# Exhibit 13

New Commerce BanCorp
2003 Annual Report

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# Exhibit 13

# NEW COMMERCE BANCORP

# 2003 ANNUAL REPORT

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# TABLE OF CONTENTS

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Dear Fellow Shareholders,
Clients, and Friends:

New Commerce BanCorp and its wholly
owned subsidiary New Commerce Bank experienced significant growth in both earnings and
assets in 2003. Earnings increased to $85,794 which is more than twice the earnings of
2002. Basic earnings per share increased to $0.09 per share from $0.04 per share in 2002.
We believe that the growth of 2003 provides momentum to continue our growth in 2004.

Total assets increased $21.4 million
to $85.0 million at December 31, 2003. Our loan portfolio increased 51% to $58.1 million
at year end 2003 which was supported by corresponding deposit growth of 51% to $71.9
million at year end 2003.

Our performance is attributable to
three key factors. Our team of bankers is very experienced in delivering excellent client
service and is highly motivated to grow the number of financial service relationships at
our company. Our strategic plan has proven to be a good road map to growth and success.
Finally, the economy in the greater Greenville area and specifically the Golden Strip
market has been significantly stronger than the national economy and conducive to growing
the company.

We are encouraged by the results of
2003 and look forward to adding more individual, professional, and small business
relationships as we work towards being recognized as the community financial service
provider of choice in the Golden Strip area of Greenville County.

Thank you for your support, your
business, and your friendship. If we can be a resource to you in providing financial
services, please let us know.

Best regards,

|                                                   | 
|-------------------------------------------------- | 
|/s/ Marshall J. Collins, JrMarshall J. Collins, Jr | 
|Chairman of the Board of Directors                 | 

1

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Financial Highlights

The following table sets forth
certain selected financial data concerning New Commerce BanCorp and subsidiary as of and
for the years ended December 31, 2003, 2002, 2001, 2000 and 1999. This information should
be read in conjunction with the consolidated financial statements, the notes thereto and
Managements Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere in this report. (Dollar amounts are in thousands,
except per share data.)

|                                          | 2003 | 2002 | 2001 | 2000   | 1999(1)
|----------------------------------------- | ---- | ---- | ---- | ------ | -------
|Summary of Operations:                    |      |      |      |        |        
|Net interest income                       |      |      | $    | 2,259  |        
|Provision for loan losses                 |      |      |      | 272    |        
|Non-interest income                       |      |      |      | 647    |        
|Non-interest expense                      |      |      |      | 2,498  |        
|                                          |      |      |      |        |        
|Income (loss) before income tax provision |      |      |      | 136    |        
|(benefit)(2)                              |      |     
|Income tax provision (benefit)            |      |      |      | 50     |        
|                                          |      |      |      |        |        
|Net income (loss)                         |      |      | $    | 86     |        
|                                          |      |      |      |        |        
|                                          |      |     
|Per Share Data:                           |      |     
|Basic earnings (loss) per share           |      |      | $    | 0.09   |        
|Diluted earnings (loss) per share         |      |      |      | 0.08   |        
|Book value per share of common stock      |      |      |      | 8.67   |        
|                                          |      |      |      |        |        
|                                          |      |     
|Balance Sheet Data:                       |      |     
|Total assets                              |      |      | $    | 85,044 |        
|Federal funds sold                        |      |      |      | 5,614  |        
|Investment securities                     |      |      |      | 14,140 |        
|Net loans                                 |      |      |      | 57,318 |        
|Total earning assets                      |      |      |      | 78,230 |        
|Deposits                                  |      |      |      | 71,876 |        
|Federal Home Loan Bank advances           |      |      |      | 3,750  |        
|Other short-term borrowings               |      |      |      | -      |        
|Shareholders' equity                      |      |      |      | 8,669  |        
|                                          |      |     
|Other Data:                               |      |     
|Net interest margin                       |      |      |      | 3.61   | %      
|Gross loans to deposits - average         |      |      |      | 87.30  |        
|Allowance for loan losses to loans        |      |      |      | 1.25   |        
|Net charge-offs to average loans          |      |      |      | 0.08   |        
|Nonperforming assets                      |      |      |      | 0.92   |        
|Shareholders equity to total assets       |      |      |      | 10.19  |        
|Capital ratios (Bank only):               |      |     
|Tier 1 risk-based capital                 |      |      |      | 10.50  |        
|Total risk-based capital                  |      |      |      | 11.56  |        
|Leverage ratio                            |      |      |      | 9.44   |        

|(1) | Partial year data as the Company commenced business on May 17, 1999.
|--- | --------------------------------------------------------------------

|(2) | Loss before income tax provision for 2001 included $122,670 in costs associated
          with the change in Chief Executive Officers.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

2

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# MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis is
intended to assist the reader in understanding the financial condition and results of
operations of New Commerce BanCorp and subsidiary. This commentary should be read in
conjunction with the financial statements and the related notes and other statistical
information included in this report.

# FORWARD-LOOKING
STATEMENTS

This report contains
forward-looking statements relating to, without limitation, future economic
performance, plans and objectives of management for future operations, and projections of
revenues and other financial items that are based on the beliefs of management, as well as
assumptions made by and information currently available to management. The words
may, will, anticipate, should,
would, believe, contemplate, expect,
estimate, continue, may, and intend, as
well as other similar words and expressions of the future, are intended to identify
forward-looking statements. Our actual results may differ materially from the results
discussed in the forward-looking statements, and our operating performance is subject to
various risks and uncertainties that are discussed in detail in our filings with the
Securities and Exchange Commission, including, without limitation:

| | 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 | 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 | 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 | 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.
| | - | --------------------------------------------------------------------------------------------------------------------

3

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# OVERVIEW

New Commerce BanCorp was incorporated
in South Carolina on July 22, 1998 to operate as a bank holding company pursuant to the
Federal Bank Holding Company Act of 1956 and the South Carolina Bank Holding Company Act,
and to own and control all of the capital stock of New Commerce Bank, a nationally
chartered commercial bank. New Commerce Bank conducts a general banking business in the
Golden Strip area of Greenville, South Carolina. The bank currently has two full-service
offices and provides banking services to individuals and businesses, including accepting
demand and time deposits and making commercial and consumer loans.

# SIGNIFICANT ACCOUNTING
POLICIES

We have adopted various accounting
policies which govern the application of accounting principles generally accepted in the
United States in the preparation of our financial statements. Certain accounting policies
involve significant judgments and assumptions by management. These judgments have a
material impact on the carrying value of certain assets and liabilities. Management
judgments and assumptions are based on historical experience and other factors, which are
believed to be reasonable under the circumstances. Because of the nature of these
judgments, actual results could differ and could have a material impact on the carrying
values of assets and liabilities and the results of operations. We believe that the
allowance for loan losses methodology represents a significant accounting policy, which
requires the most critical judgments and estimates used in preparation of our consolidated
financial statements. Refer to the Results of Operations  Provision for Loan
Losses as well as the Balance Sheet Review  Loans and Allowance for Loan
Losses discussions below.

# OFF-BALANCE SHEET RISK

In the ordinary course of business,
we are a party to various contractual commitments not reflected on our balance sheet.
These instruments represent unfunded commitments, not outstanding balances. Therefore, the
risk associated with these financial instruments is referred to as off-balance sheet
risk. Financial instruments with off-balance sheet risk that we have outstanding
consist of (1) commitments to extend credit and (2) standby letters of credit. Both
involve elements of credit and interest rate risk not reflected on the balance sheet. We
use the same credit and collateral policies in making these commitments as we do for
on-balance sheet instruments.

Commitments to extend credit are
legally binding agreements to lend money to a customer as long as there is no violation of
any material condition established in the contract. All of our commitments have
predetermined interest rates and fixed expiration dates. At December 31, 2003, our
commitments to extend credit totaled approximately $10.2 million and all represented the
unfunded portion of equity, working capital and general lines of credit. The unfunded
portion had the same contractual terms reflected in the original note and security
agreement. Approximately 28% of our total commitments had expiration dates of one year or
less, while those expiring after one year through five years accounted for approximately
23% of the total. Those expiring after five years approximated 49% of the total. The
majority of the commitments expiring after five years represented available balances on
equity lines of credit.

At December 31, 2003, our outstanding
standby letters of credit totaled $120,093 with expiration dates of one year or less.
These letters of credit are assurances to third parties that they will not incur a loss if
our customer fails to meet its contractual obligation. Past experience indicates that many
of these commitments to extend credit will expire unused. However, as described in
Liquidity Management below, we believe that we have adequate sources of
liquidity to meet these obligations should the need arise. We are not involved in any
other off-balance sheet contractual relationships or transactions, which could result in
liquidity needs or impact earnings significantly nor do we have unconsolidated related
entities.

4

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# RESULTS OF OPERATIONS

# Overview

Net income for the year ended
December 31, 2003 was $85,794, or $0.08 per diluted share, compared to net income of
$37,528, or $0.04 per diluted share, for the year ended December 31, 2002. This was a
$48,266, or $0.04 per diluted share, improvement in the net income and diluted earnings
per share, respectively, over the prior year. This improvement in our earnings resulted
primarily from an increase in the volume of earning assets and an increase in non-interest
income. These factors which increased earnings were offset partially by a decrease in our
net interest margin.

Net income for the year ended
December 31, 2002 was $37,528, or $0.04 per diluted share, compared to net loss of
$187,957, or $0.19 diluted per share, for the year ended December 31, 2001. This was a
$225,485 or $0.23 per share, improvement in the net income and diluted earnings per share,
respectively, over the prior year. This improvement in our earnings resulted primarily
from an increase in the volume of earning assets, an increase in non-interest income, and
the absence of the one-time expenses associated with our change in chief executive
officers, which was approximately $81,000 (after taxes) in the year ended December 31,
2001.

# Net Interest Income

The largest component of our income
is net interest income, the difference between the income earned on assets and the
interest expense on deposits and borrowings used to support such assets. Net interest
margin is determined by dividing the annual net interest income by average earning assets.

For the year ended December 31, 2003,
net interest income was $2.26 million, which represented a 15% increase from $1.97 million
earned in the year ended December 31, 2002. The improvement in 2003 was attributable
principally to an increase in the volume of earning assets, particularly in loans, and a
decrease in the rate paid on our interest-bearing liabilities. The increase in the volume
of earning assets was offset partially by an increase in the volume of interest-bearing
liabilities, as well as a decrease in the yield on our earning assets. Net interest margin
for 2003 was 3.61% compared to 4.06% in 2002.

For the year ended December 31, 2002,
net interest income was $1.97 million, which represented a 20% increase from $1.64 million
earned in the year ended December 31, 2001. The improvement in 2002 was attributable
principally to an increase in the volume of earning assets, particularly in loans, and a
decrease in the rate paid on our interest-bearing liabilities. The increase in the volume
of earning assets was offset partially by an increase in the volume of interest-bearing
liabilities, as well as a decrease in the yield on our earning assets. Net interest margin
for 2002 was 4.06% compared to 4.13% in 2001.

See further details of the changes in
and components of net interest income following under the headings: Interest
Income, Interest Expense, Average Balances, Yields, and
Rates, and Rate/Volume Analysis.

# Interest Income

Interest income totaled $3.28 million
in 2003 compared to $2.97 million in 2002, an increase of 10%. This increase resulted from
the net effect of increased outstanding balances and a decrease in the yield of earning
assets. Average earning assets were $62.5 million for 2003, with an average yield of
5.24%. In 2002, average earning assets and average yield were $48.5 million and 6.12%,
respectively.

5

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Loan interest income for the year
ended December 31, 2003 totaled $2,580,516, compared to $2,055,409 in 2002. The annualized
average yield on loans was 5.40% in 2003, compared to 6.32% in 2002. The decrease in yield
in 2003 as compared to 2002 is primarily the result of the impact of decreases in prime
rate in 2003 and late 2002 on our variable rate loan portfolio. In addition, our variable
rate loan portfolio has increased to 76% of total loans at December 31, 2003 as compared
to 72% at December 31, 2002. Due to the lower interest-rate risk inherent in variable-rate
loans, their yield is on average less than that of fixed-rate loans. Turnover in our fixed
rate portfolio also has contributed to the decrease in yield, as the yield on fixed rate
loans now reflect the decreases in interest rates in 2001, 2002, and 2003. Average
balances of loans increased to $47.8 million during the year ended December 31, 2003, an
increase of $15.3 million over the average of $32.5 million during the year ended December
31, 2002. The increase in average balances offset the impact of the decrease in yield on
interest income.

Interest earned on investment
securities amounted to $655,917 in 2003 as compared to $876,674 earned in 2002, a decrease
of $220,757. The decrease resulted from a decrease in the amount of investment securities
held on average during 2003 as well as a decrease in their average yield. The average
balance of investment securities was $12.6 million in 2003, a decrease of $1.8 million
from the average balance of $14.4 million in 2002. Investment securities yielded 5.20%
during the year ended December 31, 2003, compared to 6.09% during the previous year. This
difference resulted from the effect of sales of securities held in the portfolio during
2003 and 2002 that had a higher yield than the average yield on the balance of the
portfolio. In some cases, new securities with lower yields were purchased with proceeds of
the sales. Also, accelerated principal repayments on mortgage-related securities have
resulted in the lowering of our yield on investment securities as the proceeds of the
repayments have been reinvested at lower current rates. Further, accelerated principal
repayments on mortgage-related securities have accelerated the amortization of purchase
premiums, which in turn have lowered their yields. The accelerated principal repayments on
mortgage-related securities are largely the result of the refinancing of the underlying
mortgages due to the current lower prevailing mortgage interest rates. See
Non-Interest Income for further discussion of sales of investment securities.

Interest income totaled $2.97 million
in 2002 compared to $3.10 million in 2001, a decrease of 4%. This decrease resulted from
the net effect of a decrease in the yield and increased outstanding balances of earning
assets. Average earning assets were $48.5 million for 2002, with an average yield of
6.12%. In 2001, average earning assets and average yield were $39.7 million and 7.76%,
respectively.

The yield on our loan portfolio
during 2002 was 6.32%, down from 8.04% in 2001. This was principally the result of the
impact of the lower prime rate in effect for 2002, which decreased 475 basis points over
the course of 2001. The prime rate was further lowered 50 basis points in November 2002.
Not only did the actual lowering of the prime rate impact both the yield on variable-rate
and fixed-rate loans in our loan portfolio, the proportion of variable-rate loans to total
loans increased to 72% of total loans at December 31, 2002 as compared to 63% at December
31, 2001. The average balance of loans during 2002 was $32.5 million compared to $24.2
million in 2001, an increase of $8.3 million which served to offset the decrease in yield.

The yield on our investment portfolio
during 2002 was 6.09%, down from 7.44% in 2001. This decrease resulted from certain
callable investment securities being called in 2001 and reinvested at lower yields that
were in effect for the entire year of 2002. Also, the proceeds from sales of investment
securities and principal repayments received on mortgage-backed securities in 2002 were
reinvested at lower rates.

# Interest Expense

Interest expense totaled $1.02
million in 2003 compared to $1.00 million in 2002. This increase resulted from the effect
of increased outstanding balances of interest-bearing liabilities, offset partially by a
decrease in their average cost. Average interest-bearing liabilities were $52.4 million
with an average cost of 1.94% in 2003, compared to $40.7 million and 2.45%, respectively
in 2002.

6

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Interest expense on deposits totaled
$881,887 in 2003 compared to $861,469 in 2002. Average interest-bearing deposits were
$47.8 million with an average cost of 1.85% in 2003, compared to $35.3 million and 2.44%,
respectively in 2002. The decrease in cost resulted from decreases in rates paid on all
accounts due the continued declining interest rate environment of 2003.

Interest expense totaled $1.00
million in 2002 compared to $1.44 million in 2001. This decrease resulted from the effect
of a decrease in the average cost of interest-bearing liabilities, offset partially by
increased outstanding balances. Average interest-bearing liabilities were $40.7 million
with an average cost of 2.45% in 2002, compared to $32.8 million and 4.40%, respectively
in 2001.

Interest expense on deposits totaled
$861,469 in 2002 compared to $1,290,640 in 2001. Average interest-bearing deposits were
$35.3 million with an average cost of 2.44% in 2002, compared to $29.0 million and 4.45%,
respectively in 2001. The decrease in cost in 2002 also resulted from decreases in rates
paid on all accounts due to the declining interest rate environment of 2002. Interest
expense on repurchase agreements decreased due to a decrease in the rates paid, which was
2.35% in 2002 as compared to 4.02% in 2001.

# Average Balances, Yields
and Rates

The following table presents average
earning assets and interest-bearing liabilities, net interest income and margin, and
weighted average yields and rates on earning assets and interest-bearing liabilities for
the years ended December 31, 2003 and 2002. Yields and rates are derived by dividing
annual income or expense by the average balance of the corresponding asset or liability.

|                                 | 2003 | 2002
|-------------------------------- | ---- | ----
|
|
|Earning assets:                  |      |     
|Loans                            |      |     
|Investment securities            |      |     
|Federal funds sold               |      |     
|FHLB and FRB stock               |      |     
|                                 |      |     
|Total interest-earning assets    |      |     
|                                 |      |     
|Non-earning assets               |      |     
|                                 |      |     
|Total assets                     |      |     
|                                 |      |     
|Interest-bearing liabilities:    |      |     
|Deposits:                        |      |     
|Interest checking                |      |     
|Savings accounts                 |      |     
|Money market accounts            |      |     
|Time deposits                    |      |     
|Repurchase agreements            |      |     
|                                 |      |     
|FHLB advances                    |      |     
|                                 |      |     
|Federal funds purchased          |      |     
|                                 |      |     
|Total interest-bearing           |      |     
|liabilities                      |      |     
|                                 |      |     
|Non-interest-bearing liabilities |      |     
|                                 |      |     
|Total liabilities                |      |     
|                                 |      |     
|Net interest income and margin   |      |     
|                                 |      |     

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# Rate/Volume Analysis

Net interest income can be analyzed
in terms of the impact of changing rates and changing volume. The table below shows the
effect which varying levels of earning assets and interest-bearing liabilities and
associated yields and rates had on net interest income for 2003 and 2002. Changes in
rate/volume were allocated to both in their proportions to the absolute value of each.

|                              | 2003 compared to 2002 | 2002 compared to 2001
|----------------------------- | --------------------- | ---------------------
|
|
|
|
|
|Earning assets:               |                       |                      
|Loans                         |                       |                      
|Investment securities         |                       |                      
|Federal funds sold            |                       |                      
|FHLB and FRB stock            |                       |                      
|                              |                       |                      
|Total earning assets          |                       |                      
|                              |                       |                      
|Interest-bearing liabilities: |                       |                      
|Deposits:                     |                       |                      
|Interest checking             |                       |                      
|Savings accounts              |                       |                      
|Money market accounts         |                       |                      
|Time deposits                 |                       |                      
|Repurchase agreements         |                       |                      
|FHLB advances                 |                       |                      
|Federal funds purchased       |                       |                      
|                              |                       |                      
|Total interest-bearing        |                       |                      
|liabilities                   |                       |                      
|                              |                       |                      
|Net interest income           |                       |                      
|                              |                       |                      

# Provision for Loan Losses

The provision for loan losses is the
charge to operating earnings that we believe to be necessary to maintain the allowance for
loan losses at an adequate level. The amount charged to the provision is based on a review
of past-due loans and delinquency trends, actual losses, classified and criticized loans,
loan portfolio growth, concentrations of credit, economic conditions, historical
charge-off activity and internal credit risk ratings. Loan charge-offs and recoveries are
charged or credited directly to the allowance. The provision for loan losses was $271,632,
$110,093, and $117,745 for the years ended December 31, 2003, 2002 and 2001, respectively.
See Balance Sheet Review  Loans and Allowance for Loan Losses.

8

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# Non-Interest Income

Non-interest income for the year
ended December 31, 2003 was $647,018, an increase of $238,606, or 58% compared to $408,412
in 2002. The largest component of this increase is the increase in service charges on
deposit accounts which was $243,740 in 2003 compared to $130,953 in 2002, an increase of
$112,787. This increase is the result of increased deposit account fees associated with
the growth in deposit accounts and fee income attributable to the implementation of an
overdraft protection product on our checking accounts during 2003. Mortgage brokerage
income was $220,283 in 2003 compared to $142,267 in 2002, an increase of $78,016. This
increase was indicative of the refinancing and purchase money activity associated with the
continued declining interest rate environment that existed in much of 2003. Gain on sale
of investments was $125,261 in 2003 compared to $87,826 in 2002, an increase of $37,435
over the prior year. We sell securities from time to time for various reasons including
liquidity needs, changes in credit quality, and market valuation factors. Since the
principal purpose of our investment portfolio is liquidity management and not to derive
income from trading activity, we consider securities gains as nonrecurring items.
Currently, we have no plans to sell additional securities.

Non-interest income for the year
ended December 31, 2002 was $408,412, an increase of $165,298, or 68%, over the $243,114
in 2001. Service charges on deposit accounts in 2002 totaled $130,953 as compared to
$78,031 in 2001. The increase in service charge income was primarily the result of the
growth in deposit balances in 2002. The second largest component of the increase in
non-interest income was a gain of $87,826 from the sale of investment securities. Also
contributing to the increase in non-interest income was mortgage brokerage income of
$142,267, which increased by $30,638 in 2002 as compared to $111,629 in 2001. This
increase was the result of increased refinancing and purchase money activity associated
with the declining interest rate environment in 2002.

# Non-Interest Expense

Non-interest expense for the year
ended December 31, 2003 was $2,498,519, compared to $2,206,868 in the previous year. The
largest component of this increase of $291,651, or 13%, was in salaries and benefits which
is the largest component of non-interest expense. Salaries and benefits increased by
$139,226 to $1,354,672 in 2003 from $1,215,446 in 2002. This increase is the result of
annual raises and the hiring of additional staff since the prior year as well as an
increase in commissions paid on mortgage loan originations in 2003 due to increased
mortgage origination income as previously discussed. Marketing increased by $44,322 to
$80,371 in 2003 from $36,049 in 2002. This increase is the result of the retention of a
marketing consultant who assisted us in developing new marketing material and several
print media and direct mail marketing campaigns. Other expense increased by $53,871 to
$374,392 in 2003 from $320,521 in 2002, which was due principally to expenses related to
start-up costs, administrative costs, and losses associated with the overdraft protection
product implemented in 2003, increased accounting and auditing expenses, and other
increases associated with the growth of the Company.

Non-interest expense for the year
ended December 31, 2002 and 2001 was $2,206,868 and $2,046,387, respectively. The increase
of $160,481, or 8%, in 2002 consisted principally of increases in salaries and benefits,
occupancy, and other operating categories of non-interest expense and a decrease in chief
executive officer transition costs.

9

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For the year ended December 31, 2002,
salaries and benefits amounted to $1,215,446, compared to $1,051,144 in 2001. This
increase of $164,302, or 16%, was attributable to the hiring of a senior lending officer
in March 2002, the hiring of a retail banking manager in April 2002, increased
compensation of our chief executive officer, increased commissions to our mortgage loan
originator, normal merit pay increases during the year, and an increase in our medical
insurance premium. The compensation increase was slightly offset by the absence of the
salary of our chief financial officer for approximately two months. However, that
reduction of salary was offset by payments for contracted services for interim accounting
staff until a new chief financial officer was hired. Those costs are included in other
expenses further discussed below.

Occupancy costs for 2002 totaled
$355,956, compared to $318,256 in 2001. This increase of $37,700, or 12%, was attributable
to increased costs of maintenance contracts on our banking equipment, increased property
taxes, increased depreciation on banking equipment, and increased maintenance and repairs.
Other operating expenses increased by $68,182, or 27%, to $320,521 in 2002 from $252,339
in 2001. This increase consisted principally of contracted services for interim accounting
staff, a loss recorded on equipment as the result of upgrading certain hardware and
software, and increased costs associated with internal auditing.

# BALANCE SHEET REVIEW

At December 31, 2003, assets totaled
$85.0 million, an increase of $21.4 million, or 34% from $63.6 million at December 31,
2002. The increase was comprised principally of an increase in net loans, and to a lesser
extent, federal funds sold and investment securities. Total liabilities increased by $21.6
million, or 39%, to $76.4 million at December 31, 2003 from $54.8 million at December 31,
2002. The increase in liabilities was comprised principally of an increase in deposits and
was slightly offset by decreases in drafts outstanding and advances from Federal Home Loan
Bank.

# Cash and Cash Equivalents

Cash and cash equivalents are
comprised of cash and due from banks and federal funds sold. These are short-term, highly
liquid balances that are used to fund operations, including projected funding of loans.
These balances totaled $8.2 million at December 31, 2003 as compared to $6.4 million at
December 31, 2002.

# Investment Securities

At December 31, 2003, investment
securities totaled $14.1 million and represented 18% of earning assets compared to a total
of $14.0 million or 25% of earning assets at December 31, 2002. We invest primarily in
U.S. Government agency securities, government-sponsored agency securities, mortgage-backed
securities, collateralized mortgage obligations and corporate bonds. The majority of our
investment securities are classified as available for sale and are carried at estimated
fair value. The remaining investment securities are classified as held to maturity and are
carried at amortized cost.

10

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Contractual maturities and yields on
our investment securities at December 31, 2003 and 2002 are shown below. Expected
maturities may differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.

|                        |  |  | After One |           | After Five |  |      |  
|----------------------- |  |  | --------- | --------- | ---------- |  | ---- | -
|
|
|December 31, 2003:      |  |  |           |           |            |  |      |  
|Federal agency          |  |  | $         | -         |            |  | -    | %
|Mortgage-backed         |  |  |           | 1,047,831 |            |  | 5.29 |  
|Collateralized mortgage |  | 
|obligations             |  |  |           | 88,210    |            |  | 4.29 |  
|Corporate               |  |  |           | -         |            |  | -    |  
|                        |  |  |           |           |            |  |      |  
|Total                   |  |  | $         | 1,136,041 |            |  |      |  
|                        |  |  |           |           |            |  |      |  
|December 31, 2002:      |  | 
|Federal agency          |  |  | $         | -         |            |  | -%   |  
|                        |  |  |           | 1,578,794 |            |  | 5.05 |  
|Collateralized mortgage |  | 
|obligations             |  |  |           | 1,009,323 |            |  | 8.89 |  
|Corporate               |  |  |           | -         |            |  | -    |  
|                        |  |  |           |           |            |  |      |  
|Total                   |  |  | $         | 2,588,117 |            |  |      |  
|                        |  |  |           |           |            |  |      |  

The Bank, as a member institution, is
required to own certain stock investments in the Federal Home Loan Bank of Atlanta
(FHLB) and the Federal Reserve Bank (FRB). No ready market exists
for these stocks and they have no quoted market values. However, redemptions of these
stocks historically have been at par value, therefore they are carried at cost. These
stocks generally are pledged against any borrowings from these institutions. These
investments are shown on the balance sheet in separate captions.

# Loans and Allowance for
Loan Losses

Outstanding loans represent the
largest component of earning assets. At December 31, 2003, outstanding loans totaled $58.1
million, an increase of $19.6 million, or 51%, over the $38.5 million reported at December
31, 2002. Outstanding loans represented 74% and 68% of total earning assets, at December
31, 2003 and 2002, respectively. The following table summarizes the composition of the
loan portfolio at December 31, 2003 and 2002.

|                           | 2003 | 2002
|-------------------------- | ---- | ----
|
|Commercial                 |      |     
|Real estate - construction |      |     
|Real estate - mortgage     |      |     
|Consumer                   |      |     
|                           |      |     
|Total loans                |      |     
|                           |      |     
|Allowance for loan losses  |      |     
|Deferred loan costs, net   |      |     
|                           |      |     
|Net loans                  |      |     
|                           |      |     

11

---

There are risks inherent in making
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 risks resulting from uncertainties about the future
value of collateral on loans. To address these risks, we have developed policies and
procedures to identify and evaluate the overall quality of our credit portfolio and the
timely identification of potentially problem loans.

We maintain an allowance for loan
losses, which we establish through charges in the form of a provision for loan losses on
our statement of operations. We charge loan losses and credit recoveries directly to this
allowance. We attempt to maintain the allowance at a level that will be adequate to
provide for potential losses in our loan portfolio. We consider a number of factors in
determining the level of this allowance, including the total amount of outstanding loans,
the amount of past due loans, historic loan loss experience, general economic conditions
and the assessment of risk elements in our portfolio. The assessment of risk in our
portfolio includes the identification and analysis of loss potential in various portfolio
segments utilizing a credit risk grading process and specific reviews and evaluations of
problem loans. We use a classification system to identify and evaluate loans that are
currently problematic and those that we believe have the potential to be in the future
(collectively referred to as classified loans).

Our evaluation of the allowance for
loan losses is inherently subjective as it requires estimates that are susceptible to
significant change. Our losses will undoubtedly vary from our estimates, and there is a
possibility that charge-offs in future periods will exceed the allowance for loan losses
as estimated at any point in time. Further, the allowance for loan losses is subject to
periodic evaluation by various regulatory authorities and may be subject to adjustment
upon their examination.

Generally, loans are placed on
non-accrual status when they become 90 days past due, or when management believes that the
borrowers financial condition is such that collection of the loan is doubtful.
Interest stops accruing when a loan is placed on non-accrual status. Payments of interest
on these loans are recognized when received. The following is an analysis of
non-performing loans at December 31, 2003 and 2002.

|                        | 2003 | 2002
|----------------------- | ---- | ----
|Non-accrual loans:      |      |     
|Commercial              |      |     
|Real estate - mortgage  |      |     
|                        |      |     
|Total non-accrual loans |      |     
|                        |      |     

The non-accrual loans identified
above are included in the total of our classified loans. The total of classified loans at
December 31, 2003 and 2002 were $1,098,200 and $700, respectively.

Below is an analysis of the allowance
for loan losses for the years ended December 31, 2003 and 2002.

|                                               | 2003 | 2002
|---------------------------------------------- | ---- | ----
|
|Allowance for loan losses, beginning of year   |      |     
|Provision for loan losses                      |      |     
|Charge-offs:                                   |      |     
|Consumer loans                                 |      |     
|Real estate - mortgage                         |      |     
|                                               |      |     
|Allowance for loan losses, end of year         |      |     
|                                               |      |     
|Allowance for loan losses to loans outstanding |      |     
|                                               |      |     
|Net charge-offs to average loans               |      |     

12

---

The following table allocates the
allowance for loan losses by loan category at December 31, 2003 and 2002. The allocation
of the allowance to each category is not necessarily indicative of future losses and does
not restrict the use of the allowance to absorb losses in any category.

|                                | 2003 | 2002
|------------------------------- | ---- | ----
|
|
|
|
|Commercial                      |      |     
|Real estate - construction      |      |     
|Real estate - mortgage          |      |     
|Consumer                        |      |     
|                                |      |     
|Total allowance for loan losses |      |     
|                                |      |     

There was no other real estate owned
or repossessed collateral at December 31, 2003 and 2002.

The following table summarizes loan
maturities, by type, at December 31, 2003 and 2002. The information in the table is based
on the contractual maturities of individual loans, including loans which may be subject to
renewal at their contractual maturity. Renewals of such loans are subject to review and
credit approval, as well as modification of terms upon their maturity. Actual repayments
of loans may differ from maturities reflected below depending on prime rate movement and
because borrowers have the right to prepay obligations with or without prepayment
penalties.

|                                    |  | After One |   |           
|----------------------------------- |  | --------- | - | ----------
|
|
|December 31, 2003:                  |  |           |   |           
|Commercial                          |  |           | $ | 6,305,010 
|Real estate - construction          |  |           |   | 756,445   
|Real estate - mortgage              |  |           |   | 8,156,834 
|Consumer                            |  |           |   | 1,184,357 
|                                    |  |           |   |           
|Total loans                         |  |           | $ | 16,402,646
|                                    |  |           |   |           
|Loans maturing after one year with: |  |          
|Fixed interest rates                |  |           |   |           
|                                    |  |           |   |           
|Floating interest rates             |  |           |   |           
|                                    |  |           |   |           
|December 31, 2002:                  |  |          
|Commercial                          |  |           | $ | 3,564,635 
|Real estate - construction          |  |           |   | 1,781,866 
|Real estate - mortgage              |  |           |   | 2,606,861 
|Consumer                            |  |           |   | 576,254   
|                                    |  |           |   |           
|Total loans                         |  |           | $ | 8,529,616 
|                                    |  |           |   |           
|Loans maturing after one year with: |  |          
|Fixed interest rates                |  |           |   |           
|                                    |  |           |   |           
|Floating interest rates             |  |           |   |           
|                                    |  |           |   |           

---

# Deposits

Deposits are our primary source of
funds for loans and investments. Total deposits were $71.9 million at December 31, 2003,
an increase of $ 24.4 million, or 51%, over the $47.5 million reported at December 31,
2002. The following is a table of deposits by category at December 31, 2003 and 2002.

|                                  | 2003 | 2002
|--------------------------------- | ---- | ----
|
|
|Non-interest bearing              |      |     
|Interest bearing checking         |      |     
|Money market                      |      |     
|Savings                           |      |     
|Time deposits less than $100,000  |      |     
|Time deposits of $100,000 or more |      |     
|                                  |      |     
|Total deposits                    |      |     
|                                  |      |     

Core deposits, which consist of local
demand deposits and time deposits of less than $100,000, provide a relatively stable
funding source for our lending and investing activities. Our core deposits totaled $39.9
million, or 55% of total deposits, at December 31, 2003 compared to $36.8 million, or 77%
of total deposits, at December 31, 2002. Time deposit balances over $100,000 and deposits
obtained from outside the market area are not considered core deposits because their
retention can be expected to be heavily influenced by rates offered at renewal. At
December 31, 2003 the total of deposits outside of the banks primary market totaled
$22.0 million. Due to the developed national market for certificates of deposit, we
anticipate being able to either renew or replace the deposits obtained outside of the
market area when they mature, however, no assurance can be given that we will be able to
replace these deposits with the same terms.

The maturity distribution of our time
deposits of $100,000 or more at December 31, 2003 is shown in the following table.

|                               | 
|------------------------------ | 
|Three months or less           | 
|Over three through six months  | 
|Over six through twelve months | 
|Over twelve months             | 
|                               | 
|Total                          | 
|                               | 

# Other Borrowings

We maintain federal funds lines of
credit with correspondent banks to meet short-term liquidity needs. As a member of the
FHLB, we have access to borrowings through various FHLB programs. At December 31, 2003 and
2002, there were no short-term borrowings outstanding. At December 31, 2003, there were
$3.8 million of FHLB advances outstanding at fixed rates of 2.65%  3.78% (with a
weighted average rate of 3.22%) having maturities ranging from approximately 8 months to 3
years and there were investment securities with a market value of approximately $5.1
million pledged as collateral. At December 31, 2002, there were $4.7 million of FHLB
advances outstanding at fixed rates of 2.03%  3.78% (with a weighted average rate of
2.98%) having maturities ranging from approximately 3 months to 4 years and there were
investment securities with a market value of approximately $5.4 million pledged as
collateral. See Liquidity and Capital Resources for additional details of our
borrowing arrangements.

14

---

# LIQUIDITY AND CAPITAL
RESOURCES

Liquidity management involves
monitoring our sources and uses of funds in order to meet our day-to-day cash flow
requirements while maximizing profits. Liquidity represents the ability of a company to
convert assets into cash or cash equivalents without significant loss and to raise
additional funds by increasing liabilities. Liquidity management is made more complicated
because different balance sheet components are subject to varying degrees of management
control. For example, the timing of maturities of the investment portfolio is fairly
predictable and subject to a high degree of control at the time investment decisions are
made. However, net deposit inflows and outflows are far less predictable and are not
subject to nearly the same degree of control. We must maintain adequate liquidity to
respond to short-term deposit withdrawals, maturities of short-term borrowings, loan
demand and payment of operating expenses.

At December 31, 2003, our liquid
assets, consisting of cash and due from banks and federal funds sold, net of drafts
outstanding totaled $7.8 million. Investment securities that have not been pledged as
security for deposits and other borrowings, classified as available for sale, provide a
secondary source of liquidity because they can be converted to cash in a timely manner.
These non-pledged securities had a market value of $4.4 million at December 31, 2003. Our
ability to raise additional deposits and to borrow funds also serves additional liquidity
sources. Our regulatory capital ratios are at levels that support continued leveraging
through continued expansion of our deposit base and additional borrowings. We maintain
federal funds lines of credit totaling $9.1 million with correspondent banks. Advances
under these agreements are unsecured and are limited to terms ranging from 5 to 30 days.
These banks have reserved the right to withdraw these lines at their option. We have an
approved credit limit of approximately $17.0 million with the FHLB, with $13.3 million
unused at December 31, 2003. Further advances from the FHLB are limited to available
collateral acceptable to the FHLB which at December 31, 2003, consisted of non-pledged
investment securities and FHLB stock.

We plan to meet our future cash needs
through maturities of loans, maturities and cash flows from investment securities,
expansion of our deposit base, and other borrowings.

At December 31, 2003, unfunded
commitments to extend credit were approximately $10.2 million and outstanding letters of
credit were $120,093. No material capital expenditures are planned in 2004.

The Federal Reserve Board and bank
regulatory agencies require bank holding companies and financial institutions to maintain
capital at adequate levels based on a percentage of assets and off-balance sheet
exposures, adjusted for risk weights ranging from 0 % to 100 %. The Federal Reserve
guidelines also contain an exemption from the capital requirements for bank holding
companies with less than $150 million in consolidated assets. Because New Commerce BanCorp
has less than $150 million in assets, it currently is not subject to these guidelines.
However, New Commerce Bank falls under these rules as set by bank regulatory agencies.

Under the capital adequacy
guidelines, capital is classified into two tiers. Tier 1 capital consists of common
shareholders equity, excluding the unrealized gain or loss on securities available
for sale, minus certain intangible assets. Tier 2 capital consists of the general reserve
for loan losses subject to certain limitations.

The qualifying capital base for
purposes of the risk-based capital ratio consists of the sum of its Tier 1 and Tier 2
capital. The bank is also required to maintain capital at a minimum level based on total
average assets, which is known as the Tier 1 leverage ratio.

15

---

The bank exceeded the minimum capital
requirements set by the regulatory agencies at December 31, 2003 and 2002. The following
is a table that reflects the leverage and risk-based regulatory capital ratios of the bank
at December 31, 2003 and 2002.

|                                         | 2003 | 2002
|---------------------------------------- | ---- | ----
|
|Total capital (to risk-weighted assets)  |      |     
|Tier 1 capital (to risk-weighted assets) |      |     
|Tier 1 capital (to average assets)       |      |     

# INTEREST RATE SENSITIVITY

Interest rate sensitivity is defined
as the exposure to variability in net interest income resulting from changes in
market-based interest rates. Asset/liability management is the process by which we monitor
and control the mix, maturities and interest sensitivity of our assets and liabilities.
Asset/liability management seeks to ensure adequate liquidity and capital while
maintaining an appropriate balance between interest-sensitive assets and liabilities to
minimize potentially adverse impacts on earnings from changes in market interest rates.
Interest rate sensitivity can be managed by repricing assets or liabilities, selling
securities available-for-sale, replacing an asset or liability at maturity, or adjusting
the interest rate during the life of an asset or liability. We believe that interest rate
risk management becomes increasingly important in an interest rate environment and economy
such as the one that we are currently experiencing.

As a part of our measurement of
interest rate sensitivity, we use a gap analysis, which is the positive or
negative dollar difference between assets and liabilities that are subject to interest
rate repricing within a given time period. However, since interest rates and yields on
various interest sensitive assets and liabilities do not all adjust in the same degree
when there is a change in prevailing interest rates (such as prime rate), the traditional
gap analysis is only a general indicator of rate sensitivity and net interest income
volatility. Also, net interest income may be impacted by other significant factors in a
given interest rate environment, including changes in the volume and mix of earning assets
and interest-bearing liabilities. Therefore, we also contract with a third-party to assist
in the preparation of a rate sensitivity model which applies rate sensitivity measures to
assets and liabilities that will reprice within one year at assumed upward and downward
shifts in prime rate. From our latest analysis, we have estimated that net interest income
over a one-year timeframe generally would decrease with a decrease in prime rate and
increase with an increase in prime rate. The estimates, using a 100 basis point shift in
prime rate downward and upward, shows an effect on net interest income of approximately
minus $120,000 and plus $70,000, respectively. These numbers are to be taken as general
indications only, in that they were derived from a methodology that utilizes numerous
assumptions about sensitivities of various assets and liabilities to changes in interest
rates. These estimates are used as a guide by management, recognizing that model risk is
always present whenever assumptions of the future must be made. Actual results may differ
from the estimates should there be changes in interest rates.

Interest sensitivity is monitored and
managed by our management and a committee consisting of certain members of management and
our board of directors. We believe that the current level of interest sensitivity is
acceptable and manageable considering our business plan, capital level and other factors.

16

---

The following table presents our gap
analysis as of December 31, 2003 and 2002. The difference between rate-sensitive assets
and rate sensitive liabilities is shown below as the period interest-sensitive
gap.

|                                   | Within | After Three | After One | After      |  
|---------------------------------- | ------ | ----------- | --------- | ---------- | -
|
|
|
|December 31, 2003:                 |        |             |           |            |  
|Earning assets:                    |        |            
|Loans, gross                       |        |             | $         | 44,244,125 |  
|Investment securities              |        |             |           | 1,109,094  |  
|Federal funds sold                 |        |             |           | 5,613,657  |  
|FHLB and FRB stock                 |        |             |           | 433,150    |  
|                                   |        |             |           |            |  
|Total earning assets               |        |             |           | 51,400,026 |  
|                                   |        |             |           |            |  
|Interest-bearing liabilities:      |        |            
|Deposits:                          |        |            
|Interest checking                  |        |             |           | 4,650,485  |  
|Savings accounts                   |        |             |           | 931,551    |  
|Money market accounts              |        |             |           | 13,254,094 |  
|Time deposits                      |        |             |           | 15,292,264 |  
|FHLB advances                      |        |             |           | -          |  
|                                   |        |             |           |            |  
|Total interest-bearing liabilities |        |             |           | 34,128,394 |  
|                                   |        |             |           |            |  
|Period interest-sensitive gap      |        |             | $         | 17,271,632 |  
|                                   |        |             |           |            |  
|Cumulative interest-sensitive gap  |        |             | $         | 17,271,632 |  
|                                   |        |             |           |            |  
|Ratio of cumulative                |        |            
|interest-sensitive gap to earning  |        |            
|assets                             |        |             |           | 22.1       | %
|                                   |        |             |           |            |  
|December 31, 2002:                 |        |            
|Earning assets:                    |        |            
|Loans, gross                       |        |             | $         | 27,832,860 |  
|Investment securities              |        |             |           | 570,621    |  
|Federal funds sold                 |        |             |           | 3,342,348  |  
|FHLB and FRB stock                 |        |             |           | 487,250    |  
|                                   |        |             |           |            |  
|Total earning assets               |        |             |           | 32,233,079 |  
|                                   |        |             |           |            |  
|Interest-bearing liabilities:      |        |            
|Deposits:                          |        |            
|Interest checking                  |        |             |           | 3,332,544  |  
|Savings accounts                   |        |             |           | 564,582    |  
|Money market accounts              |        |             |           | 17,279,741 |  
|Time deposits                      |        |             |           | 5,046,779  |  
|FHLB advances                      |        |             |           | 325,000    |  
|                                   |        |             |           |            |  
|Total interest-bearing liabilities |        |             |           | 26,548,646 |  
|                                   |        |             |           |            |  
|Period interest-sensitive gap      |        |             | $         | 5,684,433  |  
|                                   |        |             |           |            |  
|Cumulative interest-sensitive gap  |        |             | $         | 5,684,433  |  
|                                   |        |             |           |            |  
|Ratio of cumulative                |        |            
|interest-sensitive gap to earning  |        |            
|assets                             |        |             |           | 10.2       | %
|                                   |        |             |           |            |  

17

---

# IMPACT OF INFLATION

The assets and liabilities of
financial institutions such as ours are primarily monetary in nature. Therefore, interest
rates have a more significant effect on our performance than do the effects of changes in
the general rate of inflation and changing prices. In addition, interest rates do not
necessarily move in the same direction or in the same magnitude as the prices of goods and
services. As discussed previously, we seek to manage the relationships between
interest-sensitive assets and liabilities in order to protect against wide interest rate
fluctuations, including those, which may result from inflation.

# RECENTLY ISSUED
ACCOUNTING STANDARDS

Accounting standards and
pronouncements of a recent nature are discussed in Notes to Consolidated Financial
Statements, Note 1  Summary of Significant Accounting Policies. Other accounting
standards that have been issued or proposed by authoritative standards-setting bodies that
do not require adoption until a future date are not expected to have a material impact on
the consolidated financial statements upon adoption.

18

---

# REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors New Commerce BanCorp and SubsidiaryGreenville, South Carolina

We have audited the accompanying
consolidated balance sheets of New Commerce BanCorp and Subsidiary
(the Company) as of December 31, 2003 and 2002 and the related consolidated
statements of operations, shareholders equity and comprehensive income (loss), and
cash flows for each of the years in the three year period ended December 31, 2003. These
consolidated financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable assurance about
whether the consolidated 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 New Commerce BanCorp and Subsidiary at December
31, 2003 and 2002 and the results of their operations and cash flows for each of the years
in the three year period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.

/s/ Elliott Davis, LLC
Elliott Davis, LLCGreenville, South CarolinaJanuary 16, 2004

19

---

# NEW COMMERCE BANCORP
AND SUBSIDIARY

Consolidated Balance Sheets
December 31, 2003 and 2002

|                                                                        | 2003 | 2002
|----------------------------------------------------------------------- | ---- | ----
|Assets:                                                                 |      |     
|Cash and due from banks                                                 |      |     
|Federal funds sold                                                      |      |     
|                                                                        |      |     
|Total cash and cash equivalents                                         |      |     
|Investment securities, available for sale                               |      |     
|Investment securities, held to maturity (fair value of $987,890 in 2003 |      |     
|and $1,371,222 in 2002)                                                 |      |     
|Federal Reserve Bank stock                                              |      |     
|Federal Home Loan Bank stock                                            |      |     
|Loans, net                                                              |      |     
|Property and equipment, net                                             |      |     
|Accrued interest receivable                                             |      |     
|Other assets                                                            |      |     
|                                                                        |      |     
|Total assets                                                            |      |     
|                                                                        |      |     
|Liabilities and Shareholders' Equity:                                   |      |     
|Liabilities:                                                            |      |     
|Deposits                                                                |      |     
|Advances from Federal Home Loan Bank                                    |      |     
|Drafts outstanding                                                      |      |     
|Other liabilities                                                       |      |     
|                                                                        |      |     
|Total liabilities                                                       |      |     
|                                                                        |      |     
|Shareholders' Equity:                                                   |      |     
|Preferred stock, $.01 par value, 10,000,000 shares                      |      |     
|authorized, no shares issued                                            |      |     
|Common stock, $.01 par value, 10,000,000 shares                         |      |     
|authorized, 1,000,000 issued and outstanding                            |      |     
|Additional paid-in capital                                              |      |     
|Retained deficit                                                        |      |     
|Accumulated other comprehensive income                                  |      |     
|                                                                        |      |     
|Total shareholders' equity                                              |      |     
|                                                                        |      |     
|Total liabilities and shareholders' equity                              |      |     
|                                                                        |      |     

See
accompanying notes to consolidated financial statements.

20

---

# NEW COMMERCE BANCORP AND SUBSIDIARY

Consolidated Statements of Operations
Years Ended December 31, 2003, 2002 and 2001

|                                                    | 2003 | 2002 | 2001
|--------------------------------------------------- | ---- | ---- | ----
|Interest Income:                                    |      |      |     
|Interest and fees on loans                          |      |      | $   
|Investment securities                               |      |      |     
|Federal funds sold                                  |      |      |     
|                                                    |      |      |     
|Total interest income                               |      |      |     
|                                                    |      |      |     
|Interest Expense:                                   |      |     
|Deposits                                            |      |      |     
|Securities sold under agreements to repurchase      |      |      |     
|Advances from Federal Home Loan Bank                |      |      |     
|Federal funds purchased                             |      |      |     
|                                                    |      |      |     
|Total interest expense                              |      |      |     
|                                                    |      |      |     
|Net Interest Income                                 |      |      |     
|                                                    |      |     
|Provision for Loan Losses                           |      |      |     
|                                                    |      |      |     
|Net Interest Income After Provision for Loan Losses |      |      |     
|                                                    |      |      |     
|Non-Interest Income:                                |      |     
|Service fees on deposit accounts                    |      |      |     
|Mortgage brokerage income                           |      |      |     
|Gain on sale of investment securities               |      |      |     
|Other                                               |      |      |     
|                                                    |      |      |     
|Total non-interest income                           |      |      |     
|                                                    |      |      |     
|Non-Interest Expense:                               |      |     
|Salaries and benefits                               |      |      |     
|Occupancy, furniture and equipment                  |      |      |     
|Data processing                                     |      |      |     
|Marketing                                           |      |      |     
|Printing, supplies and postage                      |      |      |     
|Other operating                                     |      |      |     
|Chief Executive Officer transition costs            |      |      |     
|                                                    |      |      |     
|Total non-interest expense                          |      |      |     
|                                                    |      |      |     
|Income (Loss) Before Income Taxes                   |      |      |     
|                                                    |      |     
|Income Tax Provision (Benefit)                      |      |      |     
|                                                    |      |      |     
|Net Income (Loss)                                   |      |      | $   
|                                                    |      |      |     
|Basic Earnings (Loss) per Share                     |      |      | $   
|                                                    |      |      |     
|Diluted Earnings (Loss) per Share                   |      |      | $   
|                                                    |      |      |     
|Weighted Average Shares Outstanding - Basic         |      |      |     
|                                                    |      |      |     
|Weighted Average Shares Outstanding - Diluted       |      |      |     
|                                                    |      |      |     

21

---

# NEW COMMERCE BANCORP AND
SUBSIDIARY

Consolidated Statements
of Shareholders Equity and Comprehensive Income (Loss)

Years Ended December
31, 2003, 2002 and 2001

|                                |  |  |  |           | Accumulated | Total
|------------------------------- |  |  |  | --------- | ----------- | -----
|
|
|
|
|Balance, December 31, 2000      |  |  |  | 1,000,000 |             | $    
|                                |  |  |  |           |             |      
|Net loss                        |  |  |  | -         |             |      
|Other comprehensive income,     |  | 
|net of tax:                     |  | 
|Unrealized gains on securities  |  | 
|available for sale, net of tax  |  | 
|effect of $55,940               |  |  |  | -         |             |      
|                                |  |  |  |           |             |      
|Comprehensive loss              |  |  |  | -         |             |      
|                                |  |  |  |           |             |      
|Balance, December 31, 2001      |  |  |  | 1,000,000 |             |      
|                                |  |  |  |           |             |      
|Net income                      |  |  |  | -         |             |      
|Other comprehensive income,     |  | 
|net of tax:                     |  | 
|Unrealized gains on securities  |  | 
|available for sale, net of tax  |  | 
|effect of $76,135               |  |  |  | -         |             |      
|Reclassification of net gain on |  | 
|securities available for sale   |  | 
|included in net income, net of  |  | 
|tax effect of $32,496           |  |  |  | -         |             |      
|                                |  |  |  |           |             |      
|Other comprehensive income      |  |  |  |           |             |      
|                                |  |  |  |           |             |      
|Comprehensive income            |  |  |  | -         |             |      
|                                |  |  |  |           |             |      
|Balance, December 31, 2002      |  |  |  | 1,000,000 |             |      
|                                |  |  |  |           |             |      
|Net income                      |  |  |  | -         |             |      
|Other comprehensive income,     |  | 
|net of tax:                     |  | 
|Unrealized losses on securities |  | 
|available for sale, net of tax  |  | 
|effect of $103,728              |  |  |  | -         |             |      
|Reclassification of net gain on |  | 
|securities available for sale   |  | 
|included in net income, net of  |  | 
|tax effect of $46,347           |  |  |  | -         |             |      
|                                |  |  |  |           |             |      
|Other comprehensive loss        |  |  |  |           |             |      
|                                |  |  |  |           |             |      
|Comprehensive loss              |  |  |  | -         |             |      
|                                |  |  |  |           |             |      
|Balance, December 31, 2003      |  |  |  | 1,000,000 |             | $    
|                                |  |  |  |           |             |      

See accompanying
notes to consolidated financial statements.

22

---

NEW COMMERCE BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flows

Years Ended December
31, 2003, 2002 and 2001

|                                                               | 2003 | 2002 | 2001
|-------------------------------------------------------------- | ---- | ---- | ----
|Operating Activities:                                          |      |      |     
|Net income (loss)                                              |      |      | $   
|Adjustments to reconcile net income (loss) to net cash         |      |     
|provided by operating activities:                              |      |     
|Provision for loan losses                                      |      |      |     
|Deferred income tax provision (benefit)                        |      |      |     
|Depreciation                                                   |      |      |     
|Net (accretion) amortization of (discounts) premiums on        |      |     
|investment securities                                          |      |      |     
|Gain on sale of investment securities available for sale       |      |      |     
|Loss on disposal of property and equipment                     |      |      |     
|(Increase) decrease in other assets                            |      |      |     
|Increase (decrease) in other liabilities                       |      |      |     
|                                                               |      |      |     
|Net cash provided by (used for) operating activities           |      |      |     
|                                                               |      |      |     
|Investing Activities:                                          |      |     
|Increase in loans, net                                         |      |      |     
|Purchase of investment securities available for sale           |      |      |     
|Purchase of investment securities held to maturity             |      |      |     
|Redemption of Federal Reserve Bank stock                       |      |      |     
|Redemption (purchase) of Federal Home Loan Bank stock          |      |      |     
|Proceeds from principal payments on investment securities      |      |     
|available for sale                                             |      |      |     
|Proceeds from principal payments on investment securities held |      |     
|to maturity                                                    |      |      |     
|Proceeds from sale or call of investment securities available  |      |     
|for sale                                                       |      |      |     
|Purchase of property and equipment                             |      |      |     
|                                                               |      |      |     
|Net cash used for investing activities                         |      |      |     
|                                                               |      |      |     
|Financing Activities:                                          |      |     
|Increase in deposits, net                                      |      |      |     
|Advances from Federal Home Loan Bank                           |      |      |     
|Repayment of advances from Federal Home Loan Bank              |      |      |     
|Net (decrease) increase in securities sold under agreements to |      |     
|repurchase                                                     |      |      |     
|Increase (decrease) in drafts outstanding                      |      |      |     
|Net decrease in federal funds purchased                        |      |      |     
|                                                               |      |      |     
|Net cash provided by financing activities                      |      |      |     
|                                                               |      |      |     
|Net Increase in Cash and Cash Equivalents                      |      |      |     
|Cash and Cash Equivalents, Beginning of Year                   |      |      |     
|                                                               |      |      |     
|Cash and Cash Equivalents, End of Year                         |      |      | $   
|                                                               |      |      |     
|Supplemental Disclosures of Cash Flow Information:             |      |     
|Cash Paid For:                                                 |      |     
|Interest                                                       |      |      | $   
|                                                               |      |      |     
|Income Taxes                                                   |      |      | $   
|                                                               |      |      |     

See
accompanying notes to consolidated financial statements.

23

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Organization
 New Commerce BanCorp (the Holding Company), was incorporated under the
laws of the State of South Carolina in 1998 for the purpose of operating as a bank holding
company for New Commerce Bank (the Bank). The Bank provides full commercial
banking services to customers and is subject to regulation of the Office of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation. The Holding
Company is subject to the regulation of the Federal Reserve Board.

Basis of
Presentation  The consolidated financial statements include the
accounts of the Holding Company and its wholly-owned subsidiary, the Bank (collectively
referred to as the Company). All significant intercompany balances and
transactions have been eliminated. The accounting and reporting policies conform to
accounting principles generally accepted in the United States of America and to general
practices in the banking industry. The Company uses the accrual basis of accounting.

Use of Estimates
 The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities as of the date of the financial statements and the
reported amount of income and expenses during the reporting periods. Actual results could
differ from those estimates.

Nature of Operations and
Concentrations of Credit Risk The
Companys principal business activities are conducted through the Bank, which is
engaged in the business of accepting demand and time deposits and providing loans to
individuals and businesses. The Companys business is limited primarily to Greenville
and adjacent counties in the northwestern area of South Carolina. The Company has a
diversified loan portfolio and the borrowers ability to repay their loans is not
dependent upon any specific economic sector.

Disclosure Regarding
Segments  The Company reports as one operating segment, as the chief
operating decision-maker reviews the results of operations of the Company as a single
enterprise.

Cash and Cash
Equivalents  For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks, short-term interest bearing
deposits and federal funds sold. Cash and cash equivalents have an original maturity of
three months or less.

Investment
Securities Investments in debt and equity
securities are classified into three categories:

| | Available
for Sale Securities: These are debt and equity securities which are not
classified as either held to maturity or as trading securities. These securities are
reported at fair market value. Unrealized gains and losses are reported, net of income
taxes, as a separate component of shareholders equity, net of income taxes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Held
to Maturity Securities: These are debt securities which the Company has the intent and
ability to hold until maturity. These securities are stated at cost, adjusted for
amortization of premiums and the accretion of discounts.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Trading
Securities:These are debt and equity securities which are bought and held
principally for the purpose of selling in the near term. Trading securities are reported
at fair market value, and related unrealized gains and losses are recognized in the income
statement. The Company has no trading securities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Gains or losses on dispositions of
investment securities are determined on a trade date basis and are based on the
differences between the net proceeds and the adjusted carrying amount of the securities
sold, using the specific identification method. Premiums and discounts are amortized or
accreted into interest income by a method that approximates a level yield.

The Bank, as a member institution, is
required to own certain stock investments in the Federal Home Loan Bank (FHLB)
and the Federal Reserve Bank (FRB). No ready market exists for these stocks
and they have no quoted market values. However, redemptions of these stocks historically
have been at par value, therefore they are carried at cost. These stocks generally are
pledged against any borrowings from these institutions.

Loans, Interest, and Fee Income
on Loans Loans are stated at the principal
balance outstanding and reduced by the allowance for loan losses and net deferred loan
origination fees. Loan origination fees and certain direct loan origination costs are
deferred and the net amount is accreted as an adjustment of the related loans yield
over the contractual life of the loan. Interest income is recognized over the term of the
loan based on the contractual interest rate and the principal balance outstanding.

Loans generally are placed on
non-accrual status when principal or interest becomes ninety days past due, or when
payment in full is not anticipated. Interest payments received after a loan is placed in
non-accrual status are applied as principal reductions until such time the loan is
returned to accrual status. Generally, a loan is returned to accrual status when the loan
is brought current and the collectibility of principal and interest no longer is in doubt.

Allowance for Loan
Losses The Company provides for loan losses
using the allowance method. Provisions for loan losses are added to the allowance through
charges to operating expenses. Loans which are determined to be uncollectible are charged
against the allowance and recoveries on loans previously charged off are added to the
allowance. The provision for loan losses is the amount deemed appropriate by management to
establish an adequate allowance to meet the present and foreseeable risk characteristics
of the current loan portfolio. Managements judgment is based on periodic and regular
evaluation of individual loans, the overall risk characteristics of the various portfolio
segments, past experience with losses, delinquency trends, and prevailing and anticipated
economic conditions. While management uses the best information available to make
evaluations, future adjustments to the allowance may be necessary if economic conditions
differ substantially from the assumptions used in making the evaluation. The allowance for
loan losses is subject to periodic evaluation by various regulatory authorities and may be
subject to adjustment upon their examination.

25

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

A loan is considered to be impaired
when full payment according to the terms of the loan agreement is not probable or when the
terms of a loan are modified. The fair value of impaired loans may be determined based
upon the present value of expected cash flows discounted at the loans effective
interest rate, the market price of the loan, if available, or value of the underlying
collateral if the loan is collateral-dependent. If a loan is determined to be impaired, a
portion of the allowance for loan losses is allocated specifically to each impaired loan.
When the ultimate collectibility of an impaired loans principal is in doubt, wholly
or partially, all cash receipts are applied to principal. Once the reported principal
balance has been reduced to zero, future cash receipts are applied to interest income, to
the extent that any interest has been foregone. Further cash receipts are recorded as
recoveries of any amounts previously charged off.

Property and
Equipment  Property and equipment are stated at cost, net of
accumulated depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Maintenance and repairs are charged to
operations, while major improvements are capitalized. Upon retirement, sale, or other
disposition of property and equipment, the cost and accumulated depreciation are
eliminated from the accounts and gain or loss is included in income from operations.

Drafts
Outstanding The Company invests any excess
funds on a daily basis by depositing the excess in other banks. The amount invested
includes amounts outstanding for disbursement checks, and accordingly, outstanding checks
are reported as a liability.

Advertising Advertising, promotional, and other business development costs are generally expensed
as incurred. External costs incurred in producing media advertising are expensed the first
time the advertising takes place. External costs relating to direct mailing costs are
expensed in the period in which the direct mailings are sent.

Income Taxes
The asset and liability approach is utilized to account for
income taxes, which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the financial statement
carrying values and the tax bases of assets and liabilities, as well as net operating loss
carry forwards. Deferred tax assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be realized or settled. A current tax asset or liability is
recognized for taxes that are presently payable.

Stock-Based
Compensation The Company has two stock-based
employee compensation plans which are described more fully in Note 13. The Company
accounts for those plans under the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation cost is
reflected in net income (loss), as all stock options and warrants granted under these
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 income (loss) and
earnings (loss) per share as if the Company had applied the fair value recognition
provisions of Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation.

26

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

|                                                             | Years Ended December 31,
|------------------------------------------------------------ | ------------------------
|
|Net income (loss) as reported                                |                         
|Deduct:  Total stock-based employee compensation expense     |                         
|determined under fair value based method for all awards, net |                         
|of related income tax effect                                 |                         
|                                                             |                         
|Pro forma net income (loss)                                  |                         
|                                                             |                         
|Earnings (loss) per share:                                   |                         
|Basic as reported                                            |                         
|                                                             |                         
|Diluted as reported                                          |                         
|                                                             |                         
|Basic and diluted - pro forma                                |                         
|                                                             |                         

Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period. Diluted
earnings (loss) per share is computed by dividing net income (loss) by the weighted
average number of common shares and potential common shares outstanding during the period.
Potential common shares consist solely of dilutive stock options determined by the
treasury stock method using the average market price of the shares during the period.
Potential common shares for the years ended December 31, 2003, 2002 and 2001 were 18,961,
14,473, and 0, respectively.

Comprehensive Income
(Loss) Comprehensive income (loss) consists of net income
(loss) and net unrealized gains and losses on investment securities available for sale and
is presented in the consolidated statements of shareholders equity and comprehensive
income.

Reclassifications
Certain amounts previously reported have been reclassified to conform
to the current presentation of these consolidated financial statements. These
reclassifications had no effect on previously reported net loss or shareholders
equity.

Fair Values of Financial
Instruments The following methods and assumptions were used
by the Company in estimating fair values of financial instruments recorded or disclosed in
the financial statements.

| | Cash
and Due from Banks: For these short-term instruments, the carrying amounts approximate
their fair value.
| | -------------------------------------------------------------------------------------------------------------

| | Federal
Funds Sold and Purchased: The carrying amounts of federal funds sold and purchased
approximate their fair value due to their short maturities (generally daily maturities).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Investment
Securities: Fair values for investment securities are based on quoted market prices,
if a market exists. If no market exists, fair values are estimated based upon bids from
securities dealers, trading of similar instruments or indices adjusted for known
differences in security being valued and the security or index to which it is being
compared.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

NOTE
1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | FRB
and FHLB Stock: No ready market exists for these stocks and they have no quoted market
values. However, redemptions of these stocks historically have been at par value,
therefore the cost basis is used as an estimate of their fair values.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loans:
For variable rate loans that reprice frequently and for loans that mature within one year,
fair values are based on carrying values. Fair values for all other loans are estimated
using discounted cash flow analyses, with interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. Fair values for impaired loans
are estimated using discounted cash flow analyses or underlying collateral values, where
applicable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deposits:
The fair values disclosed for demand deposits are, by definition, equal to their carrying
amounts. Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated monthly maturities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Advances
from FHLB: Fair values for advances from FHLB are estimated using a discounted cash
flow analysis, with interest rates currently being offered for remaining terms of the
advances.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accrued
Interest Receivable and Payable and Drafts Outstanding: The carrying amounts of these
items approximate their fair values due to the short period to settlement (three months or
less).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Off-Balance
Sheet Instruments: Fair values of off-balance sheet lending commitments are based on
fees currently charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the counterparties credit standing. The total fair value
of such instruments is not material.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fair value estimates are made at a
specific point in time, based on relevant market information and information about the
financial instrument. Because no market exists for a significant portion of the
Companys financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and, therefore, cannot be determined with
precision. Changes in assumptions could affect these estimates significantly.

28

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting
Standards  The following is a summary of recent authoritative
pronouncements that affect accounting, reporting, and disclosure of financial information
by the Company:

| | In
June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, which addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). This Statement applies to costs associated with an exit activity that does
not involve an entity newly acquired in a business combination or with a disposal activity
covered by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
Those costs include, but are not limited to, the following: a) termination benefits
provided to current employees that are involuntarily terminated under the terms of a
benefit arrangement that, in substance, is not an ongoing benefit arrangement or an
individual deferred compensation contract, b) costs to terminate a contract that is not a
capital lease and c) costs to consolidate facilities or relocate employees. This Statement
does not apply to costs associated with the retirement of a long-lived asset covered by
FASB Statement No. 143, Accounting for Asset Retirement Obligations. A liability for a
cost associated with an exit or disposal activity shall be recognized and measured
initially at its fair value in the period in which the liability is incurred. A liability
for a cost associated with an exit or disposal activity is incurred when the definition of
a liability is met. The provisions of this statement are effective for exit or disposal
activities that are initiated after December 31, 2002. The provisions of this statement
were adopted by the Company on January 1, 2003, with no impact on the Companys
financial position or results of operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which addresses the disclosure to be made by a
guarantor in its interim and annual financial statements about its obligations under
guarantees. FIN 45 requires the guarantor to recognize a liability for the non-contingent
component of the guarantee, which is the obligation to stand ready to perform in the event
that specified triggering events or conditions occur. The initial measurement of this
liability is the fair value of the guarantee at inception. The recognition of the
liability is required even if it is not probable that payments will be required under the
guarantee or if the guarantee was issued with a premium payment or as part of a
transaction with multiple events. The disclosure requirements are effective for interim
and annual financial statements for periods ending after December 15, 2002. The initial
recognition and measurement provisions are effective for all guarantees within the scope
of FIN 45 issued or modified after December 31, 2002. Adoption of this standard had no
impact on the Company as the Company has no outstanding guarantees that fall under the
scope of this statement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46), which addresses consolidation by business enterprises of
variable interest entities. Under FIN 46, an enterprise that holds significant variable
interest in a variable interest entity but is not the primary beneficiary is required to
disclose the nature, purpose, size and activities of the variable interest entity, its
exposure to loss as a result of the variable interest holders involvement with the
entity, and the nature of its involvement with the entity and date when the involvement
began. The primary beneficiary of a variable interest entity is required to disclose the
nature, purpose, size, and activities of the variable interest entity, the carrying amount
and classification of consolidated assets that are collateral for the variable interest
entitys obligations, and any lack of recourse by creditors (or beneficial interest
holders) of a consolidated variable interest entity to the general creditors (or
beneficial interest holders). FIN 46 is effective for the first fiscal year or interim
period beginning after June 15, 2003. Adoption of this standard had no impact on the
Company as the Company held no interest in any variable interest entities that would fall
under the scope of this statement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. This statement amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in other
contracts and loan commitments that relate to the origination of mortgage loans held for
sale, and for hedging activities under SFAS No. 133. SFAS No. 149 is generally effective
for contracts entered into or modified after June 30, 2003. The adoption of this standard
had no impact on financial position or results of operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This statement establishes standards for
how an issuer classifies and measures certain financial instruments with characteristics
of both liabilities and equity. It requires that an issuer classify a financial instrument
that is within its scope as a liability (or as an asset in some circumstances), many of
which were previously classified as equity. SFAS No. 150 was generally effective for
financial instruments entered into or modified after May 31, 2003, and was otherwise
effective at the beginning of the first interim period beginning after June 15, 2003. The
adoption of this standard had no impact on financial position or results of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
accounting standards that have been issued or proposed by the standards-setting bodies
that do not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 2 
RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain
average reserve balances, computed by applying prescribed percentages to its various types
of deposits, either at the bank or on deposit with the FRB. At December 31, 2003 and 2002
these required reserves were met by vault cash.

30

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 3  INVESTMENT
SECURITIES

The amortized cost and fair value of
investment securities at December 31, 2003 and 2002 are as follows:

|                                    | Amortized | Gross Unrealized | Fair
|----------------------------------- | --------- | ---------------- | ----
|
|December 31, 2003                   |           |                  |     
|Available for sale:                 |           |                 
|Federal agency obligations          |           |                  | $   
|Mortgage-backed securities          |           |                  |     
|Collateralized mortgage obligations |           |                  |     
|Corporate bonds                     |           |                  |     
|                                    |           |                  |     
|Total available for sale            |           |                  | $   
|                                    |           |                  |     
|Held to maturity:                   |           |                 
|Federal agency obligations          |           |                  | $   
|Mortgage-backed securities          |           |                  |     
|Corporate bonds                     |           |                  |     
|                                    |           |                  |     
|Total held to maturity              |           |                  | $   
|                                    |           |                  |     
|December 31, 2002                   |           |                 
|Available for sale:                 |           |                 
|Federal agency obligations          |           |                  | $   
|Mortgage-backed securities          |           |                  |     
|Collateralized mortgage obligations |           |                  |     
|Corporate bonds                     |           |                  |     
|                                    |           |                  |     
|Total available for sale            |           |                  | $   
|                                    |           |                  |     
|Held to maturity:                   |           |                 
|Federal agency obligations          |           |                  | $   
|Mortgage-backed securities          |           |                  |     
|Corporate bonds                     |           |                  |     
|                                    |           |                  |     
|Total held to maturity              |           |                  | $   
|                                    |           |                  |     

At December 31, 2003, there were
securities with a fair value of $3,691,437 pledged as collateral for public deposits and
securities with a fair value of $5,094,254 pledged as collateral for FHLB advances.

The Company had gross realized gains
on sales of investment securities available for sale in the amount of $125,261 and $87,826
during the years ended December 31, 2003 and 2002, respectively. There were no other
realized gains or losses during any period presented herein.

All of the Companys investments
that were in an unrealized loss position at December 31, 2003 have been evaluated and
deemed not to be other-than-temporarily impaired under the guidance of SFAS No. 115. This
determination was made by consideration of the nature of the investments and the causal
factors of the unrealized losses. In all cases, the principal cause of the decline in
market value was due to the increase in market interest rates subsequent to purchase of
the securities. All such investment securities have been in an unrealized loss position
for a period of less than 12 months.

31

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 3  INVESTMENT SECURITIES (Continued)

Unrealized losses and fair values of
investment securities that have been in an unrealized loss position for a period of less
than 12 months by type of investment are as follows:

|                                    | Unrealized | Fair
|----------------------------------- | ---------- | ----
|
|December 31, 2003                   |            |     
|Available for sale:                 |            |     
|Federal agency obligations          |            |     
|Mortgage-backed securities          |            |     
|Collateralized mortgage obligations |            |     
|                                    |            |     
|Total available for sale            |            |     
|Held to maturity - corporate bonds  |            |     
|                                    |            |     
|Total                               |            |     
|                                    |            |     

Amortized cost and fair value of
securities available for sale and held to maturity at December 31, 2003, by contractual
maturity, are shown below. Expected maturities may differ from contractual maturities.

|                                 | Available for Sale | Held to Maturity
|-------------------------------- | ------------------ | ----------------
|
|
|Due within one year or less      |                    |                 
|Due after one through five years |                    |                 
|Due after five through ten years |                    |                 
|Due after ten years              |                    |                 
|                                 |                    |                 
|Total investment securities      |                    |                 
|                                 |                    |                 

# NOTE 4  LOANS

Loans receivable at December 31, 2003
and 2002 consisted of the following:

|                           | 2003 | 2002
|-------------------------- | ---- | ----
|Commercial                 |      |     
|Real estate - construction |      |     
|Real estate - mortgage     |      |     
|Consumer                   |      |     
|                           |      |     
|                           |      |     
|Less:                      |      |     
|Allowance for loan losses  |      |     
|Deferred loan fees, net    |      |     
|                           |      |     
|Net loans                  |      |     
|                           |      |     

32

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 4  LOANS
(Continued)

The changes in the allowance for loan
losses consisted of the following for the years ended December 31, 2003, 2002 and 2001:

|                           | 2003 | 2002 | 2001
|-------------------------- | ---- | ---- | ----
|Balance, beginning of year |      |      | $   
|Provision for loan losses  |      |      |     
|Loans charged off          |      |      |     
|                           |      |      |     
|Balance, end of year       |      |      | $   
|                           |      |      |     

At December 31, 2003, the Company had loans
totaling $536,100 that were in non-accrual status. Interest income that would have been
recognized for the year ended December 31, 2003 had these non-accrual loans been current
in accordance with their contractual terms amounted to $22,003. The amount of interest
included in interest income on such loans for the year ended December 31, 2003 was
$21,731. There were no non-accrual loans at December 31, 2002 and 2001.

Impaired loans at December 2003 and
2002 were as follows:

|                                | 2003 | 2002
|------------------------------- | ---- | ----
|Impaired loans:                 |      |     
|No valuation allowance required |      |     
|Valuation allowance required    |      |     
|                                |      |     
|                                |      |     
|                                |      |     
|Valuation allowance             |      |     
|                                |      |     

The average recorded investment in
impaired loans was $955,496 for the year ended December 31, 2003. Interest income
recognized on impaired loans in the year ended December 31, 2003 was $34,773. There were
no impaired loans at December 31, 2002 and 2001.

Certain directors, executive officers
and companies with which they are affiliated (collectively referred to as
insiders) are customers of and have banking transactions with the Bank in the
ordinary course of business. Loans to insiders were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for comparable
arms-length transactions.

Loan transactions with insiders
during the years ended December 31, 2003 and 2002 are summarized as follows:

|                           | 2003 | 2002
|-------------------------- | ---- | ----
|Balance, beginning of year |      |     
|New loans                  |      |     
|Less loan payments         |      |     
|                           |      |     
|Balance, end of year       |      |     
|                           |      |     

33

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 5  PROPERTY
AND EQUIPMENT

Property and equipment at December
31, 2003 and 2002 are summarized as follows:

|                              | 2003 | 2002
|----------------------------- | ---- | ----
|Land                          |      |     
|Building and improvements     |      |     
|Furniture and equipment       |      |     
|                              |      |     
|                              |      |     
|Less accumulated depreciation |      |     
|                              |      |     
|Property and equipment, net   |      |     
|                              |      |     

Depreciation expense for the years ended
December 31, 2003, 2002 and 2001 was $183,063, $162,918, and $156,935, respectively.

# NOTE 6  DEPOSITS

Deposit accounts at December 31, 2003
and 2002 are summarized as follows:

|                              | 2003 | 2002
|----------------------------- | ---- | ----
|Non-interest bearing deposits |      |     
|Interest bearing deposits:    |      |     
|Interest checking             |      |     
|Money market                  |      |     
|Savings                       |      |     
|Time, less than $100,000      |      |     
|Time, $100,000 and over       |      |     
|                              |      |     
|Total deposits                |      |     
|                              |      |     

Deposits by insiders at December 31,
2003 and 2002 approximated $3,768,000 and $3,924,000, respectively.

Deposits from outside the
Companys market area obtained through brokers amounted to $22,039,790 at December
31, 2003 (none at December 31, 2002).

At December 31, 2003 the scheduled
maturities of time deposits were as follows:

|                    | 
|------------------- | 
|2004                | 
|2005                | 
|2006                | 
|                    | 
|Total time deposits | 
|                    | 

34

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 6  DEPOSITS
(Continued)

Interest expense by type of deposit
account for the years ended December 31, 2003, 2002 and 2001 is summarized as follows:

|                  | 2003 | 2002 | 2001
|----------------- | ---- | ---- | ----
|Interest checking |      |      | $   
|Money market      |      |      |     
|Savings           |      |      |     
|Time              |      |      |     
|                  |      |      |     
|Interest expense  |      |      | $   
|                  |      |      |     

# NOTE 7  ADVANCES
FROM FHLB

Advances from FHLB consisted of the
following at December 31, 2003 and 2002:

|                           | 2003 | 2002
|-------------------------- | ---- | ----
|
|
|
|Maturing Within:           |      |     
|1 year                     |      |     
|2 years                    |      |     
|3 years                    |      |     
|4 years                    |      |     
|                           |      |     
|Outstanding at end of year |      |     
|                           |      |     

At December 31, 2003, all FHLB
advances were at fixed rates with original maturities ranging from two to four years.
Investment securities with a market value of approximately $5.1 million were pledged as
collateral on the advances. At December 31, 2003, the Company had an approved credit limit
of approximately $17.0 million, subject to the Companys ability to pledge qualifying
collateral.

35

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 8  OTHER
BORROWINGS

The following sets forth certain
information about securities sold under agreements to repurchase during the years ended
December 31, 2003, 2002 and 2001:

|                                                             | 2003 | 2002 | 2001
|------------------------------------------------------------ | ---- | ---- | ----
|Balance outstanding at end of year                           |      |      | $   
|Average balance for months outstanding                       |      |      |     
|Maximum month-end balance during year                        |      |      |     
|Average interest rate for months outstanding                 |      |      |     
|Average interest rate at end of year                         |      |      |     
|Investment securities underlying the agreements at year end: |      |     
|Carrying value                                               |      |      | $   
|Estimated fair value                                         |      |      |     

The Company maintains federal funds
lines of credit with correspondent banks to meet short-term liquidity needs. Advances
under these agreements are unsecured and are limited to terms ranging from one to seven
days. These banks have reserved the right to withdraw these lines at their option. At
December 31, 2003, the Company had credit availability of $9,145,000 under these lines
with no advances outstanding.

# NOTE 9  INCOME
TAXES

The income tax effects of temporary
differences in financial statement carrying values and the tax bases of assets and
liabilities, as well as net operating loss carryforwards at December 31, 2003 and 2002 are
as follows:

|                                                      | 2003 | 2002
|----------------------------------------------------- | ---- | ----
|Deferred tax assets:                                  |      |     
|Net operating loss carryforwards                      |      |     
|Allowance for loan losses                             |      |     
|Other                                                 |      |     
|                                                      |      |     
|Total deferred tax assets before valuation allowance  |      |     
|Less valuation allowance                              |      |     
|                                                      |      |     
|Total deferred tax assets                             |      |     
|                                                      |      |     
|Deferred tax liabilities:                             |      |     
|Unrealized net gains on securities available for sale |      |     
|Depreciation                                          |      |     
|Other                                                 |      |     
|                                                      |      |     
|Total deferred tax liabilities                        |      |     
|                                                      |      |     
|Net deferred tax asset                                |      |     
|                                                      |      |     

Net operating loss carryforwards
expire in 2013 through 2016. The net deferred tax asset is included in other assets in the
consolidated balance sheets.

36

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 9  INCOME
TAXES (Continued)

The income tax provision (benefit)
for the years ended December 31, 2003, 2002 and 2001 is summarized as follows:

|                                        | 2003 | 2002 | 2001
|--------------------------------------- | ---- | ---- | ----
|Income taxes currently payable          |      |      | $   
|Deferred income tax provision (benefit) |      |      |     
|                                        |      |      |     
|Income tax provision (benefit)          |      |      | $   
|                                        |      |      |     

The provision for income taxes for the
years ended December 31, 2003, 2002 and 2001 is reconciled to the amount of income tax
computed at the federal statutory rate on income (loss) before income taxes as follows:

|                                             | 2003 | 2002 | 2001
|-------------------------------------------- | ---- | ---- | ----
|Tax expense (benefit) at statutory rate      |      |      | $   
|Increase (decrease) in taxes resulting from: |      |     
|State taxes, net of federal tax benefit      |      |      |     
|Expenses not deductible for tax purposes     |      |      |     
|Valuation allowance adjustment               |      |      |     
|                                             |      |      |     
|Income tax provision (benefit)               |      |      | $   
|                                             |      |      |     

# NOTE 10 
COMMITMENTS AND CONTINGENCIES

The Company is party to litigation
and claims arising in the normal course of business. Management, after consultation with
legal counsel, believes that the liabilities arising from such litigation and claims will
not be material to shareholders equity or the results from operations.

The Company has entered into
employment agreements with two executive officers which have initial terms of three years.
The agreements specify the annual compensation of the officers, incentive compensation and
other benefits. The agreements also provide that in the event the officers
employment is terminated or their position changed materially after a change in control,
they are entitled to severance compensation in the amount of two times the sum of their
base salary and their most recent bonus.

The Company has a contract for data
processing services through April 2009. Costs under the contract are approximately $12,000
per month.

# NOTE 11  FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the ordinary course of business,
and to meet the financing needs of its customers, the Company is a party to various
financial instruments with off-balance sheet risk. These financial instruments, which
include commitments to extend credit and standby letters of credit, involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts recognized in
the balance sheet. The contract amount of those instruments reflects the extent of
involvement the Company has in particular classes of financial instruments.

37

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 11  FINANCIAL
INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Continued)

The Companys exposure to credit
loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
contractual amounts of those instruments. The same credit policies used for on balance
sheet instruments are used in making commitments and conditional obligations.

Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any material
condition established in the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require the payment of a fee. At December 31, 2003,
unfunded commitments to extend credit were $10,215,382 outstanding letters of credit were
$120,093. At December 31, 2003, unfunded commitments consisted of $9,969,277 at variable
rates and $246,105 at fixed rates. The Company evaluates each customers credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Company upon extension of credit, is based on managements credit evaluation
of the borrower. Collateral varies but may include accounts receivable, inventory,
property, plant and equipment, and commercial and residential real estate.

# NOTE 12  EMPLOYEE
BENEFIT PLAN

The Company sponsors a 401(k) Plan
which covers all eligible employees. Participants may contribute up to 15% of eligible
compensation, and the Company contributes a discretionary amount, determined annually.
Both employee and employer contributions are subject to certain limitations. Contributions
to the Plan amounted to $21,459, $17,450, and $14,950 in the years ended December 31,
2003, 2002 and 2001, respectively.

# NOTE 13  STOCK
OPTIONS AND WARRANTS

The Company has a stock option plan
for the benefit of the directors, officers and employees. Under terms of the Plan, the
Board of Directors may grant options to purchase common stock (options) of the
Company aggregating up to 150,000 shares. Options issued under the plan have a term of 10
years and vest in equal installments over a five-year period.

The following is a summary of
activity in the stock option plan for the years ended December 31, 2003, 2002 and 2001:

|                               | 2003 | 2002 | 2001
|------------------------------ | ---- | ---- | ----
|
|
|
|
|Outstanding, beginning of year |      |      |     
|Granted                        |      |      |     
|Forfeited                      |      |      |     
|                               |      |      |     
|Outstanding, end of year       |      |      |     
|                               |      |      |     
|Options exercisable            |      |      |     
|                               |      |      |     
|Shares available for grant     |      |      |     
|                               |      |      |     

38

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 13  STOCK
OPTIONS AND WARRANTS (Continued)

The following is a summary of stock
options outstanding at December 31, 2003:

|     |  |  | Weighted        | Weighted |  | Weighted
|---- |  |  | --------------- | -------- |  | --------
|
|
|
|
|1999 |  |  | $         10.00 |          |  |         
|2000 |  |  | $ 7.38 - $10.00 |          |  |         
|2001 |  |  | $ 6.60 - $ 6.88 |          |  |         
|2002 |  |  | $ 7.88 - $ 9.42 |          |  |         
|2003 |  |  | $          9.35 |          |  |         
|     |  |  |                 |          |  |         
|     |  |  | $ 6.60 - $10.00 |          |  |         
|     |  |  |                 |          |  |         

Upon completion of the Companys
1999 stock offering, each of the Companys organizers received warrants to purchase
7,500 shares of common stock, or a total of 90,000 shares, at $10.00 per share. The
warrants vested immediately and are exercisable through January 12, 2009.

As described in Note 1, the Company
accounts for these stock compensation plans under the recognition and measurement
principles of APB Opinion No. 25, and no stock-based employee compensation cost is
reflected in net income (loss). The Company utilizes the Black-Scholes valuation model to
determine the pro forma effect on net income (loss) and earnings (loss) per share as if
the Company had applied the fair value recognition provisions of SFAS No. 123, which is
disclosed in Note 1. The following assumptions were utilized in the application of the
Black-Scholes model for the years ended December 31, 2003, 2002 and 2001:

|                                         | 2003 | 2002 | 2001
|---------------------------------------- | ---- | ---- | ----
|Dividend yield                           |      |      |     
|Weighted average risk-free interest rate |      |      |     
|Expected volatility                      |      |      |     
|Expected life (years)                    |      |      |     

# NOTE 14  DIVIDENDS

Currently, the Company has no plans
to initiate payment of cash dividends. It is anticipated that any future dividends paid by
the Company would be dependent on the Banks earnings, capital requirements, and
financial condition, as it is anticipated that such dividends would be dependent upon
dividends received by the Holding Company from the Bank. The Bank is restricted by banking
regulations in its ability to pay dividends and must obtain regulatory approval prior to
payment.

39

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 15 
REGULATORY MATTERS

The Bank is subject to various
regulatory capital requirements administered by the federal banking regulatory agencies.
Failure to meet minimum capital requirements can initiate certain mandatory, and possible
additional discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Companys financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Banks assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory accounting
practices. The Banks capital amounts and classification also are 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 Bank to maintain minimum amounts and ratios (set forth in the table below) of
total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.
Management believes, as of December 31, 2003, that the Bank meets all capital adequacy
requirements to which it is subject. As of December 31, 2003, the most recent notification
of the banking regulators categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events since that
notification that management believes have changed the institutions category. The
Banks actual capital amounts and ratios and minimum regulatory amounts and ratios
are presented as follows:

|                          |  |  |   |       | To be Well
|------------------------- |  |  | - | ----- | ----------
|
|
|
|
|
|
|
|As of December 31, 2003   |  |  |   |       |           
|Total capital             |  | 
|(To risk weighted assets) |  |  | $ | 7,902 |           
|Tier 1 capital            |  | 
|(To risk weighted assets) |  |  |   | 7,176 |           
|Tier 1 capital            |  | 
|(To average assets)       |  |  |   | 7,176 |           
|                          |  | 
|As of December 31, 2002   |  | 
|Total capital             |  | 
|(To risk weighted assets) |  |  | $ | 7,586 |           
|Tier 1 capital            |  | 
|(To risk weighted assets) |  |  |   | 7,094 |           
|Tier 1 capital            |  | 
|(To average assets)       |  |  |   | 7,094 |           

40

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

# NOTE 16  ESTIMATED
FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the
Companys financial instruments were as follows at December 31, 2003 and 2002:

|                                         | 2003 | 2002
|---------------------------------------- | ---- | ----
|
|
|Financial Assets:                        |      |     
|Cash and due from banks                  |      |     
|Federal funds sold                       |      |     
|Investment securities available for sale |      |     
|Investment securities held to maturity   |      |     
|FRB stock                                |      |     
|FHLB stock                               |      |     
|Loans, net                               |      |     
|Accrued interest receivable              |      |     
|                                         |      |     
|Financial Liabilities:                   |      |     
|Deposits                                 |      |     
|Advances from FHLB                       |      |     
|Drafts outstanding                       |      |     
|Accrued interest payable                 |      |     

# NOTE 17  PARENT
COMPANY INFORMATION

Following is condensed financial
information of New Commerce BanCorp (parent company only) as of and for the periods
indicated:

# Condensed Balance
Sheets

|                                       | December 31,
|-------------------------------------- | ------------
|
|Assets:                                |             
|Cash                                   |             
|Federal funds sold                     |             
|Investment securities held to maturity |             
|Investment in Bank                     |             
|Property and equipment                 |             
|Other assets                           |             
|                                       |             
|Total assets                           |             
|                                       |             
|Shareholders' equity                   |             
|                                       |             

41

---

NEW COMMERCE BANCORP
AND SUBSIDIARYNotes to Consolidated Financial Statements Years Ended December
31, 2003, 2002, and 2001

NOTE 17  PARENT
COMPANY INFORMATION (Continued)

Condensed Statements of
Operations

|                                                             | Years Ended December 31,
|------------------------------------------------------------ | ------------------------
|
|Interest income                                              |                         
|Non-interest income                                          |                         
|Non-interest expense                                         |                         
|                                                             |                         
|Income before equity in undistributed net income of Bank     |                         
|Income tax provision (benefit)                               |                         
|                                                             |                         
|Net income before equity in undistributed net income of Bank |                         
|Equity in undistributed net income (loss) of Bank            |                         
|                                                             |                         
|Net income (loss)                                            |                         
|                                                             |                         

# Condensed Statements
of Cash Flows

|                                                                   | Years Ended December 31,
|------------------------------------------------------------------ | ------------------------
|
|Operating Activities:                                              |                         
|Net income (loss)                                                  |                         
|Adjustments to reconcile net income (loss) to net cash provided by |                         
|operating activities:                                              |                         
|Depreciation                                                       |                         
|Decrease (increase) in other assets                                |                         
|Equity in undistributed net (income) loss of Bank                  |                         
|                                                                   |                         
|Net cash provided by operating activities                          |                         
|                                                                   |                         
|Investing Activities:                                              |                         
|Purchase of investment securities                                  |                         
|Proceeds from principal prepayments on investment securities       |                         
|Purchase of property and equipment                                 |                         
|                                                                   |                         
|Net cash (used for) provided by investing activities               |                         
|                                                                   |                         
|Net Increase (Decrease) in Cash and Cash Equivalents               |                         
|Cash and Cash Equivalents, Beginning of Year                       |                         
|                                                                   |                         
|Cash and Cash Equivalents, End of Year                             |                         
|                                                                   |                         

42

---

# Corporate Information

OFFICERSNew Commerce BanCorpFrank W. Wingate, President and Chief
Executive Officer R. Lamar Simpson, Senior Vice President and Chief Financial Officer

SENIOR OFFICERSNew Commerce BankFrank W. Wingate, President and Chief Executive
Officer Barry K. Aughtry, Senior Vice President, Commercial Lending Thomas W. Hale, Senior
Vice President and Senior Credit Officer Bradley J. Schneider, Senior Vice President,
Commercial Lending R. Lamar Simpson, Senior Vice President and Chief Financial Officer
Carolyn Austin Herbert, Vice President, Retail Banking Barbara L. Lewis, Vice President,
Operations Lisa K. Smith, Controller Dwayne L. Stickler, Vice President, Commercial
Lending

BOARD OF DIRECTORSNew Commerce BanCorp and New Commerce BankMarshall J. Collins, Jr.,
Chairman         Retired Chief Executive
Officer and Chairman, BI-LO LLCRichard W. Bailey         
President, Bayco Development CompanyTimothy A. Brett         
President, Brett Public Relations, Inc.Ralph S. Crawley         
Retired President, Carter and Crawley, Inc.G. Mitchell Gault       
  President, Kent-Gault Manufactured HomesTommy D. Greer        
 Chairman Emeritus, Catalina MarketingBobby L. Johnson        
 Real Estate DeveloperRobert T. Kellett        Owner and Operator,
Kellets Korner, Tommys Snack Bar and Kellets Fuel OilDennis O. Raines 
        Former President, Utility Partners of America
Frank W. Wingate        President and Chief Executive Officer, New Commerce Bank

43

---

OFFICESNew Commerce BancorpCorporate Office501 New Commerce Court
Greenville, South Carolina 29607 (864) 297-6333

New Commerce BankMain Office501 New Commerce CourtGreenville, South Carolina 29607 
(864) 297-6333

Five Forks Office
Five Forks Plaza CourtSimpsonville, South Carolina 29681 (864) 297-6333

ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of New Commerce BanCorp will be held at 4:00 p.m. on Wednesday,
April 28, 2004 at New Commerce Bank, 501 New Commerce Court, Greenville, South Carolina. All shareholders are
invited.

SHAREHOLDER SERVICES
Shareholders seeking information
regarding stock transfers, lost certificates, and address changes should contact the
Companys Stock Transfer Agent:

SunTrust Bank, AtlantaMail Code 258 
P.O. Box 4625 Atlanta, Georgia 30302 1-800-568-3476

LEGAL COUNSEL
Nelson, Mullins, Riley & Scarborough, L.L.P.Poinsett Plaza104 South Main Street
Greenville, South Carolina 29601

INDEPENDENT AUDITORS
Elliott Davis, LLC200 East Broad Street Greenville, South Carolina 29601

44

---

# Common Stock and Dividend
Information

The common stock of New Commerce
BanCorp is quoted on the OTC Bulletin Board under the symbol NCBS.OB. For
information contact:

|                                |  | 
|------------------------------- |  | 
|Scott & Stringfellow, Inc.      |  | 
|FIG Partners, LLC               |  | 
|Sterne, Agee & Leach, Inc.      |  | 
|E. E. Powell & Company, Inc.    |  | 
|Hill Thompson Magid & Co, Inc.  |  | 
|Pershing Trading Company, L.P   |  | 
|Schwab Capital Markets L.P      |  | 
|Knight Equity Markets, L.P      |  | 
|Monroe Securities, Inc.         |  | 
|Wedbush Morgan Securities, Inc. |  | 

As of February 27, 2004, New Commerce
BanCorp had 1,000,000 shares outstanding and 433 shareholders of record (does not include
the number of persons or entities that hold stock in nominee or street name).

To date, the Company has not paid
cash dividends on its common stock and currently has no plans to do so in the future. The
ability of the Company to pay cash dividends is dependent upon receiving cash dividends
from the Bank. However, South Carolina and federal banking regulations restrict the amount
of cash dividends that can be paid to the Company from the Bank.

The following table sets forth the
high and low bid prices as quoted on the OTC Bulletin Board during the periods indicated.
The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or
commissions, and may not represent actual transactions.

|               | Years Ended December 31,
|-------------- | ------------------------
|
|
|First quarter  |                         
|Second quarter |                         
|Third quarter  |                         
|Fourth quarter |                         

A copy of the Companys Annual
Report on Form 10-KSB for the year ended December 31, 2003, as filed with the Securities
and Exchange Commission, may be obtained free of charge by contacting R. Lamar Simpson at
the corporate address or from the Securities and Exchange Commission website at
www.sec.gov.

This Annual Report serves as the
ANNUAL FINANCIAL DISCLOSURE STATEMENT furnished pursuant to Part 350 of the Federal
Deposit Insurance Corporation Rules and Regulations. THIS STATEMENT HAS NOT BEEN REVIEWED
OR CONFIRMED FOR ACCURACY OR RELEVANCE BY THE FDIC.

45