Exhibit 13
















                         First National Bancshares, Inc.

                                       And

                       First National Bank of Spartanburg






                              [Insert company logo]












                                      2001

                                  ANNUAL REPORT





<PAGE>


                                   OUR MISSION






                               [Insert bank logo]








   "The mission of First National Bank of Spartanburg is to be the premier bank
      and a leading corporate citizen in our markets by providing quality,
      competitive financial products and services with a team of friendly,
                          well-trained professionals."





<PAGE>

                         FIRST NATIONAL BANCSHARES, INC.

                             LETTER TO SHAREHOLDERS


                                                  March 15, 2002




Dear Fellow Shareholders:

On behalf of our board of directors, we are pleased to report an outstanding
year for your company, only in its second year of banking operations. Total
assets increased by 41.2% to $82.3 million at December 31, 2001 compared with
$58.3 million at December 31, 2000. Loans grew to a year-end total of $63.9
million, an increase of 69.5% over total loans at December 31, 2000 of $37.7
million. Deposits were $70.9 million at December 31, 2001 compared to $46.4
million at December 31, 2000, or an increase of 52.8%. While significant changes
have taken place in our world economy, we expect to continue our growth in the
coming year as leading economic indicators show signs of a possible economic
recovery in 2002.

Net income for the fourth quarter was $9,219 compared to a net loss of $233,670
for the same period last year. Net interest income for the quarter rose to
$627,082 or an increase of 42.7% over net interest income of $439,493 for the
same period last year, primarily due to strong loan demand at all three
locations. Noninterest income for the quarter was $150,840 or an increase of
599% over the $21,581 earned during the same period last year, primarily due to
increases in service charges from new account growth and significant mortgage
loan refinancing activity. Net loss for the year was $203,248 or $.17 per share
compared to a net loss of $665,132 or $.55 per share for the previous year.

We are pleased to announce our first quarter of profitability after just
eighteen months of operation. We have experienced exceptional loan and deposit
growth during the past twelve months and continue to increase our customer base.
We celebrated several significant milestones during 2001, including the grand
opening of our permanent main office facility in February and the first-year
anniversary of the opening of our Westside office on Reidville Road in July. We
opened our third office located in the high-growth Boiling Springs community in
August and are seeing results significantly above our expectations after just a
short time.

                                       1

<PAGE>

During October, we announced the availability of our online commercial cash
management product to allow our business banking customers to manage their
accounts over the Internet. This service offering supplements our personal
online banking product which debuted in February of 2001. We have made
significant investments in these and other service delivery channels including
our branch network, onsite ATMs, debit cards and 24-hour telephone banking to
build a strong foundation designed to yield sizeable benefits for us in the
years ahead.

While only in its second year of operation, First National's strong growth trend
is indicative of our outstanding personnel. To accommodate the growth that we
have experienced, we have selected the most qualified personnel available for
each position. Our management team consists of some of the most experienced
account officers in Spartanburg County who are known for providing superior
service to our customers. This excellent group of local decision makers is what
has set us apart from the large money center banks from outside the Spartanburg
area.

We are extremely proud of the information presented to you in this annual report
and look forward to even greater success in the years to come. Thank you for
your continued support and involvement; you make our consistent success possible
with your loyalty and encouragement. Please continue to call on us for all of
your banking needs.



/s/ Jerry L. Calvert                                   /s/ Norman F. Pulliam

Jerry L. Calvert                                        Norman F. Pulliam
President and CEO                                       Chairman


                              [Insert company logo]

                                       2
<PAGE>

                         FIRST NATIONAL BANCSHARES, INC.
                              FINANCIAL HIGHLIGHTS



The information presented below should be read in conjunction with the
consolidated financial statements, the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained elsewhere in this report.
<TABLE>
<CAPTION>


                                                                            2001                   2000              % Change
                                                                   ----------------------- ---------------------- ----------------

<S>                                                                     <C>                     <C>                   <C>
Loans                                                                   $63,868,951             $37,670,154           69.55%
Deposits                                                                $70,918,406             $46,386,471           52.89%
Total Assets                                                            $82,294,257             $58,295,496           41.17%
Shareholders' Equity                                                    $10,757,580             $10,974,384           (1.98%)

Loan Loss Allowance                                                       $800,303               $470,893             69.95%
Loan Loss Allowance to Total Loans                                         1.25%                   1.25%               0.00%
Loan to Deposit Ratio                                                      90.06%                 81.21%              10.90%

Equity/Assets                                                              13.07%                 18.83%             (30.56%)
Book Value per Share                                                       $8.96                   $9.15              (2.08%)
Closing Stock Price at Yearend                                             $10.80                 $10.50               2.86%
Price/Book Value                                                            120%                   115%                4.35%
Shares Outstanding                                                       1,200,000               1,200,000             0.00%

Net Loss for the Year                                                    ($203,248)             ($665,132)           (69.44%)
Net Loss per Share for the Year                                           ($0.17)                 ($0.55)            (69.44%)
Net Interest Income for the Year                                         $2,179,308             $1,179,166            84.82%
Noninterest Income for the Year                                           $347,856                $35,668             875.26%
Net Interest Margin for Year                                               3.29%                   4.20%             (21.67%)

Total Risk-Based Capital Ratio (8% minimum)                                17.45%                 26.93%             (35.20%)
Tier 1 Risk-Based Capital Ratio (4% minimum)                               16.23%                 25.81%             (37.12%)
Tier 1 Capital Leverage Ratio (4% minimum)                                 13.21%                 29.68%             (55.49%)
</TABLE>


                                       3

<PAGE>


                         FIRST NATIONAL BANCSHARES, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS


DISCUSSION OF FORWARD-LOOKING STATEMENTS

         Management's Discussion and Analysis of Financial Condition and Results
of Operations and other portions of this annual report contain certain
"forward-looking statements" concerning our future operations. Management
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and is including this statement for the
express purpose of availing ourselves of protections of such safe harbor with
respect to all "forward-looking statements" contained in our Annual Report. We
have used "forward-looking statements" to describe future plans and strategies
including our expectations of our future financial results. Management's ability
to predict results or the effect of future plans or strategies is inherently
uncertain. Factors which could affect actual results include interest rate
trends, the general economic climate in our market area, the State of South
Carolina and the country as a whole, our ability to control costs and expenses,
our ability to efficiently incorporate acquisitions into our operations and our
ability to offer competitive products and pricing, manage loan delinquency
rates, and react to changes in federal and state regulation. These factors
should be considered in evaluating the "forward-looking statements," and undue
reliance should not be placed on such statements.

GENERAL

         First National Bancshares, Inc. was organized on July 14, 1999, and our
initial principal activities were related to our organization, conducting our
initial public offering, and pursuing regulatory approvals from the Office of
the Comptroller of the Currency, the FDIC, and the Federal Reserve Board to open
our wholly-owned subsidiary, First National Bank of Spartanburg. We completed
our initial public offering on February 10, 2000 and received all final
regulatory approvals in the first quarter of 2000 after which the bank opened
for business on March 27, 2000 at a temporary banking location. The bank opened
its Westside office on July 14, 2000, its permanent main office at 215 N. Pine
Street on February 5, 2001 and its Boiling Springs office on August 24, 2001.

NATIONAL AND ECONOMIC EVENTS

         Nationally, during most of 2001, the United States experienced a
slowing economy following a tenth year of expansion. During the year, the
economy was also affected by lower returns and expectations of the stock
markets. Economic data led the Federal Reserve to begin an aggressive program of
rate cutting, which moved the Federal Funds rate down 11 times during 2001 for a
total reduction of 425 basis points, bringing the Federal Funds rate to its
lowest level in 40 years.

         Despite sharply lower short-term rates, stimulus to the economy has
been muted because the yield curve has steepened and consumer demand and
business investment activity has been weak. The financial markets are operating
now under very low historical interest rates. Under these unusual conditions, an
economic stimulus plan is expected to be passed by Congress and further interest
rate cuts by the Federal Reserve are possible. We continue to believe that the
markets we serve generally perform better than national markets, even in times
of recession.

         Management believes that the economic impact of the terrorist attacks
of September 11, 2001 did not materially affect our operations during 2001. It
is evident from recent economic data that the U.S. economy was affected
significantly by these events. The extent and duration of the economic impact
from the attacks are not predictable but could affect consumer confidence and
the financial activities of retail and business customers. Prior to these
events, many economists were predicting that the U.S. had been in a recession.
Official economic data released in November 2001 confirms that the U.S. has been
in a recession for several months and it is likely that recovery will not occur
until sometime later in 2002.


                                       4

<PAGE>


INCOME STATEMENT REVIEW

General
         Our net loss for the period ended December 31, 2001 was $203,248 or a
net loss of $.17 per share compared to our net loss for the period ended
December 31, 2000 of $665,132 or $.55 per share. Prior to opening the bank on
March 27, 2000, we were involved in activities related to our organization and
of our subsidiary bank including obtaining the required regulatory approvals,
hiring qualified personnel, implementing operating procedures and taking other
actions necessary for a successful bank opening. These activities contributed to
the loss incurred for the period ended December 31, 2000. We incurred a total of
$402,480 in organizational expenses from inception (July 14, 1999) to the bank's
opening date, of which $156,457 was incurred during the period ended December
31, 2000. These costs were expensed when incurred in accordance with SOP 98-5,
"Reporting on the Costs of Start-Up Activities."

Net Interest Income
         Net interest income, the largest component of our income, was
$2,179,308 for the period compared to $1,179,166 in 2000 or an increase of
84.8%. Interest income for 2001 of $5,064,917 consisted of $4,178,305 on loans,
$556,555 in investments and $330,057 on federal funds sold. Interest income for
the year 2000 of $2,331,790 includes $147,517 earned on stock subscription
deposits received prior to opening the bank. The remainder of interest income
for the period includes $1,373,801 on loans; and $810,472 on investments and
federal funds sold.

         The level of net interest income is determined by balances of earning
assets and successfully managing the net interest margin. Changes in interest
rates paid on assets and liabilities, the rate of growth of the asset and
liability base, the ratio of interest-earning assets to interest-bearing
liabilities and management of the balance sheet's interest rate sensitivity all
factor into changes in net interest income.

          Interest expense was $2,885,609 for the period ended December 31,
2001; interest expense of $1,152,624 for the period ended December 31, 2000
includes $6,481 related to the line of credit we used to fund organizational
expenses incurred prior to opening the bank. The remainder of interest expense
for the period of $1,146,143 was related to deposit accounts.

         The following table sets forth, for the years ended December 31, 2001
and 2000, information related to our average balance sheet and average yields on
assets and average costs of liabilities. We derived these yields by dividing
income or expense by the average balance of the corresponding assets or
liabilities. We derived average balances from the daily balances throughout the
periods indicated.
<TABLE>
<CAPTION>

                               Average Balances, Income and Expenses, and Rates (in $000's)

                                       For the year ended December 31,2001       For the year ended December 31,2000
                                       -----------------------------------       -----------------------------------

                                        Average       Income/      Yield/        Average        Income/      Yield/
                                        Balance       Expense       Rate         Balance       Expense        Rate
                                        -------       --------      ----         -------      ---------       ----

<S>                                    <C>         <C>         <C>             <C>            <C>          <C>
Federal funds sold                        7,162       330         4.61%           8,968          595          6.63%

Investment securities                     9,156       557         6.08%           5,689          363          6.38%
Loans                                    49,999     4,178         8.36%          13,568        1,374         10.13%
                                         ------     -----         -----          ------        -----        ------
     Total earning assets                66,317     5,065         7.64%          28,225        2,332          8.26%
                                         ======     =====         =====          ======        =====        ======

NOW accounts                              4,537       110         2.42%           1,092           39          3.57%
Savings & money market                   10,757       394         3.66%           3,023          171          5.66%
Time deposits                            39,935     2,382         5.96%          13,124          936          7.13%
                                         ------     -----         -----          ------        ------       -------
     Total interest-bearing deposits     55,229     2,886         5.22%          17,239         1,146         6.65%
                                         ======     =====         =====          ======        ======       =======

Net interest spread                                               2.42%                                       1.61%
Net interest income/margin                                        3.29%                                       4.20%


</TABLE>

                                       5
<PAGE>


         Our net interest spread was 2.42% for the year ended December 31, 2001
as compared to 1.61% for the year ended December 31, 2000. The net interest
spread is the difference between the yield we earn on our interest-earning
assets and the rate we pay on our interest-bearing liabilities.

         Our consolidated net interest margin for the period ended December 31,
2001 was 3.29% as compared to 4.20% for the year ended December 31, 2000. During
2001, earning assets averaged $66.3 million as compared to $28.2 million in
2000. The net interest margin is calculated as net interest income divided by
year-to-date average earning assets.

         In pricing deposits, we considered our liquidity needs, the direction
and levels of interest rates and local market conditions. As such, higher rates
have been paid initially to attract deposits.

Rate/Volume Analysis
         Net interest income can be analyzed in terms of the impact of changing
rates and changing volume. The following table sets forth the effect which the
varying levels of earning assets and interest-bearing liabilities and the
applicable rates have had on changes in net interest income for the periods
presented. As 2000 was our first period of operations, we have only included the
table containing the changes between 2001 and 2000.

<TABLE>
<CAPTION>

                   ------------------------------------------ ----------------------------------
                   Year Ended December 31, 2001                       Change Related to
                            (Dollars in Thousands)
                   ------------------------------------------ ----------------------------------
                                                               Volume      Rate     Net Change
                   EARNING ASSETS:
<S>                                                           <C>          <C>       <C>
                   Federal funds sold                         $    (83)    (182)     $ (265)
                   Investment securities                             11     (17)         194
                   Loans                                          3,045    (241)     $ 2,804
                                                               --------   ------     -------
                          Total earning assets                $   3,173    (440)     $ 2,733


                   INTEREST BEARING LIABILITIES
                   Deposits                                   $  2,027    (287)     $ 1,740

                           Net interest income                $  1,146    (153)     $   993
                                                              ========   ======     =======
</TABLE>

Provision for Loan Losses
       Included in the losses for each of the periods ended December 31, 2001
and 2000 is a non-cash expense of $335,576 and $470,893, respectively, related
to the provision for loan losses. The loan loss reserve was $800,303 and
$470,893 as of December 31, 2001 and 2000 or 1.25% of gross loans in both years.
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. 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 accurate. Because of the
inherent uncertainty of assumptions made during the evaluation process, there
can be no assurance that loan losses in future periods will not exceed the
allowance for loan losses or that additional allocations will not be required.
For the year ended December 31, 2001, we reported net charge-offs of $6,166.
There were no loans charged off during the year ended December 31, 2000.

Noninterest Income and Expenses
         Noninterest income in 2001 was $347,856, an increase of 875% over
noninterest income of $35,668 in 2000. This increase was primarily due to
increases in service charges on deposit accounts and additional loan fees
received on the origination of mortgage loans, primarily due to significant
mortgage refinancing activity.

         Noninterest expense was $2,418,836 for 2001 as compared to $1,409,073
in 2000. A majority of the increased expenditures reflects the cost of
additional personnel hired to support our growth and the opening of our


                                       6
<PAGE>


Boiling Springs office. The most significant item included in noninterest
expenses is salaries and employee benefits which totaled $1,303,762 in 2001 as
compared to $768,574 in 2000. Occupancy and equipment expense increased to
$359,479 in 2001 from $212,476 in 2000 or an increase of 69.2%, primarily due to
the expenses associated with the new main office facility opened in February of
2001 and the branch facilities opened in July of 2000 and August of 2001. Public
relations expense increased by 89% to $208,026 for 2001 as compared to $110,072
in 2000, primarily due to increased community relations expenditures and
expansion of print and television media advertising as a result of the
increasing customer base. In addition, noninterest expense for 2000 includes
$156,457 in organizational expenses related to the remaining months of the
organizational phase which ended when the bank opened for business on March 27,
2000.

         Included in the line item "other expenses" which increased $72,490 or
51% between 2001 and 2000 are charges for insurance premiums; postage, printing
and stationery expense; and various customer-related expenses. A majority of
these items are related directly to the normal operations of our bank and are
related to the increase in assets, the higher level of transaction volume and
the higher number of customer accounts.


BALANCE SHEET REVIEW

         General At December 31, 2001, the end of our first full year of banking
operations, we had total assets of $82,294,257 or an increase of 41.2% over
total assets of $58,295,496 at December 31, 2000. Assets at December 31, 2001
and 2000 consisted of cash and due from banks of $381,844 and $994,505,
respectively; federal funds sold of $929,000 and $7,990,000, respectively;
securities available for sale of $12,407,758 and $8,022,471, respectively;
premises and equipment, net of $4,506,144 and $3,321,854, respectively; loans,
net of unearned income, of $63,868,951 and $37,670,154, respectively and other
assets of $946,863 and $767,405, respectively. We continue to decrease the level
of federal funds sold in order to fund loan growth.

         Our liabilities at December 31, 2001 and 2000 were $71,536,677 and
$47,321,112, respectively and consisted of deposits of $70,918,406 and
$46,386,471, respectively and other liabilities of $618,271 and $934,641,
respectively. Shareholders' equity at December 31, 2001 was $10,757,580 as
compared to shareholders' equity at December 31, 2000 of $10,974,384.

Investments
         At December 31, 2001, the investment securities portfolio represented
approximately 16% of our earning assets at $12,407,758. We were invested in U.S.
Government agency securities and mortgage-backed securities with a fair value of
$12,407,758 and an amortized cost of $12,353,825, for an unrealized gain of
$53,933.

         Contractual maturities and yields on our investments (all available for
sale) at December 31, 2001 are shown in the following table (dollars in
thousands). Expected maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>



                                                       After one but
                                Within                 Within five              Over
                               one year     Yield         Years     Yield   Five years    Yield      Total       Yield

<S>                        <C>           <C>       <C>           <C>      <C>         <C>        <C>               <C>
U.S. Government agencies      $   1,010     6.60%   $     1,505    4.74%    $  1,996      2.72% $    4,511        4.26%
Mortgage-backed securities          ---      ---            ---    ----        7,897      5.97%      7,897        5.97%

                               --------------------- ----------------------- ------------------- -----------------------
            Total             $   1,010     6.60%   $     1,505    4.74%    $  9,893      5.31% $   12,408        5.35%
</TABLE>


         At December 31, 2001, short-term investments in federal funds sold on
an overnight basis comprised 1.2% of total earning assets at $929,000 as
compared to $7,990,000 or 14.8% of total earning assets at December 31, 2000.


                                       7
<PAGE>


As the bank continues to grow, it is expected that there will be continue to be
a shift from overnight investments into the loan portfolio, primarily, and into
the investment securities portfolio, secondarily.

Loans
         Since loans typically provide higher interest yields than do other
types of interest earning assets, it is our intent to channel a substantial
percentage of our earning assets into the loan portfolio. Average loans for the
years ended December 31, 2001 and 2000 were $50.0 million and $13.6 million,
respectively. Total loans outstanding at December 31, 2001 and 2000 were
$63,868,951 and $37,670,154, respectively, before allowance for loan losses.

         The following table summarizes the composition of the loan portfolio at
December 31:
<TABLE>
<CAPTION>
                                                               2001                                 2000
                                                               ----                                 ----
                                                     Amount            % of Total         Amount          % of Total

<S>                                           <C>                            <C>      <C>                      <C>
   Commercial and industrial                  $       10,095,665             15.81%   $     8,033,469          21.33%
   Commercial secured by real estate                  38,344,136             60.04%        22,017,360          58.45%
   Real estate--residential mortgages                 11,832,317             18.53%         5,251,227          13.94%
   Installment and other consumer loans                3,713,501              5.81%         2,453,250           6.51%
   Unearned income                                      (116,668)             (.19%)          (85,152)          (.23%)
                                               -----------------        -----------      ------------     -----------
     Total loans, net of unearned income              63,868,951            100.00%        37,670,154         100.00%

   Less--allowance for loan losses                      (800,303)                            (470,893)
                                               -----------------                         ------------

         Total loans, net                     $       63,068,648                       $   37,199,261
                                               =================                        =============
</TABLE>

         The principal component of our loan portfolio at year-end 2001 and 2000
was loans secured by real estate mortgages. Due to the short time the portfolio
has existed, the current mix of loans may not be indicative of the ongoing
portfolio mix. Management will attempt to maintain a relatively diversified loan
portfolio to help reduce the risk inherent in concentration of collateral.

Provision and Allowance for Loan Losses
         We have developed policies and procedures for evaluating the overall
quality of our credit portfolio and the timely identification of potential
credit problems. Management's judgment as to the adequacy of the allowance is
based on a number of assumptions about future events, which it believes to be
reasonable, but which may or may not be valid. Based on our judgments,
evaluation, and analysis of the loan portfolio, we consider the allowance for
loan losses to be adequate. However, there can be no assurance that charge-offs
in future periods will not exceed the allowance for loan losses as estimated at
any point in time or that provisions for loan losses may be significant to a
particular accounting period.

         We have established an allowance for loan losses through a provision
for loan losses charged to expense on our statement of operations. The allowance
represents an amount which we believe will be adequate to absorb probable losses
on existing loans that may become uncollectible. Our judgment in determining the
adequacy of the allowance is based on evaluations of the collectibility of
loans, including consideration of factors such as the balance of impaired loans;
the quality, mix and size of our overall loan portfolio; economic conditions
that may affect the borrower's ability to repay; the amount and quality of
collateral securing the loans; our historical loan loss experience and a review
of specific problem loans. We adjust the amount of the allowance periodically
based on changing circumstances as a component of the provision for loan losses.
We charge recognized losses to the allowance and add subsequent recoveries back
to the allowance.

         We do not allocate the allowance for loan losses to specific categories
of loans but evaluate the adequacy on an overall portfolio basis utilizing our
credit grading system which we apply to each loan. Due to our limited operating
history, the provision for loan losses has been made primarily as a result of
management's assessment of general loan loss risk as the bank recorded its first
loans.

         At December 31, 2001 and 2000, the allowance for loan losses was
$800,303 and $470,893, respectively, or 1.25% of outstanding loans, net of
unearned income, of $63,868,951 and $37,670,154,


                                       8
<PAGE>

respectively. During the year ended December 31, 2001, we charged off one loan
and recorded a loss of $6,166. There were no loans charged off during the year
ended December 31, 2000.

         At December 31, 2001, we had one loan of approximately $48,000 that was
on nonaccrual status. We classified this loan during the second quarter of 2001.
There were no loans on nonaccrual status at December 31, 2000. Generally, a loan
is placed on nonaccrual status when it becomes 90 days past due as to principal
or interest, or when management believes, after considering economic and
business conditions and collection efforts, that the borrower's financial
condition is such that collection of the loan is doubtful. A payment of interest
on a loan that is classified as nonaccrual is recognized as income when
received.

Maturities and Sensitivity of Loans to Changes in Interest Rates
         The information in the following table is based on the contractual
maturities of 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. Actual
repayments of loans may differ from maturities reflected below because borrowers
have the right to prepay obligations with or without prepayment penalties.

         The following table summarizes the loan maturity distribution, by type,
and related interest rate characteristics at December 31, 2001 (dollars in
thousands):
<TABLE>
<CAPTION>
                                                     After one but
                                        One year     Within five         After
                                         or less        Years          five years      Total
                                         -------     ------------      ----------      -------
<S>                                   <C>           <C>            <C>            <C>
         Commercial                     $      7,026  $     2,952    $     118      $    10,096

         Real estate - construction            3,428          192            0            3,620

         Real estate - mortgage                7,352       32,516        6,688           46,556

         Consumer and other                    1,462        2,085          167            3,714
                                           ---------     --------      -------          -------

         Total loans                    $     19,268   $    37,745   $   6,973      $    63,986
                                           ---------     --------      -------          -------
         Unearned income, net                                                       $      (117)
                                                                                         ------

         Total loans, net of unearned income                                        $    63,869
                                                                                         ======
         Loans maturing after one year with:
         Fixed interest rates                                                       $    29,704
         Floating interest rates                                                    $    15,014
</TABLE>

Deposits and Other Interest-Bearing Liabilities
         Our primary source of funds for loans and investments is our deposits.
Average total deposits for the years ended December 31, 2001 and 2000 were $59.9
million and $18.5 million, respectively and average interest-bearing deposits
were $55.2 million and $17.2 million, respectively.

         National and local market trends over the past several years suggest
that consumers have moved an increasing percentage of discretionary savings
funds into investments such as annuities and stock and fixed income mutual
funds. Management believes that conditions in 2001 were favorable for deposit
growth and that factors such as the low returns on investments and mutual funds
may have increased traditional deposit inflows during 2001.


                                       9
<PAGE>
<TABLE>
<CAPTION>
         The following is a table of deposits by category at December 31
(dollars in thousands):

                                                            2001                        2000
                                                            ----                        ----
                                                    Amount         Percent        Amount      Percent
                                                    ------         -------        ------      -------
<S>                                           <C>                       <C>        <C>            <C>
Demand deposit accounts                       $      6,558          9.25%      $    3,020     6.51%
NOW accounts                                         7,120         10.04%           2,966     6.39%
Money market accounts                               11,108         15.66%           9,022    19.45%
Savings accounts                                       807          1.14%             260     0.56%
Time deposits less than $100,000                    25,728         36.28%          18,715    40.35%
Time deposits of $100,000 or more                   19,597         27.63%          12,403    26.74%
                                                    ------         ------          ------    ------

Total deposits                                $    $70,918        100.00%         $46,386   100.00%
                                                   -------        -------         -------   -------
</TABLE>


         Core deposits, which exclude time deposits of $100,000 or more, provide
a relatively stable funding source for our loan portfolio and other earning
assets. Our core deposits were $51.32 million and $33.98 million at December 31,
2001 and 2000, respectively. Our loan-to-deposit ratio was 90.1% and 81.2% at
year-end 2001 and 2000, respectively. The maturity distribution of our time
deposits of $100,000 or more at December 31, 2001 and 2000 is as follows:
<TABLE>
<CAPTION>

                                                        2001                       2000
                                                        ----                       ----
                                               (Dollars in thousands)     (Dollars in thousands)
                                               ----------------------     ----------------------

<S>                                            <C>                      <C>
     Three months or less                      $              8,102     $           1,068
     Over three through twelve months                        10,984                10,432
     Over twelve months                                         511                   903
                                               --------------------     -----------------
     Total                                     $             19,597     $          12,403
                                               ====================     =================
</TABLE>



Short-term Borrowings

         As of December 31, 2001, we had no outstanding balances under
short-term borrowings. We did have short-term lines of credit with correspondent
banks to purchase unsecured federal funds totaling $5,000,000. The interest rate
on any borrowings under these lines would be the prevailing market rate for
federal funds purchased. We also have the ability to borrow up to 10% of our
total assets from the Federal Home Loan Bank of Atlanta as of December 31, 2001.
Borrowings under this arrangement can be made with various terms and repayment
schedules and with fixed or variable rates of interest. The borrowings under
this arrangement are available by pledging collateral and may require additional
purchases of stock in the FHLB.

         Until March 27, 2000, we had a line of credit with a bank at the prime
rate minus 1/2% that was primarily used to fund the organizational and start-up
costs of the bank. The maximum amount of borrowings outstanding at any month end
was $490,000 at January 31, 2000. The average rate paid on the short-term
borrowings was 8.2%.


CAPITAL RESOURCES

         Total shareholders' equity amounted to $10,757,580 at December 31, 2001
and $10,974,384 at December 31, 2000. The decrease between 2000 and 2001
primarily resulted from the net loss incurred during 2001.

         The following table shows the return on average assets (net income
divided by average total assets), return on average equity (net income divided
by average equity), and equity to assets ratio (average equity divided by
average total assets) for 2001 and 2000. Since our inception, we have not paid
cash dividends.


                                       10
<PAGE>

                                                  2001        2000

       Return on average assets                  -0.28%       -1.68%

       Return on average equity                  -1.87%       -5.91%

       Equity to assets ratio                    13.99%       28.37%


         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 epxosures, adjusted
for risk weights ranging from 0% to 100%. The Federal Reserve guidelines also
contain an exemption from the capital requirements for bank holding companies
with less than $150 million in consolidated assets. Because we had less than
$150 million in assets, the company is not currently subject to these
guidelines. However, the bank falls under these rules as set per bank regulatory
agencies.

         Under the capital adequacy guidelines, capital is classified into two
tiers. These guidelines require an institution to maintain a certain level of
Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of
common stockholders' equity, excluding the unrealized gain or loss on securities
available for sale, minus certain intangible assets. In determining the amount
of risk-weighted assets, all assets, including certain off-balance sheet assets,
are multiplied by a risk-weight factor of 0% to 100% based on the risks believed
inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus
the general reserve for loan losses subject to certain limitations. The bank is
also required to maintain capital at a minimum level based on total average
assets, which is known as the Tier 1 leverage ratio.

         We are both subject to various regulatory capital requirements
administered by the federal banking agencies. Under these capital guidelines, we
must maintain a minimum total risk-based capital of 8%, with at least 4% being
Tier 1 capital. In addition, we must maintain a minimum Tier 1 leverage ratio of
at least 4%. To be considered "well-capitalized", we must maintain total
risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a
leverage ratio of at least 5%.

         The following table sets forth the company's and the bank's various
capital ratios at December 31, 2001 and 2000. At December 31, 2001 and 2000, we
both were in compliance with each of the applicable regulatory capital
requirements and were considered to be "well capitalized" at the bank level.


                                    2001                        2000
                                    ----                        ----

                              The           The           The          The
                            company         bank        company        bank
                            -------         ----        -------        ----



Total risk-based capital     17.45%        15.89%       26.93%        24.56%

Tier 1 risk-based capital    16.23%        14.68%       25.81%        26.97%

Leverage capital             13.21%        11.95%       29.68%        23.45%


         We believe that capital is sufficient to fund the activities of the
bank in its initial stages of operation and that the rate of asset growth will
not negatively impact the capital base. As of December 31, 2001, there were no
significant firm commitments outstanding for capital expenditures.


                                       11
<PAGE>


EFFECT OF INFLATION AND CHANGING PRICES

         The effect of relative purchasing power over time due to inflation has
not been taken into effect in our financial statements. Rather, the statements
have been prepared on an historical cost basis in accordance with generally
accepted accounting principles.

         Unlike most industrial companies, the assets and liabilities of
financial institutions such as our company and bank are primarily monetary in
nature. Therefore, the effect of changes in interest rates will have a more
significant impact on our performance than will the effect of changing prices
and inflation in general. In addition, interest rates may generally increase as
the rate of inflation increases, although not necessarily in the same magnitude.
As discussed previously, we seek to mange the relationships between interest
sensitive assets and liabilities in order to protect against wide rate
fluctuations, including those resulting from inflation.


OFF-BALANCE SHEET RISK

         Through the operations of our bank, we have made contractual
commitments to extend credit with off-balance sheet risk in the ordinary course
of our business activities to meet the financing needs of customers. These
commitments are legally binding agreements to lend money at predetermined
interest rates for a specified period of time and generally have fixed
expiration dates or other termination clauses. We use the same credit and
collateral policies in making these commitments as we do for on-balance sheet
instruments.

         We evaluate each customer's creditworthiness on a case-by-case basis
and obtain collateral, if necessary, based on our credit evaluation of the
borrower. In addition to commitments to extend credit, we also issue standby
letters of credit which are assurances to a third party that they will not
suffer a loss if our customer fails to meet its contractual obligation to the
third party. The credit risk involved in the underwriting of letters of credit
is essentially the same as that involved in extending loan facilities to
customers.

         At December 31, 2001, we had issued commitments to extend credit of
$25.6 million through various types of commercial and consumer lending
arrangements, of which the majority are at variable rates of interest. Standby
letters of credit totaled $81,151 at December 31, 2001. Past experience
indicates that many of these commitments to extend credit will expire unused.
However, we believe that we have adequate sources of liquidity to fund
commitments that may be drawn upon by borrowers.

         Except as disclosed in this report, we are not involved in off-balance
sheet contractual relationships, unconsolidated related entities that have
off-balance sheet arrangements or transactions that could result in liquidity
needs or other commitments or significantly impact earnings.


LIQUIDITY & INTEREST RATE SENSITIVITY

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

         At December 31, 2001 and 2000, our liquid assets, consisting of cash
and due from banks and federal funds sold, amounted to $1,310,844 and
$8,984,505, representing 1.59% and 15.4% of total assets, respectively.
Investment securities at December 31, 2001 and 2000 amounted to $12,407,758 and
$8,022,471, representing 15.08% and 13.8% of total assets, respectively; these
securities provide a secondary source of liquidity since they can be converted
into cash in a timely manner. Our ability to maintain and expand our deposit
base and borrowing capabilities also serves as a source of liquidity.

                                       12
<PAGE>


         We plan to meet our future cash needs through the liquidation of
temporary investments, maturities of loans and investment securities, and
generation of deposits. In addition, the bank maintains federal funds purchased
lines of credit with correspondent banks in the amount of $5,000,000. The bank
is also a member of the Federal Home Loan Bank of Atlanta from which application
for borrowings can be made for leverage purposes, if so desired. Management
believes that its existing stable base of core deposits along with continued
growth in this deposit base will enable us to successfully meets our long term
liquidity needs.

         Asset/liability management is the process by which we monitor and
control the mix and maturities of our assets and liabilities. The essential
purposes of asset/liability management are to ensure adequate liquidity and to
maintain an appropriate balance between interest sensitive assets and
liabilities to minimize potentially adverse impacts on earnings from changes in
market interest rates. The bank's asset/liability management committee ("ALCO")
monitors and considers methods of managing exposure to interest rate risk. The
ALCO consists of members of the board of directors and senior management of the
bank and meets quarterly. The ALCO is charged with the responsibility to
maintain the level of interest rate sensitivity of the bank's interest sensitive
assets and liabilities within Board-approved limits.

         The following table presents our rate sensitivity at each of the time
intervals indicated as of December 31, 2001. The table may not be indicative of
our rate sensitivity position at other points in time. In addition, the table's
maturity distribution may differ from the contractual maturities of the earning
assets and interest bearing liabilities presented due to consideration of
prepayment speeds under various interest rate change scenarios in the
application of the interest rate sensitivity methods described above.
<TABLE>
<CAPTION>

                                      Within        After three but        After one but      After
                                       three         Within twelve         Within five        Five
                                      months            Months                Years          Years         Total
                                      ------            ------                -----          -----        ------
                                                                  (Dollars in Thousands)
<S>                                 <C>            <C>                <C>            <C>              <C>
Interest-earning assets:
  Federal funds sold             $            929    $       ---         $      ---    $       ---    $          929

  Investment securities                     1,673          1,042              2,400          7,293            12,408

  Loans                                    36,253          3,809             23,784            140            63,986
                                         --------       --------           --------        -------          --------

Total earning assets             $         38,855    $     4,851         $   26,184    $     7,433    $       77,323

Interest-bearing liabilities:
  Money market and NOW           $          5,755    $       ---         $   12,473    $       ---    $       18,228
  Regular savings                             323            ---                484            ---               807
  Time deposits                            20,533         23,552              1,240            ---            45,325
                                         --------       --------           --------        -------          --------

Total interest-bearing
liabilities                      $         26,611    $    23,552         $   14,197    $       ---    $       64,360

Period gap                       $         12,244    $   (18,701)        $   11,987    $     7,433    $       12,963
Cumulative gap                   $         12,244    $    (6,457)        $    5,530    $    12,963    $       12,963

Ratio of cumulative gap to
       total earning assets                 15.83%         (8.35)%             7.15%         16.76%


</TABLE>


                                       13
<PAGE>


ACCOUNTING, REPORTING AND REGULATORY MATTERS

         On July 20, 2001, the FASB issued SFAS No. 141, Business Combinations
(SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS
Nos. 141 and 142 will change the accounting for business combinations and
goodwill in two significant ways. First, SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Use of the pooling-of-interests method is prohibited. Second, SFAS No.
142 changes the accounting for goodwill from an amortization method to an
impairment-only approach. The application of these statements is not expected to
have a material impact on our financial statements.

         In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations (SFAS 143). SFAS 143 requires that obligations associated
with the retirement of tangible long-lived assets be recorded as a liability
when those obligations are incurred, with the amount of liability initially
measured at fair value. SFAS 143 will be effective for financial statements
beginning after June 15, 2002, though early adoption is encouraged. The
application of this statement is not expected to have a material impact on our
financial statements.

         In July 2001, the FASB issued SFAS No. 144, Accounting for Impairment
or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 supersedes SFAS 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. SFAS 144 applies to all long-lived assets including discontinued
operations, and amends Accounting Principle Board of Opinion No. 30, Reporting
the Effect of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions. SFAS 144 requires that
long-lived assets that are to be disposed of by sale be measured at the lower of
book or fair value less cost to sell. SFAS 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001 and its
provisions are generally expected to be applied prospectively. The application
of this statement is not expected to have a material impact on our financial
statements.


MARKET RISK

         Market risk is the risk of loss from adverse changes in market prices
and rates which principally arises from interest rate risk inherent in our
lending, investing, deposit gathering and borrowing activities. Other types of
market risks, such as foreign currency exchange rate risk and commodity price
risk, do not normally arise in the normal course of our business. Management
actively monitors and manages its interest rate risk exposure.

         The principal interest rate risk monitoring technique we employ is the
measurement of our 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. We generally would benefit from increasing market rates of
interest when we have an asset-sensitive gap position and generally would
benefit from decreasing market rates of interest when we are
liability-sensitive.

         Due to the fact that just over 50% of our loans were variable rate
loans at December 31, 2001, we are currently asset sensitive over the one-year
time frame. However, our gap analysis is not a precise indicator of our interest
sensitivity position. The analysis presents only 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. For
example, rates paid on a substantial portion of core deposits may change
contractually within a relatively short time frame, but those rates are viewed
by management as significantly less interest-sensitive than market-based rates
such as those paid on non-core deposits. Net interest income may be impacted by
other significant factors in a given interest rate environment, including
changes in the volume and mix of earning assets and interest-bearing
liabilities.


                                       14
<PAGE>


                          Independent Auditors' Report


To the Board of Directors and Stockholders of
First National Bancshares, Inc.
Spartanburg, South Carolina


We have audited the accompanying consolidated balance sheets of First National
Bancshares, Inc. and subsidiary as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended and for the period from July 14, 1999 (date of
inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First National
Bancshares, Inc. and subsidiary as of December 31, 2001 and 2000 and the results
of their operations and their cash flows for the years then ended and for the
period from July 14, 1999 (date of inception) through December 31, 1999, in
conformity with U.S. generally accepted accounting principles.


Spartanburg, South Carolina
January 23, 2002




                                                    /s/ Crisp Hughes Evans LLP



                                       15
<PAGE>
<TABLE>
<CAPTION>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                          Consolidated Balance Sheets

                           December 31, 2001 and 2000

                                                                                  2001                 2000
                                                                                  ----                 ----
                                            Assets
                                            ------

<S>                                                                       <C>                   <C>
Cash and due from banks                                                   $         381,844   $           994,505
Federal funds sold                                                                  929,000             7,990,000
Securities available for sale                                                    12,407,758             8,022,471
Loans, net of allowance for loan losses of $800,303                              63,068,648            37,199,261
           and $470,893, respectively
Premises and equipment, net                                                       4,560,144             3,321,854
Other                                                                               946,863               767,405
                                                                            ---------------       ---------------

         Total assets                                                     $      82,294,257     $      58,295,496
                                                                           ================      ================

   Liabilities and Shareholders' Equity

Liabilities:
   Deposits
        Noninterest-bearing                                               $       6,500,856     $       4,766,005
        Interest-bearing                                                         64,417,550            41,620,466
                                                                          -----------------     -----------------

              Total deposits                                                     70,918,406            46,386,471
                                                                          -----------------     -----------------

   Accrued expenses and other liabilities                                           618,271               934,641
                                                                            ---------------       ---------------
           Total liabilities                                                     71,536,677            47,321,112
                                                                            ---------------       ---------------
Commitments and contingencies--Note 14

Shareholders' equity:
   Preferred stock, par value $.01 per share, 10,000,000
     shares authorized, no shares issued or outstanding                                   -                     -
   Common stock, par value $.01 per share, 10,000,000
     shares authorized, 1,200,000 shares issued
     and outstanding                                                                 12,000                12,000
   Additional paid-in capital                                                    11,791,311            11,791,311
   Retained earnings (deficit)                                                   (1,081,326)             (878,078)
   Accumulated other comprehensive income                                            35,595                49,151
                                                                            ---------------       ---------------
         Total shareholders' equity                                              10,757,580            10,974,384
                                                                            ---------------       ---------------
         Total liabilities and shareholders' equity                       $      82,294,257     $      58,295,496
                                                                           ================      ================

</TABLE>


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


                                       16
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                          Consolidated Statements of Operations

<TABLE>
<CAPTION>

               For the Years Ended December 31, 2001 and 2000 and
             for the Period from July 14, 1999 (Date of Inception)
                              to December 31, 1999
                                                                           2001                2000                 1999
                                                                           ----                ----                 ----
<S>                                                                 <C>                 <C>                  <C>
Interest income:
   Loans                                                            $       4,178,305   $       1,373,801    $               -
   Investment securities                                                      556,555             362,698               30,079
   Federal funds sold                                                         330,057             595,291                2,998
                                                                     ----------------    ----------------     ----------------
         Total interest income                                              5,064,917           2,331,790               33,077
                                                                     ----------------    ----------------     ----------------

Interest expense:
   Line of credit                                                                   -               6,481                7,866
   Deposits                                                                 2,885,609           1,146,143                    -
                                                                     ----------------    ----------------     ----------------
         Total interest expense                                             2,885,609           1,152,624                7,866
                                                                     ----------------    ----------------     ----------------

Net interest income                                                         2,179,308           1,179,166               25,211
Provision for loan losses                                                     335,576             470,893                    -
                                                                     ----------------    ----------------     ----------------
Net interest income after provision for loan losses                         1,843,732             708,273               25,211
                                                                     ----------------    ----------------     ----------------
Noninterest income
  Mortgage loan fees from correspondent bank                                  139,515               5,366                    -
  Service charges and fees on deposit accounts                                157,408              20,717                    -
  Other                                                                        50,933               9,585                    -
                                                                     ----------------    ----------------     ----------------
           Total noninterest income                                           347,856              35,668                    -

Noninterest expense:
   Salaries and employee benefits                                           1,303,762             768,574              112,731
   Professional fees                                                           88,973              70,300               85,588
   Data processing                                                            154,357              51,595                    -
   Public relations                                                           208,026             110,072                    -
   Occupancy and equipment                                                    359,479             212,476                6,151
   Telephone and supplies                                                      89,646              53,953                6,749
   Other                                                                      214,593             142,103               26,938
                                                                     ----------------    ----------------     ----------------
         Total noninterest expense                                          2,418,836           1,409,073              238,157
                                                                     ----------------    ----------------     ----------------
Loss before income taxes                                                     (227,248)           (665,132)            (212,946)
Provision for income taxes                                                    (24,000)                  -                    -
                                                                     ----------------    ----------------     ----------------

         Net loss                                                   $        (203,248)  $        (665,132)   $        (212,946)
                                                                     =================   ================     =================

Basic and diluted loss per common share                             $             .17   $             .55    $          N/A

Weighted average common shares outstanding, basic and diluted               1,200,000           1,200,000               N/A
</TABLE>

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

                                       17
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

           Consolidated Statements of Changes in Shareholders' Equity

<TABLE>
<CAPTION>

               For the Years Ended December 31, 2001 and 2000 and
             for the Period from July 14, 1999 (Date of Inception)
                              to December 31, 1999


                                                                                                    Accumulated
                                            Common Stock            Additional       Retained         Other
                                      -----------------------         Paid-In        Earnings     Comprehensive   Shareholders'
                                       Shares          Amount         Capital       (Deficit)         Income          Equity
                                       ------          ------       ----------      ----------    --------------     --------

<S>                                  <C>        <C>             <C>             <C>            <C>             <C>
Balance, July 14, 1999 (inception)             -   $           -   $           -  $           -   $           -   $           -
Proceeds from the sale of stock to
   organizers                                 10               -             100              -               -             100
Comprehensive income:
   Net loss                                    -               -               -       (212,946)              -        (212,946)
                                    ------------    ------------    ------------   ------------    ------------   -------------

Balance, December 31, 1999                    10   $           -   $         100  $    (212,946)  $           -   $    (212,846)
                                    ============   =============   =============  =============   =============   =============

Redemption of stock from
   organizer                                 (10)              -            (100)             -               -            (100)
Proceeds from sale of stock, net
   of offering costs of $196,689       1,200,000          12,000      11,791,311              -               -      11,803,311
Comprehensive income:
   Net loss                                    -               -               -       (665,132)              -        (665,132)
   Change in net unrealized gains
     on securities available for sale          -               -               -              -          49,151          49,151
                                                                                                                    -----------
         Total comprehensive
           income                              -               -               -              -               -        (615,981)
                                    ------------    ------------    ------------   ------------    ------------     -----------

Balance, December 31, 2000             1,200,000   $      12,000   $  11,791,311  $    (878,078)  $      49,151   $  10,974,384
                                    ============    ============    ============   ============    ============    ============

Comprehensive income:
   Net loss                                    -               -               -       (203,248)              -       (203,248)
   Change in net unrealized gains
    on securities available for sale,
    net of tax of $18,338                      -               -               -              -         (13,556)       (13,556)
                                                                                                                   -----------
         Total comprehensive
           Income                              -               -               -              -               -       (216,804)
                                    ------------    ------------    ------------   ------------    ------------    -----------

Balance, December 31, 2001             1,200,000   $      12,000   $  11,791,311  $(1,081,326)    $      35,595   $ 10,757,580
                                    ============    ============    ============   ===========     ============    ===========


</TABLE>

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

                                       18
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

               For the Years Ended December 31, 2001 and 2000 and
             for the Period from July 14, 1999 (Date of Inception)
                              to December 31, 1999

                                                                             2001                 2000                 1999
                                                                             ----                 ----                 ----

<S>                                                                <C>                   <C>                 <C>
Cash flows from operating activities:
   Net loss                                                        $        (203,248)    $        (665,132)  $         (212,946)
   Adjustments to reconcile net loss to net cash provided by
     (used for) operating activities:
     Provision for loan losses                                               335,576               470,893                    -
      Provision for deferred income tax benefits                             (24,000)                    -                    -
     Depreciation                                                            181,247                83,674                  301
     Deferred stock offering costs                                                 -                     -              (80,980)
     Discount accretion, net                                                 (29,514)             (153,431)             (30,079)
     Changes in deferred and accrued amounts:
       Other assets                                                          (58,758)             (330,355)             (12,270)
       Accrued expenses and other liabilities                               (157,055)              749,735                7,254
                                                                    -----------------     ----------------   ------------------
         Net cash provided by (used for) operating activities                 44,248               155,384             (328,720)
                                                                    ----------------      ----------------   ------------------

Cash flows from investing activities:
    Purchases of investment securities                                             -           (34,269,732)         (11,167,288)
    Proceeds from maturity of investment securities                                -            45,594,000                    -
    Proceeds from maturity of securities available for sale                6,349,006                44,965                    -
    Purchases of securities available for sale                           (10,699,998)           (7,991,755)                   -
    Net increase in loans                                                (26,204,963)          (37,670,154)                   -
    Net purchases of premises and equipment                               (1,597,189)           (3,186,156)             (52,021)
    Purchase of FHLB and other stock                                         (96,700)             (333,800)                   -
                                                                    -----------------     ----------------   ------------------
         Net cash used by investing activities                           (32,249,844)          (37,812,632)         (11,219,309)
                                                                    -----------------     ----------------   ------------------

Cash flows from financing activities:
   Proceeds from sale of stock, net of stock offering costs                        -               519,261                  100
   Proceeds from stock subscription                                                -                     -           11,284,050
   Redemption of stock of organizer                                                -                  (100)                   -
   Loans from organizers                                                           -                     -               65,000
   Repayment of organizers' loans                                                  -                     -              (65,000)
   Increase (decrease) on line of credit                                           -              (390,000)             390,000
   Net increase in deposits                                               24,531,935            46,386,471                    -
                                                                    ----------------      ----------------   ------------------
         Net cash provided by financing activities                        24,531,935            46,515,632           11,674,150
                                                                    ----------------      ----------------   ------------------
         Net increase/(decrease) in cash and cash equivalents             (7,673,661)            8,858,384              126,121

Cash and cash equivalents at beginning of period                           8,984,505               126,121                   -
                                                                    ----------------      ----------------   ------------------

Cash and cash equivalents, end of period                           $       1,310,844     $       8,984,505  $           126,121
                                                                    ================      ================   ==================


</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
                                       19

<PAGE>


                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000

Note 1 - Summary of Significant Accounting Policies and Activities

           Business Activity and Organization - First National Bancshares, Inc.
           (the "Company") was incorporated on July 14, 1999 under the laws of
           the state of South Carolina for the purpose of operating as a bank
           holding company pursuant to the federal Bank Holding Company Act of
           1956, as amended, and to purchase 100% of the capital stock of First
           National Bank of Spartanburg (the "Bank"). The Bank was organized as
           a national bank under the laws of the United States with the purpose
           of becoming a new bank to be located in Spartanburg County, South
           Carolina. The Bank provides full commercial banking services to
           customers and is subject to regulation by the Federal Deposit
           Insurance Corporation and the Office of the Comptroller of the
           Currency. The group of organizers initiated several financial
           transactions on behalf of the Company prior to the date of
           incorporation and as early as April 1, 1999 which have been included
           in the financial statements for the period ending December 31, 1999.

           The Company offered its common stock for sale to the public under an
           initial public offering which began on November 10, 1999. The
           offering raised approximately $11,800,000, net of underwriting
           discounts and commissions and offering expenses, and was completed on
           February 10, 2000. The directors and executive officers of the
           Company purchased 484,100 shares of common stock at $10 per share,
           for a total of $4,841,000. Upon purchase of these shares, the Company
           issued stock warrants to the organizers to purchase 313,333 shares of
           common stock for $10 per share. The remaining 715,900 shares were
           sold in the public offering. The Company used $11 million of the
           proceeds to capitalize the Bank. During the first quarter of 2000,
           the Company obtained all regulatory approvals to operate and opened
           the Bank for business on March 27, 2000.

           Principles of Consolidation - The consolidated financial statements
           include the accounts of the Company and the Bank. All significant
           intercompany balances and transactions have been eliminated in
           consolidation. The accounting and reporting policies of the Company
           conform to U.S. generally accepted accounting principles and to
           general practices in the banking industry. The Company uses the
           accrual basis of accounting.

           Use of Estimates - The financial statements are prepared in
           conformity with U.S. generally accepted accounting principles
           ("GAAP") which requires management to make estimates and assumptions.
           These estimates and assumptions affect the reported amounts of assets
           and liabilities at the date of the financial statements. In addition,
           they affect the reported amounts of income and expense during the
           reporting period. Actual results could differ from these estimates.

                                       20
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

           Investment Securities - Management determines the appropriate
           classification of investment securities at the time of purchase into
           one of three categories as follows: (1) Investments Held to Maturity:
           securities which the Company has the positive intent and ability to
           hold to maturity, which are reported at amortized cost; (2) Trading
           Securities: securities that are bought and held principally for the
           purpose of selling them in the near future, which are reported at
           fair value with unrealized gains and losses included in earnings; and
           (3) Investments Available for Sale: securities that may be sold under
           certain conditions, which are reported at fair value, with unrealized
           gains and losses excluded from earnings and reported as a separate
           component of shareholders' equity as accumulated other comprehensive
           income. The amortization of premiums and accretion of discounts on
           investment securities are recorded as adjustments to interest income.
           Gains or losses on sales of investment securities are based on the
           net proceeds and the adjusted carrying amount of the securities sold,
           using the specific identification method. Unrealized losses on
           securities, reflecting a decline in value or impairment judged by the
           Company to be other than temporary, are charged to earnings in the
           consolidated statements of operations.

           Loans and Interest Income - Loans of the Bank are carried at
           principal amounts, reduced by an allowance for loan losses. The Bank
           recognizes interest income daily based on the principal amount
           outstanding using the simple interest method. The accrual of interest
           is generally discontinued on loans of the Bank which become 90 days
           past due as to principal or interest or when management believes,
           after considering economic and business conditions and collection
           efforts, that the borrower's financial condition is such that
           collection of interest is doubtful. Management may elect to continue
           accrual of interest when the estimated net realizable value of
           collateral is sufficient to cover the principal balances and accrued
           interest and the loan is in the process of collection. Amounts
           received on nonaccrual loans generally are applied against principal
           prior to the recognition of any interest income. Generally, loans are
           restored to accrual status when the obligation is brought current,
           has performed in accordance with the contractual terms for a
           reasonable period of time and the ultimate collectibility of the
           total contractual principal and interest is no longer in doubt.

           Impairment of Loans - Loans are considered to be impaired when, in
           management's judgment, the collection of all amounts of principal and
           interest is not probable in accordance with the terms of the loan
           agreement. The Company accounts for impaired loans in accordance with
           the terms of Statement of Financial Accounting Standards ("SFAS") No.
           114, "Accounting by Creditors for Impairment of a Loan," as amended
           by SFAS No. 118 in the areas of disclosure requirements and methods
           of recognizing income. SFAS 114 requires that impaired loans be
           recorded at fair value, which is determined based upon the present
           value of expected cash flows discounted at the loan's effective
           interest rate, the market price of the loan, if available, or the
           value of the underlying collateral. All cash receipts on impaired
           loans are applied to principal until such time as the principal is
           brought current. After principal has been satisfied, future cash
           receipts are applied to interest income, to the extent that any
           interest has been foregone. As a practical matter, the Bank
           determines which loans are impaired through a loan review process.


                                       21
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

           Allowance for Loan Losses - The allowance for loan losses is
           established through a provision for loan losses charged to operations
           and reflects an amount that, in management's opinion, is adequate to
           absorb inherent losses in the existing portfolio. Additions to the
           allowance are based on management's evaluation of the loan portfolio
           under current economic conditions, past loan loss experience, and
           such other factors which, in management's judgment, deserve
           recognition in estimating loan losses.

           Loans are charged off when, in the opinion of management, they are
           deemed to be uncollectible. Recognized losses are charged against the
           allowance and subsequent recoveries are added to the allowance.
           Management believes that the allowance is adequate. While management
           uses the best information available to make evaluations, future
           adjustments to the allowance may be necessary if economic conditions
           differ substantially from the assumptions used in making the
           evaluations. The allowance for loan losses is subject to periodic
           evaluation by various regulatory authorities and may be subject to
           adjustments based upon information that is available to them at the
           time of their examination.

           Loan Fees - Loan origination fees and direct costs of loan
           originations are deferred and recognized as an adjustment of yield by
           the interest method based on the contractual terms of the loan. Loan
           commitment fees are deferred and recognized as an adjustment of yield
           over the related loan's life, or if the commitment expires
           unexercised, recognized in income upon expiration.

           Premises and Equipment - Land is carried at cost. Premises and
           equipment are stated at cost less accumulated depreciation and
           amortization, computed principally by the straight line method over
           the estimated useful lives of the assets as follows: building, 40
           years; furniture and fixtures, 10 years; and computer hardware and
           software, 3 to 5 years. Amortization of leasehold improvements is
           recorded using the straight-line method over the lesser of the
           estimated useful life of the asset or the term of the operating
           lease. Additions to premises and equipment and major replacements and
           betterments are added at cost. Maintenance, repairs and minor
           replacements are included in operating expense. When assets are
           retired or otherwise disposed of, the cost and accumulated
           depreciation are removed from the accounts and any gain or loss is
           reflected in income.

           Deferred Stock Offering Costs - Deferred stock offering costs were
           incurred by the Company in connection with the offering and issuance
           of its stock. The deferred stock offering costs of approximately
           $200,000 were deducted from the Company's additional paid-in capital
           after the stock offering was completed on February 10, 2000.

           Organization Costs - Organization costs include incorporation, legal
           and consulting fees incurred in connection with establishing the
           Company and the Bank. In accordance with Statement of Position (SOP)
           98-5, "Reporting on the Costs of Start-Up Activities," organization
           costs were expensed when incurred.

                                       22
<PAGE>


           Income Taxes - Income taxes are accounted for in accordance with SFAS
           No. 109, "Accounting for Income Taxes". Under the asset and liability
           method of SFAS 109, deferred tax assets and liabilities are
           recognized for the future tax consequences attributable to
           differences between the financial statement carrying amounts of
           existing assets and liabilities and their respective tax bases.
           Deferred tax assets and liabilities are measured using the enacted
           rates expected to apply to taxable income in the years in which those
           temporary differences are expected to be recovered or settled. Under
           SFAS 109, the effect on deferred tax assets and liabilities of a
           change in tax rates is recognized in income in the period that
           includes the enactment date. Valuation allowances are established to
           reduce deferred tax assets if it is determined to be "more likely
           than not" that all or some portion of the potential deferred tax
           asset will not be realized.

           Reclassifications - Certain prior year amounts have been reclassified
           to conform with the current presentation. These reclassifications
           have no effect on previously reported shareholders' equity or net
           income as previously reported.

           Stock Compensation Plans - Statement of Financial Accounting
           Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
           encourages all entities to adopt a fair value based method of
           accounting for employee stock compensation plans, whereby
           compensation cost is measured at the grant date based on the value of
           the award and is recognized over the service period, which is usually
           the vesting period. However, it also allows an entity to continue to
           measure compensation cost for those plans using the intrinsic value
           based method of accounting prescribed by Accounting Principles Board
           Opinion No. 25, "Accounting for Stock Issued to Employees," whereby
           compensation cost is the excess, if any, of the quoted market price
           of the stock at the grant date (or other measurement date) over the
           amount an employee must pay to acquire the stock. Stock options and
           warrants issued under the Company's stock option plan and warrant
           agreement have no intrinsic value at the grant date, and under
           Opinion No. 25 no compensation cost is recognized for them. The
           Company has elected to continue with the accounting methodology in
           Opinion No. 25 and, as a result, has provided pro forma disclosures
           of net loss and loss per share and other disclosures, as if the fair
           value based method of accounting had been applied. (See Note 12.)

           Earnings Per Common Share - Basic earnings per share represents
           income available to common stockholders divided by the
           weighted-average number of common shares outstanding during the
           period. Diluted earnings per share reflects additional common shares
           that would have been outstanding if dilutive potential common shares
           had been issued, as well as any adjustment to income that would
           result from the assumed issuance. Potential common shares that may be
           issued by the Company relate solely to outstanding stock options and
           stock warrants and are determined using the treasury stock method.
           For the years ended December 31, 2001 and 2000, no dilutive potential
           common shares existed.

           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.
                                       23

<PAGE>


                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

           Recently Issued Accounting Standards - On July 20, 2001, the FASB
           issued SFAS No. 141, Business Combinations (SFAS 141), and No. 142,
           Goodwill and Other Intangible Assets (SFAS 142). SFAS Nos. 141 and
           142 will change the accounting for business combinations and goodwill
           in two significant ways. First, SFAS No. 141 requires that the
           purchase method of accounting be used for all business combinations
           initiated after June 30, 2001. Use of the pooling-of-interests method
           is prohibited. Second, SFAS No. 142 changes the accounting for
           goodwill from an amortization method to an impairment-only approach.
           The application of these statements is not expected to have a
           material impact on the Company's financial statements.

           In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
           Retirement Obligations (SFAS 143). SFAS 143 requires that obligations
           associated with the retirement of tangible long-lived assets be
           recorded as a liability when those obligations are incurred, with the
           amount of liability initially measured at fair value. SFAS 143 will
           be effective for financial statements beginning after June 15, 2002,
           though early adoption is encouraged. The application of this
           statement is not expected to have a material impact on the Company's
           financial statements.

           In July 2001, the FASB issued SFAS No. 144, Accounting for Impairment
           or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 supersedes SFAS
           121, Accounting for the Impairment of Long-Lived Assets and for
           Long-Lived Assets to be Disposed Of. SFAS 144 applies to all
           long-lived assets including discontinued operations, and amends
           Accounting Principle Board of Opinion No. 30, Reporting the Effect of
           Disposal of a Segment of a Business, and Extraordinary, Unusual and
           Infrequently Occurring Events and Transactions. SFAS 144 requires
           that long-lived assets that are to be disposed of by sale be measured
           at the lower of book or fair value less cost to sell. SFAS 144 is
           effective for financial statements issued for fiscal years beginning
           after December 15, 2001 and its provisions are generally expected to
           be applied prospectively. The application of this statement is not
           expected to have a material impact of the Company's financial
           statements.

Note 2 - Statement of Cash Flows

           In accordance with the provisions of SFAS No. 95, "Statement of Cash
           Flows," the Company considers cash and cash equivalents to be those
           amounts included in the balance sheet captions "Cash and due from
           banks" and "Federal funds sold." These accounts totaled $1,310,844
           and $8,984,505 at December 31, 2001 and 2000, respectively.

           The following summarizes supplemental cash flow data for the years
           ended December 31:
<TABLE>
<CAPTION>


                                                                       2001           2000              1999
                                                              -----------------------------------------------------
<S>                                                               <C>               <C>                <C>
           Interest paid                                            $3,128,989        $ 456,403          $ 7,606
           Change in fair value of securities available
                  for sale, net of income tax                       $  (13,556)       $   49,151               -

</TABLE>

           Noncash investing activities during the year ended December 31, 2000
           also included $177,652 of premises additions included in accrued
           expenses.

                                       24
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

Note 3 - Restrictions on Cash and due from Banks

           The Bank is currently not required to maintain average reserve
           balances by the Federal Reserve Bank.

Note 4 - Securities

           The amortized cost, fair value and gross unrealized holding gains and
           losses of securities available for sale at December 31, 2001 and
           2000, consisted of the following:
<TABLE>
<CAPTION>
                                                                             2001
                                             ---------------------------------------------------------------------
                                                                    Gross            Gross
                                                Amortized        Unrealized        Unrealized          Fair
                                                   Cost             Gains            Losses            Value

<S>                                          <C>               <C>              <C>               <C>
             Debt securities
                available for sale:
                U.S. Agency
                  obligations                $    4,512,970    $       13,588   $      (16,065)   $    4,510,493
                Mortgage-backed                   7,840,855            77,841          (21,431)        7,897,265
                                              -------------     -------------    --------------    -------------

                                             $   12,353,825    $       91,429   $      (37,496)   $   12,407,758
                                              =============     =============    ==============    =============


                                                                             2000
                                             ---------------------------------------------------------------------
                                                                    Gross            Gross
                                                Amortized        Unrealized        Unrealized          Fair
                                                   Cost             Gains            Losses            Value
              Debt securities
                available for sale:
                U.S. Agency
                  obligations                $    6,067,003    $       18,727   $            -    $    6,085,730
                Mortgage-backed                   1,906,317            30,424                -         1,936,741
                                              -------------     -------------    -------------     -------------

                                             $    7,973,320    $       49,151   $            -    $    8,022,471
                                              =============     =============    =============     =============

</TABLE>

           At December 31, 2001 and 2000, securities with a carrying value of
           approximately $7,061,000 and $3,648,000, respectively, were pledged
           to secure public deposits and for other purposes required or
           permitted by law.

           The amortized cost and estimated fair value of investment securities
           available for sale at December 31, 2001, by contractual maturity, are
           shown in the following table. Expected maturities may differ from
           contractual maturities because issuers may have the right to call or
           prepay obligations with or without prepayment penalties. Fair value
           of securities was determined using quoted market prices.


                                       25
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>

                                                                              Amortized              Fair
                                                                                Cost                 Value
                                                                             ----------            --------

<S>                                                                      <C>                  <C>
              Due in one year or less                                    $         996,644    $       1,009,588
              Due after one year, through five years                             1,510,499            1,505,315
              Due after five years, through ten years                            2,005,827            1,995,590
                                                                          ----------------     ----------------
                                                                                 4,512,970            4,510,493
                                                                          ----------------     ----------------
              Mortgage-backed securities                                         7,840,855            7,897,265
                                                                          ----------------     ----------------
                                                                         $      12,353,825    $      12,407,758
                                                                          ================     ================
</TABLE>
Note 5 - Investments Required by Law

           The Bank, as a member of the Federal Reserve Bank ("FRB") and the
           Federal Home Loan Bank of Atlanta ("FHLB"), is required to own
           capital stock in these organizations. The Bank's equity investments
           required by law are included in the accompanying consolidated balance
           sheets in "Other assets". The amount of stock owned is based on the
           Bank's capital levels in the case of the FRB and totaled $330,000 at
           December 31, 2001. The amount of FHLB stock owned is determined based
           on the Bank's balances of residential mortgages and advances from the
           FHLB and totaled $100,500 at December 31, 2001. No ready market
           exists for these stocks and they have no quoted market value.
           However, redemption of these stocks has historically been at par
           value. Accordingly, the carrying amounts are deemed to be a
           reasonable estimate of fair value.

Note 6 - Loans

           A summary of loans by classification at December 31 is as follows:
<TABLE>
<CAPTION>
                                                                           2001                 2000
                                                                           ----                 ----

<S>                                                                 <C>                  <C>
              Commercial and industrial                             $      10,095,665    $     8,033,469
              Commercial secured by real estate                            38,344,136         22,017,360
              Real estate--residential mortgages                           11,832,317          5,251,227
              Installment and other consumer loans                          3,713,501          2,453,250
              Unearned income                                                (116,668)           (85,152)
                                                                     ----------------    ---------------
                    Total loans, net of unearned income                    63,868,951         37,670,154

              Less--allowance for loan losses                                (800,303)          (470,893)
                                                                     ----------------    ---------------

                    Total loans, net                                $      63,068,648    $    37,199,261
                                                                     ================    ===============

</TABLE>

           Approximately $32,826,000 of the loans were variable interest rate
           loans at December 31, 2001. The remaining portfolio was fixed
           interest rate loans.

                                       26
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

           One loan totaling $48,000 was on non-accrual at December 31, 2001.
           Foregone interest income on the nonaccrual loan was approximately
           $4,000 during 2001. There were no loans on nonaccrual at December 31,
           2000. There were no loans past due in excess of 90 days at December
           31, 2001 or 2000. There were no foreclosed loans or other real estate
           owned in any year presented. There were no impaired loans at or for
           the years ended December 31, 2001 or 2000.

           Changes in the allowance for loan losses for the years ended December
           31 were as follows:
<TABLE>
<CAPTION>

                                                                                   2001                2000
                                                                                   ----                ----

<S>                                                                         <C>                 <C>
                    Balance, beginning of period                            $         470,893   $               -
                    Provision charged to operations                                   335,576             470,893
                    Loans charged off                                                  (6,166)                  -
                    Recoveries on loans previously charged off                              -                   -
                                                                             ----------------    ----------------
                    Balance, end of period                                  $         800,303   $         470,893
                                                                             ================    ================
</TABLE>


           The Company, through the Bank, makes loans to individuals and small-
           to mid-sized businesses for various personal and commercial purposes
           primarily in Spartanburg County, South Carolina. The Company has a
           diversified loan portfolio and the Company's loan portfolio is not
           dependent on any specific economic segment. The Company regularly
           monitors its credit concentrations based on loan purpose, industry
           and customer base. As of December 31, 2001, there were no material
           concentrations of credit risk within the Company's loan portfolio.

           Directors, executive officers and associates of such persons are
           customers of and have transactions with the Bank in the ordinary
           course of business. Included in such transactions are outstanding
           loans and commitments, all of which are made under substantially the
           same credit terms, including interest rates and collateral, as those
           prevailing at the time for comparable transactions with unrelated
           persons and do not involve more than the normal risk of
           collectibility.

           The aggregate dollar amount of these outstanding loans was
           approximately $4.47 million and $2.9 million at December 31, 2001 and
           2000, respectively. During 2001, new loans and advances on these
           lines of credit totaled approximately $2.95 million and payments on
           these loans and lines totaled approximately $1.38 million. At
           December 31, 2001, there were commitments to extend additional credit
           to related parties in the amount of approximately $961,000.

           Under current Federal Reserve regulations, the Bank is limited to the
           amount it may loan to the Company. Loans made by the Bank may not
           exceed 10% and loans to all affiliates may not exceed 20% of the
           Bank's capital, surplus and undivided profits, after adding back the
           allowance for loan losses. There were no loans outstanding between
           the Bank and the Company at December 31, 2001.

                                       27
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

Note 7 - Premises and Equipment

           A summary of premises and equipment at December 31 is as follows:
<TABLE>
<CAPTION>

                                                                                2001                 2000
                                                                                ----                 ----

<S>                                                                      <C>                  <C>
              Land                                                       $         962,018    $         952,238
              Building and improvements                                          2,774,123              610,993
              Furniture, fixtures and equipment                                  1,044,636              573,544
              Construction in progress                                                   -            1,269,054
                                                                          ----------------     ----------------
                                                                                 4,780,777            3,405,829
              Accumulated depreciation                                             220,633               83,975
                                                                          ----------------     ----------------

                                                                         $       4,560,144    $       3,321,854
                                                                          ================     ================
</TABLE>

           Depreciation expense charged to operations totaled $181,247, $83,674
           and $301 in 2001, 2000 and 1999, respectively.

           The Bank entered into a long-term land lease during 2000 which has an
           initial term of 20 years and various renewal options under
           substantially the same terms with certain rate escalations. The Bank
           leased temporary facilities during its organizational and initial
           operational phase which expired in 2001 upon completion of the
           Company's new main office facility. Rent expense charged to
           operations totaled $48,000, $46,100 and $3,900 for the years ended
           December 31, 2001, 2000 and 1999, respectively.

           The annual minimum rental commitments under the terms of the
           Company's noncancellable lease at December 31, 2001 are as follows:

              2002                                          $          48,000
              2003                                                     48,000
              2004                                                     48,000
              2005                                                     50,917
              2006                                                     50,917
              Thereafter                                              818,166
                                                             ----------------

                    Total                                   $       1,064,000
                                                             ================

                                       28
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)


Note 8 - Deposits

           The aggregate amount of time deposits with a minimum denomination of
           $100,000 is approximately $19,597,000 at December 31, 2001.

           The scheduled maturities of time deposits at December 31 are as
follows:
<TABLE>
<CAPTION>

                                                                          2001                  2000
                                                                          ----                  ----


<S>                                                             <C>                   <C>
              One year or less                                    $      44,085,263     $    26,985,381
              From one year to three years                                1,168,100           4,127,977
              After three years                                              71,915               4,835
                                                                   ----------------     ---------------

                    Total                                         $      45,325,278     $    31,118,193
                                                                   ================      ==============
</TABLE>

Note 9 - Lines of Credit

           At December 31, 2001, the Bank had short-term lines of credit with
           correspondent banks to purchase unsecured federal funds totaling
           $5,000,000. The interest rate on any borrowings under this line would
           be the prevailing market rate for federal funds purchased.

           The Bank also has the ability to borrow up to 10% of its assets from
           the FHLB as of December 31, 2001. Borrowings under this arrangement
           can be made with various terms and repayment schedules and with fixed
           or variable rates of interest. The borrowings under this arrangement
           are available by pledging collateral and may require additional
           purchases of stock in the FHLB.

Note 10 - Income Taxes

           The Company had no currently taxable income for the period from July
           14, 1999 (inception) to December 31, 1999 or the years ending
           December 31, 2001 and 2000. The following is a summary of the items
           which caused recorded income taxes to differ from taxes computed
           using the statutory tax rate for the periods ending December 31:
<TABLE>
<CAPTION>

                                                               2001                  2000                  1999
                                                               ----                  ----                  ----

<S>                                                     <C>                  <C>                   <C>
   Income tax benefit at federal statutory rate         $         (77,264)   $        (226,145)    $          (72,402)
   Change in valuation allowance                                   47,353              214,809                 79,429
   Other, net                                                       5,911               11,336                 (7,027)
                                                         ----------------     ----------------     ------------------

   Income tax benefit                                   $         (24,000)   $               -     $                -
                                                         =================    ================     ==================
</TABLE>

                                       29
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)


           The components of the deferred tax assets and liabilities at December
           31 are as follows:
<TABLE>
<CAPTION>
                                                                                  2001                 2000
                                                                                  ----                 ----

<S>                                                                              <C>                  <C>
              Deferred tax liability:
                 Net deferred loan costs                                            22,916               14,332
                 Prepaid expenses deducted currently for tax                        22,286               19,864
                 Discount accretion on securities                                        -               32,654

                Unrealized gain on securities available
                  for sale                                                          18,338               18,186
                                                                          ----------------     ----------------

                    Total deferred tax liability                                    63,540               85,036
                                                                          ----------------     ----------------

              Deferred tax asset:
                Allowance for loan losses                                          272,103              160,104
                Net operating loss carryforward                                     50,558               84,667
                Deferred organizational and start-up costs                          88,132              116,317
                                                                          ----------------     ----------------
                Deferred tax asset before valuation
                  allowance                                                        410,793              361,088
                Valuation allowance                                               (341,591)            (276,052)
                                                                          -----------------    ----------------

                    Net deferred tax asset                               $           5,662    $               -
                                                                          ================     ================
</TABLE>

           The Company has recorded a valuation allowance for a portion of the
           deferred tax asset as the realization of this asset is dependent on
           the Company's ability to generate future taxable income during the
           periods in which temporary differences become deductible.

           A portion of the change in the valuation allowance relates to the tax
           effect of the change in the unrealized gain on securities available
           for sale. The balance of the change in the net deferred tax asset
           results from the current period deferred tax benefit of $24,000.

           The Company has federal net operating loss carryforwards of
           approximately $149,000 that may be used to offset future taxable
           income and expire in 2020.

Note 11 - Regulatory Capital Requirements and Dividend Restrictions

           The Company (on a consolidated basis) and the Bank are subject to
           various regulatory capital requirements administered by the federal
           banking agencies. Failure to meet minimum capital requirements can
           initiate certain mandatory and possibly additional discretionary
           actions by regulators that, if undertaken, could have a material
           effect on the financial statements. Under capital adequacy guidelines
           and the regulatory framework for prompt corrective action, the
           Company and the Bank must meet specific capital guidelines that
           involve quantitative measures of their assets, liabilities and
           certain off-balance sheet items as calculated under regulatory
           accounting practices. The Company's and the Bank's capital amounts
           and classification are also subject to qualitative judgments by the
           regulators about components, risk weightings, and other factors.
           Prompt corrective action provisions are not applicable to bank
           holding companies.

                                       30
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)


           The Company and the Bank are required to maintain minimum amounts and
           ratios of total risk-based capital, Tier 1 capital, and Tier 1
           leverage capital (as defined in the regulations) as set forth in the
           table following. Management believes, as of December 31, 2001 that
           the Company and the Bank meet all capital adequacy requirements to
           which they are subject. At December 31, 2001, the Bank is categorized
           as "well capitalized" under the regulatory framework for prompt
           corrective action. There are no current conditions or events that
           management believes would change the Company's or the Bank's
           category.

           The following table presents the Company's and the Bank's actual
           capital amounts and ratios at December 31, 2001 and 2000 as well as
           the minimum calculated amounts for each regulatory-defined category.
<TABLE>
<CAPTION>
                                                                                                      Minimum to be
                                                                                                    Categorized as Well
                                                                                                     Capitalized Under
                                                                            For Capital              Prompt Corrective
                                                    Actual               Adequacy Purposes           Action Provisions
                                           -----------------------    -----------------------    ------------------------
                                               Amount      Ratio          Amount      Ratio          Amount       Ratio
      As of December 31, 2001

        The Company
     --------------------------------------
<S>                                      <C>             <C>        <C>              <C>
        Total capital to risk-weighted      $11,498,288     17.45%     $5,272,160       8.00%            N/A       N/A
     assets
        Tier 1  capital to risk-weighted    $10,697,985     16.23%     $ 2,626,808      4.00%            N/A       N/A
     assets

        Tier 1 capital to average assets    $10,697,985     13.21%     $ 3,238,240      4.00%            N/A       N/A

        The Bank
     --------------------------------------
        Total capital  to risk-weighted     $10,474,764     15.89%     $5,272,160       8.00%     $  6,590,200    10.00%
     assets
        Tier 1 capital to risk-weighted     $  9,674,461    14.68%     $ 2,636,080      4.00%     $  3,954,120     6.00%
     assets
        Tier 1 capital to average assets    $  9,674,461    11.95%     $ 3,238,240      4.00%     $  4,047,800     5.00%


     As of December 31, 2000

        The Company
    ---------------------------------------
        Total capital to risk-weighted      $11,396,126   26.93%       $3,385,744       8.00%             N/A        N/A
     assets
        Tier 1 capital to risk-weighted     $10,925,233   25,81%       $ 1,692,872      4.00%             N/A        N/A
     assets
        Tier 1 capital to average assets    $10,925,233   29.68%       $1,472,275       4.00%             N/A        N/A

        The Bank
    ---------------------------------------
        Total capital  to risk-weighted    $10,396,188   24.56%       $3,385,744       8.00%     $  4,232,000    10.00%
     assets
        Tier 1 capital to risk-weighted    $ 9,925,295   23.45%      $ 1,692,872      4.00%     $  2,539,320     6.00%
     assets
        Tier 1 capital to average assets   $ 9,925,295   26.97%      $ 1,472,275      4.00%     $  1,840,343     5.00%
</TABLE>
           The ability of the Company to pay cash dividends is dependent upon
           receiving cash in the form of dividends from the Bank. The dividends
           that may be paid by the Bank to the Company are subject to legal
           limitations and regulatory capital requirements. The approval of the
           Comptroller of the Currency is required if the total of all dividends
           declared by a national bank in any calendar year exceeds the Bank's
           net profits (as defined by the Comptroller) for that year combined
           with its retained net profits (as defined by the Comptroller) for the
           two preceding calendar years. As of December 31, 2001, no cash
           dividends have been declared or paid by the Bank.

                                       31
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)


Note 12 - Stock Compensation Plans

           Effective March 26, 2000, the Company adopted the First National
           Bancshares, Inc. 2000 Stock Incentive Plan (the "Plan"). Under the
           Plan, options are periodically granted to employees and directors by
           the Personnel Committee at a price not less than the fair market
           value of the shares at the date of grant. Options granted are
           exercisable for a period of ten years from the date of grant and
           become exercisable at a rate of 20% each year on the first five
           anniversaries of the date of grant. The Plan authorizes the granting
           of stock options up to a maximum of 180,000 shares of common stock.
           At December 31, 2001, 72,500 option shares were available to be
           granted under the Plan.

           Upon consummation of the initial public offering, the organizers were
           issued stock warrants to purchase 313,333 shares of common stock for
           $10 per share. These warrants vest ratably over a five year period
           beginning February 10, 2000, and will be exercisable in whole or in
           part during the ten year period following that date.

           The Company follows APB Opinion No. 25 to account for its stock-based
           option plans. The Company has also adopted the disclosure-only
           provisions of Statement of Financial Accounting Standards No. 123,
           "Accounting for Stock-based Compensation." Accordingly, no
           compensation cost has been recognized for the stock option plans. Had
           compensation cost for the Company's incentive and non-employee stock
           option plans been determined based on the fair value at the grant
           dates for awards under the plans consistent with the method
           prescribed by FASB Statement No. 123, the Company's net loss and
           diluted loss per share would have been adjusted to the pro forma
           amounts indicated below:

           (dollars, except per share, in thousands)       2001          2000
                                                           ----          ----

              Net loss - as reported                   $     203    $     665
              Net loss - pro forma                     $     435    $     876
              Basic and diluted loss per share
                 As reported                           $     .17    $     .55
                 Pro forma                             $     .36    $     .73

           The following is a summary of the activity under the plans for the
           years ended December 31:
<TABLE>
<CAPTION>

                                                               2001                                      2000
                                                               ----                                      ----
                                                                       Weighted                                  Weighted
                                                                        Average                                   Average
                                                                    Exercise Price                            Exercise Price
                                                    Shares             Per Share             Shares              Per Share
                                                    ------          --------------          --------          --------------

<S>                                           <C>              <C>                   <C>                 <C>
   Outstanding, beginning of period                     409,833   $            10.00                  -    $                -
   Granted                                               11,000                10.72             409,833                10.00
   Cancelled                                                  -                    -                   -                    -
   Exercised                                                  -                    -                   -                    -
                                               ----------------    -----------------    ----------------     ----------------

   Outstanding, December 31                             420,833   $            10.00             409,833    $           10.00
                                               ================    =================    ================     ================
   Exercisable, December 31                              81,967   $            10.00                   -    $               -
                                               ================    =================    ================     ================

</TABLE>

                                       32
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)


           The following table summarizes information about stock options
           outstanding under the stock-based option plans at December 31, 2001:
<TABLE>
<CAPTION>

                                               Options Outstanding                       Options Exercisable
                                  ----------------------------------------------    -------------------------------
                                                   Weighted
                                                    Average         Weighted                           Weighted
                                     Number        Remaining        Average             Number         Average
           Range of                  Options      Contractual       Exercise           Options         Exercise
           Exercise Prices         Outstanding        Life           Price           Exercisable        Price
           -----------------      ------------   ------------    -------------      -------------     -------------

<S>                               <C>          <C>                <C>               <C>           <C>
              $10.00                 409,833      8.25 years           $10.00            81,967        $         10.00
              $10.50 - $10.80         11,000      9.80 years           $10.72                 -        $             -
                                  -----------    -------------   --------------     -------------      ---------------

              $10.00 - $10.80        420,833      8.40 years           $10.07            81,967        $         10.00
                                  ============   =============   ==============     ==============     ===============
</TABLE>

           The weighted average fair value per share of options granted in 2001
           and 2000 amounted to $1.91 and $3.15, respectively. The fair value of
           each option grant was estimated on the date of grant using the
           Black-Scholes option pricing model with the following assumption used
           for grants: expected volatility of 6.0% for 2001 and 2000, risk-free
           interest rate of 2.70% and 5.50% for 2001 and 2000, respectively, and
           expected lives of the options of seven years in 2001 and 2000. There
           were no cash dividends in 2001 or 2000.

Note 13 - Employee Benefit Plan

           The Company maintains an employee benefit plan for all eligible
           employees of the Company and the Bank under the provisions of
           Internal Revenue Code Section 401(k). The First National Retirement
           Savings Plan (the "Plan") allows for employee contributions and, upon
           annual approval of the Board of Directors, the Company matches 25% of
           employee contributions up to a maximum of six percent of annual
           compensation. A total of $9,914 and $7,232 was charged to operations
           in 2001 and 2000, respectively, for the Company's matching
           contribution. Employees are immediately vested in their contributions
           to the Plan and become fully vested in the employer matching
           contribution after five years of service.

Note 14 - Commitments and Contingencies

           The Company has entered into an employment agreement with its
           President and Chief Executive Officer that includes an annually
           renewable three-year compensation term, annual bonus, incentive
           program, stock option plan and a one-year non-compete agreement upon
           termination.

           In the normal course of business, the Company and the Bank are
           periodically subject to various pending or threatened lawsuits in
           which claims for monetary damages may be asserted. At December 31,
           2001, the Company and the Bank were not involved with any litigation
           matters.

                                       33
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

Note 15 - Financial Instruments with Off-Balance Sheet Risk

           The Company is party to financial instruments with off-balance sheet
           risk in the normal course of business to meet the financing needs of
           its customers. These financial instruments include commitments to
           extend credit and standby letters of credit and involve, to varying
           degrees, elements of credit and interest rate risk in excess of the
           amount recognized in the balance sheet. The Company's exposure to
           credit loss in the event of nonperformance by the other party to the
           financial instrument for commitments to extend credit and standby
           letters of credit is represented by the contractual amounts of those
           instruments.

           The Company uses the same credit and collateral policies in making
           commitments and conditional obligations as it does for on-balance
           sheet instruments. The Company evaluates each customer's
           creditworthiness on a case-by-case basis. The amount of collateral
           obtained if deemed necessary by the Company upon extension of credit
           is based on management's credit evaluation. Commitments to extend
           credit are agreements to lend to a customer as long as there is no
           violation of any condition established in the contract. Commitments
           generally have fixed expiration dates or other termination clauses
           and may require payment of a fee. Since many of the commitments may
           expire without being drawn upon, the total commitment amounts do not
           necessarily represent future cash requirements.

           At December 31, 2001, the Company's commitments to extend additional
           credit totaled approximately $25.6 million, the majority of which are
           at variable rates of interest. Included in the Company's total
           commitments are standby letters of credit. Letters of credit are
           commitments issued by the Company to guarantee the performance of a
           customer to a third party and totaled $81,151 at December 31, 2001.
           The credit risk involved in the underwriting of letters of credit is
           essentially the same as that involved in extending loan facilities to
           customers.

Note 16 - Fair Value of Financial Instruments

           SFAS 107, "Disclosures about Fair Value of Financial Instruments,"
           requires disclosure of fair value information, whether or not
           recognized in the statement of financial position, when it is
           practicable to estimate fair value. SFAS 107 defines a financial
           instrument as cash, evidence of an ownership interest in an entity,
           or contractual obligations which require the exchange of cash or
           other financial instruments. Certain items which are specifically
           excluded from the disclosure requirements, including the Company's
           common stock, premises and equipment and other assets and
           liabilities.

           Fair value approximates book value for the following financial
           instruments due to the short-term nature of the instrument: cash and
           due from banks, interest-bearing deposits in banks, federal funds
           sold, federal funds purchased, repurchase agreements, short-term FHLB
           advances, and other short-term borrowings. Fair value of investment
           securities is estimated based on quoted market prices where
           available. If quoted market

                                       34


<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

           prices are not available, fair values are based on quoted market
           prices of comparable instruments.

           Fair value for variable rate loans that reprice frequently and for
           loans that mature in less than one year is based on the carrying
           value, reduced by an estimate of credit losses inherent in the
           portfolio. Fair value of fixed rate real estate, consumer, commercial
           and other loans maturing after one year is based on the discounted
           present value of the estimated future cash flows, reduced by an
           estimate of credit losses inherent in the portfolio. Discount rates
           used in these computations approximate the rates currently offered
           for similar loans of comparable terms and credit quality.

           Fair value for demand deposit accounts and variable rate
           interest-bearing accounts with no fixed maturity date is equal to the
           carrying value. Certificate of deposit accounts maturing during 2001
           are valued at their carrying value. Certificate of deposit accounts
           maturing after 2001 are estimated by discounting cash flows from
           expected maturities using current interest rates on similar
           instruments. Fair value for long-term FHLB advances is based on
           discounted cash flows using the current market rate.

           The estimated fair market value of commitments to extend credit and
           standby letters of credit are equal to their carrying value as the
           majority of these off-balance sheet instruments have relatively short
           terms to maturity and are written with variable rates of interest.

           The Company has used management's best estimate of fair values based
           on the above assumptions. Thus, the fair values presented may not be
           the amounts which could be realized in an immediate sale or
           settlement of the instrument. In addition, any income tax or other
           expense which would be incurred in an actual sale or settlement are
           not taken into consideration in the fair value presented.


           The estimated fair values of the Company's financial instruments at
           December 31 are as follows:
<TABLE>
<CAPTION>
                                                             2001                                  2000
                                                             ----                                  ----

                                                 Carrying          Estimated             Carrying           Estimated
                                                  Amount           Fair Value             Amount           Fair Value
                                                 ---------        ------------          ----------       --------------

<S>                                           <C>              <C>                 <C>                 <C>
   Financial assets:
     Cash and due from banks                  $    381,844     $      381,844      $         994,505   $       994,505
     Federal funds sold                            929,000            929,000              7,990,000         7,990,000
     Securities available for sale              12,407,758         12,407,758              8,022,471         8,022,471
     Loans, net                                 63,068,648         63,684,000             37,199,261        37,379,000
   Financial liabilities:
     Deposits                                   70,918,406         73,639,000             46,386,471        47,844,000

</TABLE>


                                       35
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)


Note 17 - Parent Company Financial Information

           The following is condensed financial information of First National
           Bancshares, Inc. (parent company only) at December 31, 2001 and 2000
           and for the years then ended.
<TABLE>
<CAPTION>

                         First National Bancshares, Inc.
                            Condensed Balance Sheets

                                                                          2001                  2000
                                                                          ----                  ----

<S>                                                               <C>                     <C>
              Assets:
                Cash                                              $       1,029,687       $     1,016,300
                Investment in bank subsidiary                             9,734,057             9,974,445
                                                                   ----------------      ----------------

                    Total                                         $      10,763,744      $     10,990,745
                                                                   ================      ================

              Liabilities and shareholders' equity:
                 Accruals and other liabilities                   $           6,164      $         10,650
                 Due to bank subsidiary                                           -                 5,711
                 Shareholders' equity                                    10,757,580            10,974,384
                                                                   ----------------      ----------------

                    Total                                         $      10,763,744      $     10,990,745
                                                                   ================      ================
</TABLE>



<TABLE>
<CAPTION>

                         First National Bancshares, Inc.
                            Condensed Statements of Income

                                                                                 2001               2000
                                                                                 ----               ----

<S>                                                                       <C>                <C>
      Interest income                                                     $         37,898   $        189,515
      Interest expense                                                                   -             (6,481)
                                                                          ----------------    ---------------
            Net interest income                                                     37,898            183,034

      Payment from bank subsidiary
            for organizational costs                                                                  402,480
      Noninterest expense                                                          (14,314)          (175,941)
      Equity in undistributed net loss of bank subsidiary                         (226,832)        (1,074,705)
                                                                          ----------------    ---------------
      Net loss before income taxes                                                (203,248)          (665,132)
      Income taxes                                                                       -                  -
                                                                          ----------------    ---------------

            Net loss                                                     $        (203,248)  $       (665,132)
                                                                          ================    ===============
</TABLE>


                                       36
<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>


                         First National Bancshares, Inc.
                       Condensed Statements of Cash Flows
                                                                                          2001                 2000
                                                                                          ----                 ----


<S>                                                                                <C>                  <C>
   Operating activities:
    Net loss                                                                      $        (203,248)   $        (665,132)
     Adjustments to reconcile net loss to
       net cash provided by operating activities:
       Equity in undistributed net loss of bank subsidiary                                   226,832            1,074,705
       Discount accretion                                                                          -             (126,900)
       Decrease in other assets                                                                    -               92,650
       Increase/(decrease) in other liabilities                                               (4,486)               3,396
                                                                                    -----------------    ----------------
         Net cash provided by operating activities                                            19,098              378,719
                                                                                    ----------------     ----------------

   Investing activities:
     Purchases of investment securities                                                            -          (34,269,732)
     Maturity of investment securities                                                             -           45,594,000
     Repayment from bank for equipment and other assets                                            -               52,320
     Increase/(decrease) in due to bank subsidiary                                            (5,711)               5,711
     Capital contribution to bank subsidiary                                                       -          (11,000,000)
                                                                                    ----------------     -----------------
         Net cash provided/(used) by investing activities                                     (5,711)             382,299
                                                                                    -----------------    ----------------

   Financing activities:
     Proceeds from stock offering, net of costs                                                    -              519,261
     Redemption of stock of organizer                                                              -                 (100)
     Increase (decrease) on line of credit                                                         -             (390,000)
                                                                                    ----------------     -----------------
         Net cash provided by financing activities                                                 -              129,161
                                                                                    ----------------     ----------------
   Net increase in cash and cash equivalents                                                  13,387              890,179
   Balance, beginning of year                                                              1,016,300              126,121
                                                                                    ----------------     ----------------
   Balance, end of year                                                            $       1,029,687    $       1,016,300
                                                                                    ================     ================

</TABLE>



                                       37
<PAGE>

                              [Insert company logo]


                               BOARD OF DIRECTORS

                                Norman F. Pulliam
                                    Chairman
                            *************************
                                  C. Dan Adams
                               Mellnee G. Buchheit
                                Jerry L. Calvert
                                Martha C. Chapman
                                 W. Russel Floyd
                           Dr. C. Tyrone Gilmore, Sr.
                           Dr. Gaines W. Hammond, Jr.
                                Benjamin R. Hines
                                William A. Hudson
                                  Peter Weisman
                                Donald B. Wildman
                              Coleman L. Young, Jr.
                ************************************************


                               [Insert bank logo]


                               EXECUTIVE OFFICERS

                                Jerry L. Calvert
                      President and Chief Executive Officer

                             Robert W. Murdoch, Jr.
                 Senior Vice President & City Executive Officer

                                 Kitty B. Payne
                 Senior Vice President & Chief Financial Officer

                               David H. Zabriskie
                  Senior Vice President & Chief Lending Officer



                                       38
<PAGE>

                              [Insert company logo]

                             SHAREHOLDER INFORMATION

                             Market for Common Stock

First National Bancshares, Inc. common stock is traded on the OTC Bulletin Board
under the symbol FNSC. At March 1, 2002, there were 355 shareholders of record.
The number of shareholders of record does not reflect the number of persons or
entities who hold the stock in nominee or "street" name through various
brokerage firms.

All of our currently issued and outstanding common stock was issued in our
initial public offering on November 10, 1999. The price per share in the initial
public offering was $10.00 per share. There is currently not a well-established
public trading market in the common stock, and trading and quotations of the
common stock have been limited and sporadic. Because there has not been an
established market for our common stock, we may not be aware of all prices at
which the common stock has been traded. Based on information available to us
from a limited number of sellers and purchasers of our common stock, we believe
transactions in the common stock, on a per share basis, ranged from $10.00 to
$12.00 during 2001 and from $10.50 to $10.75 during 2000. There is no assurance
that these prices reflect the market value of our common stock.

Registered Market Makers               Stock Transfer Agent and Registrar

Scott & Stringfellow, Inc.             First Citizens Bank and Trust
Hill Thompson Magid, L.P.                    Company of South Carolina
Monroe Securities, Inc.                        P.O. Box 29
Anpac Securities Group, Inc.                Columbia, SC  29202
Wedbush Morgan Securities, Inc.                (803) 733-2703


                                 Annual Meeting

 The Annual Meeting of Shareholders will be held at 5:30 PM on Tuesday, April
 16, 2002 at our main offices at 215 N. Pine Street, Spartanburg, SC 29302. All
 shareholders of record as of March 1, 2002 are eligible to attend and
                                      vote.

                              Financial Information

Analysts, investors and others seeking financial information, including our
            Annual Report to the SEC on Form 10-KSB, should contact:

                               Ms. Kitty B. Payne
                         First National Bancshares, Inc.
                                  P.O. Box 3508
                              Spartanburg, SC 29304

                                 General Counsel

                  Nelson, Mullins, Riley & Scarborough, L.L.P.
                                First Union Plaza
                      999 Peachtree Street, NE / Suite 1400
                             Atlanta, Georgia 30309
                                       39

<PAGE>

                              [Insert bank logo]




                                OFFICE LOCATIONS

                                   Main Office
                         (across from Converse College)
                        Manager - Lawson "Boo" Hayes, Jr.
                               215 N. Pine Street
                              Spartanburg, SC 29302
                               Phone: 864-948-9001
                                Fax: 864-948-0001

                                 Westside Office
                              (across from Saturn)
                              Manager - Todd Cannon
                               2680 Reidville Road
                              Spartanburg, SC 29301
                               Phone: 864-576-7220
                                Fax: 864-576-7282

                             Boiling Springs Office
                               (next to Hardee's)
                             Manager - Randy Foster
                            3090 Boiling Springs Road
                            Boiling Springs, SC 29316
                               Phone: 864-578-8600
                                Fax: 864-578-8664

                             24-Hour Account Access
                                  864-948-9008


                Visit us online at www.firstnational-online.com!





                       Doing Business RIGHT Here at Home.




                                       40
<PAGE>




[Insert company logo]

Post Office Box 3508
Spartanburg, SC  29304
(864) 948-9001
www.firstnational-online.com