SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                     For fiscal year ended December 31, 1997

                         Commission File Number 33-76644

                                  COMMUNITYCORP
             (Exact name of Registrant as specified in its charter)

        South Carolina                                          57-1019001
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

1100 N. Jefferies Blvd. Walterboro, South Carolina                29488
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code 803/549-2265

Securities registered pursuant to Section 12(b) of the Act -- None

Securities registered pursuant to Section 12(g) of the Act:

                      Common Stock, par value $5 per share
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter  periods that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirement for the past 90 days. Yes _X_ No ___

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

The aggregate  market value  (computed on the basis of the most recent trades of
which the  Registrant was aware) of shares of the Common Stock ($5 par value per
share)  held by  non-affiliates  of the  registrant  as of  March  9,  1998  was
$4,826,575.  The market value calculation  assumes that all shares  beneficially
owned by members of the Board of Directors of the  Registrant are shown owned by
"affiliates", a status which each of the directors individually disclaims.

The number of shares  outstanding of the issuer's  classes of common stock as of
March 9, 1998 - 300,000 shares of Common Stock, $5 Par Value.

                       Documents Incorporated by Reference

No documents have been incorporated by reference.


                                       Page 1 of 45 sequentially numbered pages.

<PAGE>


                                     PART I

ITEM 1.  BUSINESS

General.  Communitycorp  (the  "Company  or  "Registrant")  is a South  Carolina
corporation organized for the purpose of becoming a bank holding company for the
Bank of Walterboro (the "Bank"), under the Bank Holding Company Act. The Company
was incorporated on March 13, 1995.  Effective September 11, 1995 the Registrant
acquired, in exchange for its own shares of common stock, all of the outstanding
common stock of the Bank.

Subsidiary.  Bank of Walterboro is a  state-chartered  commercial bank operating
from two offices located at 1100 North Jefferies  Boulevard,  Walterboro,  South
Carolina and at 6225  Savannah  Highway,  Ravenel,  South  Carolina.  The Bank's
primary  market  area is  Northern  Charleston  and  Colleton  Counties in South
Carolina.  Depository  accounts  are  insured by the Federal  Deposit  Insurance
Corporation  up to the maximum  amount  permitted by law. The Bank  received its
charter on October 11, 1988, and opened for business on May 1, 1989.

The Bank offers a full range of deposit services for individuals and businesses.
Deposit products include checking  accounts,  savings  accounts,  certificate of
deposit, money market accounts and IRA's.

The Bank offers short to  intermediate  term commercial and consumer loans for a
variety  of  purposes  on  both a  secured  and  unsecured  basis.  The  primary
commercial market for these loans is small to medium sized businesses located in
the Colleton County area.  Commercial  loans may be made to companies to acquire
fixed  assets,  for  general  operating  purposes,  or to finance  inventory  or
accounts receivables,  as well as for other purposes. Consumer loans are made to
finance the purchase of real estate,  automobiles,  mobile homes,  boats,  other
recreational items, or for home improvements, education or personal investments.

The Bank has not  obtained a material  portion of its  deposits  from any single
person or few persons nor is a material portion of the Bank's loans concentrated
within a single  industry  or group of  related  industries.  Management  has no
reason  to  believe  that  the  loss  of any  depositor  or a few of the  larger
depositors  would have a materially  adverse  effect upon the  operations of the
Bank or erode its deposit base.

Employees.  As of March 9, 1998, the Company and the Bank had 27 full-time and 2
part-time employees. Neither the Company nor the Bank is a party to a collective
bargaining  agreement,  and they consider  their  relations with employees to be
good.

Competition and Market Area. The Company and the Bank conduct  business in terms
substantially  the same as a typical  commercial  bank  offering a full range of
banking  services,   with  the  exception  of  trust  services.   The  Company's
capitalization  allows  the  Company  to  compete  effectively  in it's  market.
Correspondent  banks are used to meet  customer  credit  needs  that  exceed the
Bank's lending limits.

The Bank  competes in a very  competitive  market for deposits and loans against
four commercial  banks, two savings and loans and one credit union.  None of the
bank's  competitors are  headquartered in Colleton County except for one savings
and loan.  The Bank prides  itself in  providing  prompt,  efficient,  courteous
service and subscribes to the theory that funds resulting from local  depositors
should be reinvested in the depositor's community.

The Bank strongly feels that decisions  regarding  credit and services of a bank
can  best  be made at a  local  level  and  that  stability  and  continuity  of
management  within  a  bank  without  frequent  transfers  is  important  to the
financial well-being of its customers.


                                       Page 2 of 45 sequentially numbered pages.

<PAGE>


Supervision  and  Regulation.  The Company is a bank holding  company within the
meaning of the Bank Holding Company Act of 1956, as amended (the "Act"),  and is
registered  with the Board of  Governors  of the  Federal  Reserve  System  (the
"Federal  Reserve  Board")  and the  South  Carolina  State  Board of  Financial
Institutions  (the "State Board").  The Company is required to file  semi-annual
reports with the Federal Reserve Board and such  additional  information as that
Board may require pursuant to the Act, and to file annual reports with the State
Board.

The Company also is subject to examination by the Federal  Reserve Board and the
State  Board and is  required to obtain  Federal  Reserve  Board and State Board
approval prior to acquiring, directly or indirectly, ownership or control of any
voting  shares of a bank if,  after such  acquisition,  it would own or control,
directly or indirectly, more than 5% of the voting stock of such bank, unless it
already  owns a majority of the voting stock of such bank.  Furthermore,  a bank
holding company is, with limited exceptions, prohibited from acquiring direct or
indirect  ownership or control of any voting stock of any company which is not a
bank or a bank  holding  company and must engage only in the business of banking
or managing  and  controlling  banks or  furnishing  services  to or  performing
services for its subsidiary  banks. One of the exceptions to this prohibition is
the  ownership  of shares of a  company,  the  activities  of which the  Federal
Reserve Board has determined to be so closely  related to banking or managing or
controlling banks as to be a proper incident thereto.

A bank holding  company and its  subsidiaries  are  prohibited  from engaging in
certain  tie-in  arrangements  in  connection  with the  extension  of credit or
provisions  of any  property or service.  Thus,  an  affiliate of a bank holding
company may not extend credit,  lease or sell property,  furnish any services or
fix or vary the  consideration  for such on the condition  that (I) the customer
must obtain or provide some additional  credit,  property or services from or to
its bank holding company or subsidiaries  thereof,  or (ii) the customer may not
obtain some other credit, property or services from a competitor,  except to the
extent  reasonable  conditions are imposed to assure the soundness of the credit
extended.

Stockholders of the Company's common stock are entitled to receive  dividends as
and when  declared by the  Company's  Board of  Directors  out of funds  legally
available therefore under the laws of the State of South Carolina. The Company's
ability to pay  dividends is  dependent  on the amount of dividends  paid by the
Bank and any other subsidiary of the Company.

In August 1989, the Financial  Institutions  Reform Recovery and Enforcement Act
of 1989  ("FIRREA")  was enacted.  FIRREA  provides,  among other things,  for a
phased-in  increase in the rate on annual insurance  assessments paid by a bank,
including the Bank, whose deposits are insured by the new Bank Insurance Fund of
the FDIC. FIRREA also imposes liability on an institution, the deposits of which
are insured by the FDIC for certain  potential  obligations to the FDIC incurred
in connection  with assistance to other FDIC insured  institutions  under common
control with such institutions.

In December  1991, a major banking bill entitled the Federal  Deposit  Insurance
Corporation Improvement Act of 1991 ("FDICIA") was enacted. FDICIA substantially
revised the bank  regulatory  and  funding  provisions  of the  Federal  Deposit
Insurance  Act and makes  other  revisions  to  several  other  federal  banking
statutes.  Among other things,  FDICIA defined new regulatory  standards in such
areas as asset quality, earnings and competition and revised existing regulatory
standards for powers of state banks, real estate lending,  capital adequacy, and
other items.

On September 29, 1994, the federal government enacted the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "1994 Act"). The provisions of
the 1994 Act became effective on September 29, 1995, at which time eligible bank
holding  companies  in any state were  permitted,  with  Federal  Reserve  Board
approval,  to acquire  banking  organizations  in any other state.  As such, all
existing regional  compacts and substantially all existing regional  limitations
on interstate acquisitions of banking organizations have been eliminated.


                                       Page 3 of 45 sequentially numbered pages.

<PAGE>


The 1994 Act also  removed  substantially  all of the existing  prohibitions  on
interstate  branching by banks.  On and after June 1, 1997, a bank  operating in
any state may establish one or more branches within any other state without,  as
currently required, the establishment of a separate banking structure within the
other state. Interstate branching is allowed earlier than the automatic phase-in
date of June 1, 1997, as long as the  legislatures  of both states involved have
adopted statutes expressly permitting such branching to take place at an earlier
date.

On May 7, 1996,  South  Carolina  adopted the South  Carolina  Act which  became
effective on July 1, 1996.  The South  Carolina Act permits the  acquisition  of
South  Carolina  banks  and  bank  holding   companies  by,  and  mergers  with,
out-of-state  banks and bank holding  companies  with the prior  approval of the
State Board.  The South  Carolina Act also permits South  Carolina  state banks,
with prior approval of the State Board, to operate branches outside the State of
South  Carolina.  Although the 1994 Act has the potential to increase the number
of  competitors  in the  marketplace of the Bank, the Company cannot predict the
actual impact of such legislation on the competitive position of the Bank.

The Company cannot predict what other legislation might be enacted or what other
regulations  might be adopted,  or if enacted or adopted,  the affect thereof on
the Company and/or the Bank.

Sources and  Availability of Funds.  The resources  essential to the business of
the Company and its  subsidiary,  the Bank,  consist  primarily of funds derived
from deposits.  The Company's banking  subsidiary uses these funds to make loans
and to  fund  its  investment  portfolio.  The  availability  of such  funds  is
primarily dependent upon the economic policies of the government, the economy in
general and the general credit market for loans.

Monetary Policy and Economic Controls.  The earnings of the Company's subsidiary
bank, and therefore, to a large extent the earnings of the Company, are affected
by the policies of regulatory authorities, including the Federal Reserve System.
An important  function of the Federal Reserve System is to regulate the national
supply of bank credit in order to combat recession and curb inflation. Among the
instruments used to attain these  objectives are open market  operations in U.S.
Government  securities  and changes in the reserve  requirements  applicable  to
member bank deposits.  These  instruments  are used in varying  combinations  to
influence  overall  growth  and  distribution  of bank  loans,  investments  and
deposits,  and their use also may affect interest rates charged on loans or paid
for deposits.

Dependence Upon Single  Customer or Group of Customers.  Neither the Company nor
the Bank is dependent upon a single customer or a group of a few customers.

ITEM 2.  PROPERTIES

The Company owns a 5,400 square foot  facility  located at 1100 North  Jefferies
Boulevard,  Walterboro,  South Carolina,  which is its corporate banking office.
Construction  on this facility was completed in 1989 at a total cost,  including
land, furniture and fixtures of $775,345.  All corporate headquarters as well as
normal banking services and operations are housed at this location. The facility
has a second floor which would allow for  expansion  consisting  of 2,700 square
feet. The existing  building was built to adequately serve the anticipated needs
of the Bank for the foreseeable future.

The  Company  opened its  second  banking  location  at 6225  Savannah  Highway,
Ravenel, South Carolina.  This 3,622 square foot facility opened for business on
October 6, 1997 and provides  traditional  banking  services.  The total cost of
this facility, including land, and furniture and fixtures was $930,344.


                                       Page 4 of 45 sequentially numbered pages.

<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

The nature of the  Company's  business and that of the Bank  generates a certain
amount  of  litigation  involving  matters  arising  in the  ordinary  course of
business.  In the  opinion  of  management  of the  Company,  none of the  legal
proceedings  currently  pending  or  threatened  to  which  the  Company  or its
subsidiary  Bank is a party or of which any of their  properties is subject,  is
reasonably  likely  to have any  material  adverse  effect  on the  business  or
financial condition of the Company or the Bank.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the fourth quarter of
1997.


                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

As of December 31, 1997,  there were 617 holders of the Company's  Common Stock.
Currently,  there is no  established  trading  market for the  Company's  Common
Stock. Based on information known to management,  its Common Stock has traded in
the range of $ 17.50 to $ 24.00 per share.

Holders of the Company's  Common Stock are entitled to such  dividends as may be
declared  from  time to time by the  Board of  Directors  out of  funds  legally
available  thereof.  The Company paid cash  dividends of $.28 and $.25 per share
during 1997 and 1996, respectively. Any cash dividends paid by the Bank are paid
to the Company as the sole shareholder of the Bank.

No  representations  can be made as to if or when  the  Company  will  pay  cash
dividends in the future. Future dividend policy of the Company is subject to the
discretion  of the Board of Directors  and will depend upon a number of factors,
including future earnings,  financial condition, cash need, and general business
conditions. The Company's ability to pay dividends will depend entirely upon the
Bank's  abilities to distribute  dividends to the Company.  As a state bank, the
Bank is subject to legal  limitations on the amount of dividends it is permitted
to pay. In particular,  the Bank must receive the approval of the South Carolina
Commissioner of Banking prior to paying  dividends to the Company.  Furthermore,
neither the Bank nor the  Company  may declare or pay a cash  dividend on any of
their  capital  stock if they are  insolvent  or if the payment of the  dividend
would render them  insolvent or unable to pay their  obligations  as they become
due in the ordinary course of business.


                                       Page 5 of 45 sequentially numbered pages.

<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

The following  table sets forth certain  selected  financial data concerning the
Company.  The selected  financial  data has been  derived from the  consolidated
financial statements which have been audited by Tourville,  Simpson & Henderson,
independent  accountants.  This  information  should be read in conjunction with
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

<TABLE>
<CAPTION>
Year ended December 31                         1997           1996            1995           1994          1993
                                            ---------      ---------       ---------      ---------      --------
(Dollars in thousands,
 except per share)
<S>                                         <C>            <C>             <C>            <C>            <C>
Balance Sheet:
  Securities available for sale             $   9,395      $  10,188       $   4,965      $   5,541      $     --
  Securities held to maturity                   6,301          6,810           5,008          6,560         7,339
  Allowance for loan losses                       743            639             617            550           499
  Net loans                                    40,614         34,515          29,598         25,224        21,642
  Premises and equipment - net                  1,999          1,262             818            764           779
  Total assets                                 65,075         56,778          47,848         40,622        36,071
  Non-interest bearing deposits                 6,064          5,674           4,690          4,656         3,426
  Interest bearing deposits                    50,879         44,391          35,950         27,981        28,079
  Total deposits                               56,943         50,065          40,640         32,637        31,505
  Short-term borrowings                           480             --             990          3,044            --
  Total liabilities                            57,841         50,395          42,234         35,793        31,756
  Total shareholders' equity                    7,234          6,383           5,614          4,829         4,315

Results of Operations:
  Interest income                           $   4,749      $   4,151       $   3,557      $   3,035      $  2,650
  Interest expense                              2,131          1,937           1,524          1,141         1,003
                                            ---------      ---------       ---------      ---------      --------
  Net interest income                           2,618          2,214           2,033          1,894         1,647
  Provision for loan losses                       135            130             125            120           125
                                            ---------      ---------       ---------      ---------      --------
  Net interest income after provision           2,483          2,084           1,908          1,774         1,522
  Other income                                    258            224             176            151           154
  Other expenses                                1,329          1,072             952            886           871
  Income tax expense                              468            417             397            352           284
                                            ---------      ---------       ---------      ---------      --------

  Net income                                $     944      $     819       $     735      $     687      $    521
                                            =========      =========       =========      =========      ========


Cash Dividends Paid:                        $      84      $      75       $      63      $      54      $     45
                                            =========      =========       =========      =========      ========

Per Share Data:
  Weighted average common
    shares outstanding                        298,646        299,420         300,000        300,000       300,000
  Net income                                $    3.16      $    2.73       $    2.45      $    2.29      $   1.74
  Cash dividends paid                       $     .28      $     .25       $     .21      $     .18      $    .15
  Period end book value                     $   24.11      $   21.32       $   18.71      $   16.10      $  14.38
</TABLE>


                                       Page 6 of 45 sequentially numbered pages.

<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

Communitycorp is a South Carolina corporation  organized on March 13, 1995 to be
a bank  holding  company  (the  Company).  The  Company's  subsidiary,  Bank  of
Walterboro is a state-chartered  commercial bank with two banking locations. The
Bank's  main  office and  operations  center is located at 1100 North  Jefferies
Boulevard,  Walterboro,  South  Carolina.  The Bank  opened its first  branch on
October 6, 1997 at 6225 Savannah Highway, Ravenel, South Carolina. The Company's
primary  market  area  is  Colleton  County  and  northern   Charleston  County.
Depository accounts are insured by the Federal Deposit Insurance  Corporation up
to the maximum amount  permitted by law. The Bank, which received its charter on
October  11,  1988 and  opened for  business  on May 1, 1989,  is  dedicated  to
providing prompt, efficient,  personal service to its customers. A full range of
deposit services for individuals and businesses are offered by the Bank. Deposit
products include checking accounts,  savings accounts,  certificates of deposit,
money market accounts and IRA's.

The Company is primarily engaged in the business of attracting deposits from the
general  public and using  these  deposits  together  with  other  funds to make
commercial,  consumer,  and real estate loans. The Company's  operating  results
depend to a  substantial  extent on the  difference  between  interest  and fees
earned on loans, investments,  and services, and the Company's interest expense,
consisting  principally  of interest  paid on deposits.  Unlike most  industrial
companies, virtually all of the assets and liabilities of financial institutions
are monetary. As a result, interest rates have a greater effect on the financial
institution's  performance.  In addition  to  competing  with other  traditional
financial  institutions,  the Company  also  competes  for savings  dollars with
non-traditional financial intermediaries such as mutual funds. This has resulted
in a highly  competitive  market area which demands the type of personal service
and attention granted by Bank of Walterboro.

The earnings and growth of the banking  industry and the Company are and will be
affected by general  conditions  of the  economy and by the fiscal and  monetary
policies of the federal  government  and its  agencies,  including  the Board of
Governors of the Federal Reserve System (the "Board"). The Board regulates money
and credit conditions and, as a result, has a strong influence on interest rates
and on general economic conditions. The effect of such policies in the future on
the business and earnings of the Company cannot be predicted with certainty.

As of December 31, 1997, the Company had 17 full-time and 2 part-time  employees
in the Walterboro branch and six full-time employees at the Ravenel branch.


                                       Page 7 of 45 sequentially numbered pages.

<PAGE>


RESULTS OF OPERATIONS

This  discussion and analysis is intended to assist the reader in  understanding
the  financial  condition and results of  operations  of  Communitycorp  and its
subsidiary,  Bank of Walterboro.  This commentary  should be read in conjunction
with the consolidated  financial  statements and the related notes and the other
statistical information in this report.

1997 compared to 1996

Net income for the year  ended  December  31,  1997 was  $944,374,  or $3.16 per
share, compared to $818,719, or $2.73 per share, for the year ended December 31,
1996.  An increase in net  interest  income of $403,739  over the 1996 amount of
$2,213,891 contributed to this overall increase.  Other income increased $34,733
or 15.49% over 1996. Other operating expenses increased from $1,071,882 for 1996
to  $1,329,266  for 1997.  Expenses  associated  with opening a second branch in
Ravenel were a  contributing  factor to the increase in operating  expenses.  In
addition  to hiring  employees  to service the branch,  other  expenses  such as
supplies and stationary were purchased.  Although earnings in 1997 were slightly
affected by the new branch, the growth in the loan portfolio from this branch is
expected to  positively  affect  earnings in 1998.  However,  management  cannot
provide positive assurance that this will happen.

1996 compared to 1995

The  Company  had net income of $818,719 or $2.73 per share for 1996 as compared
to  $734,902,  or $2.45 per share for 1995.  One of the primary  factors for the
increase is attributable to the increase in net interest income of $180,805 over
1995.  Other  income  increased  $48,476 or 27.58%  over 1995.  Other  operating
expenses  increased  from  $952,372  for 1995 to  $1,071,882  for the year ended
December 31, 1996.


NET INTEREST INCOME

General.  To a large degree,  earnings are dependent on net interest income.  It
represents the  difference  between  interest  earned on assets and the interest
paid on  liabilities.  Interest  rate  spread  and net  interest  margin are two
significant  elements in analyzing the Company's net interest  income.  Interest
rate spread is the  difference  between the yield on average  earning assets and
the rate on average  interest  bearing  liabilities.  Net interest margin is net
interest income divided by earning assets.

Net interest  income  increased  from  $2,213,891 in 1996 to $2,617,630 in 1997,
resulting  in an increase of 18.24%.  Income from loans  increased  by 16.75% to
$3,552,858  for 1997 as compared  to  $3,043,172  for 1996.  This  increase  was
attributable  to the growth in the loan  portfolio  from  $35,153,845 in 1996 to
$41,357,114 in 1997. There was also an increase in investment income of $96,856,
an increase of 10.88% over the 1996 amount of $890,561.  The net interest spread
and net  interest  margin  were 3.86% and 4.61% in 1997 as compared to 3.62% and
4.40% in 1996.

Net interest  income  increased  from  $2,033,086 in 1995 to $2,213,891 in 1996,
resulting  in an increase of 8.89%.  Income  from loans  increased  by 10.56% to
$3,043,172  for 1996 as compared  to  $2,752,591  for 1995.  This  increase  was
attributable  to the growth in the loan  portfolio  from  $30,215,361 in 1995 to
$35,153,845  in 1996.  There  was  also an  increase  in  investment  income  of
$339,323,  an  increase  of 61.56%  over the 1995  amount of  $551,238.  The net
interest spread and net interest margin were 3.62% and 4.40% in 1996 as compared
to 4.06% and 4.88% in 1995.


                                       Page 8 of 45 sequentially numbered pages.

<PAGE>


NET INTEREST INCOME -- Continued

Average Balances,  Income,  Expenses, and Rates. The following table sets forth,
for the periods  indicated,  the weighted aver age yields  earned,  the weighted
average  yields  paid,  the net interest  spread and the net interest  margin on
earning  assets.  The table also indicates the average  monthly  balance and the
interest income or expense by specific categories.

Average Balances, Income, Expenses, and Rates

<TABLE>
<CAPTION>
                                                             1997                                     1996
                                             -----------------------------------      --------------------------------------
                                              Average      Income/        Yield/       Average       Income/          Yield/
                                              Balance      Expense         Rate        Balance       Expense           Rate
                                             ---------    ---------       ------      ---------    -----------        ------
(Dollars in thousands)
<S>                                          <C>          <C>              <C>        <C>          <C>                 <C>
Assets:
Time deposits in other banks                 $       8    $       1        5.50%      $      10    $         1         5.50%
Taxable securities (1)                          13,254          851        6.42%         12,437            777         6.25%
Tax-exempt securities (1)                        3,063          137        4.47%          2,657            114         4.29%
Federal funds sold                               3,754          208        5.54%          3,966            216         5.45%
Loans (2)                                       36,668        3,552        9.69%         31,315          3,043         9.72%
                                             ---------    ---------                   ---------    -----------
    Total earning assets                        56,747        4,749        8.37%         50,385          4,151         8.24%
                                                          ---------                                -----------
Cash and due from banks                          2,231                                    2,015
Allowance for loan losses                         (692)                                    (639)
Premises and equipment                           1,578                                      955
Other assets                                       923                                      812
                                             ---------                                ---------
    Total assets                             $  60,787                                $  53,528
                                             =========                                =========

Liabilities:
Interest bearing deposits                    $  46,892        2,113        4.51%      $  41,666          1,924         4.62%
Short-term borrowings                              379           18        4.75%            236             13         5.51%
                                             ---------    ---------                   ---------    -----------
    Total interest--
     bearing liabilities                        47,271        2,131        4.51%         41,902          1,937         4.62%
                                                          ---------                                -----------
Non-interest bearing deposits                    6,376                                    5,350
Accrued interest and
 other liabilities                                 452                                      444
Shareholders' equity                             6,688                                    5,832
                                             ---------                                ---------
    Total liabilities and
       shareholders' equity                  $  60,787                                $  53,528
                                             =========                                =========

Net interest income/
 interest rate spread                                     $   2,618        3.86%                   $     2,214         3.62%
                                                          =========        =====                   ===========         =====

Net interest margin on earning assets                                      4.61%                                       4.39%
                                                                           =====                                       =====
</TABLE>

(1) Averages for securities are stated at historical cost.

(2) The  effect  of loans  in  non-accrual  status  and  fees  collected  is not
significant to the computations. All loans and deposits are domestic.


                                       Page 9 of 45 sequentially numbered pages.

<PAGE>


NET INTEREST INCOME -- Continued

Analysis of Changes in Net  Interest  Income.  Net  interest  income can also be
analyzed  in terms of the impact of  changing  rates and  changing  volume.  The
following  table  describes  the extent to which  changes in interest  rates and
changes in the volume of earning assets and interest  bearing  liabilities  have
affected the Company's  interest income and interest  expense during the periods
indicated.  Information provided on changes in each category attributable to (I)
changes due to volume (change in volume  multiplied by prior period rate),  (ii)
changes due to rates  (changes in rates  multiplied by prior period  volume) and
(iii)  changes in rate and volume  (change in rate  multiplied  by the change in
volume).

<TABLE>
<CAPTION>
Analysis of Changes in Net Interest Income                              1997 compared to 1996
                                                                    Due to increase (decrease) in

(Dollars in thousands)                               Volume            Rate          Volume/Rate          Total
                                                    --------         --------        -----------        --------
<S>                                                 <C>              <C>              <C>               <C>
Earning Assets
  Deposits in other banks                           $     --         $     --         $     --          $     --
  Taxable securities                                      51               22                1                74
  Tax-exempt securities                                   17                5                1                23
  Federal funds sold                                     (12)               4               --                (8)
  Loans                                                  520              (10)              (2)              508
                                                    --------         --------         --------          --------
        Total interest income                            576               21               --               597
                                                    --------         --------         --------          --------
Interest-Bearing Liabilities
  Interest bearing deposits                              241              (46)              (6)              189
  Short-term borrowings                                    8               (2)              (1)                5
                                                    --------         --------         --------          --------
        Total interest expense                           249              (48)              (7)              194
                                                    --------         --------         --------          --------
        Net interest income                         $    327         $     69         $      7          $    403
                                                    ========         ========         ========          ========

<CAPTION>
                                                                        1996 compared to 1995
                                                                    Due to increase (decrease) in

(Dollars in thousands)                               Volume            Rate          Volume/Rate          Total
                                                    --------         --------        -----------        --------
<S>                                                 <C>              <C>              <C>               <C>
Earning Assets
  Deposits in other banks                           $     (3)        $     (1)        $      1          $     (3)
  Taxable securities                                     288               12                8               308
  Tax-exempt securities                                   31                1               --                32
  Federal funds sold                                      (1)             (32)              --               (33)
  Loans                                                  326              (33)              (4)              289
                                                    --------         --------         --------          --------
        Total interest income                            641              (53)               5               593
                                                    --------         --------         --------          --------
Interest-Bearing Liabilities
  Interest bearing deposits                              414               56               16               486
  Short-term borrowings                                  (74)               6               (6)              (74)
                                                    --------         --------         --------          --------
        Total interest expense                           340               62               10               412
                                                    --------         --------         --------          --------

        Net interest income                         $    301         $   (115)        $     (5)         $    181
                                                    ========         ========         ========          ========
</TABLE>

Interest Sensitivity.  The Company monitors and manages the pricing and maturity
of its assets and liabilities in order to diminish the potential  adverse impact
that  changes in  interest  rates  could have on its net  interest  income.  The
principal monitoring technique employed by the Company is the measurement of the
Company's  interest  sensitivity "gap," which is the positive or negative dollar
difference  between  assets and  liabilities  that are subject to interest  rate
repricing  within a given  period  of time.  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.  Managing the amount
of assets and  liabilities  repricing in this same time interval  helps to hedge
the risk and  minimize  the impact on net  interest  income of rising or falling
interest rates.


                                      Page 10 of 45 sequentially numbered pages.

<PAGE>


NET INTEREST INCOME -- Continued

The following table presents the Company's rate  sensitivity at each of the time
intervals  indicated as of December 31, 1997. The table may not be indicative of
the Company's rate sensitivity position at other points in time.

Interest Sensitivity Analysis

<TABLE>
<CAPTION>
                                                           After six
                                   Within    After three    through       Within      Greater than
                                   three     through six    twelve          one       One Year or
(Dollars in thousands)             months       months      months         year       Nonsensitive     Total
                                 ---------    ---------    ---------     ---------     ---------     ---------
<S>                              <C>          <C>          <C>           <C>           <C>           <C>
Assets
Interest earning assets:
  Federal funds sold and
    securities purchased under
    agreements to resell         $   3,130           --           --         3,130            --     $   3,130
  Investment securities                359        1,493          678         2,530        13,166        15,696
  Loans (1)                          7,126        3,671        6,464        17,261        23,535        40,796
                                 ---------    ---------    ---------     ---------     ---------     ---------
           Total                    10,615        5,164        7,142     $  22,921     $  36,701     $  59,622
                                 =========    =========    =========     =========     =========     =========
Liabilities
Interest bearing liabilities:
  Demand deposits                   14,142           --           --        14,142            --        14,142
  Savings deposits                  12,150           --           --        12,150            --        12,150
  Time deposits                      7,992        7,248        7,099        22,339         2,247        24,586
  Short-term borrowings                480           --           --           480            --           480
                                 ---------    ---------    ---------     ---------     ---------     ---------
           Total                    34,764        7,248        7,099     $  49,111     $   2,247     $  51,358
                                 =========    =========    =========     =========     =========     =========

Period gap                         (24,149)      (2,084)          43       (26,190)       34,454

Cumulative gap                     (24,149)     (26,233)     (26,190)      (26,190)        8,264

Ratio of cumulative gap to
  total earning assets              (40.50)%     (44.00)%     (43.93)%      (43.93)%      13.86%
</TABLE>

----------
(1) Excludes nonaccrual loans.

The  above  table   reflects  the  balances  of   interest-earning   assets  and
interest-bearing  liabilities  at the  earlier of their  repricing  or  maturity
dates.  Overnight  federal funds and securities  purchased  under  agreements to
resell are  reflected at the earliest  pricing  interval due to the  immediately
available  nature of the  instruments.  Scheduled  payment amounts of fixed rate
amortizing loans are reflected at each scheduled payment date. Scheduled payment
amounts of  variable  rate  amortizing  loans are  reflected  at each  scheduled
payment  date  until the loan may be  repriced  contractually;  the  unamortized
balance  is  reflected  at  that  point.  Interest-bearing  liabilities  with no
contractual maturity, such as savings deposits and interest-bearing  transaction
accounts,  are  reflected in the earliest  repricing  period due to  contractual
arrangements  which give the Company the  opportunity  to vary the rates paid on
those deposits within a thirty-day or shorter period.  Fixed rate time deposits,
principally certificates of deposit, are reflected at their contractual maturity
date. Short-term borrowings are reflected in the earliest repricing period since
these borrowings mature daily.


                                      Page 11 of 45 sequentially numbered pages.

<PAGE>


NET INTEREST INCOME -- Continued

The Company  generally  would benefit from  increasing  market rates of interest
when it has an  asset-sensitive  gap and generally would benefit from decreasing
market rates of interest when it is liability  sensitive.  The Company currently
is liability sensitive over periods with maturity dates of less than six months.
However,  the Company's gap analysis is not a precise  indicator of its interest
sensitive  position.  The  analysis  presents  a static  view of the  timing  of
maturities and repricing  opportunities,  without taking into consideration that
changes in interest rates do not affect all assets and liabilities  equally. Net
interest income is also impacted by other significant factors, including changes
in the volume and mix of earning assets and interest-bearing liabilities.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

General.  The Company has developed  policies and  procedures for evaluating the
overall  quality  of its  credit  portfolio  and the  timely  identification  of
potential  problem  credits.  Management's  judgment  as to the  adequacy of the
allowance is based upon a number of  assumptions  about  future  events which it
believes to be reasonable, but which may or may not be valid. Thus, there can be
no assurance  that  charge-offs  in future periods will not exceed the allowance
for loan losses or that additional increases in the loan loss allowance will not
be required.

Additions to the allowance for loan losses,  which are expended as the provision
for loan losses on the Company's  income  statement,  are made  periodically  to
maintain the allowance at an appropriate level based on management's analysis of
the  potential  risk in the loan  portfolio.  Currently,  the allowance for loan
losses  is  evaluated  on an  overall  portfolio  basis.  Although  an  informal
allocation was used in the past,  management  intends to implement a more formal
allocation system in the future. This system will allocate the allowance to loan
categories,  and  will  be  implemented  at the  time  the  size  and mix of the
portfolio  support such a system.  The amount of the  provision is a function of
the level of loans  outstanding,  the level of nonperforming  loans,  historical
loan loss  experience,  the amount of loan losses  actually  charged against the
reserve during a given period, and current and anticipated economic conditions.

The Company's allowance for loan losses is based upon judgements and assumptions
of risk elements in the portfolio,  future economic conditions and other factors
affecting  borrowers.  The process includes  identification and analysis of loss
potential in various portfolio  segments utilizing a credit risk grading process
and  specific  reviews  and  evaluations  of  significant  problem  credits.  In
addition,  management  monitors the overall portfolio quality through observable
trends in delinquency,  charge-offs,  and general and economic conditions in the
service   area.   The  adequacy  of  the  allowance  for  loan  losses  and  the
effectiveness of the Company's  monitoring and analysis system are also reviewed
periodically by the banking regulators and the Company's independent auditors.

The reserve  for loan losses was 1.79% and 1.82% of total loans on December  31,
1997 and 1996,  respectively.  Management's  goal will be to keep the reserve at
1.75% to 2.00% of total loans.  As the Company  continues to mature,  management
will evaluate its reserve policy and adjust the policy based on historical  loss
experience,  changes  in  economic  conditions,  growth  in  the  portfolio  and
evaluations of specific  loans.  Management  believes the level of the allowance
for loan  losses is  sufficient  to  provide  for  potential  losses in the loan
portfolio.

Accrual of interest is discontinued on a loan when  management  believes,  after
considering  economic and business conditions and collection  efforts,  that the
borrower's  financial  condition  is such that the  collection  of  interest  is
doubtful.  A delinquent  loan is generally  placed in nonaccrual  status when it
becomes 90 days or more past due. No additional  interest is accrued on the loan
balance until the collection of both principal and interest  becomes  reasonably
certain.  When a problem loan is finally  resolved,  there may  ultimately be an
actual writedown or charge-off of the principal  balance of the loan which would
necessitate  additional  charges to  earnings.  For all periods  presented,  the
additional  interest  income,  which would have been recognized into earnings if
the  Company's  nonaccrual  loans had been  current  in  accordance  with  their
original terms, is immaterial.


                                      Page 12 of 45 sequentially numbered pages.

<PAGE>


PROVISION AND ALLOWANCE FOR LOAN LOSSES -- Continued

<TABLE>
<CAPTION>
Allowance for Loan Losses                                         1997             1996
                                                               -----------      -----------
<S>                                                            <C>              <C>
Loans outstanding at the end of year                           $41,357,114      $35,153,845
                                                               ===========      ===========
Average amount of loans outstanding                            $36,667,794      $31,314,650
                                                               ===========      ===========
Balance, beginning of year                                     $   638,688      $   617,457
                                                               -----------      -----------
Loans charged off:
  Commercial, financial and agricultural                            13,734          105,893
  Real estate-mortgage                                                  --              605
  Consumer                                                          29,577           16,005
                                                               -----------      -----------
          Total loans charged off                                   43,311          122,503
Recoveries of previous loan losses:
  Commercial, financial and agricultural                             6,587            9,385
  Real estate-mortgage                                                  --               --
  Consumer                                                           6,296            4,349
                                                               -----------      -----------
          Total recoveries                                          12,883           13,734
                                                               -----------      -----------
          Net charge-offs                                           30,428          108,769
                                                               -----------      -----------
Provision charged to operations                                    135,000          130,000
                                                               -----------      -----------
Balance, end of year                                           $   743,260      $   638,688
                                                               ===========      ===========
Ratios:
  Net charge-offs to average loans outstanding                         .08%             .35%
  Net charge-offs to loans at end of year                              .07%             .31%
  Allowance for loan losses to average loans                          2.03%            2.04%
  Allowance for loan losses to loans, end of year                     1.79%            1.82%
  Net charge-offs to allowance for loan losses                        4.09%           17.03%
  Net charge-offs to provisions for loan losses                      22.54%           83.67%
</TABLE>

Nonperforming Assets. The following table sets forth the Company's nonperforming
assets for the dates indicated:

<TABLE>
<CAPTION>
                                                                  1997             1996
                                                               -----------      -----------
<S>                                                            <C>              <C>
Nonaccrual loans                                               $   561,381      $   290,977
Restructured or impaired loans                                          --               --
                                                               -----------      -----------

           Total nonperforming loans                           $   561,381      $   290,977
                                                               ===========      ===========


Loans 90 days or more past due and still accruing interest     $     5,133      $     8,000
                                                               ===========      ===========
</TABLE>

Potential  Problem Loans.  At December 31, 1997,  through their internal  review
mechanisms the Company had identified  $206,708 of criticized loans and $748,727
of classified loans. The results of this internal review process are the primary
determining  factor in management's  assessment of the adequacy of the allowance
for loan losses.


                                      Page 13 of 45 sequentially numbered pages.

<PAGE>


NON-INTEREST INCOME AND EXPENSE

Non-interest  Income.  Other income increased  $34,733 or 15.49% to $258,997 for
the year ending December 31, 1997. Service charges on deposit accounts increased
from  $203,929 for 1996 to $238,051 for the year ending  December 31, 1997.  NSF
and overdraft  fees of $24,922,  or 17.73%,  was a  significant  portion of this
increase.  In addition,  fees from check sales  increased from $8,939 in 1996 to
$16,754 for the year ended December 31, 1997.

Other income  increased from $175,788 in 1995 to $224,264 or 27.58% for the year
ended  December 31, 1996. An increase in NSF and overdraft  fees of $32,015,  or
29.49%, was the major cause for the increase. In addition,  fees from mini-ATM's
installed in 1995  increased from $10,392 to $14,668 for the year ended December
31, 1996.

Non-interest  Expense.  The Company had an increase in non-interest  expenses of
$257,384  or 24.01% to a total of  $1,329,266  for the year ended  December  31,
1997.  Annual pay raises and the  addition  of five  employees  for the  Ravenel
branch contributed to an increase of $121,203 or 25.18% in salaries and employee
benefits.  Employees for the Ravenel branch began employment in September, 1997.
Net occupancy  expense  increased  $83,172 or 57.74% to $227,220 at December 31,
1997. This increase is partially attributable to depreciation on the new branch.
Other  operating  expenses  increased  $65,392 or 16.76% over the 1996 amount of
$390,097.  The purchase of supplies for the new branch was a contributing factor
to this increase.

Non-interest  expenses increased by $119,510,  or 12.54% over the 1995 amount of
$952,372 for the year ended  December 31,  1996.  The largest  component of this
increase was in salaries and employee  benefits,  which  increased by $64,499 or
15.48%.  This  increase was due to the addition of several  employees and annual
employee  raises.  Net  occupancy  expense  increased  from  $127,429 in 1995 to
$144,048 in 1996 due in part to the  depreciation  on the house  acquired on the
adjoining lot. Other operating expenses increased $34,547 or 9.72% over the 1995
amount of  $355,550.  Professional  fees  associated  with the filings as an SEC
registrant was the source of much of the increase in other operating expenses.

Income  Taxes.  The  Company's  income tax  expense  for 1997 was  $467,987,  an
increase  of $50,433  over the 1996  expense of  $417,554.  The  increase in the
expense  results  primarily  from increased  income before taxes.  The Company's
effective  tax rates for the years ended  December 31, 1997 and 1996 were 33.14%
and 33.78% respectively.

EARNING ASSETS

Loans.  Loans are the largest  category of earning assets and typically  provide
higher yields than the other types of earning assets. Associated with the higher
loan  yields  are the  inherent  credit and  liquidity  risks  which  management
attempts to control  and  counterbalance.  Loans  averaged  $36,667,793  in 1997
compared  to  $31,314,649  in 1996,  an increase of  $5,353,144,  or 17.09%.  At
December 31,  1997,  total loans were  $41,357,114  compared to  $35,153,845  at
December 31, 1996.

The  Company's  ratio of loans to deposits  was 72.63% on  December  31, 1997 as
compared to 70.26% on December  31, 1996.  The loan to deposit  ratio is used to
monitor a financial  institution's  potential  profitability  and  efficiency of
asset distribution and utilization. Generally, a higher loan to deposit ratio is
indicative  of higher  interest  income  since loans yield a higher  return than
alternative  investment  vehicles.  Management has  concentrated  on maintaining
quality in the loan portfolio while continuing to increase the deposit base.

The Company  extends  credit  primarily to  consumers  and small  businesses  in
Walterboro and Ravenel, South Carolina,  and, to customers in surrounding areas.
The  Company's  service area is mixed in nature.  The economy of Walterboro is a
regional  business  center whose economy  contains  elements of medium and light
manufacturing,   higher  education,   regional  health  care,  and  distribution
facilities.  Outside the  incorporated  city limits of  Walterboro,  the economy
includes manufacturing,  agriculture,  timber, and recreational activities. Loan
growth in the Ravenel  area is also  expected to come  primarily  from  consumer
loans and small businesses in northern Charleston county. No particular category
or  segment  of the  economies  previously  described  are  expected  to grow or
contract  disproportionately in 1998. Management is of the opinion that the loan
portfolio is adequately diversified.  There are no significant concentrations of
loans in any particular  individuals or industry or group of related individuals
or  industries.  The loan demand  remains  strong in the Company's  market area,
supported in part, by customers moving from larger financial  institutions after
recent mergers.


                                      Page 14 of 45 sequentially numbered pages.

<PAGE>


EARNING ASSETS -- Continued

Loan Portfolio Composition
<TABLE>
<CAPTION>
                                                          1997                             1996
                                             ----------------------------      ----------------------------
                                                               Percent of                        Percent of
                                                Amount           Total            Amount            Total
                                             ------------      ----------      ------------      ----------
<S>                                          <C>                 <C>           <C>                 <C>
Commercial, financial and agricultural       $ 28,729,677         69.46%       $ 24,391,088         69.38%
Real estate loans                               5,080,608         12.28           4,564,843         12.98
Consumer and other loans                        7,546,829         18.26           6,197,914         17.64
                                             ------------        ------        ------------        ------
          Total gross loans                    41,357,114        100.00%         35,153,845        100.00%
                                                                 ======                            ======

Allowance for loan losses                        (743,260)                         (638,688)
                                             ------------                      ------------
          Total net loans                    $ 40,613,854                      $ 34,515,157
                                             ============                      ============
</TABLE>

Commercial,  financial and agricultural loans increased  $4,338,589 or 17.79% to
$28,729,677 at December 31, 1997. A portion of this increase is  attributable to
new loans in this  category at the Ravenel  branch which  totaled  $1,456,814 at
December 31, 1997.

Real estate loans  totaled  $5,080,608  at December  31,  1997.  The increase of
$515,765 or 11.30% is considered normal growth in the portfolio.

Consumer and all other loans  increased  $1,348,912  or 21.76% to  $7,546,829 at
December 31, 1997. This increase is partially attributable to new consumer loans
at the Ravenel branch which totaled $382,200 at December 31, 1997.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The  following  table  summarizes  the loan maturity  distribution,  by type, at
December 31, 1997 and related interest rate characteristics:

<TABLE>
<CAPTION>
                                                One year          One to            After
                                                or less         five years        five years           Total
                                            --------------    --------------    --------------    --------------
<S>                                         <C>               <C>               <C>               <C>
Commercial, financial and agricultural      $    5,404,128    $   23,286,996    $       38,553    $   28,729,677
Real estate loans                                3,334,622         1,620,326           125,660         5,080,608
Consumer and other loans                         1,365,017         6,045,696           136,116         7,546,829
                                            --------------    --------------    --------------    --------------
                                            $   10,103,767    $   30,953,018    $      300,329    $   41,357,114
                                            ==============    ==============    ==============    ==============
Loans maturing after one year with:
          Fixed interest rates                                                                        29,046,871
          Floating interest rates                                                                 $    2,206,476
                                                                                                  --------------
                                                                                                  $   31,253,347
                                                                                                  ==============
</TABLE>

The  information  presented  in the  above  table is  based  on the  contractual
maturities  of the  individual  loans,  including  loans which may be subject to
renewal  at their  contractual  maturity.  Renewal  of such  loans is subject to
review and credit approval as well as modification of terms upon their maturity.
Consequently,  management  believes this treatment  presents fairly the maturity
and repricing structure of the loan portfolio shown on the above table.


                                      Page 15 of 45 sequentially numbered pages.

<PAGE>


EARNING ASSETS -- Continued

Short-Term Investments.  Short-term investments,  which consist of federal funds
sold and securities purchased under agreements to resell, averaged $3,753,734 in
1997,  as compared to  $3,966,371  in 1996.  At December  31,  1997,  short-term
investments  totaled  $3,130,000.  These  funds  are a  primary  source  of  the
Company's  liquidity  and are  generally  invested in an earning  capacity on an
overnight basis.

Investment  Securities.  The  investment  securities  portfolio is a significant
component of the  Company's  total earning  assets.  Total  securities  averaged
$16,317,411 in 1997,  compared to $15,093,790 in 1996. At December 31, 1997, the
total securities portfolio was $15,696,054.  Securities  designated as available
for sale totaled  $9,394,736  and were recorded at estimated  fair market value,
and  securities  designated  as held to  maturity  totaled  $6,301,318  and were
recorded at amortized  cost.  The investment  objectives of the Company  include
maintaining  and  investing  in a portfolio  of high  quality and highly  liquid
investments with competitive returns.  Based on these objectives,  the Company's
investments are primarily in U.S. Treasuries and obligations of U.S. Agencies.

Investment  Portfolio.  The following  tables  summarize  the carrying  value of
investment  securities as of the indicated dates and weighted  average yields of
those securities at December 31, 1997 and 1996.

Investment Securities Portfolio Composition

                                                             December 31,
                                                     ---------------------------
Held to Maturity (1)                                     1997            1996
                                                     -----------     -----------
U.S. Treasury and U.S. Government agencies           $ 2,550,676     $ 2,551,246
Obligations of states and political subdivisions       2,443,742       2,695,696
Mortgage-backed securities                             1,306,900       1,563,457
                                                     -----------     -----------
                                                     $ 6,301,318     $ 6,810,399
                                                     ===========     ===========
Available for Sale (1)

U.S. Treasury and U.S. Government agencies           $ 7,521,209     $ 8,932,194
Obligations of states and political subdivisions         984,373         302,684
Mortgage-backed securities                               889,154         953,063
                                                     -----------     -----------
                                                     $ 9,394,736     $10,187,941
                                                     ===========     ===========

(1) Held to maturity  securities  are stated at amortized cost and available for
sale securities are stated at fair value.


                                      Page 16 of 45 sequentially numbered pages.

<PAGE>


INVESTMENT PORTFOLIO -- Continued

Investment Securities Maturity Distribution and Yields

<TABLE>
<CAPTION>
                                                                                1997
                                                   -----------------------------------------------------------------
                                                   Available for Sale     Yield(1)   Held to Maturity       Yield(1)
                                                   ------------------     --------   ----------------       --------
U.S. Treasury and U.S. Government
agencies due:
<S>                                                   <C>                   <C>         <C>                   <C>
  Within one year                                     $  1,641,841          5.12%       $   199,578           5.93%
After one year but
    within five years                                    3,562,584          6.60%         1,800,000           6.07%
After five years but
    within ten years                                     2,316,784          7.12%           551,098           7.21%
                                                      ------------                      -----------
                                                         7,521,209          6.43%         2,550,676           6.30%
                                                      ------------                      -----------
Obligations of state and political
  subdivisions due:
  Within one year                                               --                          480,322           6.55%
  After one year but
    within five years                                      303,583          7.01%         1,383,390           6.86%
  After five years but
    within ten years                                       446,718          7.23%           346,990           7.73%
  After ten years                                          234,072          7.56%           233,040           8.20%
                                                      ------------                      -----------
                                                           984,373          7.24%         2,443,742           7.05%
                                                      ------------                      -----------
Mortgage-backed securities due:
  Within one year                                               --            --            208,020           5.13%
  After one year but
    within five years                                           --            --            669,047           6.10%
  After five years but
    within ten years                                            --            --            429,833           6.60%
  After ten years                                          889,154          6.42%                --             --
                                                      ------------                      -----------
                                                           889,154          6.42%         1,306,900           6.11%
                                                      ------------                      -----------
Total due:
  Within one year                                        1,641,841          5.12%           887,920           6.08%
  After one year but
    within five years                                    3,866,167          6.63%         3,852,437           6.36%
  After five years but
    within ten years                                     2,763,502          7.14%         1,327,921           7.15%
  After ten years                                        1,123,226          6.66%           233,040           8.20%
                                                      ------------                      -----------
                                                      $  9,394,736          6.51%       $ 6,301,318           6.55%
                                                      ============                      ===========
</TABLE>

----------
(1) Tax equivalent yield has been calculated using an incremental rate of 34%.


                                      Page 17 of 45 sequentially numbered pages.

<PAGE>


DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

Deposits.  During 1997, the Company  experienced  significant  growth in overall
deposits.  Total  average  deposits  increased  $6,251,606  or 13.30%  over 1996
average  deposits of  $47,016,403.  The following  table  summarizes  the Bank's
deposits for the year ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>
Deposits                                                1997                             1996
                                            ----------------------------     ----------------------------
                                                               Percent                          Percent
                                               Amount        of Deposits        Amount        of Deposits
                                            -----------      -----------     -----------      -----------
<S>                                         <C>                <C>           <C>                <C>
Non-interest bearing demand                 $ 6,063,801         10.65%       $ 5,673,918         11.33%
Interest bearing transaction accounts        11,263,207         19.78          6,886,479         13.76
Savings                                      15,029,295         26.39         15,314,272         30.59
Time deposits of $100,000 and over            8,739,395         15.35          7,983,620         15.95
Other time deposits                          15,847,390         27.83         14,206,909         28.37
                                            -----------        ------        -----------        ------
                                            $56,943,088        100.00%       $50,065,198        100.00%
                                            ===========        ======        ===========        ======
</TABLE>

Core  deposits,  which  exclude  certificates  of deposit of  $100,000  or more,
provide a relatively  stable funding source for the Company's loan portfolio and
other  earning  assets.   The  Company's  core  deposits  were  $48,203,693  and
$42,081,578  at  December  31,  1997 and 1996,  respectively.  A stable  base of
deposits are expected to be the Company's primary source of funding to meet both
its short-term and long-term liquidity needs in the future.

The maturity  distribution  of the Company's time deposits at December 31, 1997,
is shown in the following table.

Maturities of Certificates of Deposit of $100,000 or More

<TABLE>
<CAPTION>
                                            After Three     After Six
                             Within           Through     Through Twelve    After Twelve
                           Three Months      Six Months       Months            Months            Total
                           ------------    ------------    ------------    --------------    --------------
<S>                        <C>             <C>             <C>             <C>               <C>
Certificates of deposit
  of $100,000 or more      $  3,026,889    $  2,284,946    $  2,927,560    $      500,000    $    8,739,395
                           ============    ============    ============    ==============    ==============
</TABLE>

Large  certificate  of  deposit  customers  tend to be  extremely  sensitive  to
interest rate levels, making these deposits less reliable sources of funding for
liquidity  planning  purposes than core deposits.  Some  financial  institutions
partially fund their balance sheet using large  certificates of deposit obtained
through  brokers.  These  brokered  deposits  are  generally  expensive  and are
unreliable  as  long-term  funding  sources.  Accordingly,  the Company does not
accept brokered deposits.

Short-term Borrowings. At December 31, 1997 and 1996, the Company had short term
borrowings  which consisted of securities sold under agreements to repurchase of
$480,000 and $0. The Company  entered into a repurchase  agreement  with a local
customer  which  generally  matures  on a one  day  basis.  The  maximum  amount
outstanding  at any  month-end  for the  repurchase  agreement  was $760,000 and
$873,436 at December 31, 1997 and 1996, respectively.  The average interest rate
paid on the  repurchase  agreement  was 4.68% and 4.42% at December 31, 1997 and
1996, respectively.

CAPITAL

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  form 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 the Company has less
than $150 million in assets, it is not currently  subject to these rules.  Under
the risk-based standard, capital is classified into two tiers. Tier 1 capital of
the Company consists of common  stockholders'  equity,  excluding the unrealized
gain (loss) on securities  available-for-sale,  minus certain intangible assets.
Tier 2 capital consists of general reserve for


                                      Page 18 of 45 sequentially numbered pages.

<PAGE>


CAPITAL -- Continued

loan losses subject to certain limitations.  A bank holding company's qualifying
capital base for purposes of its risk-based capital ratio consists of the sum of
its Tier 1 and Tier 2 capital.  The regulatory  minimum  requirements are 4% for
Tier I and 8% for total  risk-based  capital.  The  holding  company and banking
subsidiary  are also  required to maintain  capital at a minimum  level based on
total assets,  which is known as the leverage  ratio.  Only the  strongest  bank
holding  companies  and banks are  allowed to  maintain  capital at the  minimum
requirement.  All others  are  subject  to  maintaining  ratios 100 to 200 basis
points above the minimum.

Risk-Based Capital Ratios
                                                  The Bank          The Company
                                                -----------         -----------
Tier I capital:
 Common shareholders' equity                    $ 7,098,772         $ 7,233,560
Less: intangibles                                        --              30,111
                                                -----------         -----------
     Total Tier I capital                         7,098,772           7,203,449
Tier II capital:
 Allowable allowance for loan losses                580,712             581,619
                                                -----------         -----------
     Tier II capital additions                      580,712             581,619
                                                -----------         -----------
     Total capital                              $ 7,679,484         $ 7,785,068
                                                ===========         ===========
Risk adjusted assets                            $46,456,952         $46,442,292
                                                ===========         ===========
Total assets                                    $65,002,307         $65,074,862
                                                ===========         ===========
Risk-based capital ratios:
  Tier I capital                                      15.28%              15.49%
  Total capital                                       16.53               16.74
  Tier I leverage ratio                               11.23               11.39

LIQUIDITY MANAGEMENT

The Company  manages its liquidity from both the asset and liability side of the
balance sheet through the coordination of the relative  maturities of its assets
and  liabilities.  Short-term  liquidity  needs are generally met from cash, due
from banks,  federal funds sold and deposit  levels.  Management has established
policies and  procedures  governing  the length of time to maturity on loans and
investments.  Investments  classified  as available  for sale are placed in this
category specifically to fund future liquidity needs, if necessary.  The Company
maintained a high level of liquidity  during 1997 which was  attributable to the
growth in deposits during the year. In the opinion of management,  the Company's
short-term  and long-term  liquidity  needs can be  adequately  supported by the
Company's deposit base.

IMPACT OF INFLATION

The financial  statements and related  financial data presented herein have been
prepared in accordance  with  generally  accepted  accounting  principles  which
require the measurement of financial  position and operating results in terms of
historical  dollars,  without  considering  changes in relative purchasing power
over time due to inflation.  Unlike most industrial companies,  virtually all of
the assets and the  liabilities  of a  financial  institution  are  monetary  in
nature. As a result,  interest rates generally have a more significant impact on
a financial institution's performance than does the effect of inflation.

While the effect of inflation on a bank is normally  not as  significant  as its
influence  on  those  businesses  that  have  large  investments  in  plant  and
inventories,  it does have an effect.  Interest rates generally  increase as the
rate of inflation increases, but the magnitude of the change in rates may not be
the same.  While interest rates have  traditionally  moved with  inflation,  the
effect  on income is  diminished  because  both  interest  earned on assets  and
interest paid on liabilities vary directly with each other.  Also,  increases in
the price of goods and services  will  generally  result in increased  operating
expenses.


                                      Page 19 of 45 sequentially numbered pages.

<PAGE>


ACCOUNTING AND FINANCIAL REPORTING ISSUES

In June 1997, the Financial  Accounting  Standards  Board released  Statement of
Financial  Accounting  Standards (SFAS) 130, "Reporting  Comprehensive  Income."
SFAS 130  requires  that all items  that are  required  to be  recognized  under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements. Comprehensive income is the change in equity of a business
during a period  from  transactions  and other  events  and  circumstances  from
nonowner sources and excludes investments by owners and distributions to owners.
Comprehensive   income  consists  of  two  components,   net  income  and  other
comprehensive  income. Other comprehensive income includes,  among other things,
the change in the unrealized gain or loss on securities available for sale.

This statement is effective for fiscal years  beginning after December 15, 1997.
Reclassification  of  financial  statements  for earlier  periods  provided  for
comparative purposes is required.

FORWARD LOOKING AND TREND INFORMATION

The  management  of the Company is not aware of any trends or events  other than
those included in this  discussion  that are likely to have a material effect on
the Company's  capital  resources,  liquidity,  or  operations.  Please read the
discussion  below on the Company's  plan for handling Year 2000.  Also, no known
factors  regarding  regulatory  matters  are  expected  to  effect  the  overall
operating results of the Company.

The Company has  conducted a  comprehensive  review of its  computer  systems to
identify  the  systems  that could be  affected  by the "Year 2000" issue and is
developing an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer  programs being written using two digits rather than four
to  define  the  applicable  year.  Any  of the  Company's  programs  that  have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than  the  year  2000.   This  could  result  in  a  major  system   failure  or
miscalculations.  The Company  presently  believes that, with  modifications  to
existing software and converting to new software, the Year 2000 problem will not
pose significant  operational  problems for the Company's computer systems as so
modified and converted.  However,  if such modifications and conversions are not
completed  timely,  the Year  2000  problem  may have a  material  impact on the
operations of the Company.

The Company  cannot  predict with any certainty the costs the Company will incur
to  respond  to any Year  2000  issues.  Further,  the  business  of many of the
Company's  customers may be negatively  affected by the Year 2000 issue, and any
financial  difficulties incurred by the Company's customers in solving Year 2000
issues could negatively affect such customer's  ability to repay any loans which
the Bank may have extended.  Therefore,  even if the Company and the Bank do not
incur  significant  direct costs in connection  with responding to the year 2000
issue,  there  can be no  assurance  that the  failure  or  delay of the  Bank's
customers or other third parties in addressing  the Year 2000 issue or the costs
involved  in such  process  will  not  have a  material  adverse  effect  on the
Company's business, financial condition and results of operations.


                                      Page 20 of 45 sequentially numbered pages.

<PAGE>


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial  statements  identified in Item 14 of this Report on Form 10-K are
included herein on pages 25 through 44.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information as to the Board of Directors'
nominees for election as director and of those  directors  who will  continue to
serve as such after the Annual Meeting.

<TABLE>
<CAPTION>
                                                                                              Year First    Year
                               Age     Principal Occupation During Past Five                    Elected     Term
Name                           (1)     Years and Other Information                             Director     Expires
---------------------------   -----   ----------------------------------------------------   ------------   -------
                                                     BOARD NOMINEES
<S>                            <C>     <C>                                                       <C>        <C>
E. Ray Carmichael              68      President, Carmichael Oil of Walterboro, Inc.,            1988       2001(2)
                                       Exxon oil distributor

W. Roger Crook                 56      Chief Executive Officer and President of the              1988       2001(2)
                                       Bank since its incorporation on October 11, 1988

Harry L. Hill                  70      Retired, Former Vice President and Resident               1988       2001(2)
                                       Manager, Asten Dryer Fabrics, Inc.

Robert E. Redfearn             74      Retired, Former owner of Sea Spirits, Inc.                1988       2001(2)
                                       Grocery/Real Estate

                                       DIRECTORS CONTINUING IN OFFICE

George W. Cone                 52      Partner in Law Firm of McLeod, Fraser & Cone              1988       1999

Opedalis Evans                 76      Retired - Former Merchant and Farmer                      1988       1999

J. Barnwell Fishburne          42      Owner, Fishburne & Company                                1988       1999
                                       Real Estate Sales and Rentals

Calvert W. Huffines            48      President of The Huffines Company                         1988       2000
                                       Real Estate Broker

Peden B. McLeod                57      Retired Code Commissioner and Director, South             1988       2000
                                       Carolina Legislative Council, Partner in McLeod,
                                       Fraser & Cone Law Firm

Harold M. Robertson            74      Retired, Previous owner of Robertson Electric             1988       2000
                                       Company.  Retired Member of Board of Directors
                                       South Carolina Public Service Authority
</TABLE>

(1) At December 31, 1997
(2) Assuming re-election at the Annual Meeting


                                      Page 21 of 45 sequentially numbered pages.

<PAGE>


                               EXECUTIVE OFFICERS

W. Roger Crook, age 56, is Director,  CEO and President of Communitycorp.  He is
also CEO and President of the Bank since its  incorporation on October 11, 1988.
Mr. Crook was actively  involved in organizing the Bank. Prior to February 1988,
Mr. Crook was Vice President of Citizens & Southern  National Bank,  Walterboro,
South Carolina, for more than five years.

M. Ellison Young, age 60, is Vice President of  Communitycorp.  He has also been
Vice  President  since joining the Bank in October 1991.  Prior to October 1990,
Mr. Young was Vice  President  and Branch  Manager for The First  Savings  Bank,
Walterboro Branch, for more than five years.

Gwendolyn P. Bunton, age 44, Vice President and Treasurer of Communitycorp. Also
for the Bank,  she has been Vice  President  and Cashier  since  December  1993,
Assistant  Vice  President and Cashier since April 1990,  Cashier and Operations
Officer since May 1989.  Mrs. Bunton joined Bank of Walterboro in February 1989.
Prior to February 1989,  Mrs.  Bunton was Loan  Administrative  Assistant III at
Citizens & Southern  National Bank,  Walterboro,  South Carolina,  for more than
five years.

                MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors holds regular  meetings  monthly.  The Board of
Directors  has  established  an Audit  Committee,  an  Executive  Committee,  an
Investment  Committee  and  a  Loan  Committee.   The  Board  does  not  have  a
Compensation  Committee  and  functions  normally  performed  by a  Compensation
Committee are performed by the Executive Committee. During the fiscal year ended
December  31, 1997,  the Board held a total of 13 regular and special  meetings.
Each director  attended at least 75% of the aggregate of (I) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all Committees, of the Board of Directors on which he served.

The Audit Committee selects the Company's independent  auditors,  determines the
scope  of  the  Annual  Audit,  determines  whether  the  Company  has  adequate
administrative,  operational  and internal  accounting  controls and  determines
whether  the  Company  is  operating  according  to  established   policies  and
procedures.  The  members of the Audit  Committee  are George W. Cone,  Opedalis
Evans, J. Barnwell  Fishburne,  Harry L. Hill and Robert E. Redfearn.  The Audit
Committee met two times during 1997.

The Executive  Committee  established and monitors the Company's major policies,
reviews all proposed  changes to policies prior to submission to the Board,  and
monitors the Company's employee compensation and benefit programs. The Executive
Committee may act on behalf of the Board of Directors between meetings.  Members
of the  Executive  Committee  are E. Ray  Carmichael,  George W. Cone,  W. Roger
Crook, Peden B. McLeod, and Harold M. Robertson. The Executive Committee met two
times during 1997.

The Investment  Committee  establishes and monitors the Bank's investment policy
to insure the safety and  liquidity of the Bank's  investments  and monitors the
Bank's assets,  liabilities and interest rate policies and exposure.  Members of
the Investment Committee are George W. Cone, W. Roger Crook and Peden B. McLeod.
The Investment Committee met fourteen times during 1997.

The Loan Committee establishes and monitors the Bank's lending policies, reviews
compliance  with policy,  reviews loans where the borrower's  liability  exceeds
certain limits,  monitors loans for credit quality and reviews all loans over 30
days past due.  Members of the Loan Committee are E. Ray  Carmichael,  George W.
Cone,  W.  Roger  Crook,  Calvert  W.  Huffines,  Peden B.  McLeod and Harold M.
Robertson. The Loan Committee met sixty- five times during 1997.

The Board of Directors nominates candidates for election as directors; it has no
nominating   committee.   The  Board  of  Directors  will  consider  individuals
recommended by shareholders. Shareholders may make recommendations by writing to
Peden B.  McLeod,  Chairman of the Board,  Communitycorp,  Post Office Box 1707,
Walterboro, South Carolina 29488.


                                      Page 22 of 45 sequentially numbered pages.

<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION

The following  information is furnished for the Chief  Executive  Officer of the
Company.  No other executive  officer of the Company received salary and bonuses
in excess of $100,000 during the fiscal year ended December 31, 1997.

                           SUMMARY COMPENSATION TABLE
                               Annual Compensation
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                                                    Other Annual       All Other
Name and                                  Salary        Bonus       Compensation     Compensation
Principal Position           Year          ($)           ($)            ($)            ($) (1)
--------------------------------------------------------------------------------------------------
<S>                          <C>         <C>           <C>               <C>           <C>
W. Roger Crook               1997        $86,000       $12,000           --            $18,020
President and Chief          1996         76,300        10,000           --             15,341
Executive Officer            1995         72,000         7,000           --             13,334
--------------------------------------------------------------------------------------------------
</TABLE>

(1)  Included  deferred  compensation of $12,000,  $10,000,  and $9,014 in 1997,
     1996, and 1995,  respectively,  and profit sharing  contribution of $6,020,
     $5,341, and $4,320 in 1997, 1996, and 1995, respectively.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND MANAGEMENT

                    AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP

<TABLE>
<CAPTION>
                                                              Shared Voting      Total Sole and
                                                                   and            Shared Voting        Total
   Name and Address of               Sole Voting and            Investment        and Investment      Percent
     Beneficial Owner                Investment Power             Power               Power          of Class
     ----------------                ----------------             -----               -----          --------
<S>                                       <C>                    <C>                 <C>             <C>
Owners of 5% or more of
Common Stock
Sea Spirits, Inc. (1)                     23,708                  - 0 -               23,708          7.90%
3205 Palmetto Blvd.
Edisto, SC 29438
Directors
E. Ray Carmichael (2)                     11,897                  3,228               15,125          5.04%
George W. Cone (3)                         2,728                  1,500                4,228          1.41%
W. Roger Crook(4)                          2,229                    500                2,729          0.91%
Opedalis Evans                             4,200                  - 0 -                4,200          1.40%
Barnwell Fishburne(5)                      6,647                  1,488                8,135          2.71%
Harry L. Hill                              3,335                  - 0 -                3,335          1.11%
Calvert W. Huffines (6)                    2,085                  4,600                6,685          2.23%
Peden B. McLeod (7)                        7,478                 19,350               26,828          8.94%
Robert E. Redfearn (8)                       500                 23,708               24,208          8.07%
Harold Robertson (9)                       7,975                  2,534               10,509          3.50%

Executive Officers and                    50,029                 56,908              106,937         35.65%
Directors as a Group
 (12 persons)
</TABLE>

(1)  This  corporation  is controlled by Robert E.  Redfearn,  a director of the
     Bank.
(2)  Includes 2,500 shares owned by a corporation which Mr. Carmichael  controls
     and 728 shares owned by family members.
(3)  Includes 1,500 shares held by family members
(4)  Includes 500 shares held by family members.
(5)  Includes 1,488 shares held by family members.
(6)  Includes 2,300 shares owned by a foundation  controlled by Mr. Huffines and
     2,300 shares owned by family members.
(7)  Includes 19,350 shares held by family members.
(8)  Includes 23,708 shares owned by Sea Spirits,  Inc., a corporation  which is
     controlled by Mr. Redfearn.
(9)  Includes 2,534 shares held by family members.


                                      Page 23 of 45 sequentially numbered pages.

<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has had, and expects to have in the future,  banking transactions in
the ordinary  course of its business with  principal  officers,  directors,  and
their  associates on substantially  the same terms including  interest rates and
collateral  on  loans,  as  those  prevailing  at the same  time for  comparable
transactions  with  others,  and  did  not  involve  more  than  normal  risk of
collectibility or present other unfavorable  features.  During 1997, the largest
aggregate  amount of  indebtedness  of principal  officers,  directors and their
associates  to the  Company  was  $1,950,124  which  represented  31.11%  of the
Company's  equity  capital  at the time.  During  1997,  the law firm of McLeod,
Fraser & Cone provided legal  services to the Company in its ordinary  course of
business and it is expected to continue to do so in the future.  George W. Cone,
director of Communitycorp is a partner of the McLeod,  Fraser and Cone law firm.
Peden B. McLeod, Director and Chairman of the Board of Communitycorp,  is also a
partner in the law firm of McLeod, Fraser and Cone.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1)-(2) Financial Statements and Schedules:

The consolidated financial statements and schedules of the Company identified in
the  accompanying  index to financial  statements at page 25 herein are filed as
part of this report.

(a)(3)Listing of Exhibits

     3.1  *Articles of Incorporation.  (Incorporated by reference to Exhibit 3.1
          to Registrant's Form 10-K the fiscal year ended December 31, 1995)

     3.2  *Bylaws of Communitycorp. (Incorporated by reference to Exhibit 3.2 to
          Registrant's Form 10-K for the fiscal year ended December 31, 1995)

(a)(3) 21 Subsidiaries of Registrant

     Bank of Walterboro is the only subsidiary of Communitycorp.

(b)Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter ended December
31, 1997.

* Incorporated by reference as indicated.


                                      Page 24 of 45 sequentially numbered pages.

<PAGE>


                          COMMUNITYCORP AND SUBSIDIARY

                        Consolidated Financial Statements

                    Years Ended December 31, 1997, 1996, 1995

                          INDEX TO FINANCIAL STATEMENTS

                                                                          Page #
                                                                          ------
Report of Tourville, Simpson & Henderson
Independent Auditors........................................................ 26

Consolidated Balance Sheets as of
  December 31, 1997 and 1996................................................ 27

Consolidated Statements of Operations for the years ended
  December 31, 1997, 1996 and 1995.......................................... 28

Consolidated Statements of Shareholders' Equity for the years ended
  December 31, 1997, 1996 and 1995.......................................... 29

Consolidated Statements of Cash Flows for the years ended
  December 31, 1997, 1996 and 1995.......................................... 30

Notes to Consolidated Financial Statements.................................. 31


                                      Page 25 of 45 sequentially numbered pages.

<PAGE>


                  [TOURVILLE, SIMPSON & HENDERSON LETTERHEAD]


                        REPORT OF INDEPENDENT ACCOUNTANTS


The Board of Directors
Communitycorp
Walterboro, South Carolina

We have audited the accompanying consolidated balance sheets of Communitycorp as
of December 31, 1997 and 1996, and the related statements of operations, changes
in shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These 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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated  financial statements.  An audit
also  includes  assessing the  accounting  principles  used and the  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 financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Communitycorp as of December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period  ended  December  31, 1997 in  conformity  with
generally accepted accounting principles.


/s/ TOURVILLE, SIMPSON & HENDERSON

Columbia, South Carolina
February 26, 1998


                                      Page 26 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                           Consolidated Balance Sheets
                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                                        1997             1996
                                                                    ------------     ------------
<S>                                                                 <C>              <C>
Assets
Cash and cash equivalents:
  Cash and due from banks (Note B)                                  $  2,602,260     $  2,382,087
  Federal funds sold and securities
    purchased under agreements to resell                               3,130,000          640,000
                                                                    ------------     ------------
                                                                       5,732,260        3,022,087
Time deposits with other banks                                                --           10,000
Investment securities: (Note C)
  Securities available for sale                                        9,394,736       10,187,941
  Securities held to maturity (market value of $6,343,032
     in 1997 and $6,821,855 in 1996)                                   6,301,318        6,810,399
                                                                    ------------     ------------
                                                                      15,696,054       16,998,340

Loans (Note D)                                                        41,357,114       35,153,845
Less allowance for loan losses                                          (743,260)        (638,688)
                                                                    ------------     ------------
Loans, net                                                            40,613,854       34,515,157

Premises and equipment, net (Note E)                                   1,999,055        1,262,024
Accrued interest receivable                                              726,318          690,700
Other assets                                                             307,321          280,190
                                                                    ------------     ------------
            Total assets                                            $ 65,074,862     $ 56,778,498
                                                                    ============     ============

Liabilities
Deposits:
   Non-interest bearing demand deposits                             $  6,063,801     $  5,673,918
   Interest bearing demand                                            11,263,207        6,886,479
   Money market accounts                                               2,879,173        3,341,735
   Savings                                                            12,150,122       11,972,537
   Time deposits of $100,000 and over (Note F)                         8,739,395        7,983,620
   Other time deposits (Note F)                                       15,847,390       14,206,909
                                                                    ------------     ------------
                                                                      56,943,088       50,065,198
Short-term borrowings (Note H)                                           480,000               --
Accrued interest payable                                                 342,661          281,868
Other liabilities                                                         75,553           48,180
                                                                    ------------     ------------
            Total liabilities                                         57,841,302       50,395,246
                                                                    ------------     ------------
Shareholders' equity (Note K)
Preferred stock  - $5.00 par value; 3,000,000 shares
   authorized and unissued
Common stock - $5.00 par value; 3,000,000 shares
   authorized; 300,000 shares issued and outstanding                   1,500,000        1,500,000
Capital surplus                                                        1,731,708        1,731,708
Unrealized gain (loss) on securities available for sale, net              38,431           38,800
Retained earnings                                                      3,991,832        3,131,155
Treasury stock, at cost (1,583 shares in 1997 and 1,083 in 1996)         (28,411)         (18,411)
                                                                    ------------     ------------
            Total shareholders' equity                                 7,233,560        6,383,252
                                                                    ------------     ------------
            Total liabilities and shareholders' equity              $ 65,074,862     $ 56,778,498
                                                                    ============     ============
</TABLE>

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


                                      Page 27 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                      Consolidated Statements of Operations
              For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                          1997          1996          1995
                                                       ----------    ----------    ----------
<S>                                                    <C>           <C>           <C>
Interest income:
   Loans, including fees                               $3,552,858    $3,043,172    $2,752,591
   Investment securities
      Taxable                                             850,704       776,580       468,987
      Tax-exempt                                          136,713       113,981        82,251
   Federal funds sold and securities
     purchased under agreements to resell                 207,830       216,127       248,597
   Time deposits with other banks                             861         1,012         4,260
                                                       ----------    ----------    ----------
                                                        4,748,966     4,150,872     3,556,686
                                                       ----------    ----------    ----------
Interest expense:
   Deposits                                             2,113,575     1,924,305     1,437,902
   Short-term borrowings                                   17,761        12,676        85,698
                                                       ----------    ----------    ----------
                                                        2,131,336     1,936,981     1,523,600
                                                       ----------    ----------    ----------

Net interest income                                     2,617,630     2,213,891     2,033,086

Provision for loan losses (Note D)                        135,000       130,000       125,000
                                                       ----------    ----------    ----------
Net interest income after provision for loan losses     2,482,630     2,083,891     1,908,086
                                                       ----------    ----------    ----------
Other income:
   Service charges on deposit accounts                    238,051       203,929       163,918
   Other                                                   20,946        20,335        11,870
                                                       ----------    ----------    ----------
                                                          258,997       224,264       175,788
                                                       ----------    ----------    ----------
Other expenses:
   Salaries and employee benefits                         602,484       481,281       416,782
   Net occupancy expense                                  227,220       144,048       127,429
   Equipment expense                                       44,073        56,456        52,611
   Other operating expense (Note L)                       455,489       390,097       355,550
                                                       ----------    ----------    ----------
                                                        1,329,266     1,071,882       952,372
                                                       ----------    ----------    ----------
Income before income taxes                              1,412,361     1,236,273     1,131,502

Income tax expense (Note M)                               467,987       417,554       396,600
                                                       ----------    ----------    ----------
Net income                                             $  944,374    $  818,719    $  734,902
                                                       ==========    ==========    ==========
Per share
   Weighted average common shares outstanding             298,646       299,420       300,000
   Net income                                          $     3.16    $     2.73    $     2.45
</TABLE>


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


                                      Page 28 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

           Consolidated Statements of Changes in Shareholders' Equity
              For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                      Unrealized
                                                                    Gain (Loss) on
                                    Common Stock                       Securities
                               --------------------       Capital      Available     Retained      Treasury
                               Shares       Amount        Surplus    for Sale, net   Earnings       Stock        Total
                               -------    ----------    ----------     ---------    ----------     --------    ----------
<S>                            <C>        <C>           <C>            <C>          <C>            <C>         <C>
Balance,
  December 31, 1994            300,000    $1,500,000    $1,731,708     $(118,538)   $1,715,534     $     --    $4,828,704

Net income                                                                             734,902                    734,902

Cash dividends declared
  - $.21 per share                                                                     (63,000)                   (63,000)

Change in fair value
  during the year                                                        112,899                                  112,899
                               -------    ----------    ----------     ---------    ----------     --------    ----------
Balance,
  December 31, 1995            300,000     1,500,000     1,731,708        (5,639)    2,387,436           --     5,613,505

Net income                                                                             818,719                    818,719

Cash dividends declared
  - $.25 per share                                                                     (75,000)                   (75,000)

Change in fair value
  during the year                                                         44,439                                   44,439

Purchase of treasury
  stock                                                                                             (18,411)      (18,411)
                               -------    ----------    ----------     ---------    ----------     --------    ----------
Balance,
  December 31, 1996            300,000     1,500,000     1,731,708        38,800     3,131,155      (18,411)    6,383,252

Net income                                                                             944,374                    944,374

Cash dividends declared
  - $.28 per share                                                                     (83,697)                   (83,697)

Change in fair value
  during the year                                                           (369)                                    (369)

Purchase of treasury
  stock                                                                                             (10,000)      (10,000)
                               -------    ----------    ----------     ---------    ----------     --------    ----------
Balance,
  December 31, 1997            300,000    $1,500,000    $1,731,708     $  38,431    $3,991,832     $(28,411)   $7,233,560
                               =======    ==========    ==========     =========    ==========     ========    ==========
</TABLE>


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


                                      Page 29 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                      Consolidated Statements of Cash Flows
              For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                   1997            1996            1995
                                                               -----------     ------------     -----------
<S>                                                            <C>             <C>              <C>
Cash flows from operating activities
   Net income                                                  $   944,374     $    818,719     $   734,902
   Adjustments to reconcile net income to net
      cash provided by operating activities:
         Depreciation                                              169,491           94,344          81,551
         Provision for loan losses                                 135,000          130,000         125,000
         Premium amortization less accretion                         5,267           16,578           9,522
         Deferred income taxes                                     (56,384)          45,173        (183,018)
         Amortization of loan fees and costs                        63,677           52,735          48,907
         Gain on disposal of equipment                                  --               --          (5,220)
         Increase in accrued interest receivable                   (35,618)        (192,329)        (73,137)
         Decrease (increase) in other assets                        29,481           19,138         (42,342)
         Increase in accrued interest payable                       60,793           22,340         160,387
         Increase (decrease) in other liabilities                   27,373         (343,070)        312,777
                                                               -----------     ------------     -----------
        Net cash provided by operating activities                1,343,454          663,628       1,169,329
                                                               -----------     ------------     -----------
Cash flows from investing activities
  Proceeds from maturities of securities available for sale      3,312,439        3,127,790       2,650,000
  Proceeds from sale of securities available for sale                   --          100,125              --
  Purchases of securities available for sale                    (2,516,600)      (8,382,335)     (1,899,891)
  Proceeds from maturities of securities held to maturity          600,292        1,490,677       2,667,700
  Purchases of securities held to maturity                         (99,709)      (3,310,471)     (1,124,832)
  Net increase in loans to customers                            (6,297,374)      (5,099,988)     (4,548,128)
  Purchases of premises and equipment                             (906,522)        (537,993)       (143,925)
  Proceeds from sales of equipment                                      --               --          12,725
  Proceeds from maturity of time deposits with other banks          10,000               --         100,000
                                                               -----------     ------------     -----------
        Net cash used by investing activities                   (5,897,474)     (12,612,195)     (2,286,351)
                                                               -----------     ------------     -----------
Cash flows from financing activities
  Net increase in demand deposits,
    money market, and savings accounts                           6,122,115        1,441,971       1,263,088
  Net increase in time deposits                                    755,775        7,983,620       6,739,944
  Net increase (decrease) in short-term borrowings                 480,000         (989,554)     (2,054,710)
  Cash dividends paid                                              (83,697)         (75,000)        (63,000)
  Purchase of treasury stock                                       (10,000)         (18,411)             --
                                                               -----------     ------------     -----------
        Net cash provided by financing activities                7,264,193        8,342,626       5,885,322
                                                               -----------     ------------     -----------
Net increase (decrease) in cash and cash equivalents             2,710,173       (3,605,941)      4,768,300

Cash and cash equivalents, beginning of period                   3,022,087        6,628,028       1,859,728
                                                               -----------     ------------     -----------
Cash and cash equivalents, end of period                       $ 5,732,260     $  3,022,087     $ 6,628,028
                                                               ===========     ============     ===========
</TABLE>


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


                                      Page 30 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation -  Communitycorp,  a bank holding  company  organized in 1995 (the
Company), and its subsidiary,  Bank of Walterboro (the Bank), provide commercial
banking services to domestic markets  principally in northern  Charleston County
and in Colleton County,  South Carolina.  The consolidated  financial statements
include the accounts of the parent company and its wholly-owned subsidiary after
elimination of all significant intercompany balances and transactions.

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

Material  estimates that are  particularly  susceptible  to  significant  change
relate to the  determination  of the  allowance  for losses on loans,  including
valuation  allowances  for  impaired  loans  and the  valuation  of real  estate
acquired  in  connection  with  foreclosures  or in  satisfaction  of loans.  In
connection  with the  determination  of the  allowances  for losses on loans and
foreclosed  real  estate,   management   obtains   independent   appraisals  for
significant  properties.  Management must also make estimates in determining the
estimated useful lives and methods for depreciating premises and equipment.

While  management  uses available  information to recognize  losses on loans and
foreclosed  real estate,  future  additions to the  allowances  may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowances  for losses on loans and  foreclosed  real estate.  Such agencies may
require  the  Bank to  recognize  additions  to the  allowances  based  on their
judgments about information  available to them at the time of their examination.
Because of these factors, it is possible that the allowances for losses on loans
and foreclosed real estate may change in the near term.

Investment  Securities Held to Maturity - Investment securities held to maturity
are stated at cost,  adjusted  for  amortization  of premium  and  accretion  of
discount computed by the straight-line  method.  The Company has the ability and
management has the intent to hold designated  investment securities to maturity.
Reductions in market value  considered by management to be other than  temporary
are  reported  as a  realized  loss and a  reduction  in the  cost  basis of the
security.

Investment  Securities Available for Sale - Investment  securities available for
sale are carried at amortized  cost and  adjusted to  estimated  market value by
recognizing  the aggregate  unrealized  gains or losses in a valuation  account.
Aggregate market valuation  adjustments are recorded in shareholders' equity net
of deferred income taxes. Reductions in market value considered by management to
be other than  temporary  are reported as a realized loss and a reduction in the
cost basis of the security.  The adjusted cost basis of securities available for
sale is determined by specific  identification and is used in computing the gain
or loss upon sale.

Interest and Fees on Loans - Interest income on all loans is computed based upon
the unpaid principal balance. Interest income is recorded in the period earned.

The accrual of interest income is discontinued  when a loan becomes 90 days past
due as to principal or interest. Management may elect to continue the accrual of
interest  when the  estimated net  realizable  value of  collateral  exceeds the
principal balance and accrued interest.

Loan origination and commitment fees and certain direct loan  origination  costs
(principally salaries and employee benefits) are being deferred and amortized to
income over the contractual  life of the related loans or commitments,  adjusted
for prepayments, using the level yield method.

Impaired  loans are measured  based on the present value of discounted  expected
cash flows.  When it is determined  that a loan is impaired,  a direct charge to
bad debt  expense is made for the  difference  between the net present  value of
expected  future  cash flows  based on the  contractual  rate and the  Company's
recorded investment in the related loan. The corresponding entry is to a related
valuation  account.  Interest is  discontinued on impaired loans when management
determines that a borrower may be unable to meet payments as they become due.


                                      Page 31 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued

Allowance  for Loan Losses - An allowance for possible loan losses is maintained
at a level deemed  appropriate by management to provide adequately for known and
inherent risks in the loan  portfolio.  The allowance is based upon a continuing
review of past loan  loss  experience,  current  economic  conditions  which may
affect the borrowers' ability to pay and the underlying  collateral value of the
loans.  Loans which are deemed to be uncollectible  are charged off and deducted
from the  allowance.  The provision  for possible loan losses and  recoveries on
loans previously charged off are added to the allowance.

Premises  and  Equipment  - Premises  and  equipment  are  stated at cost,  less
accumulated  depreciation.  The  provision for  depreciation  is computed by the
straight-line method. Rates of depreciation are generally based on the following
estimated useful lives:  buildings - 30 years; furniture and equipment - 5 to 15
years.  The cost of  assets  sold or  otherwise  disposed  of,  and the  related
accumulated  depreciation  are  eliminated  from the accounts and the  resulting
gains or losses are reflected in the income  statement.  Maintenance and repairs
are charged to current expense as incurred,  and the costs of major renewals and
improvements are capitalized.

Other Real Estate Owned - Other real estate owned includes real estate  acquired
through  foreclosure  and  loans  accounted  for as  in-substance  foreclosures.
Collateral is considered foreclosed in substance when the borrower has little or
no equity in the fair value of the  collateral,  proceeds  for  repayment of the
debt can be  expected  to come  only from the sale of the  collateral  and it is
doubtful that the borrower can rebuild equity or otherwise repay the loan in the
foreseeable  future.  Other real estate owned is initially recorded at the lower
of cost  (principal  balance of the former loan plus costs of  improvements)  or
estimated fair value.

Any  write-downs  at the dates of  acquisition  are charged to the allowance for
possible loan losses.  Expenses to maintain such assets,  subsequent write-downs
and gains and losses on disposal are included in other expenses.

Income and Expense  Recognition  - The accrual  method of accounting is used for
all  significant  categories  of  income  and  expense.  Immaterial  amounts  of
insurance commissions and other miscellaneous fees are reported when received.

Income taxes - Income taxes are the sum of amounts  currently  payable to taxing
authorities  and the net changes in income taxes payable or refundable in future
years.  Income  taxes  deferred  to future  years  are  determined  utilizing  a
liability   approach.   This  method  gives  consideration  to  the  future  tax
consequences  associated with differences  between the financial  accounting and
tax bases of certain assets and liabilities,  principally the allowance for loan
losses, depreciable premises and equipment, and the cash basis tax accounting.

Retirement  and  Deferred  Compensation  Plans  - The  Company  has  a  trusteed
non-contributory   profit-sharing  plan  which  provides  retirement  and  other
benefits to all  full-time  employees who have worked 1,000 or more hours during
the calendar  year and have put in one year of service.  All eligible  employees
must be at least age 21.  Contributions are determined  annually by the Board of
Directors.  Expenses  charged  to  earnings  for the  profit-sharing  plan  were
$31,656, $21,341 and $17,526 in 1997, 1996 and 1995, respectively. The Company's
policy  is to  fund  contributions  to the  profit-sharing  plan  in the  amount
accrued. In addition, the plan includes a "salary reduction" feature pursuant to
Section  401(k)  of the  Internal  Revenue  Code.  Under  the plan  and  present
policies,  participants are permitted to make discretionary  contributions up to
10% of annual  compensation.  The  Company  has waived  its  option of  matching
employee contributions for this feature of the plan.

In addition, the Company has a non-qualified  voluntary salary deferral plan for
the Company's  chief  executive  officer.  Under the plan,  the Chief  Executive
Officer  may  defer  up to 25% of his  compensation  and  earn  interest  on the
deferred amount. Upon retirement,  the total amount deferred and interest earned
are to be paid to the  participant  over a period not exceeding  fifteen  years.
Expenses  charged to earnings for the deferred  compensation  plan were $12,000,
$10,000 and $9,014 in 1997, 1996 and 1995, respectively.

The Company does not provide post  employment  benefits to employees  beyond the
plans described above.


                                      Page 32 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued

Earnings Per Share - Earnings per share is  calculated  by dividing  earnings by
the weighted average number of common shares outstanding during the year.

Statement  of Cash Flows - For  purposes of  reporting  cash flows,  the Company
considers  certain highly liquid debt  instruments  purchased with a maturity of
three months or less to be cash  equivalents.  Cash equivalents  include amounts
due from banks, federal funds sold, and securities purchased under agreements to
resell.

During  1997,  1996,  and 1995,  the Company  paid  $2,070,543,  $1,914,642  and
$1,363,213, respectively, for interest. Cash paid for income taxes was $492,000,
$697,129 and $267,300 in 1997, 1996, and 1995, respectively.

Changes in the valuation account of securities available for sale, including the
deferred tax effects,  are considered non-cash  transactions for purposes of the
statement  of cash  flows  and are  presented  in  detail  in the  notes  to the
financial statements.

Off-Balance-Sheet  Financial  Instruments - In the ordinary  course of business,
the Company has entered into off-balance-sheet  financial instruments consisting
of  commitments  to  extend  credit  and  letters  of  credit.  These  financial
instruments are recorded in the financial statements when they become payable by
the customer.

Concentrations of Credit Risk - Financial  instruments which potentially subject
the  Company to  concentrations  of credit  risk  consist  principally  of loans
receivable,  investment  securities,  federal  funds sold and  amounts  due from
banks.  Management  is not aware of any  concentrations  of loans to  classes of
borrowers or industries that would be similarly affected by economic conditions.
Although the Company's loan portfolio is diversified,  a substantial  portion of
its  borrowers'  ability  to honor  the  terms of their  loans is  dependent  on
business  and  economic  conditions  in Colleton  and  Charleston  Counties  and
surrounding  areas.  Management  does not believe credit risk is associated with
obligations of the United States, its agencies or its corporations.  The Company
places its deposits,  correspondent accounts and sells its federal funds to high
credit  quality  institutions.  By policy,  time deposits are limited to amounts
insured  by  the  FDIC.   Management   believes   credit  risk  associated  with
correspondent accounts is not significant.

Reclassifications  - Certain captions and amounts in the consolidated  financial
statements  of 1996  and  1995  were  reclassified  to  conform  with  the  1997
presentations.

NOTE B -- CASH AND DUE FROM BANKS

The Company is  required by  regulation  to  maintain  an average  cash  reserve
balance  based on a  percentage  of  deposits.  The average  amounts of the cash
reserve balances at December 31, 1997 and 1996 were  approximately  $291,000 and
$268,000, respectively.

NOTE C -- INVESTMENT SECURITIES

The amortized cost and estimated market values of securities  available for sale
at December 31, 1997 and 1996 were:

<TABLE>
<CAPTION>
                                                         1997
                               ----------------------------------------------------------
                                                 Gross          Gross           Estimated
                               Amortized       Unrealized     Unrealized         Market
                                  Cost           Gains          Losses            Value
                               ----------       -------       ----------       ----------
<S>                            <C>              <C>           <C>              <C>
U.S. Treasuries                $   699,450      $ 5,050       $       --       $   704,500
U.S. Government Agencies
 and corporations                7,666,815       53,907           14,859         7,705,863
Obligations of state and
 political subdivisions            969,813       14,560               --           984,373
                               -----------      -------       ----------       -----------
                               $ 9,336,078      $73,517       $   14,859       $ 9,394,736
                               ===========      =======       ==========       ===========
</TABLE>


                                      Page 33 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE C -- INVESTMENT SECURITIES -- Continued

<TABLE>
<CAPTION>
                                                         1996
                               ----------------------------------------------------------
                                                 Gross          Gross           Estimated
                               Amortized       Unrealized     Unrealized         Market
                                  Cost           Gains          Losses            Value
                               ----------       -------       ----------       ----------
<S>                            <C>              <C>           <C>              <C>
  U.S. Treasuries              $   698,988      $ 6,418       $       --       $   705,406
  U.S. Government Agencies
    and corporations             9,129,698       80,917           30,764         9,179,851
  Obligations of state and
    political subdivisions         300,000        2,828              144           302,684
                               -----------      -------       ----------       -----------

                               $10,128,686      $90,163       $   30,908       $10,187,941
                               ===========      =======       ==========       ===========
</TABLE>

The amortized cost and estimated  market value of securities held to maturity at
December 31, 1997 and 1996 were:

<TABLE>
<CAPTION>
                                                         1997
                               ----------------------------------------------------------
                                                 Gross          Gross           Estimated
                               Amortized       Unrealized     Unrealized         Market
                                  Cost           Gains          Losses            Value
                               ----------       -------       ----------       ----------
<S>                            <C>              <C>           <C>              <C>
  U.S. Government Agencies
    and corporations           $ 3,857,576      $ 9,441       $    6,101       $ 3,860,916
  Obligations of state and
    political subdivisions       2,443,742       38,838              464         2,482,116
                               -----------      -------       ----------       -----------

                               $ 6,301,318      $48,279       $    6,565       $ 6,343,032
                               ===========      =======       ==========       ===========

<CAPTION>
                                                          1996
                               ----------------------------------------------------------
                                                 Gross          Gross           Estimated
                               Amortized       Unrealized     Unrealized         Market
                                  Cost           Gains          Losses            Value
                               ----------       -------       ----------       ----------
<S>                            <C>              <C>           <C>              <C>
  U.S. Government Agencies
    and corporations           $ 4,114,703      $ 8,404       $   17,249       $ 4,105,858
  Obligations of states and
    political subdivisions       2,695,696       26,109            5,808         2,715,997
                               -----------      -------       ----------       -----------

                               $ 6,810,399      $34,513       $   23,057       $ 6,821,855
                               ===========      =======       ==========       ===========
</TABLE>

The amortized cost and estimated  market value of securities  available for sale
at December 31, 1997 and 1996 based on maturities are summarized  below.  Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations without penalty.

<TABLE>
<CAPTION>
                                                            1997                                1996
                                                ----------------------------       -----------------------------
                                                                  Estimated                           Estimated
                                                 Amortized          Market          Amortized          Market
                                                   Cost             Value             Cost              Value
                                                ----------       -----------       -----------       -----------
<S>                                             <C>              <C>               <C>               <C>
Due within one year                             $1,649,104       $ 1,641,841       $   200,000       $   200,704
Due after one year but within five years         3,838,154         3,866,167         7,230,672         7,254,709
Due after five years but within ten years        2,733,466         2,763,502         1,745,265         1,779,465
Due after ten years                                230,000           234,072                --                --
                                                ----------       -----------       -----------       -----------
                                                 8,450,724         8,505,582         9,175,937         9,234,878
Mortgage-backed securities                         885,354           889,154           952,749           953,063
                                                ----------       -----------       -----------       -----------
                                                $9,336,078       $ 9,394,736       $10,128,686       $10,187,941
                                                ==========       ===========       ===========       ===========
</TABLE>


                                      Page 34 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE C -- INVESTMENT SECURITIES -- Continued

The amortized cost and estimated market values of securities held to maturity at
December 31, 1997 and 1996 based on their contractual  maturities are summarized
below.  Actual  maturities  may  differ  from  contractual   maturities  because
borrowers may have the right to call or prepay obligations without penalty.

<TABLE>
<CAPTION>
                                                            1997                             1996
                                                ---------------------------       ---------------------------
                                                                  Estimated                         Estimated
                                                 Amortized          Market         Amortized         Market
                                                   Cost             Value            Cost             Value
                                                ----------       ----------       ----------       ----------
<S>                                             <C>              <C>              <C>              <C>
Due within one year                             $  679,900       $  681,207       $  272,360       $  272,694
Due after one year but within five years         3,183,390        3,194,283        3,831,585        3,839,187
Due after five years but within ten years          898,088          913,030          909,377          916,682
Due after ten years                                233,040          244,564          233,619          237,053
                                                ----------       ----------       ----------       ----------
                                                 4,994,418        5,033,084        5,246,941        5,265,616
Mortgage-backed securities                       1,306,900        1,309,948        1,563,458        1,556,239
                                                ----------       ----------       ----------       ----------
                                                $6,301,318       $6,343,032       $6,810,399       $6,821,855
                                                ==========       ==========       ==========       ==========
</TABLE>

At  December  31,  1997 and 1996,  investment  securities  with a book  value of
$8,430,922  and  $6,567,826  and a market value of  $8,464,430  and  $6,566,147,
respectively,  were pledged as collateral to secure public deposits.  There were
no sales of  investment  securities  for the years ended  December  31, 1997 and
1995.  One security  classified  as  available  for sale was sold in 1996 with a
realized gain of $225.

NOTE D -- LOANS

Loans consisted of the following:
                                                           December 31,
                                                 -------------------------------
                                                     1997                1996
                                                 -----------         -----------
Real estate                                      $ 5,080,608         $ 4,564,843
Agricultural                                         265,792             255,994
Commercial and industrial loans                   28,463,885          24,135,094
Consumer                                           7,104,280           5,791,518
All other loans                                      442,549             406,396
                                                 -----------         -----------

                                                 $41,357,114         $35,153,845
                                                 ===========         ===========

The Company  identifies  impaired loans through its normal  internal loan review
process.  Loans  on  the  Company's  problem  loan  watch  list  are  considered
potentially impaired loans. These loans are evaluated in determining whether all
outstanding  principal and interest are expected to be collected.  Loans are not
considered  impaired if a minimal  delay  occurs and all  amounts due  including
accrued  interest at the  contractual  interest rate for the period of delay are
expected to be collected. At December 31, 1997 and 1996, management reviewed its
problem loan watch list and determined  that no impairment on loans existed that
would have a material effect on the Company's consolidated financial statements.

The accrual of  interest  is  discontinued  on  impaired  loans when  management
anticipates  that a borrower may be unable to meet the  obligations of the note.
Accrued  interest  through the date the  interest is  discontinued  is reversed.
Subsequent  interest  earned is recognized  only to the point that cash payments
are  received.  All payments are applied to principal if the ultimate  amount of
principal is not expected to be collected.

As of December 31, 1997 and 1996,  management had placed loans totaling $561,381
and  $290,977 in  nonaccrual  status  because the loans were not  performing  as
originally  contracted.  Loans  ninety days or more past due and still  accruing
interest were $5,133 and $8,000, at December 31, 1997 and 1996, respectively. No
impairment  has been  recognized  because  management  has  determined  that the
discounted  value of expected  proceeds from the sale of  collateral,  typically
real estate, exceeds the carrying amount of these loans.


                                      Page 35 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE D -- LOANS -- Continued

Transactions in the allowance for loan losses are summarized below:

                                       1997             1996             1995
                                    ---------        ---------        ---------

Balance, January 1                  $ 638,688        $ 617,457        $ 550,457
Provision charged to expense          135,000          130,000          125,000
Recoveries                             12,883           13,734            8,217
Charge-offs                           (43,311)        (122,503)         (66,217)
                                    ---------        ---------        ---------
Balance, December 31                $ 743,260        $ 638,688        $ 617,457
                                    =========        =========        =========

For income tax purposes, the allowance for loan losses is $96,042,  $102,790 and
$86,512 at December 31, 1997, 1996 and 1995, respectively.

The Company is a party to financial instruments with  off-balance-sheet  risk in
the normal  course of business  to meet the  financing  needs of its  customers.
These  financial  instruments  include  commitments to extend credit and standby
letters of credit.  Those instruments  involve, to varying degrees,  elements of
credit  and  interest  rate  risk in  excess  of the  amount  recognized  in the
statements of financial  position.  The contractual or notional amounts of those
instruments  reflect the extent of  involvement  the  Company has in  particular
classes of financial instruments.

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 written is represented by the contractual or notional
amount of those instruments. The Company uses the same credit policies in making
commitments  and  conditional   obligations  as  it  does  for  on-balance-sheet
instruments.

Standby  letters of credit  written are  conditional  commitments  issued by the
Company to guarantee the performance of a customer to a third party.  The credit
risk  involved  in  issuing  letters of credit is  essentially  the same as that
involved in extending loans to customers.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since some of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future cash  requirements.  The  Company  evaluates  each  customer's
creditworthiness  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 counter-party.

Collateral  held for  commitments to extend credit and standby letters of credit
varies  but  may  include  accounts  receivable,   inventory,  property,  plant,
equipment and income-producing commercial properties.

The  following  table  summarizes  the  Company's  off-balance  sheet  financial
instruments whose contractual amounts represent credit risk:

                                                           December 31,
                                                 -------------------------------
                                                    1997                 1996
                                                 ----------           ----------
Commitments to extend credit                     $2,071,278           $2,081,417
Standby letters of credit                           163,000              115,000

Management is not aware of any significant concentrations of loans to classes of
borrowers or industries that would be affected similarly by economic conditions.
At December 31, 1997, the Company was not committed to lend additional  funds to
borrowers having loans in nonaccrual status.


                                      Page 36 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE E -- PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

                                                         December 31,
                                               --------------------------------
                                                   1997                 1996
                                               -----------          -----------
Land                                           $   334,385          $   334,385
Buildings and improvements                       1,291,102              626,947
Construction in process                                 --                2,792
Furniture and equipment                            985,830              908,923
                                               -----------          -----------
                                                 2,611,317            1,873,047
Less, accumulated depreciation                    (612,262)            (611,023)
                                               -----------          -----------
                                               $ 1,999,055          $ 1,262,024
                                               ===========          ===========

Interest  capitalized  during the construction of the Ravenel branch is included
in  buildings  and  improvements.  The  amount  capitalized  for the year  ended
December 31, 1997 was $7,530 and is being amortized over forty years.

NOTE F -- DEPOSITS

At December 31, 1997, the scheduled maturities of time deposits are as follows:

            1998                          $22,339,675
            1999                            1,206,800
            2000                            1,040,310
                                          -----------
                                          $24,586,785
                                          ===========

NOTE G -- RELATED PARTY TRANSACTIONS

Certain parties  (principally certain directors and shareholders of the Company,
their immediate families and business interests) were loan customers of, and had
other transactions in the normal course of business with the Bank. Related party
loans are made on  substantially  the same terms,  including  interest rates and
collateral,  as those  prevailing at the time for comparable  transactions  with
unrelated  persons and do not involve  more than normal risk of  collectibility.
The  aggregate  dollar  amount of loans to related  parties was  $1,637,803  and
$2,256,821 at December 31, 1997 and 1996, respectively. During 1997, $308,602 of
new loans were made to related parties,  and repayments totaled $927,620.  Legal
services  were  provided to the Company in the ordinary  course of business by a
law firm in which two of the partners are  directors of the Company.  The amount
paid to this law firm for  services  rendered  was  $19,600  and $18,223 for the
years ended December 31, 1997 and 1996, respectively.

NOTE H -- SHORT TERM BORROWINGS

Short-term  borrowings  payable at December 31, 1997 consist of securities  sold
under  agreements  to  repurchase  which  generally  mature on a one-day  basis.
Short-term  borrowings  information  for 1996  below  represents  activity  from
January through May, 1996.

Information  concerning  securities  sold  under  agreements  to  repurchase  is
summarized as follows:

                                                          1997           1996
                                                        --------       --------
Average balance during the year                         $378,904       $569,967
Average interest rate during the year                       4.68%          4.42%
Maximum month-end balance during the year               $760,000       $873,436


                                      Page 37 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE H -- SHORT TERM BORROWINGS -- Continued

Under the terms of the  agreement,  the Bank  sells an  interest  in  securities
issued by United States Government  Agencies;  and the Bank agrees to repurchase
the same securities the following  business day. The securities sold under these
agreements are the identical securities on the Bank's balance sheet captioned as
securities  purchased under  agreements to resell.  As of December 31, 1997, the
par value and market value of the  securities  held by the  third-party  for the
underlying agreements were $529,000 and $528,835, respectively.

NOTE I -- UNUSED LINES OF CREDIT

As of December 31, 1997, the Bank had unused lines of credit to purchase federal
funds from other  financial  institutions  totaling  $2,500,000.  These lines of
credit are available on a one to seven day basis for general corporate purposes.
The lenders have reserved the right not to renew their respective lines.

NOTE J -- COMMITMENTS AND CONTINGENCIES

The Company was not  involved as  defendant  in any  litigation  at December 31,
1997.  Management  and legal  counsel are not aware of any pending or threatened
litigation,  or unasserted claims or assessments that could result in losses, if
any, that would be material to the financial statements.

NOTE K -- SHAREHOLDERS' EQUITY

The ability of  Communitycorp  to pay cash dividends is dependent upon receiving
cash  in the  form  of  dividends  from  Bank of  Walterboro.  However,  certain
restrictions  exist  regarding  the  ability  of the Bank to  transfer  funds to
Communitycorp in the form of cash dividends.  All of the Bank's dividends to the
Company are subject to the prior approval of the Commissioner of Banking and are
payable only from the undivided  profits of the Bank. At December 31, 1997,  the
Bank's undivided profits were $7,137,203.

NOTE L -- OTHER EXPENSES

Other  expenses  for the  years  ended  December  31,  1997,  1996  and 1995 are
summarized as follows:

                                            1997           1996           1995
                                          --------       --------       --------
Stationery, printing and postage          $137,911       $ 97,692       $ 90,682
Advertising and promotion                   34,482         31,187         26,590
Professional services                       68,727         80,567         46,786
Insurance                                   18,453         16,848         53,195
Other                                      195,916        163,803        138,297
                                          --------       --------       --------
                                          $455,489       $390,097       $355,550
                                          ========       ========       ========


                                      Page 38 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE M -- INCOME TAXES

Income tax expense  included in the statement of operations  for the years ended
December 31, 1997, 1996 and 1995 is summarized as follows:

<TABLE>
<CAPTION>
                                                     1997             1996             1995
                                                  ---------        ---------        ---------
<S>                                               <C>              <C>              <C>
Currently payable
  Federal                                         $ 477,247        $ 349,115        $ 521,738
  State                                              48,418           23,262           57,880
                                                  ---------        ---------        ---------
                                                    525,665          372,377          579,618
                                                  ---------        ---------        ---------
Deferred
  Federal                                           (49,713)          52,823          (97,947)
  State                                              (8,193)          15,845          (24,279)
                                                  ---------        ---------        ---------
                                                    (57,906)          68,668         (122,226)
                                                  ---------        ---------        ---------
                                                  $ 467,759        $ 441,045        $ 457,392
                                                  =========        =========        =========
Income tax expense is allocated as follows:
  To continuing operations                        $ 467,987        $ 417,554        $ 396,600
  To shareholders' equity                              (228)          23,491           60,792
                                                  ---------        ---------        ---------
                                                  $ 467,759        $ 441,045        $ 457,392
                                                  =========        =========        =========
</TABLE>

Deferred income taxes of $154,594,  $97,982, and $166,646 were included in other
assets at December 31, 1997, 1996, and 1995, respectively. Deferred income taxes
result from temporary  differences in the recognition of certain items of income
and expense for tax and financial reporting purposes.

The principal  sources of these differences and the related deferred tax effects
are as follows:

<TABLE>
<CAPTION>
                                                    1997             1996            1995
                                                  --------        ---------        ---------
<S>                                               <C>             <C>              <C>
Allowance for loan losses                         $(42,858)       $  (1,907)       $ (24,963)
Accumulated depreciation                            29,260           (6,300)              69
Cash basis tax accounting                          (23,916)          27,301         (128,910)
Deferred compensation                              (11,276)          (4,777)          (3,893)
Other                                               (7,594)          30,856          (25,321)
                                                  --------        ---------        ---------
Total deferred tax (benefit) expense
  attributable to continuing operations            (56,384)          45,173         (183,018)
Deferred tax (benefit) expense attributable
  to shareholders equity                              (228)          23,491           60,792
                                                  --------        ---------        ---------
                                                  $(56,612)       $  68,664        $(122,226)
                                                  ========        =========        =========
</TABLE>


                                      Page 39 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE M -- INCOME TAXES -- Continued

The gross  amounts of deferred  tax assets and deferred  tax  liabilities  as of
December 31, 1997, 1996 and 1995 are as follows:

                                        1997           1996           1995
                                      --------       --------       --------
Deferred tax assets:
  Allowance for loan losses           $249,179       $206,321       $204,414
  Available for sale securities             --             --          3,036
  Deferred compensation                 27,455         16,179         11,402
  Other                                  1,455             --         22,110
                                      --------       --------       --------
Total deferred tax assets              278,089        222,500        240,962
                                      --------       --------       --------

Deferred tax liabilities:
  Accumulated depreciation              62,120         32,860         39,160
  Cash basis tax accounting             38,177         62,093         34,792
  Available for sale securities         20,227         20,455             --
  Other                                  2,971          9,110            364
                                      --------       --------       --------
Total deferred tax liabilities         123,495        124,518         74,316
                                      --------       --------       --------
Net deferred tax asset                $154,594       $ 97,982       $166,646
                                      ========       ========       ========

Deferred tax assets  represent the future tax benefit of deductible  differences
and,  if it is more  likely  than not that a tax asset will not be  realized,  a
valuation  allowance is required to reduce the  recorded  deferred tax assets to
net realizable value.  Management has determined that it is more likely than not
that the entire  deferred tax asset at December 31, 1997,  1996 and 1995 will be
realized, and accordingly, has not established a valuation allowance.

A  reconciliation  between  the income tax  expense  and the amount  computed by
applying  the  Federal  statutory  rate of 34% to  income  before  income  taxes
follows:

<TABLE>
<CAPTION>
                                                            1997             1996             1995
                                                         ---------        ---------        ---------
<S>                                                      <C>              <C>              <C>
Tax expense at statutory rate                            $ 480,203        $ 420,333        $ 384,711
State income tax, net of Federal income tax effect          23,763           31,198            6,813
Tax exempt interest income                                 (55,575)         (53,214)         (29,618)
Disallowed interest expense                                 13,444           24,770            5,322
Other, net                                                   6,152           (5,533)          29,372
                                                         ---------        ---------        ---------
                                                         $ 467,987        $ 417,554        $ 396,600
                                                         =========        =========        =========
</TABLE>

NOTE N -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair  value of a  financial  instrument  is the amount at which the asset or
obligation could be exchanged in a current  transaction between willing parties,
other than in a forced or liquidation  sale.  Fair value estimates are made at a
specific  point in time based on relevant  market  information  and  information
about  the  financial  instruments.   Because  no  market  value  exists  for  a
significant portion of the 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.  The following  methods and assumptions  were used to estimate the fair
value of significant financial instruments:

Cash and Due from Banks - The carrying  amount is a reasonable  estimate of fair
value.

Federal Funds Sold and Securities Purchased under Agreements to Resell - Federal
funds sold and securities purchased under agreements to resell are for a term of
one day, and the carrying amount approximates the fair value.

Investment  Securities  - The  fair  values  of  marketable  securities  held to
maturity are based on quoted  market  prices or dealer  quotes.  For  securities
available  for sale,  fair value equals the carrying  amount which is the quoted
market price.  If quoted market prices are not available,  fair values are based
on quoted market prices of comparable securities.


                                      Page 40 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE N -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued

Loans -- For certain  categories of loans, such as variable rate loans which are
repriced  frequently  and have no  significant  change in credit risk and credit
card receivables,  fair values are based on the carrying amounts. The fair value
of other types of loans is estimated by discounting  the future cash flows using
the current rates at which  similar  loans would be made to the  borrowers  with
similar credit ratings and for the same remaining maturities.

Deposits  -- The fair  value of  demand  deposits,  savings,  and  money  market
accounts is the amount payable on demand at the reporting  date. The fair values
of   certificates  of  deposit  are  estimated  using  a  discounted  cash  flow
calculation  that applies  current  interest  rates to a schedule of  aggregated
expected maturities.

Short Term Borrowings -- The carrying value of securities sold under  agreements
to repurchase is a reasonable  estimate of fair value because these  instruments
typically have terms of one day.

Accrued  Interest  Receivable  and  Payable  --  The  carrying  value  of  these
instruments is a reasonable estimate of fair value.

Off-Balance  Sheet  Financial  Instruments  --  The  carrying  amount  for  loan
commitments  and  letters  of  credit,  which are  off-balance  sheet  financial
instruments,  approximates  the fair value since the  obligations  are typically
based on current market rates.

The  carrying  values  and  estimated  fair  values of the  Company's  financial
instruments for the years ending December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                        December 31, 1997                     December 31, 1996
                                               --------------------------------        --------------------------------
                                                 Carrying           Estimated            Carrying           Estimated
                                                  Amount            Fair Value            Amount            Fair Value
                                               ------------        ------------        ------------        ------------
<S>                                            <C>                 <C>                 <C>                 <C>
Financial Assets:

  Cash and due from banks                      $  2,602,260        $  2,602,260        $  2,382,087        $  2,382,087
  Federal funds sold and securities
    purchased under agreements to resell          3,130,000           3,130,000             640,000             640,000
  Securities available-for-sale                   9,394,736           9,394,736          10,187,941          10,187,941
  Securities held-to-maturity                     6,301,318           6,343,032           6,810,399           6,821,855
  Loans                                          41,357,114          41,282,127          35,153,845          35,069,875
  Allowance for loan losses                        (743,260)           (743,260)           (638,688)           (638,688)
  Accrued interest receivable                       726,318             726,318             690,700             690,700

Financial Liabilities:

  Demand deposit, interest-bearing
    transaction, and savings accounts          $ 32,356,303        $ 32,356,303        $ 27,874,669        $ 27,874,669
  Time deposits                                  24,586,785          24,680,193          22,190,529          22,258,682
  Short-term borrowings                             480,000             480,000                  --                  --
  Accrued interest payable                          342,661             342,661             281,868             281,868

Off-Balance Sheet Financial Instruments:

  Commitments to extend credit                 $  2,071,278        $  2,071,278        $  2,081,417        $  2,081,417
  Standby letters of credit                         163,000             163,000             115,000             115,000
</TABLE>


                                      Page 41 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE O -- REGULATORY MATTERS

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possibly  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank'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  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to  maintain  minimum  ratios of Tier 1 and total  capital as a
percentage of assets and off-balance-sheet exposures,  adjusted for risk weights
ranging from 0% to 100%. 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 allowance for loan
losses subject to certain limitations. Total regulatory minimum requirements are
4% for Tier 1 and 8% for total risk-based capital.

The Bank is also required to maintain  capital at a minimum level based on total
assets,  which is known as the  leverage  ratio.  Only the  strongest  banks are
allowed to  maintain  capital at the minimum  requirement  of 3%. All others are
subject to maintaining ratios 1% to 2% above the minimum.

As of December 31, 1997,  the most recent  notification  from the Bank's primary
regulator  categorized  the  Bank  as  well-capitalized   under  the  regulatory
framework for  prompt-corrective  action. There are no conditions or events that
management believes have changed the Bank's category.

The following  table  summarizes the capital  amounts and ratios of the Bank and
the regulatory minimum requirements at December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                                     To Be Well
                                                                                                  Capitalized Under
                                                                              For Capital         Prompt Corrective
                                                       Actual              Adequacy Purposes      Action Provisions
                                                -------------------      --------------------   --------------------
                                                  Amount      Ratio        Amount       Ratio     Amount       Ratio
                                                ----------    -----      ----------     -----   ----------     -----
<S>                                             <C>           <C>        <C>             <C>    <C>            <C>
December 31, 1997
  Total capital (to risk weighted assets)       $7,679,484    16.53%     $3,716,556      8.00%  $4,645,695     10.00%
  Tier 1 capital (to risk weighted assets)       7,098,772    15.28       1,858,278      4.00    2,787,417      6.00
  Tier 1 capital (to average assets)             7,098,772    11.23       2,528,920      4.00    3,161,150      5.00

December 31, 1996
  Total capital (to risk weighted assets)        6,693,184    16.85       3,176,837      8.00    3,971,047     10.00
  Tier 1 capital (to risk weighted assets)       6,196,803    15.60       1,588,419      4.00    2,382,628      6.00
  Tier 1 capital (to average assets)             6,196,803    10.92       2,262,080      4.00    2,827,600      5.00
</TABLE>

The Federal Reserve Board has similar  requirements for bank holding  companies.
The Company is currently not subject to these  requirements  because the Federal
Reserve  guidelines  contain an exemption for bank holding  companies  with less
than $150,000,000 in consolidated assets.


                                      Page 42 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE P -- COMMUNITYCORP (PARENT COMPANY ONLY)

Presented below are the condensed financial statements for Communitycorp (Parent
Company Only).

                                 Balance Sheets

                                                            December 31,
                                                   -----------------------------
                                                      1997               1996
                                                   ----------         ----------
Assets
  Cash                                             $   60,677         $  100,975
  Investment in banking subsidiary                  7,137,203          6,235,603
  Organizational costs                                 30,110             41,228
  Other assets                                          5,570              5,446
                                                   ----------         ----------

        Total assets                               $7,233,560         $6,383,252
                                                   ==========         ==========

Shareholders' equity                               $7,233,560         $6,383,252
                                                   ==========         ==========


                            Statements of Operations
                 For the years ended December 31, 1997 and 1996
         and for the period September 11, 1995 through December 31, 1995

<TABLE>
<CAPTION>
                                                       1997           1996           1995
                                                     --------       --------       --------
<S>                                                  <C>            <C>            <C>
Income
  Dividends from banking subsidiary                  $ 50,000       $175,000       $ 75,000

Expenses
  Amortization of organizational costs                 11,118         11,118          3,243
  Other expenses                                          390             25             --
                                                     --------       --------       --------
                                                       11,508         11,143          3,243
Income before income taxes and equity in
  undistributed earnings of banking subsidiary         38,492        163,857         71,757

Income tax benefit                                      3,914          4,346          1,100

Equity in undistributed earnings
  of banking subsidiary                               901,968        650,516        155,997
                                                     --------       --------       --------
Net income                                           $944,374       $818,719       $228,854
                                                     ========       ========       ========
</TABLE>


                                      Page 43 of 45 sequentially numbered pages.

<PAGE>


                                  COMMUNITYCORP

                   Notes to Consolidated Financial Statements


NOTE P -- COMMUNITYCORP (PARENT COMPANY ONLY) -- Continued

                            Statements of Cash Flows
                 For the years ended December 31, 1997 and 1996
         and for the period September 11, 1995 through December 31, 1995

<TABLE>
<CAPTION>
Cash flows from operating activities                           1997            1996             1995
                                                            ---------        ---------        ---------
<S>                                                         <C>              <C>              <C>
  Net income                                                $ 944,374        $ 818,719        $ 228,854
   Adjustments to reconcile net income to net
    cash provided by operating activities
     Amortization of organizational costs                      11,118           11,118            3,243
     Equity in undistributed earnings of
       banking subsidiary                                    (901,968)        (650,516)        (155,997)
     Increase in other assets                                    (125)          (4,346)         (56,689)
                                                            ---------        ---------        ---------
            Net cash provided by operating activities          53,399          174,975           19,411
                                                            ---------        ---------        ---------
Cash flows from financing activities
  Cash dividends paid                                         (83,697)         (75,000)              --
  Purchase of treasury stock                                  (10,000)         (18,411)              --
                                                            ---------        ---------        ---------
            Net cash used by financing activities             (93,697)         (93,411)
                                                            ---------        ---------        ---------
Increase in cash                                              (40,298)          81,564           19,411

Cash, beginning                                               100,975           19,411               --
                                                            ---------        ---------        ---------
Cash, ending                                                $  60,677        $ 100,975        $  19,411
                                                            =========        =========        =========
</TABLE>

NOTE Q -- RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial  Accounting  Standards  Board released  Statement of
Financial  Accounting  Standards (SFAS) 130, "Reporting  Comprehensive  Income."
SFAS 130  requires  that all items  that are  required  to be  recognized  under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements. Comprehensive income is the change in equity of a business
during a period  from  transactions  and other  events  and  circumstances  from
nonowner sources and excludes investments by owners and distributions to owners.
Comprehensive   income  consists  of  two  components,   net  income  and  other
comprehensive  income. Other comprehensive income includes,  among other things,
the change in the unrealized gain or loss on securities available for sale.

This statement is effective for fiscal years  beginning after December 15, 1997.
Reclassification  of  financial  statements  for earlier  periods  provided  for
comparative purposes is required.


                                      Page 44 of 45 sequentially numbered pages.

<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

COMMUNITYCORP

By:                                                         Date: March 25, 1998
--------------------------------------
W. Roger Crook
President and Chief Executive Officer

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

                                                            Date: March 25, 1998
--------------------------------------
W. Roger Crook, President, Director
(Chief Executive Officer)

                                                            Date: March 25, 1998
--------------------------------------
Gwendolyn P. Bunton, Vice President
(Chief Financial Officer)


                                                            Date: March 25, 1998
--------------------------------------
Peden B. McLeod, Director
& Chairman of the Board


                                                            Date: March 25, 1998
--------------------------------------
George W. Cone, Director
& Corporate Secretary


                                                            Date: March 25, 1998
--------------------------------------
E. Ray Carmichael, Director


                                                            Date: March 25, 1998
--------------------------------------
Opedalis Evans, Director


                                                            Date: March 25, 1998
--------------------------------------
J. Barnwell Fishburne, Director


                                                            Date: March 25, 1998
--------------------------------------
Harry L. Hill, Director


                                                            Date: March 25, 1998
--------------------------------------
Calvert W. Huffines, Director


                                                            Date: March 25, 1998
--------------------------------------
Robert E. Redfearn, Director


                                                            Date: March 25, 1998
--------------------------------------
Harold M. Robertson, Director


                                      Page 45 of 45 sequentially numbered pages.