Exhibit 13.1
                              New Commerce Bancorp
                               2002 Annual Report



                               TABLE OF CONTENTS





     Letter to Shareholders                                         1

     Financial Highlights                                           2

     Managements Discussion and Analysis of Financial
       Condition and Results of Operations                          3

     Report of Independent Certified Public Accountants            19

     Consolidated Financial Statements                             20

     Notes to Consolidated Financial Statements                    24

     Corporate Information                                         42


<PAGE>



Dear Shareholder:

For New Commerce BanCorp, 2002 was a year of profit and progress. Your company
achieved earnings of $37,528 as compared to a loss in 2001 of $187,957. Our
total assets grew by 23% to $63.6 million and this was based primarily on a 33%
increase in our loan portfolio. Deposits grew by 27% to support our loan growth.

We achieved these results while dealing with a sluggish economy and at the same
time positioning us effectively to continue our growth into the future.
Corporate scandals rocked the stock market and will lead to increased regulatory
burdens for publicly traded companies. Our country is at war with terrorism and
we all will be challenged as Americans in the years to come. Nevertheless, our
market has a strong foundation, which will serve us well going forward.

As with any enterprise, your company's success is directly related to the
quality of its management team. We have added three outstanding senior managers
to our team. Barry K. Aughtry joined us as Senior Vice President and will lead
our commercial lending group in developing relationships throughout the Golden
Strip. Carolyn A. Herbert joined as Vice President and is responsible for our
retail banking operations, assuring excellent service to all of our clients.
Finally, R. Lamar Simpson was named Chief Financial Officer in June to add great
strength to our senior management team.

During 2002 your company's board and senior management spent considerable time
and effort reviewing our strategic plan. This was a very rewarding process which
we are convinced will lead us to increased shareholder value and a rededication
to becoming the preeminent community bank in the Golden Strip. We have exciting
plans for 2003 and look forward to continued progress in the years to come.

Sincerely,


/s/ Marshall J. Collins, Jr.              /s/ Frank W. Wingate
Marshall J. Collins, Jr.                  Frank W. Wingate
Chairman of the Board                     President and Chief Executive Officer


                                       1
<PAGE>

                              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, 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.)

<TABLE>
<CAPTION>
                                                        2002          2001         2000         1999(1)
                                                     ---------     ---------     --------      --------

<S>                                                  <C>            <C>          <C>           <C>
Summary of Operations:
  Net interest income                                $   1,971     $   1,638     $  1,205      $    587
  Provision for loan losses                                110           118          116           196
  Non-interest income                                      408           243          115            45
  Non-interest expense                                   2,206         2,046        1,690         1,371
                                                     ---------     ---------     --------      --------
  Income (loss) before income tax provision
    (benefit)(2)                                            62          (283)        (486)         (934)
  Income tax provision (benefit)                            24            95          148           266
                                                     ---------     ---------     --------      --------
  Net income (loss)                                  $      38     $   (188)    $   (338)      $   (668)
                                                     =========     =========     ========      ========

Per Share Data:
  Net loss per share of common stock                 $    0.04     $   (0.19)   $   (0.34)     $  (0.67)
  Book value per share of common stock                    8.84          8.76         8.81          9.01

Balance Sheet Data:
  Total assets                                       $  63,633     $  51,631    $  40,278      $ 27,547
  Federal funds sold                                     3,342         1,026            -         5,838
  Investment securities                                 14,023        15,690       13,620         3,985
  Net loans                                             37,938        28,542       19,193        12,855
  Total earning assets                                  56,282        45,966       33,380        23,149
  Deposits                                              47,522        37,564       31,168        18,391
  Federal Home Loan Bank advances                        4,725             -            -             -
  Other short-term borrowings                                -         4,854          100             -
  Shareholders' equity                                   8,839         8,758        8,808         9,012

Other Data:
  Net interest margin                                    4.06%         4.13%        4.41%         5.37%
  Loans to deposits - average                           81.08         70.31        67.20         77.90
  Allowance for loan losses to loans                     1.28          1.40         1.50          1.50
  Net charge-offs to average loans                       0.07          0.02         0.12          0.00
  Nonperforming assets                                   0.00          0.00         0.00          0.00
  Shareholders equity to total assets                   13.89         16.96        21.87         32.71
  Capital ratios (Bank only):
    Tier 1 risk-based capital                           14.47         17.47        26.30         49.70
    Total risk-based capital                            15.47         18.47        27.36         50.90
    Leverage ratio                                      11.85         14.71        19.52         31.10

<FN>
(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.  See discussion
     later in this report.
</FN>
</TABLE>



                                       2
<PAGE>


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 each quarter 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   The effects of future economic conditions;

     o   Governmental monetary and fiscal policies, as well as legislative and
         regulatory changes;

     o   Changes in interest rates and their effect on the level and
         composition of deposits, loan demand, and the values of loan
         collateral, securities and other interest-sensitive assets and
         liabilities;

     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   Our ability to control costs, expenses, and loan delinquency rates; and

     o   The effects of competition from other commercial banks, thrifts,
         mortgage banking firms, consumer finance companies, credit unions,
         securities brokerage firms, insurance companies, money market and
         other mutual funds, and other financial institutions operating in our
         market area and elsewhere, including institutions operating regionally,
         nationally, and internationally, together with such competitors
         offering banking products and services by mail, telephone, computer
         and the Internet.

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.

                                       3
<PAGE>

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. These significant accounting policies are described
in the Notes to Consolidated 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, 2002, our commitments to extend credit
totaled approximately $7.7 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 45% of our total commitments had expiration dates of
one year or less, while those expiring after one year through five years
accounted for approximately 5% of the total. Those expiring after five years
approximated 50% of the total. The majority of the commitments expiring after
five years represented available balances on equity lines of credit.

At December 31, 2002, our outstanding standby letters of credit totaled $40,000
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
<PAGE>

RESULTS OF OPERATIONS

Overview
Net income for the year ended December 31, 2002 was $37,528, or $0.04 per share,
compared to net loss of $187,957, or $0.19 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 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
discussed in the next paragraph.

Net loss for the year ended December 31, 2001 was $187,957, or $0.19 per share,
compared to net loss of $338,459, or $0.34 per share, in 2000. This was a
$150,502, or $0.15 per share, decrease in the net loss and loss per share,
respectively, over the prior year. The decrease in our net loss resulted
primarily from an increase in the volume of earning assets, the repricing of
prior year higher-rate CDs due to maturity, and the continued improvement in
non-interest income. Included in our net loss for 2001 was approximately $81,000
(after taxes) in one-time expenses associated with our change in chief executive
officers, details of which are discussed in "Non-Interest Expenses" below. Net
loss in 2001, excluding these one-time charges, was approximately $107,000.

Net Interest Income

The largest component of our income is net interest income, the difference
between the income earned on assets and the interest accrued 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, 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 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.

During 2001, net interest income was $1.64 million, which represented a 37%
increase from the $1.20 million earned in 2000. The improvement in 2001
principally was attributable to an increase in the volume of earning assets,
particularly in loans and investment securities. The impact of the increase in
the volume of earning assets was offset partially by an increase in the volume
of interest-bearing liabilities. The rate earned and paid on earning assets and
interest-bearing liabilities, respectively, both declined and the net impact on
net interest income was negligible.

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 $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.


                                       5
<PAGE>


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. Due to the lower interest-rate
risk inherent in variable-rate loans, their yield is on average less than that
of fixed-rate loans. The increase in the variable-rate portion of our portfolio
is largely market driven as our client base has been attracted to the current
low variable rates, generally coupled with their belief that short-term rates
are not likely to rise significantly in the near term.

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 and part of the year 2001. Also, the proceeds from sales of
investment securities and principal repayments received on mortgage-backed
securities were reinvested at lower rates in 2002. See "Non-Interest Income" for
further discussion of sales of investment securities.

The increase in the average balance of loans outstanding served to offset the
decreases in rate discussed above. The average balance of loans during 2002 was
$32.5 million compared to $24.2 million in 2001.

In the year ended December 31, 2001, interest income totaled $3.08 million
compared to $2.29 million in 2000, an increase of 34%. This increase was
primarily the result of a general increase in earning assets and a reallocation
from lower yielding assets to higher yielding loans and investment securities.
Average earning assets were $39.7 million for 2001, with an average yield of
7.76%. In 2000, average earning assets and average yield were $27.3 million and
8.38%, respectively. Although the volume of earning assets increased, the
significant drop in the prime rate impacted the variable rate portion of our
loan portfolio, which comprised approximately 63% of our total loan portfolio at
December 31, 2001, as well as new loans originated and investment securities
purchased in 2001.

Loan interest income increased 28% to $1.95 million in 2001 from $1.52 million
in 2000. Average loans comprised 61% of average earning assets in 2001 and 58.6%
in 2000. The average yield on loans was 8.04% in 2001 and 9.49% in 2000, with
the decrease resulting from the declining trend in interest rates in 2001 and
its effect on the variable portion of our loan portfolio.

Investment interest income totaled $1,089,831 in 2001, a 78% increase from
$613,258 in 2000. Investment securities averaged $14.6 million, or 37%, of
average earning assets in 2001 compared to $8.8 million, or 32%, in 2000.
Average yield on investment securities for 2001 and 2000 was 7.44% and 6.97%,
respectively

Interest Expense

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



                                       6
<PAGE>



The average rate paid on interest-bearing deposits was 2.44% in 2002 compared to
4.45% in 2001. This decrease in rate resulted from the general declining rate
environment of 2001 whereby certificates of deposit that repriced in 2001 were
outstanding for a whole year in 2002 at lower rates. Additionally, the decrease
in prime rate in November 2002 also served to lower the rate paid on deposits.
The average rate paid on repurchase agreements was 2.35% in 2002 as compared to
4.02% in 2001, again the result of rate decreases in 2001 being effective for
the entire year of 2002.

For the year ended December 31, 2001, interest expense was $1.44 million
compared to $1.08 million in 2000. Deposit interest expense was $1.29 million in
2001 compared to $1.08 million in 2000. The 19% increase was attributable
principally to an average volume increase of $8.3 million in interest-bearing
deposits. The increase in interest on deposits due to the volume increase was
offset partially by a decrease in the average rate paid on deposits. The average
rate paid on interest-bearing deposits was 4.45% in 2001 compared to 5.23% in
2000. This decrease in average rates was the result of the general declining
rate environment in 2001 and the repricing of promotional certificates of
deposit issued in connection with a marketing campaign shortly after the bank
opened for business. Interest expense also increased due to the addition of
interest on repurchase agreements that was not present 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, 2002 and 2001. Yields and rates are derived by dividing annual
income or expense by the average balance of the corresponding asset or
liability.
<TABLE>
<CAPTION>

                                                    2002                                   2001
                                    -------------------------------------- --------------------------------------
                                       Average        Income/     Yield/      Average        Income/     Yield/
                                       Balance        Expense      Rate       Balance        Expense      Rate
                                    ------------- ------------- ---------- --------------- ------------ ---------
<S>                                  <C>            <C>           <C>      <C>              <C>            <C>
Earning assets:
  Loans                              $32,531,816    $2,055,409    6.32%    $ 24,216,140     $1,948,178     8.04%
  Investment securities               14,385,604       876,674    6.09       14,647,552      1,089,831     7.44
  Federal funds sold                   1,205,776        13,634    1.13          513,225         21,565     4.20
  FHLB and FRB stock                     373,166        22,476    6.02          296,017         18,155     6.13
                                    ------------- ------------- ---------- --------------- ------------ ---------

    Total interest-earning assets     48,496,362     2,968,193    6.12     $ 39,672,934      3,077,729     7.76
                                                  ------------- ----------                 ------------ ---------
Non-earning assets                     6,398,266                              6,744,861
                                    ---------------                        ---------------

    Total assets                     $54,894,628                           $ 46,417,795
                                    ===============                        ===============

Interest-bearing liabilities:
  Deposits:
    Interest checking                $ 3,090,722        30,452    0.99     $  3,608,463         57,729     1.60
    Savings accounts                     518,543         6,578    1.27          330,513          6,249     1.89
    Money market accounts             13,229,891       221,653    1.68       10,733,398        395,698     3.69
    Time deposits                     18,496,714       602,786    3.26       14,344,807        830,964     5.79
  Repurchase agreements                2,977,375        69,929    2.35        3,155,332        126,914     4.02
  FHLB advances                        1,816,884        53,716    2.96                -              -        -
  Federal funds purchased                591,629        12,502    2.35          573,022         21,920     3.83
                                    ------------- ------------- ---------- --------------- ------------ ---------

    Total interest-bearing
      liabilities                     40,721,758       997,616    2.45     $ 32,745,535      1,439,474     4.40
                                                  ------------- ----------                 ------------ ---------
Non-interest-bearing liabilities       5,383,353                              5,021,762
                                    ---------------                        ---------------

    Total liabilities                 $46,105,111                          $ 37,767,297
                                    ===============                        ===============


Net interest income and margin                      $1,970,577    4.06%                    $1,638,255    4.13%
                                                  ============= ==========                 ============ =========
</TABLE>


                                       7
<PAGE>

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 2002 and 2001. Changes in rate/volume were
allocated to both in their proportions to the absolute value of each.

<TABLE>
<CAPTION>
                                         2002 compared to 2001                      2001 compared to 2000
                                ----------------------------------------  -----------------------------------------
                                 Net Change                                Net Change
                                 in Interest      Attributable to:         in Interest        Attributable to:
                                   Income/      ------------------------     Income/     --------------------------
                                   Expense        Volume       Rate          Expense        Volume         Rate
                                --------------  ----------  -----------   ------------   ------------  ------------
<S>                                <C>           <C>          <C>            <C>            <C>          <C>
Earning assets:
  Loans                            $ 107,231     $580,630     $(473,399)     $ 428,286    $  687,579     $(259,293)
  Investment securities             (213,157)     (19,173)     (193,984)       476,573       431,779        44,794
  Federal funds sold                  (7,931)      15,304       (23,235)      (116,266)      (82,102)      (34,164)
  FHLB and FRB stock                   4,321        4,652          (331)           862         1,300          (438)
                                --------------  ----------  ------------- -------------  ------------  ------------

    Total earning assets            (109,536)     581,413      (690,949)       789,455     1,038,556      (249,101)
                                --------------  ----------  ------------- -------------  ------------  ------------

Interest-bearing liabilities:
  Deposits:
    Interest checking                (27,277)      (7,418)      (19,859)      (202,244)      (71,665)     (130,579)
    Savings accounts                     329        2,814        (2,485)         4,795           779         4,016
    Money market accounts           (174,045)      77,028      (251,073)        27,189       140,655      (113,466)
    Time deposits                   (228,178)     198,618      (426,796)       379,208       400,173       (20,965)
  Repurchase agreements              (56,985)      (6,802)      (50,183)       126,914       126,914             -
  FHLB advances                       53,716       53,716             -              -             -             -
  Federal funds purchased             (9,418)         690       (10,108)        20,276        20,827          (551)
                                --------------  ----------  ------------- -------------  ------------  ------------

    Total interest-bearing
      liabilities                   (441,858)     318,646      (760,504)       356,138       617,683      (261,545)
                                --------------  ----------  ------------- -------------  ------------  ------------

Net interest income                $ 332,322     $262,767     $  69,555      $ 433,317    $  420,873     $  12,444
                                ==============  ==========  ============= =============  ============  ============
</TABLE>

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 $110,093, $117,745 and $116,027 for the years ended December 31,
2002, 2001 and 2000, respectively. See "Balance Sheet Review - Loans and
Allowance for Loan Losses."


                                       8
<PAGE>

Non-Interest Income

Non-interest income for the year ended December 31, 2002 was $408,412, an
increase of $165,298, or 68%, over the $243,114 reported 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
continued growth in deposit balances. The second largest component of the
increase in non-interest income was a gain of $87,826 from the sale of
investment securities. Because the principal purpose of our investment portfolio
is liquidity management, and not to derive income from trading activity, we
consider this gain a nonrecurring item. Although we may sell securities in the
future, currently, we have no plans to do so. Also contributing to the increase
in non-interest income was mortgage loan brokerage income of $142,267, which
increased by $30,638 in 2002 as compared to $111,629 in 2001. This increase was
indicative of the refinancing and purchase money activity associated with the
continued declining interest rate environment in 2002.

Non-interest income for the year ended December 31, 2001 was $243,114, an
increase of $127,907, or 11%, over the $115,207 reported in 2000. The largest
component of the increase was attributable to mortgage loan brokerage income of
$111,629 in 2001 as compared to $38,217 in 2000, an increase of $73,412. This
increase was the result of refinancing and purchase money activity associated
with the declining interest rate environment in 2001. Service charges on deposit
accounts were $78,031 in 2001 as compared to $42,786 in 2000, an increase of
$35,245. The increase in service charge income was primarily the result of
continued growth in deposit balances. The remaining balance of non-interest
income was generated from other fees charged, which increased by $15,915 during
2001.

Non-Interest Expense

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.

The largest component of non-interest expense is salaries and benefits. 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.

Non-interest expense totaled $2,046,387 for the year ended December 31, 2001,
compared to $1,690,264 in 2000, an increase of $356,123, or 21%. Salaries and
benefits totaled $1,051,144 in 2001, compared to $877,292 in 2000. This 20%
increase was attributable primarily to a full year of salaries and benefits
associated with the opening of two permanent locations in May and June 2000 and
the hiring of additional support staff and client service personnel in 2001 to
handle the general growth of the bank.



                                       9
<PAGE>

Occupancy furniture and equipment expense increased $56,487, or 22%, to $318,256
in 2001 from $261,769 in 2000. The increase in 2001 was associated with a full
year of depreciation, utilities, building maintenance, real estate taxes and
other costs incurred to maintain two permanent locations. Data processing
expense of $178,302 in 2001 increased 17% from 2000 and consisted primarily of
our monthly fee to the bank's data processing service bureau. This category also
includes costs associated with maintaining our computer network and those costs
increased as they were directly related to the growth of the bank.

On October 1, 2001, we hired Frank W. Wingate as our president and chief
executive officer and director. Mr. Wingate replaced James D. Stewart who had
served as our president and chief executive officer from our inception in 1999
until his resignation in September 2001. In conjunction with this change, we
incurred $122,670 in costs labeled on our Statement of Operations as "Chief
Executive Officer Transition Costs." Costs associated with Mr. Stewart's
separation agreement totaled $36,290 and costs associated with the hiring of Mr.
Wingate totaled $86,380.

BALANCE SHEET REVIEW

At December 31, 2002, assets totaled $63.6 million, an increase of $12.0
million, or 23%, from $51.6 million at December 31, 2001. The increase was
comprised principally of an increase in net loans, and to a lesser extent, cash
and federal funds sold. Total liabilities increased by $11.9 million, or 28%, to
$54.8 million at December 31, 2002 from $42.9 million at December 31, 2001. The
increase in liabilities was comprised principally of an increase in deposits,
and to a lesser extent, drafts outstanding.

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 $6.4
million at December 31, 2002 as compared to $2.0 million at December 31, 2001.
Of this amount, $2.3 million represented the overnight investment of outstanding
disbursement checks. The liability for the outstanding checks is included in the
balance sheet caption "Drafts Outstanding."

Investment Securities

At December 31, 2002, investment securities totaled $14.0 million and
represented 25% of earning assets compared to a total of $15.7 million or 34% of
earning assets at December 31, 2001. 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
<PAGE>

Contractual maturities and yields on our investment securities at December 31,
2001 and 2000 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.
<TABLE>
<CAPTION>

                                                     After One                After Five
                               Within                but Within               but Within                After
Security Type                 One Year     Yield     Five Years     Yield     Ten Years      Yield     Ten Years     Yield
--------------------------  -----------  ---------  ------------  ---------  ------------  ---------  -----------  ---------
<S>                           <C>          <C>       <C>            <C>        <C>           <C>       <C>           <C>
December 31, 2002:
Federal agency                $        -       -%   $    199,001    4.20%   $   717,456      7.20%     $       -         -%
Mortgage-backed                1,578,794    5.05       3,401,071    5.02      1,888,681      4.80       1,838,147     5.27
Collateralized mortgage
  obligations                  1,009,323    8.89         134,048    9.51              -         -               -        -
Corporate                              -       -       2,294,724    6.92              -         -               -        -
Trust preferred                        -       -               -       -              -         -         500,000     9.00
                            -------------         ---------------         --------------            -------------
  Total                       $2,588,117            $  6,028,844            $ 2,606,137                $2,338,147
                            =============         ===============         ==============            =============


December 31, 2001:
Federal agency                $        -       -%   $  6,001,270    4.56%   $   713,387      7.20%     $        -        -%
Mortgage-backed                        -       -       2,525,618    6.97              -         -         498,753     6.06
Collateralized mortgage
  obligations                    491,635    5.56       1,863,957    7.16              -         -               -         -
Corporate                              -       -       2,794,634    6.79        425,600      7.00               -         -
                            -------------         ---------------         --------------            -------------
  Total                       $  491,635            $ 13,185,479            $ 1,138,987                $  498,753
                            =============         ===============         ==============            =============
</TABLE>

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, 2002, outstanding loans totaled $38.5 million, an increase of $9.6 million,
or 33%, over the $28.9 million reported at December 31, 2001. Outstanding loans
represented 68% and 63% of total earning assets, at December 31, 2002 and 2001,
respectively. The following table summarizes the composition of the loan
portfolio at December 31, 2002 and 2001.
<TABLE>
<CAPTION>
                                                              2002                               2001
                                                ---------------------------------  ---------------------------------
                                                     Amount           Percent           Amount           Percent
                                                -----------------  --------------  -----------------  --------------

<S>                                                 <C>                  <C>          <C>                  <C>
Commercial                                          $ 6,462,271          16.8%       $ 7,545,371           26.0%
Real estate - construction                            1,781,866           4.6          3,110,670           10.7
Real estate - mortgage                               24,760,074          64.4         16,357,204           56.5
Consumer                                              5,474,605          14.2          1,959,154            6.8
                                                -----------------  --------------  -----------------  --------------

  Total loans                                        38,478,816         100.0%        28,972,399          100.0%
                                                                   ==============                     ==============
Allowance for loan losses                              (492,000)                        (405,000)
Deferred loan costs, net                                (49,279)                         (25,236)
                                                -----------------                  -----------------

  Net loans                                         $37,937,537                      $28,542,163
                                                =================                  =================
</TABLE>

                                       11
<PAGE>

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, in the case of a collateralized loan, risks resulting from
uncertainties about the future value of the collateral. To address these risks,
we have developed policies and procedures to evaluate the overall quality of our
credit portfolio and the timely identification of potential problem loans.

We maintain an allowance for loan losses, which we establish through charges in
the form of a provision for loan losses. 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. To maintain the allowance at an adequate level, we periodically make
additions to the allowance by charging an expense to the provision for loan
losses on our statement of operations. We evaluate the allowance for loan losses
on an overall portfolio basis. We consider a number of factors in determining
the level of this allowance, including our total amount of outstanding loans,
our amount of past due loans, our historic loan loss experience, general
economic conditions and our assessment of potential losses, classified and
criticized loans, concentrations of credit and internal credit risk ratings. In
calculating our required allowance we grade our loan portfolio. All "pass" loans
are risk rated on a scale from one to four, and weightings are applied to each
risk rating. Additionally, our watch list is incorporated and loans criticized
and classified are weighted accordingly. Our evaluation 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.

Nonperforming assets consist of non-accrual loans, other real estate owned, and
repossessed collateral. 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. There were neither any
non-performing loans nor loans delinquent more than 90 days at December 31, 2002
and 2001.

Below is an analysis of the allowance for loan losses for the years ended
December 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                                       2002           2001
                                                                   -------------   ------------
<S>                                                                  <C>            <C>
Allowance for loan losses, beginning of year                         $ 405,000      $ 292,277
Provision for loan losses                                              110,093        117,745
Charge-offs - consumer loans                                           (23,093)        (5,022)
                                                                   -------------   ------------

Allowance for loan losses, end of year                               $ 492,000      $ 405,000
                                                                   =============   ============
Allowance for loan losses to loans outstanding                            1.28%          1.40%
                                                                   =============   ============
Net charge-offs to average loans                                          0.07%          0.02%
                                                                   =============   ============
</TABLE>



                                       12
<PAGE>

The following table allocates the allowance for loan losses by loan category at
December 31, 2002 and 2001. 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.
<TABLE>
<CAPTION>

                                                            2002                            2001
                                                -----------------------------   -----------------------------
                                                                Percent of                      Percent of
                                                                 Loans in                        Loans in
                                                               Category to                     Category to
                                                  Amount        Total Loans       Amount       Total Loans
                                                ------------  ---------------   ------------  ---------------

<S>                                                <C>              <C>           <C>            <C>
Commercial                                       $  100,000         16.8%       $ 85,000          26.0%
Real estate - construction                           85,000          4.6          70,000          10.7
Real estate - mortgage                              200,000         64.4         165,000          56.5
Consumer                                            107,000         14.2          85,000           6.8
                                                ------------  ---------------   ------------  ---------------

  Total allowance for loan losses                $  492,000        100.0%       $405,000         100.0%
                                                ============  ===============   ============  ===============
</TABLE>

The following table summarizes loan maturities, by type, at December 31, 2002
and 2001. 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.

<TABLE>
<CAPTION>
                                                              After One
                                              One Year        but Within          After
                                              or Less         Five Years        Five Years         Total
                                           ---------------  ---------------   ---------------  ---------------

<S>                                            <C>              <C>                  <C>           <C>
December 31, 2002:
Commercial                                     $3,564,635      $ 2,897,636        $        -      $ 6,462,271
Real estate - construction                      1,781,866                -                 -        1,781,866
Real estate - mortgage                          2,606,861       18,865,786         3,287,427       24,760,074
Consumer                                          576,254        1,152,904         3,745,447        5,474,605
                                           ---------------  ---------------   ---------------  ---------------

  Total loans                                  $8,529,616      $22,916,326        $7,032,874      $38,478,816
                                           ===============  ===============   ===============  ===============
Loans maturing after one year with:
  Fixed interest rates                                                                            $ 9,284,252
                                                                                               ===============
  Floating interest rates                                                                         $20,664,948
                                                                                               ===============

December 31, 2001:
Commercial                                     $3,444,513       $3,890,655         $ 210,203      $ 7,545,371
Real estate - construction                      1,851,570        1,259,100                 -        3,110,670
Real estate - mortgage                          2,100,041       10,908,382         3,348,781       16,357,204
Consumer                                          511,017        1,137,797           310,340        1,959,154
                                           ---------------  ---------------   ---------------  ---------------
  Total loans                                  $7,907,141      $17,195,934        $3,869,324      $28,972,399
                                           ===============  ===============   ===============  ===============
Loans maturing after one year with:
  Fixed interest rates                                                                            $ 9,230,653
                                                                                               ===============
  Floating interest rates                                                                         $11,834,605
                                                                                               ===============
</TABLE>



                                       13
<PAGE>

Deposits

Deposits are our primary source of funds for loans and investments. Total
deposits were $47.5 million at December 31, 2002, an increase of $9.9 million,
or 26%, over the $37.6 million reported at December 31, 2001. We consider demand
deposits and time deposits of less than $100,000 to be core deposits. We believe
that core deposits provide a relatively stable funding source for our lending
and investing activities. Our core deposits totaled $36.8 million, or 77% of
total deposits, at December 31, 2002 compared to $28.5 million, or 76.0% of
total deposits, at December 31, 2001.

Time deposit balances over $100,000 tend to be extremely sensitive to interest
rate levels, making these deposits less reliable sources of funding for
liquidity planning purposes than core deposits. Accordingly, we have elected to
concentrate on core deposits. Currently, we have no brokered deposits. The
following is a table of deposits by category at December 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                             2002                            2001
                                                 ------------------------------  ------------------------------
                                                                     Percent                         Percent
                                                     Amount          of Total        Amount          of Total
                                                 ---------------   ------------  ---------------   ------------
<S>                                                <C>                <C>           <C>                <C>
Non-interest bearing                               $  4,877,681       10.3%         $ 6,388,120        17.0%
Interest bearing checking                             3,332,544        7.0            3,367,344         9.0
Money market                                         17,279,741       36.4           10,847,650        28.9
Savings                                                 564,582        1.2              452,123         1.2
Time deposits less than $100,000                     10,707,188       22.5            7,442,601        19.8
Time deposits of $100,000 or more                    10,760,269       22.6            9,065,760        24.1
                                                 ---------------   ------------  ---------------   ------------
Total deposits                                      $47,522,005      100.0%         $37,563,598       100.0%
                                                 ===============   ============  ===============   ============
</TABLE>

The maturity distribution of our time deposits of $100,000 or more at December
31, 2002 is shown in the following table.

Three months or less                                            $1,378,551
Over three through six months                                    2,294,473
Over six through twelve months                                   5,723,020
Over twelve months                                               1,364,225
                                                            ---------------
  Total                                                        $10,760,269
                                                            ===============

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, 2002 and 2001, there
were no short-term borrowings outstanding. 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. There were no FHLB advances outstanding at December 31, 2001.
See "Liquidity and Capital Resources" for additional details of our borrowing
arrangements. From time to time we also borrow funds by selling securities under
agreements to repurchase. At December 31, 2002, there were no outstanding
repurchase agreements and at December 31, 2001 a repurchase agreement in the
amount of $4,854,000 was outstanding at a rate of 2.50%. See Notes to
Consolidated Financial Statements for more details about outstanding balances
and rates on repurchase agreements outstanding during the years ended December
31, 2002 and 2001.


                                       14
<PAGE>

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, 2002, our liquid assets, consisting of cash and due from banks
and federal funds sold, net of drafts outstanding totaled $4.1 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 $3.9 million at December 31, 2002.
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 $5.8
million with correspondent banks. 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. We have an approved
credit limit of approximately $12.4 million with the FHLB, with $7.7 million
unused at December 31, 2002. Further advances from the FHLB are limited to
available collateral acceptable to the FHLB which at December 31, 2002,
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, 2002, unfunded commitments to extend credit were approximately
$7.7 million and outstanding letters of credit were $40,000. No material capital
expenditures are planned in 2003.

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.

The bank exceeded the minimum capital requirements set by the regulatory
agencies at December 31, 2002 and 2001. The following is a table that reflects
the leverage and risk-based regulatory capital ratios of the bank at December
31, 2002 and 2001.

                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                          2002                           2001
                                               ---------------------------   -----------------------------
                                                 Actual        Minimum         Actual          Minimum
                                               -----------   -------------   ------------   --------------
<S>                                               <C>            <C>            <C>             <C>
Total capital (to risk-weighted assets)           15.5%          8.0%           18.5%           8.0%
Tier 1 capital (to risk-weighted assets)          14.5           4.0            17.5            4.0
Tier 1 capital (to average assets)                11.9           4.0            14.7            4.0
</TABLE>

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 $100,000 and plus $100,000, 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.


                                       16
<PAGE>

The following table presents our gap analysis as of December 31, 2002 and 2001.
The difference between rate-sensitive assets and rate sensitive liabilities is
shown below as the "period interest-sensitive gap."

<TABLE>
<CAPTION>
                                          Within        After Three       After One         After
                                          Three          but Within       but Within        Five
                                          Months       Twelve Months      Five Years        Years          Total
                                      --------------- ----------------- --------------- -------------- ---------------
<S>                                     <C>             <C>                <C>           <C>             <C>
December 31, 2002:
Earning assets:
  Loans, gross                          $27,832,860     $     811,480     $ 8,728,319    $ 1,106,157     $38,478,816
  Investment securities                     570,621         2,017,496       6,746,300      4,226,828      13,561,245
  Federal funds sold                      3,342,348                 -               -              -       3,342,348
  FHLB and FRB stock                        487,250                 -               -              -         487,250
                                      --------------- ----------------- --------------- -------------- ---------------
    Total earning assets                 32,233,079         2,828,976      15,474,619      5,332,985      55,869,659
                                      --------------- ----------------- --------------- -------------- ---------------
Interest-bearing liabilities:
  Deposits:
    Interest checking                     3,332,544                 -               -              -       3,332,544
    Savings accounts                        564,582                 -               -              -         564,582
    Money market accounts                17,279,741                 -               -              -      17,279,741
    Time deposits                         5,046,779        14,707,431       1,713,247              -      21,467,457
  FHLB advances                             325,000           650,000       3,750,000              -       4,725,000
                                      --------------- ----------------- --------------- -------------- ---------------
    Total interest-bearing liabilities   26,548,646        15,357,431       5,463,247              -      47,369,324
                                      --------------- ----------------- --------------- -------------- ---------------
Period interest-sensitive gap           $ 5,684,433     $ (12,528,455)    $10,011,372    $ 5,332,985     $ 8,500,335
                                      =============== ================= =============== ============== ===============
Cumulative interest-sensitive gap       $ 5,684,433     $  (6,844,022)    $ 3,167,350    $ 8,500,335
                                      =============== ================= =============== ==============
Ratio of cumulative interest-
  sensitive gap to earning assets              10.2%            (12.2)%           5.7%         15.2%
                                      =============== ================= =============== ==============
December 31, 2001:
Earning assets:
  Loans, gross                          $18,095,103     $   1,575,979     $ 7,878,556    $ 1,422,761     $28,972,399
  Investment securities                   5,000,000                 -       3,987,137      6,327,717      15,314,854
  Federal funds sold                      1,026,449                 -               -              -       1,026,449
  FHLB and FRB stock                        302,650                 -               -              -         302,650
                                      --------------- ----------------- --------------- -------------- ---------------
    Total earning assets                 24,424,202         1,575,979      11,865,693      7,750,478      45,616,352
                                      --------------- ----------------- --------------- -------------- ---------------
Interest-bearing liabilities:
  Interest checking                       3,367,344                 -               -              -       3,367,344
  Savings accounts                          452,123                 -               -              -         452,123
  Money market accounts                  10,847,650                 -               -              -      10,847,650
  Time deposits                           4,009,907        11,739,841         758,613              -      16,508,361
  Repurchase agreements                   4,854,000                 -               -              -       4,854,000
                                      --------------- ----------------- --------------- -------------- ---------------
    Total interest-bearing liabilities   23,531,024        11,739,841         758,613              -      36,029,478
                                      --------------- ----------------- --------------- -------------- ---------------
Period interest-sensitive gap           $   893,178     $ (10,163,862)    $11,107,080    $ 7,750,478     $ 9,586,874
                                      =============== ================= =============== ============== ===============
Cumulative interest-sensitive gap       $   893,178     $  (9,270,684)    $ 1,836,396    $ 9,586,874
                                      =============== ================= =============== ==============
Ratio of cumulative interest-
  sensitive gap to earning assets               2.0%            (20.3)%           4.0%          21.0%
                                      =============== ================= =============== ==============
</TABLE>



                                       17
<PAGE>

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
<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
New Commerce BanCorp and Subsidiary
Greenville, South Carolina


We have audited the accompanying consolidated balance sheets of New Commerce
BanCorp and Subsidiary (the "Company") as of December 31, 2002 and 2001 and the
related consolidated statements of operations, shareholders' equity and
comprehensive income, and cash flows for each of the years in the three year
period ended December 31, 2002. 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, 2002 and 2001 and the results of their operations
and cash flows for each of the years in the three year period ended December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.



/s/ Elliott Davis LLC

Greenville, South Carolina
January 17, 2003


                                       19
<PAGE>


<TABLE>
<CAPTION>

                       NEW COMMERCE BANCORP AND SUBSIDIARY

                           Consolidated Balance Sheets

                           December 31, 2002 and 2001

                                                                                            2002                 2001
                                                                                      -----------------    -----------------
<S>                                                                                       <C>                   <C>
Assets:
Cash and due from banks                                                                  $  3,017,238         $    997,887
Federal funds sold                                                                          3,342,348            1,026,449
Investment securities, available for sale                                                  12,736,310           14,969,033
Investment securities, held to maturity (fair value of $1,371,222 in
  2002 and $739,848 in 2001)                                                                1,286,650              720,512
Federal Reserve Bank stock                                                                    237,250              237,250
Federal Home Loan Bank stock                                                                  250,000               65,400
Loans, net                                                                                 37,937,537           28,542,163
Property and equipment, net                                                                 4,232,820            4,367,879
Accrued interest receivable                                                                   251,725              302,131
Other assets                                                                                  341,221              401,853
                                                                                      -----------------    -----------------
        Total assets                                                                     $ 63,633,099         $ 51,630,557
                                                                                      =================    =================

Liabilities and Shareholders' Equity:
  Liabilities:
     Deposits                                                                            $ 47,522,005         $ 37,563,598
     Advances from Federal Home Loan Bank                                                   4,725,000                    -
     Securities sold under agreements to repurchase                                                 -            4,854,000
     Drafts outstanding                                                                     2,289,560              151,487
     Other liabilities                                                                        257,429              303,280
                                                                                      -----------------    -----------------
        Total liabilities                                                                  54,793,994           42,872,365
                                                                                      -----------------    -----------------

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                                           10,000               10,000
     Additional paid-in capital                                                             9,741,658            9,741,658
     Retained deficit                                                                      (1,203,432)          (1,240,960)
     Accumulated other comprehensive income                                                   290,879              247,494
                                                                                      -----------------    -----------------
        Total shareholders' equity                                                          8,839,105            8,758,192
                                                                                      -----------------    -----------------
        Total liabilities and shareholders' equity                                       $ 63,633,099         $ 51,630,557
                                                                                      =================    =================
</TABLE>


          See accompanying notes to consolidated financial statements.




                                       20
<PAGE>

<TABLE>
<CAPTION>
                       NEW COMMERCE BANCORP AND SUBSIDIARY

                      Consolidated Statements of Operations

                  Years Ended December 31, 2002, 2001 and 2000

                                                                         2002                2001               2000
                                                                    ----------------    ---------------    ----------------
<S>                                                                     <C>                <C>                 <C>
Interest Income:
     Interest and fees on loans                                         $2,055,409         $1,948,178          $1,519,892
     Investment securities                                                 899,150          1,107,986             630,551
     Federal funds sold                                                     13,634             21,565             137,831
                                                                    ----------------    ---------------    ----------------
        Total interest income                                            2,968,193          3,077,729           2,288,274
                                                                    ----------------    ---------------    ----------------

Interest Expense:
     Deposits                                                              861,469          1,290,640           1,081,692
     Securities sold under agreements to repurchase                         69,929            126,914                   -
     Advances from Federal Home Loan Bank                                   53,716                  -                   -
     Federal funds purchased                                                12,502             21,920               1,644
                                                                    ----------------    ---------------    ----------------
        Total interest expense                                             997,616          1,439,474           1,083,336
                                                                    ----------------    ---------------    ----------------

Net Interest Income                                                      1,970,577          1,638,255           1,204,938

Provision for Loan Losses                                                  110,093            117,745             116,027
                                                                    ----------------    ---------------    ----------------

Net Interest Income After Provision for Loan Losses                      1,860,484          1,520,510           1,088,911
                                                                    ----------------    ---------------    ----------------

Non-Interest Income:
     Service fees on deposit accounts                                      130,953             78,031             42,786
     Mortgage brokerage income                                             142,267            111,629             38,217
     Gain (loss) on sale of investment securities                           87,826                  -             (3,335)
     Other                                                                  47,366             53,454             37,539
                                                                    ----------------    ---------------    ----------------
        Total non-interest income                                          408,412            243,114            115,207
                                                                    ----------------    ---------------    ----------------

Non-Interest Expense:
     Salaries and benefits                                               1,215,446          1,051,144             877,292
     Occupancy, furniture and equipment                                    355,956            318,256             261,769
     Data processing                                                       184,876            178,302             152,191
     Marketing                                                              36,049             42,999              86,470
     Printing, supplies and postage                                         94,020             80,677              78,153
     Other operating                                                       320,521            252,339             234,389
     Chief Executive Officer transition costs                                    -            122,670                   -
                                                                    ----------------    ---------------    ----------------
        Total non-interest expense                                       2,206,868          2,046,387           1,690,264
                                                                    ----------------    ---------------    ----------------

Income (Loss) Before Income Taxes                                           62,028           (282,763)           (486,146)

Income Tax Provision (Benefit)                                              24,500            (94,806)           (147,687)
                                                                    ----------------    ---------------    ----------------

Net Income (Loss)                                                       $   37,528         $ (187,957)         $ (338,459)
                                                                    ================    ===============    ================

Basic and Diluted Earnings (Loss) per Share                             $     0.04         $    (0.19)         $    (0.34)
                                                                    ================    ===============    ================

Weighted Average Shares Outstanding - Basic                              1,000,000          1,000,000           1,000,000
                                                                    ================    ===============    ================

Weighted Average Shares Outstanding - Diluted                            1,014,473          1,000,000           1,000,000
                                                                    ================    ===============    ================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       21
<PAGE>


<TABLE>
<CAPTION>
                       NEW COMMERCE BANCORP AND SUBSIDIARY

    Consolidated Statements of Shareholders' Equity and Comprehensive Income
                  Years Ended December 31, 2002, 2001 and 2000
                                                                                                       Accumulated        Total
                                                Common Stock          Additional                       Other Com-         Share-
                                          -------------------------    Paid-In         Retained        prehensive        holders
                                             Shares       Amount       Capital         Deficit        Income (Loss)       Equity
                                          -------------  ----------  -------------  ---------------  ----------------  -------------
<S>                                        <C>            <C>         <C>              <C>             <C>              <C>
Balance, December 31, 1999                  1,000,000     $10,000     $9,741,658      $  (714,544)       $  (25,015)    $9,012,099
                                                                                                     ----------------  -------------
Net loss                                            -           -              -         (338,459)                -       (338,459)
    Other comprehensive income,
       net of tax:
       Unrealized gains on securities
          available for sale, net of tax
          effect of $68,423                         -           -              -                -           131,974              -
       Reclassification of net gain on
          securities available for sale
          included in net income, net of
          tax effect of $1,141                      -           -              -                -             2,201              -
                                                                                                     ----------------

          Other comprehensive income                                                                        134,175        134,175
                                                                                                     ----------------  -------------

    Comprehensive loss                              -           -              -                -                 -       (204,284)
                                          -------------  ----------  -------------  ---------------  ----------------  -------------

Balance, December 31, 2000                  1,000,000      10,000      9,741,658       (1,053,003)          109,160      8,807,815
                                                                                                                       -------------
    Net loss                                        -           -              -         (187,957)                -       (187,957)
    Other comprehensive income,
       net of tax:
       Unrealized gains on securities
          available for sale, net of tax
          effect of $55,940                         -           -              -                -          138,334         138,334
                                                                                                                       -------------

    Comprehensive loss                              -           -              -                -                -         (49,623)
                                          -------------  ----------  -------------  ---------------  ----------------  -------------

Balance, December 31, 2001                  1,000,000      10,000      9,741,658       (1,240,960)          247,494      8,758,192
                                                                                                     ----------------  -------------

    Net income                                      -           -              -           37,528                 -         37,528
    Other comprehensive income,
       net of tax:
       Unrealized gains on securities
          available for sale, net of tax
          effect of $76,135                         -           -              -                -            98,715              -
       Reclassification of net gain on
          securities available for sale
          included in net income, net of
          tax effect of $32,496                     -           -              -                -           (55,330)             -
                                                                                                     ----------------

          Other comprehensive income                                                                         43,385         43,385
                                                                                                     ----------------  -------------

    Comprehensive income                            -           -              -                -                 -         80,913
                                          -------------  ----------  -------------  ---------------  ----------------  -------------

Balance, December 31, 2002                  1,000,000     $10,000     $9,741,658      $(1,203,432)         $  290,879     $8,839,105
                                          =============  ==========  =============  ===============  ================  =============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       22
<PAGE>


<TABLE>
<CAPTION>
                       NEW COMMERCE BANCORP AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
                  Years Ended December 31, 2002, 2001 and 2000

                                                                          2002               2001               2000
                                                                    -----------------   ----------------   ----------------
<S>                                                                      <C>               <C>                <C>
Operating Activities:
    Net income (loss)                                                   $    37,528        $  (187,957)       $  (338,459)
    Adjustments to reconcile net income (loss) to net cash
      provided by (used for) operating activities:
      Provision for loan losses                                             110,093            117,745            116,027
      Deferred income tax provision (benefit)                                22,800            (94,806)          (147,687)
      Depreciation                                                          162,918            156,935            111,369
      Net (accretion) amortization of (discounts) and premiums on
         investment securities                                              (39,613)           (65,395)           (18,357)
      (Gain) loss on sale of investment securities                          (87,826)                 -              3,335
      Loss on disposal of property and equipment                             22,269                  -              2,310
      Decrease (increase)in other assets                                     44,600             18,285           (219,839)
      (Decrease) increase in other liabilities                              (45,851)           100,635             58,097
                                                                    -----------------   ----------------   ----------------
         Net cash provided by (used for) operating activities               226,918             45,442           (433,204)
                                                                    -----------------   ----------------   ----------------

Investing Activities:
    Increase in loans, net                                               (9,505,467)        (9,467,069)        (6,453,783)
    Purchase of investment securities available for sale                 (7,842,977)       (13,742,199)       (10,217,093)
    Purchase of investment securities held to maturity                     (698,688)                 -                  -
    Purchase of Federal Home Loan Bank stock                               (184,600)           (27,200)                 -
    Proceeds from principal payments on investment securities
       available for sale                                                 2,674,051          2,428,807            252,532
    Proceeds from principal payments on investment securities held
       to maturity                                                          140,989            118,325            126,168
    Proceeds from sale or call of investment securities available
      for sale                                                            7,607,672          9,400,000            422,224
    Purchase of property and equipment                                      (50,128)           (51,462)        (2,001,915)
                                                                    -----------------   ----------------   ----------------
         Net cash used for investing activities                          (7,859,148)       (11,340,798)       (17,871,867)
                                                                    -----------------   ----------------   ----------------

Financing Activities:
    Increase in deposits, net                                             9,958,407          6,754,098         12,515,725
    Advances from Federal Home Loan Bank                                  5,000,000                  -                  -
    Repayment of advances from Federal Home Loan Bank                      (275,000)                 -                  -
    Net (decrease) increase in securities sold under agreements to
       repurchase                                                        (4,854,000)         4,854,000                  -
    Increase (decrease) in drafts outstanding                             2,138,073           (206,771)           261,338
    Net increase (decrease) in federal funds purchased                            -           (100,000)           100,000
                                                                    -----------------   ----------------   ----------------
         Net cash provided by financing activities                       11,967,480         11,301,327         12,877,063
                                                                    -----------------   ----------------   ----------------
Net Increase (Decrease) in Cash and Cash Equivalents                      4,335,250              5,971         (5,428,008)

Cash and Cash Equivalents, Beginning of Year                              2,024,336          2,018,365          7,446,373
                                                                    -----------------   ----------------   ----------------
Cash and Cash Equivalents, End of Year                                  $ 6,359,586        $ 2,024,336        $ 2,018,365
                                                                    =================   ================   ================

Supplemental Disclosures of Cash Flow Information:
    Cash Paid For:
      Interest                                                       $      993,542        $ 1,396,589        $ 1,029,967
                                                                    =================   ================   ================
      Income Taxes                                                  $             -     $            -        $         -
                                                                    =================   ================   ================
</TABLE>
          See accompanying notes to consolidated financial statements.




                                       23
<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - New Commerce BanCorp (the "Holding Company"), is incorporated
under the laws of the State of South Carolina 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
<PAGE>

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
<PAGE>

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
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                  -------------------------------------------------
                                                                      2002              2001             2000
                                                                  --------------    --------------   --------------

<S>                                                                  <C>             <C>               <C>
Net income (loss) as reported                                        $ 37,528        $ (187,957)       $(338,459)
Deduct:  Total stock-based employee compensation expense
   determined under fair value based method for all awards,
   net of related income tax effect                                    30,732            32,222           33,022
                                                                  --------------    --------------   --------------

Pro forma net income (loss)                                          $  6,796        $ (220,179)       $(371,481)
                                                                  ==============    ==============   ==============

Earnings (loss) per share:
  Basic and diluted - as reported                                    $   0.04         $  (0.19)        $  (0.34)
                                                                  ==============    ==============   ==============
  Basic and diluted - pro forma                                      $   0.01         $  (0.22)        $  (0.37)
                                                                  ==============    ==============   ==============
</TABLE>

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, 2002, 2001 and 2000 were 14,473, 0 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 it is being compared to.

     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.


                                       27
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.

     Repurchase Agreements: The carrying amounts of securities sold under
     ---------------------
     agreements to repurchase approximate their fair value due to the short
     terms of the agreements (three months or less).

     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.

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.

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 July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
     No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
     the purchase method of accounting be used for all business combinations
     initiated after June 30, 2001. SFAS No. 141 also specifies criteria
     intangible assets acquired in a purchase method business combination must
     meet to be recognized and reported apart from goodwill, noting that any
     purchase price allocable to an assembled workforce may not be accounted for
     separately. SFAS No. 142 requires that goodwill and intangible assets with
     indefinite useful lives not be amortized, but instead tested for impairment
     at least annually in accordance with the provisions of SFAS No. 142. The
     Company was required to adopt the provisions of SFAS No. 141 immediately
     and adopt SFAS No. 142 effective January 1, 2002. The adoption of the
     provisions of SFAS No. 141 in 2001 and SFAS No. 142 in 2002 had no impact
     on financial position or results of operations.



                                       28
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
     Obligations. This statement requires the Company to record the fair value
     of an asset retirement obligation as a liability in the period in which it
     incurs a legal obligation associated with the retirement of tangible
     long-lived assets that result from the acquisition, construction,
     development and/or normal use of assets. The Company also records a
     corresponding asset which is depreciated over the life of the asset. The
     provisions of SFAS No. 143 were adopted by the Company on January 1, 2003,
     with no impact on financial position and results of operations.

     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
     or Disposal of Long-Lived Assets, which supersedes prior pronouncements
     associated with impairment or disposal of long-lived assets. The statement
     establishes methodologies for assessing impairment of long-lived assets,
     including assets to be disposed of by sale or by other means. The Company
     adopted this standard on January 1, 2002, with no impact on financial
     position or results of operations.

     In April 2002, The FASB issued SFAS No. 145, Rescission of FASB Statements
     No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
     Corrections. This statement rescinds SFAS No. 4, Reporting Gains and Losses
     from Extinguishments of Debt, and an amendment of SFAS No. 4, SFAS No. 64,
     Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
     statement also rescinds SFAS No. 44, Accounting for Intangible Assets of
     Motor Carriers and amends SFAS No. 13, Accounting for Leases. This new
     statement requires gains and losses from extinguishment of debt to be
     classified as an extraordinary item only if they meet the criteria of APB
     Opinion No. 30, Reporting the Results of Operations-Reporting the Effects
     of Disposal of a Segment of Business, and Extraordinary, Unusual and
     Infrequently Occurring Events and Transactions, which will distinguish
     transactions that are part of an entity's recurring operations from those
     that are unusual or infrequent or that meet the criteria for classification
     as an extraordinary item. The provisions of SFAS No. 145 were adopted by
     the Company on January 1, 2003 with no impact on financial position and
     results of operations.

     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
     financial position or results of operations.


                                       29
<PAGE>

 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     In October 2002, the FASB issued SFAS No. 147, Accounting for Certain
     Financial Institutions - an amendment of FASB Statements No. 72 and 144 and
     FASB Interpretation No. 9, which brings all business combinations involving
     financial institutions, except mutual financial institutions, into the
     scope of SFAS No. 141, Business Combinations. This statement requires that
     all acquisitions of financial institutions that meet the definition of a
     business, including acquisitions of part of a financial institution that
     meet the definition of a business, must be accounted for in accordance with
     SFAS No. 141 and the related intangibles accounted for in accordance with
     SFAS No. 142. SFAS No. 147 removes such acquisitions from the scope of SFAS
     No. 72, Accounting for Certain Acquisitions of Banking or Thrift
     Institutions. SFAS No. 147 also amends SFAS No. 144 to include in its scope
     long-term customer relationship intangibles of financial institutions. SFAS
     No. 147 generally was effective upon issuance and had no impact on
     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.

     In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based
     Compensation-Transition and Disclosure-an amendment of FASB Statement No.
     123. This Statement amends FASB Statement No. 123, Accounting for
     Stock-Based Compensation, to provide alternative methods of transition for
     a voluntary change to the fair value based method of accounting for
     stock-based employee compensation. In addition, this Statement amends the
     disclosure requirements of Statement 123 to require prominent disclosures
     in both annual and interim financial statements about the method of
     accounting for stock-based employee compensation and the effect of the
     method used on reported results. The Company adopted this standard
     effective December 31, 2002. The disclosures required by this standard are
     included herein; the balance of the statement had no impact upon adoption
     as the Company has not elected the fair value treatment of stock-based
     compensation.

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.



                                       30
<PAGE>

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, 2002 and 2001 these required reserves
were met by vault cash.


NOTE 3 - INVESTMENT SECURITIES

The amortized cost and fair value of investment securities at December 31, 2002
and 2001 are as follows:

<TABLE>
<CAPTION>
                                                     Amortized              Gross Unrealized                Fair
                                                                    ---------------------------------
                                                        Cost            Gains             Losses            Value
                                                   ---------------  ---------------   ---------------  ---------------
<S>                                                  <C>             <C>               <C>              <C>
December 31, 2002
Available for sale:
  Federal agency obligations                         $    717,456    $      68,667     $           -     $    786,123
  Mortgage-backed securities                            8,119,044           98,598                 -        8,217,642
  Collateralized mortgage obligations                   1,143,371           43,099                 -        1,186,470
  Corporate bonds                                       2,294,724          251,351                 -        2,546,075
                                                   ---------------  ---------------   ---------------  ---------------

    Total available for sale                         $ 12,274,595    $     461,715     $           -     $ 12,736,310
                                                   ===============  ===============   ===============  ===============

  Held to maturity:
  Federal agency obligations                         $    199,001     $     10,054     $           -     $    209,055
  Mortgage-backed securities                              587,649           63,963                 -          651,612
  Trust preferred security                                500,000           10,555                 -          510,555
                                                   ---------------  ---------------   ---------------  ---------------
    Total held to maturity                           $  1,286,650     $     84,572     $           -     $  1,371,222
                                                   ===============  ===============   ===============  ===============
December 31, 2001
Available for sale:
  Federal agency obligations                         $  6,714,657     $     86,543     $      25,000     $  6,776,200
  Mortgage-backed securities                            2,303,859           65,729                 -        2,369,588
  Collateralized mortgage obligations                   2,355,592           90,253                 -        2,445,845
  Corporate bonds                                       3,220,234          157,166                 -        3,377,400
                                                   ---------------  ---------------   ---------------  ---------------
    Total available for sale                         $ 14,594,342     $    399,691     $      25,000     $ 14,969,033
                                                   ===============  ===============   ===============  ===============

  Held to maturity:
  Mortgage-backed securities                         $    720,512     $     19,336     $           -     $    739,848
                                                   ===============  ===============   ===============  ===============
</TABLE>

The amortized cost and fair value of securities available for sale and held to
maturity at December 31, 2002, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities.

<TABLE>
<CAPTION>
                                                         Available for Sale                  Held to Maturity
                                                   --------------------------------   --------------------------------
                                                     Amortized                          Amortized
                                                        Cost          Fair Value           Cost          Fair Value
                                                   ---------------  ---------------   ---------------  ---------------
<S>                                                   <C>              <C>                <C>             <C>
Due within one year or less                           $ 2,475,242      $ 2,534,563        $  112,875       $  125,161
Due after one through five years                        5,554,374        5,855,109           474,470          514,508
Due after five through ten years                        2,606,136        2,692,771           135,154          149,864
Due after ten years                                     1,638,843        1,653,867           564,151          581,689
                                                   ---------------  ---------------   ---------------  ---------------
Total investment securities                           $12,274,595      $12,736,310        $1,286,650       $1,371,222
                                                   ===============  ===============   ===============  ===============
</TABLE>



                                       31
<PAGE>

 NOTE 3 - INVESTMENT SECURITIES (Continued)

At December 31, 2002, there were securities with a fair value of $3,439,916
pledged as collateral for public deposits and securities with a fair value of
$5,382,424 pledged as collateral for FHLB advances.

The Company had gross realized gains on sales of investment securities in the
amount of $87,826 during the year ended December 31, 2002 and gross realized
losses in the amount of $3,335 during the year ended December 31, 2000. There
were no other realized gains or losses during any period presented herein.


NOTE 4 - LOANS

Loans receivable at December 31, 2002 and 2001 consisted of the following:

<TABLE>
<CAPTION>
                                                                         2002              2001
                                                                    ---------------   ---------------
<S>                                                                    <C>               <C>
Commercial                                                            $ 6,462,271       $ 7,545,371
Real estate - construction                                              1,781,866         3,110,670
Real estate - mortgage                                                 24,760,074        16,357,204
Consumer                                                                5,474,605         1,959,154
                                                                    ---------------   ---------------
                                                                       38,478,816        28,972,399
Less:
  Allowance for loan losses                                               492,000           405,000
  Deferred loan fees, net                                                  49,279            25,236
                                                                    ---------------   ---------------
Net loans                                                             $37,937,537       $28,542,163
                                                                    ===============   ===============
</TABLE>

At December 31, 2002 and 2001, there were no loans in non-accrual status nor
were there any impaired loans.

The changes in the allowance for loan losses consisted of the following for the
years ended December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                       2002              2001             2000
                                                   ---------------  ---------------   ---------------
<S>                                                 <C>              <C>               <C>
Balance, beginning of year                          $    405,000     $    292,277      $    195,800
Provision for loan losses                                110,093          117,745           116,027
Loans charged off                                        (23,093)          (5,022)          (19,550)
                                                   ---------------  ---------------   ---------------
Balance, end of year                                $    492,000     $    405,000      $    292,277
                                                   ===============  ===============   ===============
</TABLE>

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.



                                       32
<PAGE>

NOTE 4 - LOANS (Continued)

Loan transactions with insiders during the years ended December 31, 2002 and
2001 are summarized as follows:

<TABLE>
<CAPTION>
                                                                         2002              2001
                                                                    ---------------   ---------------
<S>                                                                  <C>                 <C>
Balance, beginning of year                                            $  2,088,607      $  1,816,321
New loans                                                                1,241,299         1,807,383
Less loan payments                                                         924,200         1,535,097
                                                                    ---------------   ---------------
Balance, end of year                                                  $  2,405,706      $  2,088,607
                                                                    ===============   ===============
</TABLE>


NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2002 and 2001 are summarized as follows:

<TABLE>
<CAPTION>
                                                                         2002              2001
                                                                    ---------------   ---------------
<S>                                                                  <C>               <C>
Land                                                                  $  1,466,997      $  1,466,997
Building and improvements                                                2,471,396         2,459,293
Furniture and equipment                                                    724,789           733,658
                                                                    ---------------   ---------------
                                                                         4,663,182         4,659,948
Less accumulated depreciation                                              430,362           292,069
                                                                    ---------------   ---------------
Property and equipment, net                                           $  4,232,820      $  4,367,879
                                                                    ===============   ===============
</TABLE>

Depreciation expense for the years ended December 31, 2002, 2001 and 2000 was
$162,918, $156,935 and $111,369, respectively.


NOTE 6 - DEPOSITS

Deposit accounts at December 31, 2002 and 2001 are summarized as follows:

<TABLE>
<CAPTION>
                                                                         2002              2001
                                                                    ---------------   ---------------
<S>                                                                  <C>                  <C>
Non-interest bearing deposits                                         $  4,877,681      $  6,388,120
Interest bearing deposits:
  Interest checking                                                      3,332,544         3,367,344
  Money market                                                          17,279,741        10,847,650
  Savings                                                                  564,582           452,123
  Time, less than $100,000                                              10,707,188         7,442,601
  Time, $100,000 and over                                               10,760,269         9,065,760
                                                                    ---------------   ---------------
Total deposits                                                        $ 47,522,005      $ 37,563,598
                                                                    ===============   ===============
</TABLE>

Deposits by insiders at December 31, 2002 and 2001 approximated $3,924,000 and
$2,463,000, respectively.



                                       33
<PAGE>

NOTE 6 - DEPOSITS (Continued)

At December 31, 2002 the scheduled maturities of time deposits were as follows:

2003                                                           $ 19,754,210
2004                                                                855,000
2005                                                                858,247
                                                             ---------------
Total time deposits                                            $ 21,467,457
                                                             ===============

Interest expense by type of deposit account for the years ended December 31,
2002, 2001 and 2000 is summarized as follows:

<TABLE>
<CAPTION>
                                                       2002              2001             2000
                                                   ---------------  ---------------   ---------------
<S>                                                 <C>                  <C>               <C>
Interest checking                                   $      30,452       $   57,728        $  259,973
Money market                                              221,653          395,699           365,261
Savings                                                     6,579            6,249             4,701
Time                                                      602,785          830,964           451,757
                                                   ---------------  ---------------   ---------------
Interest expense                                    $     861,469       $1,290,640        $1,081,692
                                                   ===============  ===============   ===============
</TABLE>


NOTE 7 - ADVANCES FROM FHLB

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

                                                                     Weighted
                                                                     Average
                                                    Amount             Rate
                                               ---------------   ---------------
Maturing Within:
1 year                                            $   975,000           2.03%
2 years                                             1,250,000           2.65
3 years                                             1,250,000           3.24
4 years                                             1,250,000           3.78
                                               ---------------   ---------------

Outstanding at end of year                        $ 4,725,000           2.98%
                                               ===============   ===============

At December 31, 2002, all FHLB advances were at fixed rates with original
maturities ranging from 3 months to 4 years. Mortgage-backed securities with a
market value and cost of approximately $5.4 million were pledged as collateral
on the advances. At December 31, 2002, the Company had an approved credit limit
of approximately $12.4 million. There were no FHLB advances outstanding at
December 31, 2001.




                                       34
<PAGE>

NOTE 8 - OTHER BORROWINGS

The following sets forth certain information about securities sold under
agreements to repurchase during the years ended December 31, 2002, 2001 and
2000:

<TABLE>
<CAPTION>
                                                                    ---------------------------------------------
                                                                       2002             2001           2000
                                                                    -------------   -------------   -------------

<S>                                                                    <C>             <C>             <C>
Balance outstanding at end of year                                    $        -      $4,854,000      $       -
Average balance for months outstanding                                 4,788,204       4,964,684              -
Maximum month-end balance during year                                  4,854,000       5,000,000              -
Average interest rate for months outstanding                               2.37%           4.04%              -%
Average interest rate at end of year                                          -%           2.50%              -%
Investment securities underlying the agreements at year end:
  Carrying value                                                      $        -      $5,000,000      $       -
  Estimated fair value                                                         -       4,984,400              -
</TABLE>

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,
2002, the Company had credit availability of $5,800,000 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, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                                        2002            2001
                                                                                    -------------   -------------
<S>                                                                                   <C>               <C>
Deferred tax assets:
  Net operating loss carryforwards                                                    $  435,879      $  457,159
  Allowance for loan losses                                                              153,285         137,700
  Other                                                                                   55,102          58,448
                                                                                    -------------   -------------
    Total deferred tax assets before valuation allowance                                 644,266         653,307
  Less valuation allowance                                                                60,175          60,175
                                                                                    -------------   -------------
    Total deferred tax assets                                                            584,091         593,132
                                                                                    -------------   -------------
Deferred tax liabilities:
  Unrealized net gains on securities available for sale                                  170,836         127,197
  Depreciation                                                                            98,267          84,507
                                                                                    -------------   -------------
    Total deferred tax liabilities                                                       269,103         211,704
                                                                                    -------------   -------------
Net deferred tax asset                                                                $  314,988      $  381,428
                                                                                    =============   =============
</TABLE>

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


                                       35
<PAGE>

NOTE 9 - INCOME TAXES (Continued)

The income tax provision (benefit) for the years ended December 31, 2002, 2001
and 2000 is summarized as follows:

<TABLE>
<CAPTION>
                                                                         2002            2001             2000
                                                                      ------------    ------------    -------------

<S>                                                                    <C>             <C>              <C>
Income taxes currently payable                                         $   1,700       $      -         $       -
Deferred income tax provision (benefit)                                   22,800        (94,806)         (147,687)
                                                                      ------------    ------------    -------------
Income tax provision (benefit)                                         $  24,500       $(94,806)        $(147,687)
                                                                      ============    ============    =============
</TABLE>

The provision for income taxes for the years ended December 31, 2002, 2001 and
2000 is reconciled to the amount of income tax computed at the federal statutory
rate on income (loss) before income taxes as follows:

<TABLE>
<CAPTION>
                                                        2002                  2001                   2000
                                                 -------------------- --------------------- -----------------------

<S>                                                <C>          <C>      <C>          <C>      <C>          <C>
Tax expense (benefit) at statutory rate            $21,090      34.0%   $(96,139)    34.0%    $(165,290)    34.0%
Increase (decrease) in taxes resulting from:
  State taxes, net of federal tax benefit            1,100       1.7           -        -             -        -
  Expenses not deductible for tax purposes           2,310       3.8       6,947     (2.5)        4,131     (0.8)
  Valuation allowance adjustment                         -         -      (5,614)     2.0        13,472     (2.8)
                                                 ---------- --------- ------------ -------- -------------  --------
Income tax provision (benefit)                     $24,500      39.5%   $(94,806)    33.5%    $(147,687)    30.4%
                                                 ========== ========= ============ ======== =============  ========
</TABLE>


 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 a contract for data processing services through April 2004.
Costs under the contract are approximately $10,000 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.


                                       36
<PAGE>

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, 2002, unfunded commitments
to extend credit were $7,725,456 and outstanding letters of credit were $40,000.
At December 31, 2002, unfunded commitments consisted of $7,547,515 at variable
rates and $177,941 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 $17,450, $14,950 and $18,705 in the years ended December 31,
2002, 2001 and 2000, 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, 2002, 2001 and 2000:
<TABLE>
<CAPTION>

                                              2002                           2001                        2000
                                    --------------------------    --------------------------  -------------------------
                                                    Weighted                     Weighted                   Weighted
                                                    Average                      Average                    Average
                                                    Exercise                     Exercise                   Exercise
                                      Shares         Price           Shares       Price         Shares       Price
                                    -----------    -----------    ------------  ------------  ----------- -------------

<S>                                   <C>            <C>            <C>          <C>           <C>          <C>
Outstanding, beginning of year        113,000       $  8.35         133,000      $   9.80       127,500      $  10.00
Granted                                33,500          8.40          52,500          6.62        26,000          8.94
Forfeited                             (18,500)         9.35         (72,500)         9.75       (20,500)        10.00
                                    -----------    -----------    ------------  ------------  ----------- -------------
Outstanding, end of year              128,000       $  8.22         113,000      $   8.35       133,000      $   9.80
                                    ===========    ===========    ============  ============  =========== =============
Options exercisable                    37,100       $  8.95          21,500      $   9.92        21,700      $  10.00
                                    ===========    ===========    ============  ============  =========== =============
Shares available for grant             22,000                        37,000                      17,000
                                    ===========                   ============                ===========
</TABLE>



                                       37
<PAGE>

NOTE 13 - STOCK OPTIONS AND WARRANTS (Continued)

The following is a summary of stock options outstanding at December 31, 2002:
<TABLE>
<CAPTION>
                                                        Weighted        Weighted                       Weighted
                                      Number            Average         Average         Number          Average
  Year            Range of          of Options         Remaining        Exercise      of Options       Exercise
 Issued       Exercise Prices       Outstanding       Life (Years)       Price        Exercisable        Price
----------   -------------------  ----------------   ---------------  -------------  --------------   ------------
<S>          <C>                           <C>                  <C>       <C>               <C>          <C>
  1999       $10.00                       37,000               6.6       $  10.00          22,200       $  10.00
  2000       $ 7.38 - $10.00              11,000               7.8           9.19           4,400           9.19
  2001       $ 6.60 - $  6.88             52,500               8.7           6.61          10,500           6.61
  2002       $ 7.88 - $  9.42             27,500               9.3           8.49               -              -
                                  ----------------   ---------------  -------------  --------------   ------------
             $ 6.60 - $10.00             128,000               8.1       $   8.22          37,100       $   8.95
                                  ================   ===============  =============  ==============   ============
</TABLE>

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, 2002, 2001 and 2000:

                                                   2002       2001        2000
                                                ----------  ---------  ---------

Dividend yield                                     None       None        None
Weighted average risk-free interest rate            4.2%       5.9%        6.0%
Expected volatility                                20.0%       5.0%       12.5%
Expected life (years)                               5          5           5


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.


                                       38
<PAGE>

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, 2002, that the Bank meets all capital
adequacy requirements to which it is subject. As of December 31, 2002, 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:

<TABLE>
<CAPTION>
                                                                                             To be Well Capitalized
                                                                                             Under Prompt Corrective
                                                                   For Capital Adequacy        Action Provisions
                                                                         Purposes           ------------------------
                                               Actual                     Minimum                   Minimum
                                       ------------------------   -----------------------   ------------------------
                                         Amount       Ratio        Amount        Ratio        Amount        Ratio
                                       -----------  -----------   ----------   ----------   ----------   -----------

                                                                     (Amounts in $000)
<S>                                       <C>           <C>         <C>            <C>         <C>          <C>
As of December 31, 2002
Total capital
  (To risk weighted assets)               $ 7,586      15.5%        $ 3,923       8.0%         $ 4,904      10.0%
Tier 1 capital
  (To risk weighted assets)                 7,094      14.5           1,962       4.0            2,942       6.0
Tier 1 capital
  (To average assets)                       7,094      11.9           2,394       4.0            2,992       5.0

As of December 31, 2001
Total capital
  (To risk weighted assets)               $ 7,479      18.5%        $ 3,239       8.0%         $ 4,049      10.0%
Tier 1 capital
  (To risk weighted assets)                 7,074      17.5           1,619       4.0            2,429       6.0
Tier 1 capital
  (To average assets)                       7,074      14.7           1,923       4.0            2,404       5.0

</TABLE>






                                       39
<PAGE>

 NOTE 16 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments were as follows
at December 31, 2002 and 2001:
<TABLE>
<CAPTION>

                                                               2002                              2001
                                                    ------------------------------   -------------------------------
                                                     Carrying          Fair           Carrying           Fair
                                                      Amount           Value           Amount            Value
                                                    --------------  --------------   --------------   --------------
<S>                                                  <C>               <C>               <C>              <C>
Financial Assets:
  Cash and due from banks                            $  3,017,238     $ 3,017,238      $   997,887      $   997,887
  Federal funds sold                                    3,342,348       3,342,348        1,026,449        1,026,449
  Investment securities available for sale             12,736,310      12,736,310       14,969,033       14,969,033
  Investment securities held to maturity                1,286,650       1,371,222          720,512          739,848
  FRB stock                                               237,250         237,250          237,250          237,250
  FHLB stock                                              250,000         250,000           65,400           65,400
  Loans, net                                           37,937,537      39,396,498       28,542,163       29,524,857
  Accrued interest receivable                             251,725         251,725          302,131          302,131

Financial Liabilities:
  Deposits                                             47,522,005      47,677,172       37,563,598       37,714,707
  Advances from FHLB                                    4,725,000       4,798,415                -                -
  Repurchase agreements                                         -               -        4,854,000        4,854,000
  Drafts outstanding                                    2,289,560       2,289,560          151,487          151,487
  Accrued interest payable                                131,573         131,573          127,499          127,499

Off-Balance Sheet Instruments:
  Commitments to extend credit                          7,725,456       7,725,456        4,792,904        4,792,904
  Standby letters of credit                                40,000          40,000           53,947           53,947
</TABLE>


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,
                                                  ------------------------------
                                                      2002             2001
                                                  --------------  --------------
Assets:
  Cash                                              $   251,188      $    85,986
  Federal funds sold                                          -          200,000
  Investment securities held to maturity                786,650          720,512
  Investment in Bank                                  7,384,778        7,321,210
  Property and equipment                                404,531          404,077
  Other assets                                           11,958           26,407
                                                  --------------  --------------
    Total assets                                    $ 8,839,105      $ 8,758,192
                                                  ==============  ==============

Shareholders' equity                                $ 8,839,105      $ 8,758,192
                                                  ==============  ==============



                                       40
<PAGE>

NOTE 17 - PARENT COMPANY INFORMATION (Continued)

<TABLE>
<CAPTION>
                       Condensed Statements of Operations

                                                                                 Years Ended December 31,
                                                                        --------------------------------------------
                                                                           2002             2001          2000
                                                                        -------------   -------------  -------------

<S>                                                                     <C>             <C>               <C>
Interest income                                                         $    56,790     $    59,340       $ 65,839
Non-interest income                                                          19,250          15,313              -
Non-interest expense                                                        (47,695)        (64,434)       (53,595)
                                                                        -------------   -------------  -------------

Income before equity in undistributed net income (loss) of Bank              28,345          10,219         12,244
Income tax provision (benefit)                                               11,000          (1,804)         4,163
                                                                        -------------   -------------  -------------

Net income before equity in undistributed net income (loss) of Bank          17,345          12,023          8,081
Equity in undistributed net income (loss) of Bank                            20,183        (199,980)      (346,540)
                                                                        -------------   -------------  -------------
Net income (loss)                                                       $    37,528      $ (187,957)    $ (338,459)
                                                                        =============   =============  =============

</TABLE>

<TABLE>
<CAPTION>
                       Condensed Statements of Cash Flows

                                                                                 Years Ended December 31,
                                                                        --------------------------------------------
                                                                           2002             2001          2000
                                                                        -------------   -------------  -------------
<S>                                                                     <C>              <C>            <C>
Operating Activities:
  Net income (loss)                                                      $   37,528      $ (187,957)    $ (338,459)
  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
    Depreciation                                                             11,649          11,677         10,081
    Decrease (increase) in other assets                                      14,449          (1,174)         4,839
    Equity in undistributed net loss of Bank                                (20,183)        199,980        346,540
                                                                        -------------   -------------  -------------
      Net cash provided by operating activities                              43,443          22,526         23,001
                                                                        -------------   -------------  -------------

Investing Activities:
  Purchase of investment securities                                        (198,688)              -              -
  Proceeds from principal prepayments on investment securities              132,550         118,325        126,168
  Purchase of property and equipment                                        (12,103)        (25,898)             -
                                                                        -------------   -------------  -------------

      Net cash (used for) provided by investing activities                  (78,241)         92,427        126,168
                                                                        -------------   -------------  -------------

Net Increase (Decrease) in Cash and Cash Equivalents                        (34,798)        114,953        149,169

Cash and Cash Equivalents, Beginning of Year                                285,986         171,033         21,864
                                                                        -------------   -------------  -------------

Cash and Cash Equivalents, End of Year                                   $  251,188      $  285,986     $  171,033
                                                                        =============   =============  =============
</TABLE>


                                       41
<PAGE>

CORPORATE INFORMATION

OFFICERS
New Commerce Bancorp
Frank W. Wingate, President and Chief Executive Officer
R. Lamar Simpson, Senior Vice President and Chief Financial Officer

SENIOR OFFICERS
New Commerce Bank
Frank W. Wingate, President and Chief Executive Officer
R. Lamar Simpson, Senior Vice President and Chief Financial Officer
Barry K. Aughtry, Senior Vice President, Commercial Lending
Bradley J. Schneider, Senior Vice President, Commercial Lending
Carolyn Austin Herbert, Vice President, Retail Banking
John L. Jolly, Vice President, Consumer Lending

BOARD OF DIRECTORS
New Commerce Bancorp and New Commerce Bank
Marshall J. Collins, Jr., Chairman
Richard W. Bailey
Timothy A. Brett
Ralph S. Crawley
G. Mitchell Gault
Tommy D. Greer
Bobby L. Johnson
Robert T. Kellett
Dennis O. Raines
Frank W. Wingate

ADVISORY BOARD
New Commerce Bank
Jacque G. Bell
Alan Wayne Crick
Robert M. Dumit
Tracy M. Greene
Dana B. Greer
Edward O. McCameron, Jr.
Michelle S. Meekins
Thomas B. Minor
Sarah W. Paul
James G. Putnam
Gary L. Selvaggio
Gary E. Strickland
James T. Vaughn
J. Frank Wickliffe
Larry K. Wood
Jane H. Zhang
Larry J. Zitzke

OFFICES
New Commerce Bancorp
Corporate Office
501 New Commerce Court
Greenville, South Carolina  29607
(864) 297-6333

New Commerce Bank
Main Office
501 New Commerce Court
Greenville, South Carolina  29607
(864) 297-6333

Five Forks Office
1 Five Forks Plaza Court
Simpsonville, 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 30, 2003 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, Atlanta
Mail Code 258
P.O. Box 4625
Atlanta, Georgia  30302
(800) 568-3476

Legal Counsel
Nelson, Mullins, Riley & Scarborough, L.L.P.
First Union Plaza
999 Peachtree Street, Suite 1400
Atlanta, Georgia  30309

Independent Auditors
Elliott Davis, LLC
200 East Broad Street
Greenville, South Carolina  29601

                                       42
<PAGE>

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.          Greenville, SC   (864) 233-3655
ASG Securities, Inc.                Atlanta, GA      (800) 897-0384
Sterne, Agee & Leach, Inc.          Birmingham, AL   (800) 239-2408
Monroe Securities, Inc.             Rochester, NY    (800) 766-5560
Baird, Patrick & Co., Inc.          New York, NY     (212) 422-1120
E. E. Powell & Company, Inc.        Pittsburgh, PA   (800) 282-1940
Knight Securities, L.P.             New York, NY     (800) 232-3684
Schwab Capital Markets L.P          Jersey City, NJ  (201) 963-3311
Hill Thompson Magid, L.P.           Jersey City, NJ  (201) 434-8100
Wedbush Morgan Securities, Inc.     Los Angeles, CA  (213) 688-4450

As of March 4 2003, New Commerce BanCorp had 1,000,000 shares outstanding and
456 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. See Note 14 of Notes to
Consolidated Financial Statements for further information.

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,
                       2002                     2001
                  High     Low              High     Low
First quarter     $9.40    $7.05            $7.50    $6.00
Second quarter    $9.42    $8.11            $6.75    $6.25
Third quarter     $9.47    $9.10            $6.30    $6.05
Fourth quarter    $9.40    $9.00            $7.05    $6.27

Financial Information
A copy of the Company's Annual Report on Form 10-KSB for the year ended December
31, 2002, as filed with the Securities and Exchange Commission, may be obtained
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.






                                       43