<PAGE>

                                  COMMUNITYCORP

                                  Exhibit 13.1

                          Annual Report of Shareholders

<PAGE>

                                  Exhibit 13.1

Providing personal , prompt, efficient service is the goal of Walterboro. We are
committed to the concept of "Hometown Banking" and hope we can be of service to
you. "Where other banks have their Branches we have our Roots."

Contents:
Shareholder's Letter...........................................................1
Summary of Selected Financial Data.............................................2
Financial Charts.............................................................3-6
Company's Business.............................................................7
Management's Discussion and Analysis........................................8-22
Independent Auditor's Report..................................................23
Consolidated Balance Sheets...................................................24
Consolidated Statements of Operations.........................................25
Consolidated Statements of Changes in Shareholders' Equity
   and Comprehensive Income...................................................26
Consolidated Statements of Cash Flows.........................................27
Notes to Consolidated Financial Statements.................................28-42
Directors, Officers and Staff.................................................43
Corporate Data................................................................44
Services......................................................................45

                                   Member FDIC

<PAGE>

                                  COMMUNITYCORP

Dear Shareholder,

It is a pleasure to report the progress of Communitycorp and its subsidiary,
Bank of Walterboro, during 2002. The Company continued to experience good growth
in deposits and loans during the year. Earnings increased, 15.76%, primarily as
a result of an increase in average earning assets, which were primarily loans.
More detailed information follows, but we are pleased to report return on
average assets of 1.31%, a sound capital to asset ratio of 10.58%, and reserve
for loan losses of 1.75%.

Deposits at year-end were $102,619,759, an increase of $4,199,448, or 4.27%,
over 2001 year-end. Net loans increased from $70,127,879 to $73,856,419, an
increase of $3,728,540, or 5.32%. The reserve for loan losses increased from a
December 31, 2001 balance of $1,231,051 to $1,319,202 or 1.75% of gross loans.
Total assets increased from $110,850,168 to a December 31, 2002 total of
$115,775,230 an increase of $4,925,062, 4.44%.

Earnings increased in 2002 for the Company with net income of $1,508,390, an
increase of $205,308, or 15.76%, more than 2001 earnings of $1,303,082. Earnings
increased from $4.65 per share in 2001 to $5.46 per share in 2002. Our net
interest margin increased from 3.68% in 2001 to 3.98% in 2002.

Please read the following financial information so you may become aware of your
Company's progress. We believe the information contained in this Annual Report
shows that a local, well-managed, independent bank can compete successfully in a
deregulated market against national, regional, and state-wide banking
institutions. Our success can be attributed to the teamwork by our shareholders,
directors, officers, and employees. We most importantly want to thank our
customers for allowing us to be of service to them.

The Board of Directors, officers, and employees thank you for your past support
and solicit your continued support as we continue our efforts to provide prompt,
efficient, and courteous service to our customers. We welcome any suggestions
you may have.

We invite and encourage you to attend our Annual Meeting on Thursday, May 1,
2003.

Very truly yours,


W. Roger Crook                                   Peden B. McLeod
President and CEO                                Chairman of the Board

                                       1

<PAGE>

                                  COMMUNITYCORP

                             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 & Caskey,
L.L.P., independent accountants for 1998 through 2001 and by Elliott Davis, LLC,
independent accountants for 2002. 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,
(Dollars in thousands, except per share)       2002       2001       2000       1999       1998
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
Results of Operations:
   Interest income                           $  7,000   $  7,897   $  7,511   $  6,882   $  5,728
   Interest expense                             2,640      4,030      3,579      3,168      2,674
                                             --------   --------   --------   --------   --------
   Net interest income                          4,360      3,867      3,932      3,714      3,054
   Provision for loan losses                      405        257        290        360        260
                                             --------   --------   --------   --------   --------
   Net interest income after provision for
      loan losses                               3,955      3,610      3,642      3,354      2,794
   Other income                                   492        493        480        488        362
   Other expense                                2,224      2,183      1,974      1,810      1,630
                                             --------   --------   --------   --------   --------
   Income before income taxes                   2,223      1,920      2,148      2,032      1,526
   Income tax expense                             715        617        692        652        500
                                             --------   --------   --------   --------   --------
   Net income                                $  1,508   $  1,303   $  1,456   $  1,380   $  1,026
                                             ========   ========   ========   ========   ========

Balance Sheet Data:
   Securities available-for-sale             $ 12,661   $ 11,343   $ 18,867   $ 18,760   $ 10,744
   Securities held-to-maturity                  3,050      3,499      4,598      5,327      5,192
   Allowance for loan losses                    1,319      1,231      1,174      1,087        929
   Net loans                                   73,856     70,128     66,621     58,576     50,950
   Premises and equipment, net                  2,169      2,013      2,160      1,776      1,906
   Total assets                               115,775    110,850    103,069     96,695     89,503
   Noninterest-bearing deposits                 9,304      9,230      9,800      9,953      8,533
   Interest-bearing deposits                   93,316     89,190     81,997     76,982     71,816
   Total deposits                             102,620     98,420     91,797     86,935     80,349
   Short-term borrowings                          400        560        530        290        410
   Total liabilities                          103,526     99,848     93,189     87,890     81,333
   Total shareholders' equity                  12,249     11,002      9,880      8,805      8,170

Per Share Data:
   Weighted-average common
      shares outstanding                      276,473    280,330    283,194    296,522    298,390
   Net income                                $   5.46   $   4.65   $   5.14   $   4.65   $   3.44
   Cash dividends paid                       $    .59   $   0.55   $   0.50   $   0.40   $   0.31
   Period end book value                     $  44.62   $  39.52   $  35.07   $  30.15   $  27.37
</TABLE>

                                       2

<PAGE>

                                  COMMUNITYCORP
                     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 three banking locations.
The Bank's main office and operations center is located at 1100 North Jefferies
Boulevard, Walterboro, South Carolina. The Bank has branches at 6225 Savannah
Highway, Ravenel, South Carolina and at 110 Forest Hills Road in Walterboro,
South Carolina. The Company's primary market area includes Colleton and
Charleston Counties. 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 is 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
nontraditional financial intermediaries such as mutual funds. This has resulted
in a highly competitive market area which demands the type of personal service
and attention provided 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, 2002, the Company had twenty-four full-time employees in the
Walterboro office, six full-time and three part-time employees at the Ravenel
branch, and one full time employee at the Forest Hills branch.

                                       3

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

This discussion and analysis is intended to assist the reader in understanding
the financial condition and results of operations of 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.

                          CRITICAL ACCOUNTING POLICIES

The Company has adopted various accounting policies, which govern the
application of account principles generally accepted in the United States of
America in the preparation of the Company's financial statements. The
significant accounting policies of the Company are described in the notes to the
consolidated financial statements.

Certain accounting policies involve significant judgments and assumptions by
management, which have a material impact on the carrying value of certain assets
and liabilities. Management considers such accounting policies to be critical
accounting policies. The judgments and assumptions used by management are based
on historical experience and other factors which are believed to be reasonable
under the circumstances. Because of the nature of the judgments and assumptions
made by management, actual results could differ from these judgments and
estimates, which could have a material impact on the carrying values of assets
and liabilities and the results of operations of the Company.

The Company believes the allowance for loan losses is a critical accounting
policy that requires the most significant judgments and estimates used in
preparation of its consolidated financial statements. Refer to the section
"Provision and Allowance for Loan Losses" and Note 1 to the consolidated
financial statements for a detailed description of the Company's estimation
process and methodology related to the allowance for loan losses.

                           FORWARD-LOOKING STATEMENTS

Statements included in Management's Discussion and Analysis which are not
historical in nature are intended to be, and are hereby identified as "forward
looking statements" for purposes of the safe harbor provided by Section 21E of
the Securities Exchange Act of 1934, as amended. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements which are
other than statements of historical facts. Such forward-looking statements may
be identified, without limitation, by the use of the words "anticipates,"
"believes," "estimates," "expects," "intends," "plans," "predicts," "projects,"
and similar expressions. The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a reasonable
basis, including without limitation, management's examination of historical
operating trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that management's
expectations, beliefs or projections will result or be achieved or accomplished.
The Company cautions readers that forward looking statements, including without
limitation, those relating to future business prospects, revenues, working
capital, liquidity, capital needs, interest costs, and income, are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward looking statements, due to
several important factors herein identified, among others, and other risks and
factors identified from time to time in the Company's reports filed with the
Securities and Exchange Commission.

                                       4

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                              RESULTS OF OPERATIONS

2002 compared to 2001

Net income for the year ended December 31, 2002 was $1,508,390 or $5.46 per
share, compared to $1,303,082, or $4.65 per share, for the year ended December
31, 2001. The increase in net income for 2002 resulted primarily from the
increase in net interest income of $493,485 over the 2001 amount of $3,867,096.
The net interest margin increased from 3.68% in 2001 to 3.98% in 2002.
Noninterest income decreased from $493,209 for the year ended December 31, 2001
to $492,116 for the year ended December 31, 2002. Noninterest expenses increased
from $2,182,822 for 2001 to $2,224,168 for 2002. The increase in noninterest
expenses is primarily attributable to an increase in salaries and employee
benefits of $89,847 from 2001 to 2002. Annual pay raises for the staff plus the
addition of an executive officer contributed to this increase.

2001 compared to 2000

Net income for the year ended December 31, 2001 was $1,303,082, or $4.65 per
share, compared to $1,456,351, or $5.14 per share, for the year ended December
31, 2000. A decrease in net interest income of $65,311 over the 2000 amount of
$3,932,407 contributed to this overall decrease. The net interest margin
decreased from 4.33% in 2000 to 3.68% in 2001 as a result of the deteriorating
economy. Noninterest income increased from $480,155 for the year ended December
31, 2000 to $493,209 for the year ended December 31, 2001. Noninterest expenses
increased from $1,974,528 for 2000 to $2,182,822 for 2001. The increase in
noninterest expenses is primarily attributable to an increase in salaries and
employee benefits of $127,950 from 2000 to 2001. Annual pay raises for the staff
contributed to this increase

                               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 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 average earning assets.

Net interest income increased from $3,867,096 in 2001 to $4,360,581 in 2002,
resulting in an increase of 12.76%. While total interest income decreased
$897,264 to $7,000,0063 in 2002, interest expense decreased $1,390,749 to
$2,639,482 in 2002. Income from loans decreased by 5.57% to $5,989,229 in 2002
as compared to $6,342,684 in 2001. Additionally, income from federal funds sold
decreased by 59.63% to $296,592 in 2002 as compared to $734,690 in 2001. The
overall decrease in both interest income and interest expense was mainly
attributable to the decline in interest rates earned on all category of earning
assets and interest rates paid on all category of interest bearing liabilities.
The net interest spread and net interest margin were 3.53% and 3.98% in 2002 as
compared to 3.01% and 3.68% in 2001

Net interest income decreased from $3,932,407 in 2000 to $3,867,096 in 2001,
resulting in a decrease of 1.66%. While total interest income increased $386,278
to $7,897,327 in 2001, interest expense increased $451,589 to $4,030,231 in
2001. Income from loans increased by 6.51% to $6,342,684 in 2001 as compared to
$5,954,829 in 2000. This increase was attributable to the growth in the loan
portfolio from $67,794,723 at December 31, 2000 to $71,358,930 at December 31,
2001. Investment income decreased 43.30% from $1,439,877 in 2000 to $816,448 in
2001. The net interest spread and net interest margin were 3.01% and 3.68% in
2001 as compared to 3.66% and 4.33% in 2000.

Average Balances, Income, Expenses, and Rates. The following table sets forth,
for the periods indicated, the weighted average 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.

                                       5

<PAGE>

                                 COMMUNITYCORP
                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

                         NET INTEREST INCOME (continued)

Average Balances, Income, Expenses, and Rates

<TABLE>
<CAPTION>
                                                        2002                         2001
                                            ---------------------------   ---------------------------
                                             Average   Income/   Yield/    Average   Income/   Yield/
(Dollars in thousands)                       Balance   Expense    Rate     Balance   Expense    Rate
                                            --------   -------   ------   --------   -------   ------
<S>                                         <C>         <C>       <C>     <C>         <C>       <C>
Assets:
   Earning Assets:
      Securities, taxable (1)               $ 10,720    $  446    4.16%   $  9,782    $  539    5.51%
      Securities, tax-exempt (1)               5,694       236    4.14       5,963       254    4.26
      Nonmarketable equity securities            331        17    5.14         331        22    6.65
      Federal funds sold                      18,991       297    1.56      19,446       735    3.78
      Time deposits with other banks             299        15    5.02          90         4    4.40
      Loans (2)                               73,550     5,989    8.14      69,505     6,343    9.13
                                            --------    ------            --------    ------
         Total earning assets                109,585     7,000    6.39     105,117     7,897    7.51
                                                        ------                        ------
   Cash and due from banks                     3,334                         3,282
   Allowance for loan losses                  (1,280)                       (1,231)
   Premises and equipment                      2,089                         2,080
   Other assets                                1,447                         1,422
                                            --------                      --------
         Total assets                       $115,175                      $110,670
                                            ========                      ========
Liabilities:
   Interest-bearing liabilities:
      Interest-bearing deposits             $ 91,939     2,636    2.87%   $ 89,024     4,012    4.51%
      Short-term borrowings                      467         3     .86         576        18    3.13
                                            --------    ------            --------    ------
         Total interest-
            bearing liabilities               92,406     2,639    2.86      89,600     4,030    4.50
                                            --------    ------            --------    ------
   Noninterest-bearing deposits               10,464                         9,578
   Accrued interest and other liabilities        738                         1,027
   Shareholders' equity                       11,567                        10,465
                                            --------                      --------
         Total liabilities and
            shareholders' equity            $115,175                      $110,670
                                            ========                      ========

Net interest spread                                               3.53%                         3.01%
Net interest income                                     $4,361                        $3,867
                                                        ======                        ======

Net interest margin                                               3.98%                         3.68%
</TABLE>

(1) Averages for securities are stated at historical cost.
(2) The effect of loans in nonaccrual status and fees collected is not
significant to the computations. All loans and deposits are domestic.

                                       6

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                         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 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)
is provided as follows:

Analysis of Changes in Net Interest Income

<TABLE>
<CAPTION>
                                          2002 Compared With 2001             2001 Compared With 2000
                                  ------------------------------------   --------------------------------
                                            Variance Due to                        Variance Due to
                                  ------------------------------------   --------------------------------
                                                     Volume/                              Volume/
(Dollars in thousands)            Volume     Rate     Rate      Total    Volume   Rate      Rate    Total
                                  ------   -------   -------   -------   ------   -----   -------   -----
<S>                                <C>     <C>        <C>      <C>       <C>      <C>      <C>      <C>
Earning Assets
   Securities, taxable             $ 52    $  (132)   $(13)    $   (93)  $ (526)  $(152)   $  70    $(608)
   Securities, tax-exempt           (11)        (7)     --         (18)      (8)     (7)      --      (15)
   Nonmarketable equity
      securities                     --         (5)     --          (5)       6      (5)      (1)      --
   Federal funds sold               (17)      (431)     10        (438)   1,032     (42)    (372)     618
   Time deposits with
      other banks                     9          1       1          11       --      --        4        4
   Loans                            369       (683)    (40)       (354)     480     (86)      (7)     388
                                   ----    -------    ----     -------   -----    -----    -----    -----
   Total interest income            402     (1,257)    (42)       (897)     984    (292)    (306)     387
                                   ----    --------   ----     -------   -----    -----    -----    -----

   Interest-Bearing Liabilities
   Interest-bearing deposits        131     (1,461)    (47)     (1,377)     558     (73)     (11)     474
   Short-term borrowings             (3)       (13)      2         (14)      (5)    (20)       2      (23)
                                   ----    -------    ----     -------   ------   -----    -----    -----
   Total interest expense           128     (1,474)    (45)     (1,391)     553     (93)      (9)     451
                                   ----    -------    ----     -------   ------   -----    -----    -----

   Net interest income             $274    $   217    $  3     $   494   $  431   $(199)   $(297)   $ (64)
                                   ====    =======    ====     =======   ======   =====    =====    =====
</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.

                                       7

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                         NET INTEREST INCOME (continued)

The following table presents the Company's rate sensitivity at each of the time
intervals indicated as of December 31, 2002. The table may not be indicative of
the Company's rate sensitivity position at other points in time.

Interest Sensitivity Analysis

<TABLE>
<CAPTION>
                                                          After Three   After One   Greater Than
                                               Within       Through      Through     Five Years
                                                Three       Twelve        Five        or Non-
(Dollars in thousands)                         Months       Months        years      Sensitive       Total
                                              --------    -----------   ---------   ------------   --------
<S>                                           <C>          <C>           <C>          <C>          <C>
Assets
Earning Assets:
   Federal funds sold and securities
      purchased under agreements to resell    $ 17,052     $     --      $    --      $    --      $ 17,052
   Time deposits with other banks                  299           --           --           --           299
   Investment securities                           877          103       10,192        4,874        16,046
   Loans (1)                                    13,721       40,640       17,467          580        72,408
                                              --------     --------      -------      -------      --------
      Total earning assets                      31,949       40,743       27,659        5,454       105,805
                                              --------     --------      -------      -------      --------
Liabilities
Interest-bearing liabilities:
   Interest-bearing deposits:
      Demand deposits                           18,977           --           --           --        18,977
      Savings deposits                          18,104           --           --           --        18,104
      Time deposits                             13,838       39,949        2,537           --        56,324
                                              --------     --------      -------      -------      --------
         Total interest-bearing deposits        50,919       39,949        2,537           --        93,405
Short-term borrowings                              400           --           --           --           400
                                              --------     --------      -------      -------      --------
         Total interest-bearing deposits        51,319       39,949        2,537           --        93,805
                                              --------     --------      -------      -------      --------

Period gap                                    $(19,370)    $    794      $25,122      $ 5,454
                                              ========     ========      =======      =======

Cumulative gap                                $(19,370)    $(18,576)     $ 6,546      $12,000
                                              ========     ========      =======      =======

Ratio of cumulative gap
   to total earning assets                      (18.31)%     (17.56)%       6.19%        11.34%
</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.

                                       8

<PAGE>

                                 COMMUNITYCORP
                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

                         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 twelve
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 expensed as the provision
for loan losses on the Company's Statements of Operations, 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 judgments 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 1.75% and 1.73% of total loans on December 31,
2002 and 2001, respectively. On a continual basis, management evaluates its
reserve policy and adjusts 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. When a loan is placed in nonaccrual status,
all interest which has been accrued on the loan but remains unpaid is reversed
and deducted from current earnings as a reduction of reported interest income.
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 write-down or charge-off of
the principal balance of the loan which would necessitate additional charges to
earnings.

                                       9

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

               PROVISION AND ALLOWANCE FOR LOAN LOSSES (continued)

<TABLE>
<CAPTION>
Allowance for Loan Losses
Year ended December 31,                                  2002          2001          2000
                                                      -----------   -----------   -----------
<S>                                                   <C>           <C>           <C>
Total loans outstanding at end of year                $75,175,621   $71,358,930   $67,794,723
                                                      ===========   ===========   ===========
Average loans outstanding                             $73,550,058   $69,505,339   $64,314,225
                                                      ===========   ===========   ===========
Balance of allowance for loan losses at beginning
   of period                                          $ 1,231,051   $ 1,173,832   $ 1,086,980
Loan losses:
   Real estate - construction                                  --            --            --
   Real estate - mortgage                                      --            --            --
   Commercial and industrial                              153,898        56,132       118,031
   Consumer                                               181,879       153,016        99,866
                                                      -----------   -----------   -----------
      Total loan losses                                   335,777       209,148       217,897
                                                      -----------   -----------   -----------
Recoveries of previous loan losses:
   Real estate - construction                                  --            --            --
   Real estate - mortgage                                      --            --            --
   Commercial and industrial                                4,981         1,734         2,100
   Consumer                                                13,947         7,633        12,649
                                                      -----------   -----------   -----------
      Total recoveries                                     18,928         9,367        14,749
                                                      -----------   -----------   -----------
Net charge-offs                                           316,849       199,781       203,148
Provision charged to operations                           405,000       257,000       290,000
                                                      -----------   -----------   -----------
Balance of allowance for loan losses at end of year   $ 1,319,202   $ 1,231,051   $ 1,173,832
                                                      ===========   ===========   ===========
Ratios:
Net charge-offs to average loans outstanding                  .43%         0.29%         0.32%
Net charge-offs to loans at end of year                       .42%         0.28%         0.30%
Allowance for loan losses to average loans                   1.79%         1.77%         1.83%
Allowance for loan losses to loans at end of year            1.75%         1.73%         1.73%
Net charge-offs to allowance for loan losses                24.02%        16.23%        17.31%
Net charge-offs to provisions for loan losses               78.23%        77.74%        70.05%
</TABLE>

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

<TABLE>
<CAPTION>
                                                                   December 31,
                                                      -------------------------------------
                                                         2002         2001          2000
                                                      ----------   ----------    ----------
<S>                                                   <C>          <C>           <C>
Nonaccrual loans                                      $2,768,412   $3,239,425    $1,353,224
Restructure or impaired loans                                 --           --            --
Loans 90 days or more past due and still accruing
   interest                                                1,927       26,492         1,000
                                                      ----------   ----------    ----------
      Total nonperforming loans                        2,770,339    3,265,917     1,354,224
Other real estate owned                                  313,148           --       170,000
                                                      ----------   ----------    ----------
      Total nonperforming assets                      $3,083,487   $3,265,917    $1,524,224
                                                      ==========   ==========    ==========

Nonperforming assets to year end loans                      4.10%        4.58%         2.25%
</TABLE>

Potential Problem Loans. At December 31, 2002, through their internal review
mechanisms the Company had identified $1,474,989 of criticized loans and
$1,672,978 of classified loans. At December 31, 2001, the internal review
mechanisms had identified no criticized loans and $3,012,26 of classified loans.
Classified loans decreased between the two periods as a result of the
foreclosure and subsequent sale of a large motel loan. 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.

                                       10

<PAGE>

                                 COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                         NONINTEREST INCOME AND EXPENSE

Noninterest Income. Noninterest income decreased from $493,209 in 2001 to
$492,116 for the year ended December 31, 2002. Service charges on deposit
accounts increased from $348,416 for 2001 to $364,464 for the year ended
December 31, 2002. The increase of $16,048 in service charges on deposit
accounts was offset by a decrease of $17,141 in all other noninterest income,
which decreased from $144,793 in 2001 to $127,652 in 2002.

Noninterest income increased from $480,155 in 2000 to $493,209 for the year
ended December 31, 2001. Service charges on deposit accounts increased from
$333,379 for 2000 to $348,416 for the year ended December 31, 2001. NSF and
overdraft fees totaled $293,585 for the year ended December 31, 2001, which
contributed to a significant portion of the increase in service charges on
deposit accounts. Other charges, fees, and commissions increased from $80,452 in
2000 to $90,564 in 2001.

Noninterest Expense. The Company had an increase in noninterest expense of
$41,346, or 1.89%, to a total of $2,224,168 for the year ended December 31,
2002. Annual pay raises plus the addition of an executive officer contributed to
an increase of $89,847, or 8.29%, in salaries and employee benefits. Other
operating expenses increased $45,517, or 6.55%, over the 2001 amount of
$695,066. Net occupancy expense decreased $2,644 to $155,756 in 2002 when
compared to 2001. Other operating expenses and net occupancy expense included
expenses associated with the new Forest Hills branch which opened in 2001.

The Company had an increase in noninterest expense of $208,294, or 10.55%, to a
total of $2,182,822 for the year ended December 31, 2001, when compared to 2000.
Annual pay raises contributed to an increase of $127,950, or 13.39%, in salaries
and employee benefits. Other operating expenses increased $52,980, or 8.25%,
over the 2000 amount of $642,086. Net occupancy expense increased $30,187 to
$158,400 in 2001 when compared to 2000. Increases in other operating and
occupancy expenses were partially attributable to the new Forest Hills branch
which opened in 2001.

Income Taxes. The Company's income tax expense for 2002 was $715,139, an
increase of $97,738 over the 2001 expense of $617,401. The increase in expense
resulted primarily from the increase in the income before taxes. The Company's
effective tax rates for the years ended December 31, 2002 and 2001 were 32.16%
and 32.15%, respectively.

The Company's income tax expense for 2001 was $617,401, a decrease of $74,282
over the 2000 expense of $691,683. The decrease in expense resulted primarily
from the decrease in the income before taxes. The Company's effective tax rates
for the years ended December 31, 2001 and 2000 were 32.15% and 32.20%,
respectively.

                                 EARNING ASSETS

Loans. Loans are the largest category of earning assets and typically provide
higher yields than 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 $73,550,058 in 2002
compared to $69,505,339 in 2001, an increase of $4,044,719, or 5.82%. At
December 31, 2002, total loans were $75,175,621 compared to $71,358,930 at
December 31, 2001.

The Company's ratio of loans to deposits was 73.26% at December 31, 2002 as
compared to 72.50% at December 31, 2001. 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.

                                       11

<PAGE>

                                 COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                           EARNING ASSETS (continued)

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. 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 expected to come primarily from consumer loans and small businesses in
neighboring Charleston County. No particular category or segment of the
economies previously described is expected to grow or contract
disproportionately in 2003. Management is of the opinion that the loan portfolio
is adequately diversified. There are no significant concentrations of loans in
any particular individuals, industry, or group of related individuals or
industries. The loan demand remains strong in the Company's market area.

The following table sets forth the composition of the loan portfolio by category
at December 31, 2002 and 2001 and highlights our general emphasis on commercial
and mortgage lending.

<TABLE>
<CAPTION>
Loan Portfolio Composition
                                              2002                     2001
                                      ----------------------   ----------------------
                                                    Percent                  Percent
                                        Amount      of Total      Amount     of Total
                                      -----------   --------   -----------   --------
<S>                                   <C>             <C>      <C>            <C>
Commercial and industrial             $27,010,050     35.93%   $25,868,360     36.25%
Real estate
   Construction                         3,928,774      5.23      6,312,748      8.85
   Mortgage                            32,052,444     42.64     24,844,649     34.82
Consumer and other loans               12,184,353     16.20     14,333,173     20.08
                                      -----------    ------    -----------    ------
      Total loans                      75,175,621    100.00%    71,358,930    100.00%
                                                     ======                   ======
Allowance for loan losses              (1,319,202)              (1,231,051)
                                      -----------              -----------

      Net loans                       $73,856,419              $70,127,879
                                      ===========              ===========
</TABLE>

Real estate loans, including construction and mortgage loans, increased
$4,823,821 or 15.48% to $35,981,218 at December 31, 2002. Consumer and all other
loans decreased $2,148,820 or 14.99% to $12,184,353 at December 31, 2002.
Commercial and industrial loans increased $1,141,690 or 4.41% from $25,868,360
at December 31, 2001.

Maturities and Sensitivity of Loans to Changes in Interest Rates

The following table summarizes the loan maturity distribution, by type, at
December 31, 2002 and related interest rate characteristics:

<TABLE>
<CAPTION>
                                                    Over One Year
                                      One Year or     Through       Over Five
(Dollars in thousands)                   Less        Five Years       Years        Total
                                      -----------   -------------   ---------   -----------
<S>                                   <C>            <C>            <C>         <C>
Real estate - construction            $ 2,628,815    $ 1,299,959    $     --    $ 3,928,774
Real estate - mortgage                  6,125,015     25,682,196     245,233     32,052,444
Commercial and industrial              11,004,403     15,784,432     221,215     27,010,050
Consumer and other                      2,616,074      9,474,139      94,140     12,184,353
                                      -----------    -----------    --------    -----------
                                      $22,374,307    $52,240,726    $560,588    $75,175,621
                                      ===========    ===========    ========    ===========

Loans maturing after one year with:
   Fixed interest rates                                                         $52,801,314
   Floating interest rates                                                               --
                                                                                -----------

                                                                                $52,801,314
                                                                                ===========
</TABLE>

                                       12

<PAGE>

                                 COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                           EARNING ASSETS (continued)

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 the treatment shown in the above table
presents fairly the maturity and repricing structure of the loan portfolio.

Short-Term Investments. Short-term investments, which consist of federal funds
sold and securities purchased under agreements to resell averaged $18,991,519 in
2002, compared to $19,445,836 in 2001. At December 31, 2002, short-term
investments totaled $17,052,000. These funds are a primary source of the
Company's liquidity and are generally invested in an earning capacity on an
overnight basis. Also included are time deposits with other banks, which
averaged $299,000 in 2002. The total of these time deposits was $299,000 at
December 31, 2002.

Investment Securities. The investment securities portfolio is a significant
component of the Company's total earning assets. Total securities, stated at
historical cost, averaged $16,745,134 in 2002, compared to $16,075,968 in 2001.
At December 31, 2002, the total securities portfolio was $16,045,808. Securities
designated as available-for-sale totaled $12,660,654 and were recorded at
estimated fair value. Securities designated as held-to-maturity totaled
$3,050,279 and were recorded at amortized cost. Securities designated as
nonmarketable equity securities totaled $334,875 at December 31, 2002. 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
obligations of U.S. government agencies and corporations.

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, 2002 and 2001.

Investment Securities Portfolio Composition

                                                          2002           2001
                                                       -----------   -----------
Available-for-Sale (1)
U.S. government agencies and corporations              $ 8,515,199   $ 7,789,721
Obligations of states and local governments              2,728,054     2,472,742
                                                       -----------   -----------
                                                        11,243,253    10,262,463
Mortgage-backed securities                               1,417,401     1,081,010
                                                       -----------   -----------

   Total available-for-sale securities                 $12,660,654   $11,343,473
                                                       ===========   ===========

                                                          2002           2001
                                                       -----------   -----------
Held-to-Maturity (1)
Obligations of states and local governments            $ 3,004,696   $ 3,417,253
Mortgage-backed securities                                  45,583        81,972
                                                       -----------   -----------

   Total held-to-maturity securities                   $ 3,050,279   $ 3,499,225
                                                       ===========   ===========

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

                                       13

<PAGE>

                                 COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                           EARNING ASSETS (continued)

Investment Securities Maturity Distribution and Yields

Available-for-Sale

<TABLE>
<CAPTION>
                                                                 After One But       After Five But
December 31, 2002                          Within One Year     Within Five Years    Within Ten Years      Over Ten Years
                                         ------------------   ------------------   ------------------   ------------------
   (Dollars in thousands)                Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)
                                         ------   ---------   ------   ---------   ------   ---------   ------   ---------
<S>                                       <C>       <C>       <C>        <C>       <C>        <C>        <C>           <C>
U.S. government agencies (3)              $404      2.64%     $8,112     3.78%     $   --         %      $ --          %
Obligations of states and
   local governments                       327      7.09%        829     7.19%      1,572     6.19%        --
                                          ----                ------               ------                ----

   Total available-for-sale securities    $731      4.60%     $8,941     4.10%     $1,572     6.19%      $ --          %
                                          ====                ======               ======                ====
</TABLE>

Held-to-Maturity

<TABLE>
<CAPTION>
                                                                After One But        After Five But
December 31, 2002                          Within One Year    Within Five Years     Within Ten Years      Over Ten Years
                                         ------------------   ------------------   ------------------   ------------------
   (Dollars in thousands)                Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)
                                         ------   ---------   ------   ---------   ------   ---------   ------   ---------
<S>                                       <C>       <C>       <C>        <C>       <C>        <C>        <C>       <C>
U.S. government agencies (2)              $ --          %     $   --         %     $   --         %      $ --          %
Obligations of states and local
    governments                            250      6.41%      1,206     6.29%      1,449     6.53%       100      6.67%
                                          ----                ------               ------                ----

   Total available-for-sale securities    $250      6.41%     $1,206     6.29%     $1,449     6.53%      $100      6.67%
                                          ====                ======               ======                ====
</TABLE>

----------
(1)  Tax equivalent yield has been calculated using an incremental rate of 34%.
(2)  Excludes mortgage-backed securities totaling $45,583 with a yield of 6.50%.
(3)  Excludes mortgage-backed securities totaling $1,417,401 with a yield of
     5.46%.

                                       14

<PAGE>

                                 COMMUNITY CORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Available-for-Sale

<TABLE>
<CAPTION>
                                                                 After One But      After Five But
December 31, 2002                          Within One Year     Within Five Years   Within Ten Years       Over Ten Years
                                         ------------------   ------------------   ------------------   ------------------
   (Dollars in thousands)                Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)
                                         ------   ---------   ------   ---------   ------   ---------   ------   ---------
<S>                                       <C>       <C>       <C>        <C>       <C>        <C>         <C>          <C>
U.S. government agencies (3)              $404      2.64%     $8,112     3.78%     $   --         %       $--          %
Obligations of states and local
   governments                             327      7.09%        829     7.19%      1,572     6.19%        --
                                          ----                ------               ------                 ---

   Total available-for-sale securities    $731      4.60%     $8,941     4.10%     $1,572     6.19%       $--          %
                                          ====                ======               ======                 ===
</TABLE>

Held-to-Maturity

<TABLE>
<CAPTION>
                                                                 After One But       After Five But
December 31, 2002                          Within One Year     Within Five Years    Within Ten Years      Over Ten Years
                                         ------------------   ------------------   ------------------   ------------------
   (Dollars in thousands)                Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)   Amount   Yield (1)
                                         ------   ---------   ------   ---------   ------   ---------   ------   ---------
<S>                                       <C>       <C>       <C>        <C>       <C>        <C>        <C>       <C>
U.S. government agencies (2)              $ --          %     $   --         %     $   --         %      $ --          %
Obligations of states and local
   governments                             250      6.41%      1,206     6.29%      1,449     6.53%       100      6.67%
                                          ----                ------               ------                ----

   Total available-for-sale securities    $250      6.41%     $1,206     6.29%     $1,449     6.53%      $100      6.67%
                                          ====                ======               ======                ====
</TABLE>

----------
(1)  Tax equivalent yield has been calculated using an incremental rate of 34%.
(2)  Excludes mortgage-backed securities totaling $45,583 with a yield of 6.50%.
(3)  Excludes mortgage-backed securities totaling $1,417,401 with a yield of
     5.46%.

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

Deposits. During 2002, the Company experienced significant growth in overall
deposits. Total average deposits increased from $98,601,630 in 2001 to
$102,374,603 in 2002. This represents an increase of $3,772,973 or 3.83% over
the 2001 amount. The following table summarizes the Company's deposits for the
years ended December 31, 2002 and 2001.

<TABLE>
<CAPTION>
Deposits
   December 31,                                2002                       2001
                                    -------------------------   ------------------------
                                                   Percent of                 Percent of
                                       Amount       Deposits       Amount      Deposits
                                    ------------   ----------   -----------   ----------
<S>                                 <C>              <C>        <C>              <C>
Noninterest bearing demand          $  9,303,802      9.07%     $ 9,230,016       9.38%
Interest-bearing demand               18,977,055     18.49       14,692,130      14.93
Savings accounts                      18,014,033     17.55       16,815,417      17.08
Time deposits of $100,000 or over     28,435,742     27.71       30,163,719      30.65
Other time deposits                   27,889,127     27.18       27,519,029      27.96
                                    ------------    ------      -----------     ------

   Total deposits                   $102,619,759    100.00%     $98,420,311     100.00%
                                    ============                ===========
</TABLE>

                                       15

<PAGE>

                                 COMMUNITYCORP
                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES (continued)

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 $74,184,017 and
$68,9256,592 at December 31, 2002 and 2001, respectively. A stable base of
deposits is expected to be the Company's primary source of funding to meet both
its short-term and long-term liquidity needs in the future.

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

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

<TABLE>
<CAPTION>
                                                       After Six
                                         After Three    Through
                          Within Three   Through Six     Twelve    After Twelve
                             Months         Months       Months       Months        Total
                          ------------   -----------   ---------   -------------   -------
<S>                          <C>           <C>           <C>           <C>         <C>
Certificates of deposit
   of $100,000 or more       $6,042        $13,386       $8,098        $910        $28,436
</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, 2002 and 2001, the Company had short-term
borrowings, which consisted of securities sold under agreements to repurchase of
$400,000 and $560,000, respectively. The maximum amount outstanding at any
month-end for the repurchase agreements was $560,000 and $640,000 for 2002 and
2001, respectively. The average interest rate paid on the repurchase agreements
was 0.80% and 4.29% for 2002 and 2001, 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 shareholders' equity, excluding the
unrealized gain (loss) on securities available-for-sale, minus certain
intangible assets. Tier 2 capital consists of the general reserve for loan
losses subject to certain limitations. 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 1 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
quarterly average 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 of 3%. All others are subject to maintaining ratios 100
to 200 basis points above the minimum.

                                       16

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

CAPITAL (continued)

Risk-Based Capital Ratios

<TABLE>
<CAPTION>
                                                                       The Bank      The Company
                                                                     ------------   ------------
<S>                                                                  <C>            <C>
Tier 1 capital                                                       $ 12,056,800   $ 12,121,058
Tier 2 capital                                                          1,012,000      1,012,082
                                                                     ------------   ------------
   Total qualifying capital                                          $ 13,068,800   $ 13,133,140
                                                                     ============   ============
Risk-adjusted total assets (including off-balance-sheet exposures)   $ 80,673,246   $ 80,681,179
                                                                     ============   ============
   Total average assets                                              $115,175,219   $115,181,819
                                                                     ============   ============
</TABLE>

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

               IMPACT OF OFF-BALANCE-SHEET INSTRUMENTS (continued)

The Company is not involved in off-balance-sheet contractual relationships,
other than those disclosed in this report, that could result in liquidity needs
or other commitments or that could significantly impact earnings.

Through its operations, the Bank was made contractual commitments to extend
credit in the ordinary course of its business activities. These commitments are
legally binding agreements to lend money to the Bank's customers at
predetermined interest rates for a specified period of time. At December 31,
2002, the Bank had issued commitments to extend credit of $6,295,002 and standby
letters of credit of $496,995 through various types of commercial lending
arrangements. Approximately $881,184 of these commitments to extend credit had
variable rates.

The following table sets forth the length of time until maturity for unused
commitments to extend credit and standby letters of credit at December 31, 2002.

<TABLE>
<CAPTION>
                                                   After One   After Three
                                                    Through      Through                    Greater
                                      Within One     Three        Twelve     Within One      Than
                                         Month       Months       Months        Year       One Year      Total
                                      ----------   ---------   -----------   ----------   ----------   ----------
<S>                                    <C>          <C>         <C>          <C>          <C>          <C>
Unused commitments to extend credit    $330,414     $462,112    $3,691,646   $4,484,172   $ 1,810,83   $6,295,002
Standby letters of credit               496,995           --            --      496,995           --      496,995
                                       --------     --------    ----------   ----------   ----------   ----------

Totals                                 $827,409     $462,112    $3,691,646   $4,981,167   $1,810,830   $6,791,997
                                       ========     ========    ==========   ==========   ==========   ==========
</TABLE>

The Bank evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on its credit evaluation of the borrower.
Collateral varies but may include accounts receivable, inventory, property,
plant and equipment, commercial and residential real estate.

                               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 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
interests paid on liabilities vary directly with each other. Also, increases in
the price of goods and services will generally result in increased operating
expenses.

IMPACT OF RECENT ACCOUNTING CHANGES

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

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which supersedes prior pronouncements
associated with impairment or disposal of long-lived assets. The statement
establishes methodologies for assessing impairment of long-lived assets,
including assets to be disposed of by sale or by other means. The adoption of
this standard had no impact on the financial position of the Company.

                                       18

<PAGE>

                                  COMMUNITYCORP
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                 IMPACT OF RECENT ACCOUNTING CHANGES (continued)

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

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--an amendment of FASB Statement No.
123." This Statement amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change in the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of account for stock-based employee
compensation and the effect of the method used on the reported results. The
Company has no stock-based employee compensation and the adoption of this
statement had no impact on its financial statements.

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

                              CHANGE OF ACCOUNTANTS

Legislation and Securities Exchange Commission rules adopted in 2002 have
significantly increased, and will continue to increase, the regulatory burdens
on audit firms that audit the financial statements of companies that are subject
to the reporting requirements of the Securities Exchange Act of 1934.
Consequently, many smaller audit firms are deciding to limit their audit
practice to companies that are not subject to the 1934 Act. Tourville, Simpson &
Caskey, L.L.P., which served as the Company's principal independent accountant
since the Company's inception, is one such firm. Accordingly, effective January
2, 2003, Tourville, Simpson & Caskey resigned as the Company's principal
independent public accountant. Elliott Davis, LLC was engaged by the Company on
January 2, 2003, to audit the Company's financial statements for the year ended
December 31, 2002, and has also been selected to audit the Company's financial
statements for the year ending December 31, 2003.

Tourville, Simpson & Caskey, L.L.P.'s reports on the Company's financial
statements for each of the years ended December 31, 2001 and 2000 neither
contained an adverse opinion or disclaimer of opinion, nor were modified as to
uncertainty, audit scope, or accounting principles. There were no disagreements
with Tourville, Simpson & Caskey, L.L.P. on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to Tourville, Simpson & Caskey's satisfaction, would have
caused it to make reference to the subject matter of the disagreement in its
reports.

                                       19

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Communitycorp
Walterboro, South Carolina

We have audited the accompanying consolidated balance sheet of Communitycorp and
its subsidiary, as of December 31, 2002, and the related consolidated statement
of income, changes in shareholders' equity and comprehensive income, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements of
Communitycorp as of and for each of the two years in the period ended December
31, 2001, were audited by other auditors, whose report dated February 27, 2002,
expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material
respects, the consolidated financial position of Communitycorp and its
subsidiary as of December 31, 2002, and the consolidated results of their
operations and cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

Elliott Davis, LLC
Columbia, South Carolina
February 6, 2003

                                       20

<PAGE>

                                  COMMUNITYCORP

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                               December 31,
                                                       ---------------------------
                                                           2002           2001
                                                       ------------   ------------
<S>                                                    <C>            <C>
Assets:
   Cash and cash equivalents:
      Cash and due from banks                          $  4,772,998   $  3,841,132
      Federal funds sold and securities purchased
         under agreements to resell                      17,052,000     18,062,000
                                                       ------------   ------------
         Total cash and cash equivalents                 21,824,998     21,903,132
                                                       ------------   ------------
Time deposits with other banks                              299,000        299,000

Investment securities:
   Securities available-for-sale                         12,660,654     11,343,473
   Securities held-to-maturity (estimated fair value
      of $3,156,497 in 2002 and $3,530,683 in 2001)       3,050,279      3,499,225
   Nonmarketable equity securities                          334,875        332,375
                                                       ------------   ------------
         Total investment securities                     16,045,808     15,175,073
                                                       ------------   ------------
Loans receivable                                         75,175,621     71,358,930
   Less allowance for loan losses                        (1,319,202)    (1,231,051)
                                                       ------------   ------------
         Loans, net                                      73,856,419     70,127,879
Premises and equipment, net                               2,169,151      2,013,147
Accrued interest receivable                                 788,666        911,811
Other real estate owned                                     313,148             --
Other assets                                                478,040        420,126
                                                       ------------   ------------
         Total assets                                  $115,775,230   $110,850,168
                                                       ============   ============
Liabilities:
   Deposits:
      Noninterest-bearing transaction accounts         $  9,303,802   $  9,230,016
      Interest-bearing transaction accounts              18,977,055     14,692,130
      Money market savings accounts                       2,977,210      2,916,348
      Savings                                            15,036,823     13,899,069
      Time deposits $100,000 and over                    28,435,742     30,163,719
      Other time deposits                                27,889,127     27,519,029
                                                       ------------   ------------
         Total deposits                                 102,619,759     98,420,311

Short-term borrowings                                       400,000        560,000
Accrued interest payable                                    422,502        717,570
Other liabilities                                            83,792        150,176
                                                       ------------   ------------
         Total liabilities                              103,526,053     99,848,057
                                                       ------------   ------------
(Commitments and contingencies - Notes 4 and 10)

Shareholders' Equity:
   Preferred stock, $5 par value, 3,000,000
      shares authorized and unissued                             --             --
   Common stock, $5 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
   Retained earnings                                      9,993,521      8,648,977
   Accumulated other comprehensive income                   128,119         51,132
   Treasury stock (25,471 shares in 2002 and
      21,594 shares in 2001)                             (1,104,171)      (929,706)
                                                       ------------   ------------
         Total shareholders' equity                      12,249,177     11,002,111
                                                       ------------   ------------
         Total liabilities and shareholders' equity    $115,775,230   $110,850,168
                                                       ============   ============
</TABLE>

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

                                       21

<PAGE>

                                  COMMUNITYCORP

                        Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                        For the years ended December 31,
                                                      ------------------------------------
                                                         2002         2001         2000
                                                      ----------   ----------   ----------
<S>                                                   <C>          <C>          <C>
Interest income:
   Loans, including fees                              $5,989,229   $6,342,684   $5,954,829
   Investment securities:
      Taxable                                            445,701      538,797    1,147,177
      Tax-exempt                                         236,072      253,827      268,685
      Nonmarketable equity securities                     17,264       11,066       24,015
   Federal funds sold and securities purchased
      under agreements to resell                         296,592      734,690      116,343
   Time deposits with other banks                         15,205       16,263           --
                                                      ----------   ----------   ----------
         Total interest income                         7,000,063    7,897,327    7,511,049
                                                      ----------   ----------   ----------

Interest expense:
   Deposits                                            2,635,754    4,012,000    3,537,917
   Short-term borrowings                                   3,728       18,231       40,725
                                                      ----------   ----------   ----------
         Total interest expense                        2,639,482    4,030,231    3,578,642
                                                      ----------   ----------   ----------
Net interest income                                    4,360,581    3,867,096    3,932,407

Provision for loan losses                                405,000      257,000      290,000
                                                      ----------   ----------   ----------
Net interest income after provision for loan losses    3,955,581    3,610,096    3,642,407
                                                      ----------   ----------   ----------

Noninterest income:
   Service charges on deposit accounts                   364,464      348,416      333,379
   Commissions on credit life insurance                   15,303       20,305       24,573
   Other charges, fees, and commissions                   94,626       90,564       80,452
   Other                                                  17,723       33,924       41,751
                                                      ----------   ----------   ----------
         Total noninterest income                        492,116      493,209      480,155
                                                      ----------   ----------   ----------
Noninterest expenses:
   Salaries and employee benefits                      1,173,334    1,083,487      955,537
   Net occupancy                                         155,756      158,400      128,213
   Equipment                                             245,529      245,869      248,692
   Other operating                                       649,549      695,066      642,086
                                                      ----------   ----------   ----------
         Total noninterest expenses                    2,224,168    2,182,822    1,974,528
                                                      ----------   ----------   ----------
Income before income taxes                             2,223,529    1,920,483    2,148,034

Income tax expense                                       715,139      617,401      691,683
                                                      ----------   ----------   ----------
Net income                                            $1,508,390   $1,303,082   $1,456,351
                                                      ==========   ==========   ==========

Earnings per share:
Weighted-average common shares outstanding               276,473      280,330      283,194
                                                      ==========   ==========   ==========
Basic                                                 $     5.46   $     4.65   $     5.14
                                                      ==========   ==========   ==========
</TABLE>

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

                                       22

<PAGE>

                                 COMMUNITY CORP

         Consolidated Statements of Changes in Shareholders' Equity and
   Comprehensive Income For the years ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        other
                                        Common stock                                   compre-       Treasury       Total
                                    --------------------    Capital      Retained      hensive        stock,     shareholders
                                    Shares      Amount      surplus      earnings      income        at cost        equity
                                    -------   ----------   ----------   ----------   -----------   -----------   ------------
<S>                                 <C>       <C>          <C>          <C>           <C>          <C>           <C>
Balance,
   December 31, 1999                300,000   $1,500,000   $1,731,708   $6,186,081    $(295,119)   $  (317,931)  $ 8,804,739
                                                                                                                 -----------
Net income                                                               1,456,351                                 1,456,351
Other comprehensive income,
   net of tax expense of $117,596                                                       223,639                      223,639
                                                                                                                 -----------

Comprehensive income                                                                                               1,679,990

Cash dividends paid
   ($.50 per share)                                                       (141,598)                                 (141,598)

Purchase of treasury stock                                                                            (485,775)     (485,775)
Sale of treasury stock                                                                                  22,500        22,500
                                    -------   ----------   ----------   ----------    ---------    -----------   -----------

Balance,
   December 31, 2000                300,000    1,500,000    1,731,708    7,500,834      (71,480)      (781,206)    9,879,856
                                                                                                                 -----------

Net income                                                               1,303,082                                 1,303,082

Other comprehensive income,
   net of tax expense of $64,781                                                        122,612                      122,612
                                                                                                                 -----------

Comprehensive income                                                                                               1,425,694

Cash dividends paid
   ($.55 per share)                                                       (154,939)                                 (154,939)

Purchase of treasury stock                                                                            (180,000)     (180,000)
Sale of treasury stock                                                                                  31,500        31,500
                                    -------   ----------   ----------   ----------    ---------    -----------   -----------

Balance,
   December 31, 2001                300,000    1,500,000    1,731,708    8,648,977       51,132       (929,706)   11,002,111
                                                                                                                 -----------

Net income                                                               1,508,390                                 1,508,390

Other comprehensive income,
   net of tax expense of $40,516                                                         76,987                       76,987
                                                                                                                 -----------

Comprehensive income                                                                                               1,585,377

Cash dividends paid
   ($.59 per share)                                                       (163,846)                                 (163,846)

Purchase of treasury stock                                                                            (183,465)     (183,465)
Sale of treasury stock                                                                                   9,000         9,000
                                    -------   ----------   ----------   ----------    ---------    -----------   -----------

Balance,
   December 31, 2002                300,000   $1,500,000   $1,731,708   $9,993,521    $ 128,119    $(1,104,171)  $12,249,177
                                    =======   ==========   ==========   ==========    =========    ===========   ===========
</TABLE>

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

                                       23

<PAGE>

                                  COMMUNITYCORP

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                     For the years ended December 31,
                                                               ------------------------------------------
                                                                   2002           2001           2000
                                                               ------------   ------------   ------------
<S>                                                            <C>            <C>            <C>
Cash flows from operating activities:
   Net income                                                  $  1,508,390   $  1,303,082   $  1,456,351
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Provision for loan losses                                     405,000        257,000        290,000
      Depreciation and amortization expense                         177,854        174,527        161,026
      Premium amortization less discount accretion
         on securities available-for-sale                            35,175         18,936         18,657
      Deferred income tax expense (benefit)                           6,498       (139,898)       (45,115)
      Amortization of loan fees and costs                            63,270         77,738         26,546
      (Increase) decrease in accrued interest receivable            123,145        165,113        (72,395)
      Increase (decrease) in accrued interest payable              (295,068)       (18,089)       225,716
      Increase (decrease) in other assets                          (105,101)       243,465         34,380
      Increase (decrease) in other liabilities                      (66,385)        24,684        (29,716)
                                                               ------------   ------------   ------------
         Net cash provided by operating activities                1,852,778      2,106,558      2,065,450
                                                               ------------   ------------   ------------
Cash flows from investing activities:
   Proceeds from maturities of securities available-for-sale     18,891,058     21,721,026      1,023,651
   Purchases of securities available-for-sale                   (20,123,476)   (14,023,328)      (800,000)
   Proceeds from maturities of securities held-to-maturity          446,685      1,092,490        721,395
   Purchases of nonmarketable equity securities                      (2,500)            --             --
   Increase in time deposits with other banks                            --       (299,000)            --
   Net increase in loans to customers                            (4,509,958)    (3,841,726)    (8,531,402)
   Purchases of premises and equipment                             (333,858)       (27,628)      (544,752)
                                                               ------------   ------------   ------------
         Net cash provided (used) by investing activities        (5,632,049)     4,621,834     (8,131,108)
                                                               ------------   ------------   ------------
Cash flows from financing activities:
   Net increase (decrease) in demand deposits, interest-
      bearing transaction accounts and savings accounts           5,557,327     (1,815,738)        94,148
   Net increase (decrease) in time deposits                      (1,357,879)     8,438,257      4,768,273
   Net increase (decrease) in short-term borrowings                (160,000)        30,000        240,000
   Cash dividends paid                                             (163,846)      (154,939)      (141,598)
   Purchase of treasury stock                                      (183,465)      (180,000)      (485,775)
   Sale of treasury stock                                             9,000         31,500         22,500
                                                               ------------   ------------   ------------
         Net cash provided by financing activities                3,701,137      6,349,080      4,497,548
                                                               ------------   ------------   ------------
Net increase (decrease) in cash and cash equivalents                (78,134)    13,077,472     (1,568,110)

Cash and cash equivalents, beginning of year                     21,903,132      8,825,660     10,393,770
                                                               ------------   ------------   ------------
Cash and cash equivalents, end of year                         $ 21,824,998   $ 21,903,132   $  8,825,660
                                                               ============   ============   ============
</TABLE>

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

                                       24

<PAGE>

                                  COMMUNITYCORP

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation - Communitycorp, a bank holding company, (the Company), and its
subsidiary, Bank of Walterboro (the Bank), provide commercial banking services
to domestic markets principally in Colleton and Charleston Counties, 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 consolidated 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 income 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
Company's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Company 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.

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. The Company places its deposits and correspondent accounts
with and sells its federal funds to high quality institutions. By policy, time
deposits are limited to amounts insured by the Federal Deposit Insurance
Corporation. Management believes credit risk associated with correspondent
accounts is not significant.

Securities Available-for-Sale - Investment securities available-for-sale are
carried at amortized cost and adjusted to estimated fair 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 fair 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.

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.

                                       25

<PAGE>

                                  COMMUNITYCORP

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Nonmarketable Equity Securities - Nonmarketable equity securities include the
Company's investments in the stock of the Federal Home Loan Bank, Community
Financial Services, Inc., and various community banks. The stocks are carried at
cost because they have no quoted market value and no ready market exists.
Investment in Federal Home Loan Bank stock is a condition of borrowing from the
Federal Home Loan Bank, and the stock is pledged to collateralize the
borrowings. Dividends received on Federal Home Loan Bank stock and Community
Financial Services, Inc. stock are included as a separate component in interest
income.

At December 31, 2002 and 2001, the investment in Federal Home Loan Bank stock
was $279,800. At December 31, 2002 and 2001, the investment in Community
Financial Services, Inc. stock was $50,575. At December 31, 2002 and 2001, the
investment in various community banks was $4,500 and $2,000, respectively.

Interest and Fees on Loans - Interest income on all loans is computed based upon
the unpaid principal balance. Interest income is computed using the simple
interest method and 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.

Allowance for Loan Losses - An allowance for 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.

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.

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 - 40 years; furniture and equipment - 5 to 10
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. 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.

                                       26

<PAGE>

                                  COMMUNITYCORP

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 and depreciable premises and equipment.

Retirement and Deferred Compensation Plans - The Company has a trusteed
noncontributory 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
$55,869, $44,731 and $47,218 in 2002, 2001, and 2000, respectively. The
Company's policy is to fund contributions to the profit-sharing plan in the
amount accrued by the Board of Directors. 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 makes
no matching employee contributions to this plan.

In addition, the Company has a nonqualified voluntary salary deferral plan for
certain officers of the Company. Under the plan, these officers may defer up to
25% of their compensation and earn interest on the deferred amount. Upon
retirement, the total amount deferred and interest earned is to be paid to each
participant over a period not exceeding fifteen years. Expenses charged to
earnings for the salary deferral plan were $34,280, $30,000 and $30,000 in 2002,
2001, and 2000, respectively.

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

Earnings Per Share - Earnings per share is calculated by dividing earnings by
the weighted-average number of common shares outstanding during the year. The
Company has no instruments which are considered common stock equivalents and
therefore, dilutive earnings per share is not presented.

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 2002, 2001, and 2000, the Company paid $2,934,550, $4,048,320 and
$3,352,926, respectively, for interest. Cash paid for income taxes was $929,787,
$652,185 and $724,000 in 2002, 2001, and 2000, respectively.

Supplemental noncash investing activities are as follows: During 2002, the Bank
reclassified loans totaling $313,148 as foreclosures of real estate and
repossessed assets. There were no loans reclassified as foreclosures of real
estate or repossessions during 2001.

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

                                       27

<PAGE>

                                  COMMUNITYCORP

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Comprehensive Income - Accounting principles generally require that recognized
revenue, expenses, gains, and losses be included in net income. Although certain
changes in assets and liabilities, such as unrealized gains and losses on
available-for-sale securities, are reported as a separate component of the
equity section of the balance sheet, such items, along with net income, are
components of comprehensive income.

The components of other comprehensive income and related tax effects are as
follows:

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                        -------------------------------
                                                                          2002       2001       2000
                                                                        --------   --------   ---------
<S>                                                                     <C>        <C>        <C>
Unrealized gains (losses) on available-for-sale securities              $117,503   $187,393   $ 341,235
Reclassification adjustment for gains (losses) realized in net income         --         --          --
                                                                        --------   --------   ---------
Net unrealized gains on securities                                       117,503    187,393     341,235

Tax effect                                                               (40,516)   (64,781)   (117,596)
                                                                        --------   --------   ---------
Net-of-tax amount                                                       $ 76,987   $122,612   $ 223,639
                                                                        ========   ========   =========
</TABLE>

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.

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

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

Reclassifications - Certain captions and amounts in the consolidated financial
statements of 2001 and 2000 were reclassified to conform with the 2002
presentation.

NOTE 2 - 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, 2002 and 2001 were approximately $613,000.
These requirements were satisfied by vault cash.

                                       28

<PAGE>

                                 COMMUNITYCORP

NOTE 3 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of securities available-for-sale
were:

<TABLE>
<CAPTION>
                                                             Gross Unrealized
                                               Amortized    -------------------   Estimated
                                                 Cost        Gains       Losses   Fair Value
                                              -----------   --------    -------   -----------
<S>                                           <C>           <C>         <C>       <C>
December 31, 2002
U.S. government agencies and corporations     $ 9,847,641   $ 84,959    $    --   $ 9,932,600
Obligations of state and local governments      2,617,444    110,646         36     2,728,054
                                              -----------   --------    -------   -----------

   Total                                      $12,465,085   $195,605    $    36   $12,660,654
                                              ===========   ========    =======   ===========

December 31, 2001
U.S. government agencies and corporations     $ 8,822,580   $ 72,745    $24,594   $ 8,870,731
Obligations of state and local governments      2,442,827     37,488      7,573     2,472,742
                                              -----------   --------    -------   -----------

   Total                                      $11,265,407   $110,233    $32,167   $11,343,473
                                              ===========   ========    =======   ===========

The amortized cost and estimated fair values of securities held-to-maturity
were:

December 31, 2002
U.S. government agencies and corporations     $    45,583   $  2,348    $    --   $    47,931
Obligations of state and local governments      3,004,696    103,870         --     3,108,566
                                              -----------   --------    -------   -----------

   Total                                      $ 3,050,279   $106,218    $    --   $ 3,156,497
                                              ===========   ========    =======   ===========

December 31, 2001
U.S. government agencies and corporations     $    81,972   $  3,146    $    --   $    85,118
Obligations of state and local governments      3,417,253     49,789     21,477     3,445,565
                                              -----------   --------    -------   -----------

   Total                                      $ 3,499,225   $ 52,935    $21,477   $ 3,530,683
                                              ===========   ========    =======   ===========
</TABLE>

The amortized cost and estimated fair values of securities available-for-sale
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.

                                                           December 31, 2002
                                                       -------------------------
                                                        Amortized    Estimated
                                                          Cost       Fair Value
                                                       -----------   -----------
Due in one year or less                                $   725,422   $   730,689
Due after one year but within five years                 8,844,790     8,940,635
Due after five years but within ten years                1,505,779     1,571,929
                                                       -----------   -----------

                                                        11,075,991    11,243,253
Mortgage-backed securities                               1,389,094     1,417,401
                                                       -----------   -----------

   Total                                               $12,465,085   $12,660,654
                                                       ===========   ===========

                                       29

<PAGE>

                                 COMMUNITYCORP

NOTE 3- INVESTMENT SECURITIES - (continued)

The amortized cost and estimated fair values of securities held-to-maturity
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.

                                                            December 31, 2002
                                                         -----------------------
                                                         Amortized    Estimated
                                                            Cost      Fair Value
                                                         ----------   ----------
Due in one year or less                                  $  250,123   $  251,783
Due after one year but within five years                  1,206,255    1,252,269
Due after five years but within ten years                 1,448,726    1,502,014
Due after ten years                                          99,592      102,500
                                                         ----------   ----------

                                                          3,004,696    3,108,566
Mortgage-backed securities                                   45,583       47,931
                                                         ----------   ----------

   Total                                                 $3,050,279   $3,156,497
                                                         ==========   ==========

At December 31, 2002 and 2001, investment securities with an amortized cost of
$12,535,701 and $11,317,415 and a fair value of $12,794,207 and $12,387,126,
respectively, were pledged as collateral to secure public deposits.

There were no sales of investment securities for the years ended December 31,
2002 and 2001.

NOTE 4 - LOANS RECEIVABLE

Loans consisted of the following:

                                                              December 31,
                                                       -------------------------
                                                          2002          2001
                                                       -----------   -----------
Real estate - construction                             $ 3,928,774   $ 6,312,748
Real estate - mortgage                                  32,052,444    24,844,649
Commercial and industrial                               27,010,050    25,868,360
Consumer and other                                      12,184,353    14,333,173
                                                       -----------   -----------

   Total gross loans                                   $75,175,621   $71,358,930
                                                       ===========   ===========

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, 2002 and 2001, management reviewed its
problem loan watch list and determined that no impairment on loans existed.

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, 2002 and 2001, management had placed loans totaling
$2,768,412 and $3,239,425, respectively, in nonaccrual status because the loans
were not performing as originally contracted. Loans ninety days or more past due
and still accruing interest were $1,927 and $26,492, at December 31, 2002 and
2001, respectively.

                                       30

<PAGE>

                                 COMMUNITYCORP

NOTE 4 - LOANS (continued)

Transactions in the allowance for loan losses are summarized below:

<TABLE>
<CAPTION>
                                                    Years ended December 31,
                                             ------------------------------------
                                                2002         2001         2000
                                             ----------   ----------   ----------
<S>                                          <C>          <C>          <C>
Balance, beginning of year                   $1,231,051   $1,173,832   $1,086,980
Provision charged to operations                 405,000      257,000      290,000
Recoveries on loans previously charged-off       18,928        9,367       14,749
Loans charged-off                              (335,777)    (209,148)    (217,897)
                                             ----------   ----------   ----------

Balance, end of year                         $1,319,202   $1,231,051   $1,173,832
                                             ==========   ==========   ==========
</TABLE>

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 consist of commitments to extend credit and standby
letters of credit. Commitments to extend credit are legally binding agreements
to lend to a customer at predetermined interest rates 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. A commitment involves, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheets. The
Company's exposure to credit loss in the event of nonperformance by the other
party to the instrument is represented by the contractual notional amount of the
instrument. Since certain commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. Letters of credit are conditional commitments issued to guarantee
a customer's performance to a third party and have essentially the same credit
risk as other lending facilities. Standby letters of credit often expire without
being used. The Company believes that through various sources of liquidity, it
has the necessary resources to meet obligations arising from these financial
instruments.

The Company uses the same credit underwriting procedures for commitments to
extend credit and standby letters of credit as it does for on-balance sheet
instruments. The credit worthiness of each borrower is evaluated and the amount
of collateral, if deemed necessary, is based on the credit evaluation.
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 Company is not involved in off-balance-sheet contractual relationships,
other than those disclosed in this report, that could result in liquidity needs
or other commitments or could significantly impact earnings.

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

                                                               December 31,
                                                         -----------------------
                                                            2002         2001
                                                         ----------   ----------

Commitments to extend credit                             $6,295,002   $4,366,691
Standby letters of credit                                   496,995      634,803

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, 2002, the Company was not committed to lend additional funds to
borrowers having loans in nonaccrual status.

                                       31

<PAGE>

                                 COMMUNITYCORP

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

                                                             December 31,
                                                      -------------------------
                                                          2002         2001
                                                      -----------   -----------

Land                                                  $   434,385   $   434,385
Building and land improvements                          1,687,173     1,679,749
Furniture and equipment                                 1,374,996     1,088,428
                                                      -----------   -----------

   Total                                                3,496,554     3,202,562
Less, accumulated depreciation                         (1,327,403)   (1,189,415)
                                                      -----------   -----------

   Premises and equipment, net                        $ 2,169,151   $ 2,013,147
                                                      ===========   ===========


NOTE 6 - DEPOSITS

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

Maturing In                                                             Amount
-----------                                                          -----------

   2003                                                              $53,787,454
   2004                                                                1,842,299
   2005                                                                  578,666
   2006                                                                  116,450
                                                                     -----------

      Total                                                          $56,324,869
                                                                     ===========

NOTE 7 - RELATED PARTY TRANSACTIONS

Certain parties (principally certain directors and officers 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 Company. 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 $1,894,200 and
$1,788,793 at December 31, 2002 and 2001, respectively. During 2002, $1,059,605
of new loans were made to related parties, and repayments totaled $954,198.

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 $36,500, $30,064, and
$51,690 for the years ended December 31, 2002, 2001, and 2000, respectively.

                                       32

<PAGE>

                                 COMMUNITYCORP

NOTE 8 - SHORT-TERM BORROWINGS

At December 31, 2002 and 2001, the Company had securities sold under agreements
to repurchase, which are classified as secured borrowings and generally mature
within one to seven day periods. Either party may cancel the arrangement without
penalty. Information concerning securities sold under agreements to repurchase
is summarized as follows:

                                                      Years ended December 31,
                                                      ------------------------
                                                          2002       2001
                                                        --------   --------

Average balance during the year                         $466,575   $575,836
Average interest rate during the year                       0.80%      4.29%
Maximum month-end balance during the year               $560,000   $640,000

The Company has an agreement with its safekeeping agent (an independent third
party) to pledge certain of their U.S. Government obligation securities as
collateral for the agreements. As of December 31, 2002, the par value and fair
value of the securities underlying the agreements were $400,000 and $401,000,
respectively.

NOTE 9 - UNUSED LINES OF CREDIT

As of December 31, 2002, the Company had unused lines of credit to purchase
federal funds from other financial institutions totaling $3,800,000. 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. The Company also has a credit availability agreement with the Federal
Home Loan Bank totaling 15 percent of the Bank's assets as of any quarter end.
As of December 31, 2002, the available credit totaled $17,367,000 and there were
no draws on this line.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

The Company is subject to claims and lawsuits which arise primarily in the
ordinary course of business. At December 31, 2002, management is not aware of
any pending or threatened litigation or unasserted claims that could result in
losses, if any, that would be material to the financial statements.

NOTE 11 - SHAREHOLDERS' EQUITY

In 2000, the Board of Directors approved the repurchase of shares of the
Company's outstanding stock at current market prices. At December 31, 2002 and
2001, the Company had repurchased 25,471 and 21,594 shares, respectively.

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 payable only from the undivided profits of the Bank. At December 31,
2002, the Bank's undivided profits were $8,824,319. The Bank is authorized to
pay cash dividends up to 100% of net income in any calendar year without
obtaining the prior approval of the Commissioner of Banking provided that the
Bank received a composite rating of one or two at the last Federal or State
regulatory examination. Under Federal Reserve Board regulations, the amounts of
loans or advances from the Bank to the parent company are also restricted.

                                       33

<PAGE>

                                 COMMUNITYCORP

NOTE 12 - OTHER OPERATING EXPENSES

Other operating expenses are summarized as follows:

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

Stationery, printing, and postage             $137,608   $137,675   $135,684
Advertising and promotion                       30,817     21,993     28,631
Professional fees                              122,027    118,154    128,892
Directors' fees                                 50,450     50,700     52,000
Telephone expenses                              34,725     33,800     25,311
ATM surcharges                                  61,745     68,965     42,908
ACH charges                                     36,763     32,319     30,053
Other                                          175,414    231,460    198,607
                                              --------   --------   --------

Total                                         $649,549   $695,066   $642,086
                                              ========   ========   ========

NOTE 13 - INCOME TAXES

Income tax expense included in the consolidated statements of operations is
summarized as follows:

                                                  Years ended December 31,
                                              ------------------------------
                                                2002       2001       2000
                                              --------   --------   --------
Currently payable:
   Federal                                    $730,499   $686,791   $667,355
   State                                        71,654     70,508     69,185
                                              --------   --------   --------
      Total current                            802,153    757,299    736,540
                                              --------   --------   --------
Change in deferred income taxes:
   Federal                                      17,137    (65,009)    68,549
   State                                       (63,893)   (10,108)     4,190
                                              --------   --------   --------
      Total deferred                           (46,756)   (75,117)    72,739
                                              --------   --------   --------
Income tax expense                            $755,397   $682,182   $809,279
                                              ========   ========   ========
Income tax expense is allocated as follows:
   To continuing operations                   $715,139   $617,401   $691,683
   To shareholders' equity                      40,258     64,781    117,596
                                              --------   --------   --------
      Income tax expense                      $755,397   $682,182   $809,279
                                              ========   ========   ========

Deferred income taxes are included in other assets at December 31, 2002 and
2001. Deferred income taxes result from temporary differences in the recognition
of certain items of income and expense for tax and financial reporting purposes.

                                       34

<PAGE>

                                 COMMUNITYCORP

NOTE 13 - INCOME TAXES (continued)

The gross amounts of deferred tax assets and deferred tax liabilities were as
follows:

                                                             December 31,
                                                         -------------------
                                                           2002       2001
                                                         --------   --------
Deferred tax assets:
   Allowance for loan losses                             $377,064   $405,224
   Deferred compensation                                   69,118     63,597
   Nonaccrual of interest income                           97,451     85,449
   Other                                                    8,543      3,142
                                                         --------   --------
      Total deferred tax assets                           552,176    557,412
                                                         --------   --------

Deferred tax liabilities:
   Accumulated depreciation                                66,932     65,670
   Securities available-for-sale                           67,450     27,192
                                                         --------   --------
      Total deferred tax liabilities                      134,382     92,862
                                                         --------   --------
      Net deferred tax asset                             $417,794   $464,550
                                                         ========   ========

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, 2002 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>
                                                          Years ended December 31,
                                                      -------------------------------
                                                        2002       2001       2000
                                                      --------   --------   ---------
<S>                                                   <C>        <C>        <C>
Tax expense at statutory rate                         $756,000   $634,143   $ 730,332
State income tax, net of federal income tax benefit     68,858     56,921      44,278
Tax-exempt interest income                             (86,793)   (94,675)   (108,226)
Disallowed interest expense                             12,329     19,017      24,284
Other, net                                             (35,255)     1,995       1,015
                                                      --------   --------   ---------
Total                                                 $715,139   $617,401   $ 691,683
                                                      ========   ========   =========
</TABLE>

NOTE 14 - 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:

                                       35

<PAGE>

                                 COMMUNITYCORP

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

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 typically for
a term of one day, and the carrying amount approximates the fair value.

Time Deposits with Other Banks - The carrying value of these instruments is a
reasonable estimate of 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. The carrying amount
of nonmarketable securities is a reasonable estimate of fair value since no
ready market exists for these securities.

Loans receivable - For certain categories of loans receivable, 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
issued on a short-term or floating rate basis.

                                       36

<PAGE>

                                  COMMUNITYCORP

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The carrying values and estimated fair values of the Company's financial
instruments were as follows:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                 -----------------------------------------------------
                                                            2002                        2001
                                                 -------------------------   -------------------------
                                                   Carrying     Estimated      Carrying     Estimated
                                                    Amount      Fair Value      Amount      Fair Value
                                                 -----------   -----------   -----------   -----------
<S>                                              <C>           <C>           <C>           <C>
Financial Assets:
   Cash and due from banks                       $ 4,772,998   $ 4,772,998   $ 3,841,132   $ 3,841,132
   Federal funds sold and securities purchased
      under agreements to resell                  17,052,000    17,052,000    18,062,000    18,062,000
   Time deposits with other banks                    299,000       299,000       299,000       299,000
   Securities available-for-sale                  12,660,654    12,660,654    11,343,473    11,343,473
   Securities held-to-maturity                     3,050,279     3,156,497     3,499,225     3,530,683
   Nonmarketable equity securities                   334,875       334,875       332,375       332,375
   Loans receivable                               75,175,621    76,133,267    71,358,930    71,776,009
   Accrued interest receivable                       788,666       788,666       911,811       911,811

Financial Liabilities:
   Demand deposit, interest-bearing
      transaction, and savings accounts          $46,294,890   $46,294,890   $40,737,563   $40,737,563
   Time deposits                                  56,324,869    56,434,220    57,682,748    58,072,289
   Short-term borrowings                             400,000       400,000       560,000       560,000
   Accrued interest payable                          422,502       422,502       717,570       717,570
</TABLE>

<TABLE>
<CAPTION>
                                                   Notional     Estimated      Notional     Estimated
                                                    Amount      Fair Value      Amount      Fair Value
                                                 -----------   -----------   -----------   -----------
<S>                                               <C>           <C>           <C>           <C>
Off-Balance Sheet Financial Instruments:
   Commitments to extend credit                   $6,295,002    $6,295,002    $4,366,691    $4,366,691
   Standby letters of credit                         496,995       496,995       634,803       634,803
</TABLE>

NOTE 15 - 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 capital for purposes of computing
the capital ratios consists of the sum of Tier 1 and Tier 2 capital. Total
regulatory minimum requirements are 4% for Tier 1 and 8% for total risk-based
capital.

                                       37

<PAGE>

                                  COMMUNITYCORP

NOTE 15 - REGULATORY MATTERS (continued)

The Bank is also required to maintain capital at a minimum level based on
average 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, 2002, 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.

<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, 2002
   Total capital (to risk-weighted assets)    $13,068,800   16.20%   $6,453,840   8.00%   $8,067,300   10.00%
   Tier 1 capital (to risk-weighted assets)    12,056,800   14.94     3,226,920   4.00     4,840,380    6.00
   Tier 1 capital (to average assets)          12,056,800   10.45     4,616,560   4.00     5,770,700    5.00

December 31, 2001
   Total capital (to risk-weighted assets)    $10,904,718   15.66%   $6,056,480   8.00%   $7,570,600   10.00%
   Tier 1 capital (to risk-weighted assets)     9,954,718   14.40     3,028,240   4.00     4,542,360    6.00
   Tier 1 capital (to average assets)           9,954,718    9.89     4,410,720   4.00     5,513,400    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.

NOTE 16 - COMMUNITYCORP (PARENT COMPANY ONLY)

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

Condensed Balance Sheets

                                             December 31,
                                      -------------------------
                                          2002          2001
                                      -----------   -----------
Assets
   Cash                               $    57,098   $    40,689
   Investment in banking subsidiary    12,184,146    10,955,850
   Nonmarketable equity securities          4,500         2,000
   Other assets                             3,433         3,572
                                      -----------   -----------
      Total assets                    $12,249,177   $11,002,111
                                      ===========   ===========
Shareholders' equity                  $12,249,177   $11,002,111
                                      ===========   ===========

                                       38

<PAGE>

                                  COMMUNITYCORP

NOTE 16 - COMMUNITYCORP (PARENT COMPANY ONLY) (continued)

Condensed Statements of Income

<TABLE>
<CAPTION>
                                                               Years ended December 31,
                                                         ------------------------------------
                                                            2002        2001          2000
                                                         ----------   ----------   ----------
<S>                                                      <C>          <C>          <C>
Income
   Dividends from banking subsidiary                     $  357,000   $  325,000   $  590,000
   Other income                                                 121           --           --
                                                         ----------   ----------   ----------
      Total income                                          357,121      325,000      590,000
                                                         ----------   ----------   ----------
Expenses                                                         --          290        8,205
                                                         ----------   ----------   ----------
Income before income taxes and equity in undistributed
   earnings of banking subsidiary                           357,121      324,710      581,795

Income tax expense (benefit)                                     40          (99)      (4,017)

Equity in undistributed earnings of banking subsidiary    1,151,309      978,273      870,539
                                                         ----------   ----------   ----------

Net income                                               $1,508,390   $1,303,882   $1,456,351
                                                         ==========   ==========   ==========
</TABLE>

                       Condensed Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                         Years ended December 31,
                                                                  -------------------------------------
                                                                      2002         2001         2000
                                                                  -----------   ----------   ----------
<S>                                                               <C>           <C>          <C>
Cash flows from operating activities
   Net income                                                     $ 1,508,390   $1,303,082   $1,456,351
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Equity in undistributed earnings of banking subsidiary    (1,151,309)    (978,273)    (870,539)
   Decrease in other assets                                               139        2,868       10,664
                                                                  -----------   ----------   ----------
         Net cash provided by operating activities                    357,220      327,677      596,476
                                                                  -----------   ----------   ----------
Cash flows from investing activities
   Purchase of nonmarketable equity securities                         (2,500)          --           --
                                                                  -----------   ----------   ----------
         Net cash used by investing activities                         (2,500)          --           --
                                                                  -----------   ----------   ----------
Cash flows from financing activities
   Cash dividends paid                                               (163,846)    (154,939)    (141,598)
   Purchases of treasury stock                                       (183,465)    (180,000)    (485,775)
   Sale of treasury stock                                               9,000       31,500       22,500
                                                                  -----------   ----------   ----------
         Net cash used by financing activities                       (338,311)    (303,439)    (604,873)
                                                                  -----------   ----------   ----------
Increase (decrease) in cash                                            16,409       24,238       (8,397)

Cash, beginning of year                                                40,689       16,451       24,848
                                                                  -----------   ----------   ----------
Cash, ending of year                                              $    57,098   $   40,689   $   16,451
                                                                  ===========   ==========   ==========
</TABLE>

                                       39

<PAGE>

                                  COMMUNITYCORP

BOARD OF DIRECTORS

George W. Cone                                         J. Barnwell Fishburne
Attorney                                               Owner, Fishburne & Co.
McLeod, Fraser & Cone                                  Real Estate

W. Roger Crook                                         Peden B. McLeod
Chief Executive Officer                                Chairman of the Board
   and President                                       Attorney
Bank of Walterboro                                     McLeod, Fraser & Cone

Steven Murdaugh                                        Harry L. Hill
Certified Public Accountant                            Retired

Harold M. Robertson                                    Robert E. Redfearn
Retired                                                Retired

--------------------------------------------------------------------------------

                                    OFFICERS

W. Roger Crook                    Mildred N. Whidden   William Steadman
Chief Executive Officer           Assistant Cashier    Executive Vice President
   and President                     and Head Teller

Gwendolyn P. Bunton               Andrea M. Davis      D.A. Strickland
Vice President and Cashier        Branch Manager       Branch Manager

Lynn H. Murdaugh                  M. Ellison Young     Joanne Copeland
Assistant Vice President          Vice President       Mortgage Loan Originator
   and Administrative Assistant

                                  Bruce Tate
                                  Loan Officer

STAFF MEMBERS

Brandy Ackerman                                        Annette Lyons
Cindy Ackerman                                         Sharon Milligan
Angela Adams                                           Natalie Powers
Jennifer Crosby                                        Pam O'Quinn
Melissa Dandridge                                      Rosemary Riddle
Betty Ford                                             Shelby Segura
Elizabeth Gray                                         Susan Smoak
Barbara Grigg                                          Melissa T. Smyly
Sharon Hillier                                         Allison Thompson
Debbie Hovis                                           Rose Walker
Stephanie Kelly                                        Kathie P. Whetsell
Joy Koth                                               Louie Whidden
Amy Leonard                                            Gina Williams
Amanda Lyons

                                       40

<PAGE>

                                  COMMUNITYCORP

CORPORATE DATA

ANNUAL MEETING:

The Annual Meeting of Shareholders of Communitycorp will be held at 6 p.m. on
Thursday, May 1, 2003 at Bank of Walterboro, 1100 North Jefferies Boulevard,
Walterboro, South Carolina.

CORPORATE OFFICE:                                  GENERAL COUNSEL:

P.O. Box 1707                                      McLeod, Fraser & Cone
1100 North Jefferies Blvd.                         P.O. Box 230
Walterboro, S.C.  29488                            Washington Street
(843) 549-2265                                     Walterboro, S.C. 29488

STOCK TRANSFER DEPARTMENT:                         INDEPENDENT AUDITORS:

Bank of Walterboro                                 Elliott Davis, LLC
P.O. Box 1707                                      1901 Main Street, Suite 1650
Walterboro, S.C. 29488                             Columbia, S.C. 29201

STOCK INFORMATION:

The Common Stock of Communitycorp is not listed on any exchange, nor is there a
recognized or established market. There is limited trading in the Company's
shares of Common Stock. Management believes that the Common Stock has traded for
a price per share of $45.00 during the past two years. There were approximately
580 shareholders of record as of December 31, 2002.

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 payable only from the undivided profits of the Bank.

FORM 10-K

The Company will furnish upon request, free of charge, copies of the Annual
Report and the Company's Report to the Securities and Exchange Commission (Form
10-K) by contacting Gwen P. Bunton, Vice President, Communitycorp, P.O. Box
1707, Walterboro, South Carolina 29488.

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

                                       41

<PAGE>

                                  COMMUNITYCORP

                                    SERVICES

                                 All Day Banking
                        American Express Travelers Checks
                                   ATM Service
                                  Bank By Mail
                             Bond Coupon Redemption
                                Business Checking
                     Canceled Checks Returned with Statement
                                 Cashiers Checks
                             Certificates of Deposit
                                 Christmas Clubs
                                Collection Items
                                Commercial Loans
                                 Direct Deposits
                           Discount Brokerage Service
                                Drive-In Service
                         Individual Retirement Accounts
                                Interest Checking
                                Letters of Credit
                              Money Market Accounts
                                  Money Orders
                                 Mortgage Loans
                                Night Depository
                              Overdraft Protection
                                Personal Checking
                            Personal Lines of Credit
                                 Personal Loans
                                 Regular Savings
                               Safe Deposit Boxes
                                 Senior Checking
                          Treasury, Tax & Loan Deposits
                               U.S. Savings Bonds
                              Visa and Master Card
                                 Wire Transfers

                  110 Forest Hills Road, Walterboro, S.C. 29488
             1100 North Jefferies Boulevard, Walterboro, S.C. 29488
                   6225 Savannah Highway, Ravenel, S.C. 29470
                                   Member FDIC

                                       42