
<PAGE>

24.1   Power of Attorney (contained as part of the signature page hereof).

(b)    Reports on Form 8-K
       -------------------

       We filed a Form 8-K on November 12, 2002 to disclose that the Chief
Executive Officer, F. Thomas David, and the Chief Financial Officer, Charles R.
Fennell, Jr., each furnished to the SEC the certification required pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

Item 14. Controls and Procedures.
--------------------------------

     Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in 17
C.F.R. Sections 240.13a-14(c) and 240.15d-14(c)). Based on this evaluation, our
principal executive officer and principal financial officer concluded that the
effectiveness of such controls and procedures are adequate to timely alert them
to material information required to be included in our periodic SEC reports. The
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.

     In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.




                                       24
<PAGE>


                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       FIRST SOUTHERN BANCORP


Date:   March 28, 2003              By: /s/ F. Thomas David
       -------------------             ------------------------------------
                                       F. Thomas David
                                       President and Chief Executive Officer


     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints F. Thomas David and Charles R. Fennell, Jr. as
the true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
     Registration Statement has been signed by the following in the capacities
     and on the dates indicated.

Signature                         Title                         Date
---------                         ------                        ----

/s/ Michael R. Anderson            Director                     March 28, 2003
-------------------------------
Michael R. Anderson


/s/ F. Thomas David                President, and               March 28, 2003
-------------------------------
F. Thomas David                    Chief Executive Officer


/s/ Charles A. Deal                Director                     March 28, 2003
-------------------------------
Charles A. Deal


/s/ Charles "Bo" R. Fennell, Jr.   Principal Financial and      March 28, 2003
--------------------------------
Charles "Bo" R. Fennell, Jr.       Accounting Officer


/s/ William I. Griffis             Director                     March 28, 2003
--------------------------------
William I. Griffis


 /s/ Tracy D. Ham                  Director                     March 28, 2003
--------------------------------
Tracy D. Ham


 /s/ James A. High                 Director                     March 28, 2003
--------------------------------
James A. High


                                       25
<PAGE>


/s/ W. Pratt Hill, III             Director                     March 28, 2003
--------------------------------
W. Pratt Hill, III


 /s/ Michael R. Kennedy            Director                     March 28, 2003
--------------------------------
Michael R. Kennedy


 s/ R. Whitman Lord                Director                     March 28, 2003
--------------------------------
R. Whitman Lord


 /s/ Laura T. Marsh                Director                     March 28, 2003
--------------------------------
Laura T. Marsh


 /s/ Jeffrey D. Pope               Director                     March 28, 2003
--------------------------------
Jeffrey D. Pope


 /s/ Ronnie J. Pope                Director                     March 28, 2003
--------------------------------
Ronnie J. Pope


 /s/ Hudson J. Powell, Sr.         Director                     March 28, 2003
--------------------------------
Hudson J. Powell, Sr.


 /s/ Lamar O. Reddick              Director                     March 28, 2003
--------------------------------
Lamar O. Reddick


 /s/ Devra P. Walker               Director                     March 28, 2003
--------------------------------
Devra P. Walker


 /s/ L. Anthony Waters, III        Director                     March 28, 2003
--------------------------------
L. Anthony Waters, III







                                       26
<PAGE>






                                  Certification

I, F. Thomas David, certify that:

1. I have reviewed this annual report on Form 10-KSB of First Southern Bancorp;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: March 28, 2003

                                        /s/ F. Thomas David
                                       -------------------------------
                                       F. Thomas David
                                       President and Chief Executive Officer


                                       27
<PAGE>


                                  Certification

I, Charles R. Fennell, certify that:

1.   I have reviewed this annual report on Form 10-KSB of First Southern
     Bancorp;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)   designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

b)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

c)   presented in this annual report our conclusions about the effectiveness of
     the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

a)   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: March 28, 2003
                                        /s/ Charles R. Fennell
                                       -------------------------------
                                       Charles R. Fennell
                                       Chief Financial Officer


                                       28
<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number                     Description
------                     -----------

3.1.   Articles of Incorporation (incorporated by reference as Exhibit 3.1 to
       the Company's Form SB-2 filed with the SEC, File No. 333-66734).

3.2.   Bylaws (incorporated by reference as Exhibit 3.2 to the Company's Form
       SB-2 filed with the SEC, File No. 333-66734).

4.1.   See Exhibits 3.1 and 3.2 for provisions in First Southern Bancorp's
       Articles of Incorporation and Bylaws defining the rights of holders of
       the common stock (incorporated by reference as Exhibit 4.1 to the
       Company's Form SB-2 filed with the SEC, File No. 333-66734).

4.2.   Form of certificate of common stock (incorporated by reference as Exhibit
       34.2 to the Company's Form SB-2 filed with the SEC, File No. 333-66734).

10.1   Employment Agreement between First Southern Bancorp and F. Thomas David
       effective as of the opening date of First Southern National Bank
       (incorporated by reference as Exhibit 10.1 to the Company's Form SB-2
       filed with the SEC, File No. 333-66734).

10.2   Employment Agreement between First Southern Bancorp and Christopher T.
       Cliett effective as of June 1, 2001 (incorporated by reference as Exhibit
       10.2 to the Company's Form SB-2 filed with the SEC, File No. 333-66734).

10.3   Employment Agreement between First Southern Bancorp and Charles R.
       Fennell effective as of June 1, 2001 (incorporated by reference as
       Exhibit 10.3 to the Company's Form SB-2 filed with the SEC, File No. 333-
       66734).

10.4   Form of Stock Warrant Agreement (incorporated by reference as Exhibit
       10.4 to the Company's Form SB-2 filed with the SEC, File No. 333-66734).

21.1   Subsidiaries

24.1   Power of Attorney (contained as part of the signature page hereof).



                                       29