SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

(MARK ONE)

X        Annual Report under Section 13 or 15(d) of the Securities Exchange Act
         of 1934 For the fiscal year ended December 31, 2000

         OR

         Transition Report under Section 13 or 15(d) of the Securities Exchange
         Act of 1934 For the transition period from ________ to ________

                          Commission file no. 333-87503

                         First National Bancshares, Inc.
                -------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

             South Carolina                             58-2466370
       --------------------------                      ----------
      (State or Other Jurisdiction                  (I.R.S. Employer
    of Incorporation or Organization)              Identification No.)

             215 N. Pine St.
            Spartanburg, S.C.                             29302
            -----------------                          ---------
  (Address of Principal Executive Offices)              (Zip Code)

                                  864-948-9001
                             ---------------------
                 Issuer's Telephone Number, Including Area Code

        Securities registered pursuant to Section 12(b) of the Act: None.
        Securities registered pursuant to Section 12(g) of the Act: None.

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes  X       No
    ---         ---

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

         The issuer's loss for its most recent fiscal year was $665,132. As of
March 1, 2001, 1,200,000 shares of Common Stock were issued and outstanding.

         The aggregate market value of the Common Stock held by non-affiliates
of the Company on March 1, 2001 is $7,695,925. This calculation is based upon an
estimate of the fair market value of the Common Stock of $10.75 per share, which
was the price of the last trade of which management is aware prior to this date.

 Transitional Small Business Disclosure Format.  (Check one):  Yes    No   X
                                                                  ---     ---

                       DOCUMENTS INCORPORATED BY REFERENCE
       Company's Proxy Statement for the 2001 Annual Shareholders Meeting.


<PAGE>

ITEM 1.    DESCRIPTION OF BUSINESS

         This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
the Securities Exchange Act of 1934. These statements are based on many
assumptions and estimates and are not guarantees of future performance. Our
actual results may differ materially from those projected in any forward-looking
statements, as they will depend on many factors about which we are unsure,
including many factors which are beyond our control. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plan," and
"estimate," as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to:

o        significant increases in competitive pressure in the banking and
         financial services industries;

o        changes in the interest rate environment which could reduce anticipated
         or actual margins;

o        changes in political conditions or the legislative or regulatory
         environment;

o        general economic conditions, either nationally or regionally and
         especially in primary service area, becoming less favorable than
         expected resulting in, among other things, a deterioration in credit
         quality;

o        changes occurring in business conditions and inflation;

o        changes in technology;

o        changes in monetary and tax policies;

o        changes in the securities markets; and

o        other risks and uncertainties detailed from time to time in our filings
         with the Securities and Exchange Commission.

GENERAL

     First National Bancshares, Inc. was incorporated on July 14, 1999 in South
Carolina for the purpose of operating as a bank holding company pursuant to the
Federal Bank Holding Company Act of 1956 and the South Carolina Bank Holding
Company Act, and to purchase 100% of the issued and outstanding stock of First
National Bank of Spartanburg, an association organized under the laws of the
United States, to conduct a general banking business in Spartanburg, South
Carolina.

     On November 10, 1999, we commenced our initial public offering and
completed the sale of 1,200,000 shares of our common stock at $10 per share on
February 10, 2000. The offering raised approximately $11,800,000 net of sales
expenses and commissions. Our directors and executive officers purchased 484,100
shares of common stock at $10 per share, for a total of $4,841,000. Upon
purchase of these shares, we issued stock warrants to the organizers to purchase
an additional 313,333 shares of common stock for $10 per share. The warrants,
which are represented by separate warrant agreements, vest ratably over a
five-year period beginning on February 10, 2001 and will be exercisable in whole
or in part during the ten-year period following the grant date.

     We used $11 million of the proceeds to capitalize the bank which opened for
business on March 27, 2000 in a temporary location at 451 E. St. John St. that
was also the headquarters of the holding company. The bank opened its second
full-service banking office at 2680 Reidville Road in Spartanburg on July 14,
2000 and plans to open its third full-service office at 3006 Boiling Springs
Road in Boiling Springs during the third quarter of the year 2001. We completed
the construction of our permanent main office at 215 N. Pine St. and moved our
headquarters and a full-service banking office to this location on February 5,
2001.

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MARKETING FOCUS

     The bank has positioned itself as a locally-owned and operated bank
organized to serve consumers and small-to mid-size businesses and professional
concerns. The bank is primarily engaged in the business of accepting demand and
time deposits and providing commercial, consumer and mortgage loans to the
general public. Deposits of the bank are insured up to $100,000 by the Federal
Deposit Insurance Corporation ("FDIC"). Other services which the bank offers
include safe deposit boxes, bank official checks, traveler's checks, and wire
transfer capabilities. The bank activated its website and its remote internet
banking product, First National Online, on February 20, 2001 and plans to launch
an internet-based commercial cash management product in the second quarter of
2001.

     Because there are few locally owned banks left in Spartanburg, we believe
we offer a unique banking alternative for the market by offering a higher level
of customer service and a management team more focused on the needs of the
community than most of our competitors. In order to achieve the level of prompt,
responsive service that we believe will be necessary to attract customers and to
develop First National Bank of Spartanburg's image as a local bank with an
individual focus, we will leverage our community-oriented board of directors,
convenient branch locations, and local services and decision making to attract
and retain customers.

LOCATION AND SERVICE AREA

     Spartanburg County has a growing and dynamic economic environment that we
believe will support the bank. It is South Carolina's fourth most populous
county with over 247,000 residents. The county and surrounding area are home to
several large manufacturing concerns, including BMW, Springs Industries,
Michelin Tire Company, Advantica, Milliken & Company, and Spartanburg Regional
Medical Center, which support a stable business foundation and a skilled labor
force. The presence of companies like these has resulted in Spartanburg County
having the highest per capita international investment of any area in the United
States in 1995.

     Our primary service area consists of Spartanburg County, South Carolina,
with a focus on the ten mile radius of our main office and our branch office at
2680 Reidville Road. Our main office is located at 215 N. Pine St. in downtown
Spartanburg and provides excellent visibility for the bank. We opened our second
branch office on the west side of Spartanburg, the fastest growing area of the
county on July 14, 2000 and we plan to open our third branch office at 3006
Boiling Springs Road in northern Spartanburg County in the third quarter of
2001. Our anticipated expansion plans include opening additional branches
strategically located within our service area to extend the market reach of our
bank while increasing our personal service delivery capabilities to all of our
customers. We plan to take advantage of existing contacts and relationships with
individuals and companies in this area to more effectively market the services
of the bank.

DEPOSIT SERVICES

         We offer a full range of deposit services that are typically available
in most banks and savings and loan associations, including checking accounts,
commercial accounts, savings accounts, and time deposits of various types,
ranging from daily money market accounts to longer-term certificates of deposit.
The transaction accounts and time certificates are tailored to our primary
market area at rates competitive to those offered in the Spartanburg area. In
addition, we offer certain retirement account services, such as IRAs. We solicit
these accounts from individuals, businesses, associations, organizations, and
governmental authorities.

LENDING ACTIVITIES

         GENERAL. The bank emphasizes a range of lending services, including
real estate, commercial, and consumer loans to individuals and small- to
medium-sized businesses and professional firms that are located in or conduct a
substantial portion of their business in the bank's market area. The bank
intends to originate quality, profitable loans which will benefit the area's
economy and promote the growth of the bank. Management has focused on
maintaining a quality loan portfolio and to accept only those credit risks which
meet the bank's underwriting standards.

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<PAGE>

         LOAN APPROVAL AND REVIEW. The bank's loan approval policies provide for
various levels of officer lending authority. When the amount of aggregate loans
to a single borrower exceeds an individual officer's lending authority, the loan
request is considered and approved by an officer with a higher lending limit or
the bank's loan committee. The bank does not make any loans to any director or
executive officer of the bank unless the loan is approved by the board of
directors of the bank and is made on terms not more favorable to such person
than would be available to a person not affiliated with the bank. The bank
adheres to Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation guidelines in its residential mortgage loan review process, but may
choose to alter this policy in the future. The bank currently originates its
residential mortgage loans through a correspondent bank.

         LENDING LIMITS. The bank's lending activities are subject to a variety
of lending limits imposed by federal law. In general, the bank is subject to a
legal limit on loans to a single borrower equal to 15% of the bank's capital and
unimpaired surplus. Different limits may apply in certain circumstances based on
the type of loan or the nature of the borrower, including the borrower's
relationship to the bank. These limits increase or decrease as the bank's
capital increases or decreases. Based upon the initial capitalization of the
bank with $11 million, the bank initially had a self-imposed loan limit of
$1,320,000, which represents 80% of its anticipated legal lending limit of
$1,650,000. The bank actively engages in selling participations in its loans to
other financial institutions in order to more adequately meet all of the lending
needs of loan customers requiring aggregate extensions of credit above these
limits. The bank competes for real estate loans with a number of competitors
which are well-established in the Spartanburg County area and have substantially
greater resources and lending limits than the bank. As a result, the bank
occasionally must charge a lower interest rate to attract borrowers.

         REAL ESTATE AND MORTGAGE LOANS. One of the primary components of the
bank's loan portfolio is loans secured by first or second mortgages on real
estate. These loans generally consist of commercial real estate loans,
construction and development loans, and residential real estate loans, including
home equity loans. Interest rates for all categories may be fixed or adjustable,
and will more likely be fixed for shorter-term loans. Loan terms generally are
limited to five years or less, although payments may be structured on a longer
amortization basis. The bank generally charges an origination fee for each loan.

         Real estate loans are subject to the same general risks as other loans.
The principal economic risk associated with each category of loans, including
real estate loans, is the creditworthiness of the bank's borrowers. They are
particularly sensitive to fluctuations in the value of real estate, which is
generally the underlying security for real estate loans. Fluctuations in the
value of real estate, as well as other factors arising after a loan has been
made, could negatively affect a borrower's cash flow, creditworthiness, and
ability to repay the loan. Management attempts to reduce credit risk in the
commercial real estate portfolio by emphasizing loans on owner-occupied office
and retail buildings where the loan-to-value ratio, established by independent
appraisals, does not exceed 80%. In addition, the bank typically requires
personal guarantees of the principal owners of the property backed with a review
by the bank of the personal financial statements of the principal owners.

         The underwriting criteria for home equity loans and lines of credit is
generally the same as applied by the bank when making a first mortgage loan, as
described above, and home equity lines of credit typically expire ten years or
less after origination. The bank currently originates residential real estate
loans through a correspondent bank and is therefore not subject to interest rate
and credit risk on these loans.

         COMMERCIAL LOANS. The bank makes loans for commercial purposes in
various lines of businesses. Commercial loans are generally considered to have
greater risk than first or second mortgages on real estate because they may be
unsecured, or if they are secured, the value of the security may be difficult to
assess and more likely to decrease than real estate. Equipment loans are
typically made for a term of five years or less at fixed or variable rates, with
the loan fully amortized over the term and secured by the financed equipment and
with a loan-to-value ratio of 80% or less. Working capital loans typically have
terms not exceeding one year and are usually secured by accounts receivable or
inventory, and/or personal guarantees of the principals of the business. The
bank also plans to make small business loans utilizing government enhancements
such as the Small Business Administration's 7(a) program and SBA's 504 programs.
These loans are typically partially guaranteed



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by the government, which may help to reduce the bank's risk. Government
guarantees of SBA loans do not exceed 80% of the loan value and will generally
be less.

         As with other categories of loans, the principal economic risk
associated with commercial loans is the creditworthiness of the borrower. The
risks associated with commercial loans vary with many economic factors,
including the economy in the Spartanburg County area. The well-established banks
in the Spartanburg County area make proportionately more loans to medium to
large-sized businesses than the bank. Many of the bank's anticipated commercial
loans are made to small- to medium-sized businesses which may be less able to
withstand competitive, economic, and financial conditions than larger borrowers.

         CONSUMER LOANS. The bank makes a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
loans and revolving lines of credit. Installment loans typically carry balances
of less than $50,000 and are amortized over periods up to 60 months. Consumer
loans may be offered on a single maturity basis where a specific source of
repayment is available. Revolving loan products typically require monthly
payments of interest and a portion of the principal. Consumer loans are
generally considered to have greater risk than first or second mortgages on real
estate because they may be unsecured, or if they are secured, the value of the
security may be difficult to assess and more likely to decrease than real
estate. As with other categories of loans, the principal economic risk
associated with consumer loans is the creditworthiness of the borrower. The
principal competitors for consumer loans are the established banks and financial
services companies in the Spartanburg County area.

OTHER BANKING SERVICES

         The bank offers other banking services including drive-up ATM's, safe
deposit boxes, traveler's checks, direct deposit, U.S. Savings Bonds, and
banking by telephone. The bank activated its website and its internet banking
product on February 20, 2001 and plans to offer an internet-based commercial
cash management product in the second quarter of 2001. The bank is associated
with the Cirrus and Pulse ATM networks, which may be used by its customers
throughout the country. The bank also offers credit card services through a
correspondent bank. The bank does not plan to exercise trust powers during its
initial years of operation.

MARKET SHARE

         As of June 30, 2000, total deposits in the bank's primary service area
were $2.3 billion, which represented a 2.9% deposit growth rate from 1999. Our
plan is to grow our deposit base to $200 million in our five initial years of
operation. Of course, we cannot be sure that these deposit growth rates will
continue, or that we will accomplish this objective.

EMPLOYEES

         As of March 1, 2001, we had 22 employees, of which 21 were full time.
These employees provide the majority of their services to the bank.

                           SUPERVISION AND REGULATION

         We are subject to extensive state and federal banking laws and
regulations which impose specific requirements or restrictions on and provide
for general regulatory oversight of virtually all aspects of operations. These
laws and regulations are generally intended to protect depositors, not
shareholders. The following summary is qualified by reference to the statutory
and regulatory provisions discussed. Changes in applicable laws or regulations
may have a material effect on our business and prospects. Beginning with the
enactment of the Financial Institution Report Recovery and Enforcement Act in
1989 and following with the FDIC Improvement Act in 1991, numerous additional
regulatory requirements have been placed on the national banking industry in the
past several years, and additional changes have been proposed. Our operations
may be affected by legislative changes and the policies of various regulatory
authorities. We cannot predict the effect that fiscal or

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<PAGE>

monetary policies, economic control, or new federal or state legislation may
have on our business and earnings in the future.

GRAMM-LEACH-BLILEY ACT

         On November 4, 1999, the U.S. Senate and House of Representatives each
passed the Gramm-Leach-Bliley Act, previously known as the Financial Services
Modernization Act of 1999. The Act was signed into law by President Clinton on
November 12, 1999. Among other things, the Act repeals the restrictions on banks
affiliating with securities firms contained in sections 20 and 32 of the
Glass-Steagall Act. The Act also permits bank holding companies to engage in a
statutorily provided list of financial activities, including insurance and
securities underwriting and agency activities, merchant banking, and insurance
company portfolio investment activities. The Act also authorizes activities that
are "complementary" to financial activities.

         The Act is intended, in part, to grant to community banks certain
powers as a matter of right that larger institutions have accumulated on an ad
hoc basis. Nevertheless, the Act may have the result of increasing the amount of
competition that we face from larger institutions and other types of companies.
In fact, it is not possible to predict the full effect that the Act will have on
us. From time to time, other changes are proposed to laws affecting the national
banking industry, and these changes could have a material effect on our business
and prospects.

         The Act also contains provisions regarding consumer privacy. These
provisions require financial institutions to disclose their policy for
collecting and protecting confidential information. Customers generally may
prevent financial institutions from sharing personal financial information with
nonaffiliated third parties except for third parties that market an
institution's own products and services. Additionally, financial institutions
generally may not disclose consumer account numbers to any nonaffiliated third
party for use in telemarketing, direct mail marketing, or other marketing to the
consumer.

FIRST NATIONAL BANCSHARES, INC.

         Because we own the outstanding capital stock of the bank, we are a bank
holding company under the federal Bank Holding Company Act of 1956 and the South
Carolina Banking and Branching Efficiency Act. Our activities are also governed
by the Glass-Steagall Act of 1933. These regulations may be affected by the
changes enacted by the Gramm-Leach-Bliley Act.

         THE BANK HOLDING COMPANY ACT. Under the Bank Holding Company Act, we
are subject to periodic examination by the Federal Reserve and required to file
periodic reports of its operations and any additional information that the
Federal Reserve may require. Our activities at the bank and holding company
level are limited to:

o        banking and managing or controlling banks;
o        furnishing services to or performing services for its subsidiaries; and
o        engaging in other activities that the Federal Reserve determines to be
         so closely related to banking and managing or controlling banks as to
         be a proper incident thereto.

         INVESTMENTS, CONTROL, AND ACTIVITIES. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:

o        acquiring substantially all the assets of any bank;
o        acquiring direct or indirect ownership or control of any voting shares
         of any bank if after the acquisition it would own or control more than
         5% of the voting shares of such bank (unless it already owns or
         controls the majority of such shares); or
o        merging or consolidating with another bank holding company.

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<PAGE>


         In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of a bank holding company. Control is rebuttably presumed to exist if
a person acquires 10% or more, but less than 25%, of any class of voting
securities and either the company has registered securities under Section 12 of
the Securities Exchange Act of 1934 or no other person owns a greater percentage
of that class of voting securities immediately after the transaction. Our common
stock is registered under the Securities Exchange Act of 1934. The regulations
provide a procedure for challenge of the rebuttable control presumption.

         Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:

o        making or servicing loans and certain types of leases;
o        engaging in certain insurance and discount brokerage activities;
o        performing certain data processing services;
o        acting in certain circumstances as a fiduciary or investment or
         financial adviser;
o        owning savings associations; and
o        making investments in certain corporations or projects designed
         primarily to promote community welfare.

         The Federal Reserve Board imposes certain capital requirements on the
company under the Bank Holding Company Act, including a minimum leverage ratio
and a minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "First National Bank of Spartanburg -
Capital Regulations." Subject to its capital requirements and certain other
restrictions, we are able to borrow money to make a capital contribution to the
bank, and these loans may be repaid from dividends paid from the bank to us. The
bank's ability to pay dividends is subject to regulatory restrictions as
described below in " First National Bank of Spartanburg - Dividends." We are
also able to raise capital for contribution to the bank by issuing securities
without having to receive regulatory approval, subject to compliance with
federal and state securities laws.

         SOURCE OF STRENGTH; CROSS-GUARANTEE. In accordance with Federal Reserve
Board policy, we are expected to act as a source of financial strength to the
bank and to commit resources to support the bank in circumstances in which we
might not otherwise do so. Under the Bank Holding Company Act, the Federal
Reserve Board may require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary, other than a nonbank subsidiary of a
bank, upon the Federal Reserve Board's determination that such activity or
control constitutes a serious risk to the financial soundness or stability of
any subsidiary depository institution of the bank's holding company. Further,
federal bank regulatory authorities have additional discretion to require a bank
holding company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.

         SOUTH CAROLINA STATE REGULATION. As a bank holding company registered
under the South Carolina Banking and Branching Efficiency Act, we are subject to
limitations on sale or merger and to regulation by the South Carolina Board of
Financial Institutions. Prior to acquiring the capital stock of a national bank,
we are not required to obtain the approval of the Board, but must notify them at
least 15 days prior to doing so. We must receive the board's approval prior to
engaging in the acquisition of banking or nonbanking institutions or assets and
must file periodic reports with respect to our financial condition and
operations, management, and intercompany relationships between our subsidiaries.

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FIRST NATIONAL BANK OF SPARTANBURG

         The bank operates as a national banking association incorporated under
the laws of the United States and subject to examination by the Office of the
Comptroller of the Currency. Deposits in the bank are insured by the FDIC up to
a maximum amount, which is generally $100,000 per depositor subject to
aggregation rules.

         The Office of the Comptroller of the Currency and the FDIC regulate or
monitor virtually all areas of the bank's operations, including:

o        security devices and procedures;
o        adequacy of capitalization and loss reserves;
o        loans;
o        investments;
o        borrowings;
o        deposits;
o        mergers;
o        issuances of securities;
o        payment of dividends;
o        interest rates payable on deposits;
o        interest rates or fees chargeable on loans;
o        establishment of branches;
o        corporate reorganizations;
o        maintenance of books and records; and
o        adequacy of staff training to carry on safe lending and deposit
         gathering practices.

         The Office of the Comptroller of the Currency requires the bank to
maintain specified capital ratios and imposes limitations on the bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Office of the Comptroller of the Currency will also require the bank to
prepare quarterly reports on the bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with its minimum standards
and procedures.

         Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and their state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:

o        internal controls;
o        information systems and audit systems;
o        loan documentation;
o        credit underwriting;
o        interest rate risk exposure; and
o        asset quality.

         National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the Office of the Comptroller of the Currency or the
Federal Reserve Board to be troubled institutions must give the Office of the
Comptroller of the Currency or the Federal Reserve Board thirty days' prior
notice of the appointment of any senior executive officer



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or director. Within the 30-day period, the Office of the Comptroller of the
Currency or the Federal Reserve Board, as the case may be, may approve or
disapprove any such appointment.

         DEPOSIT INSURANCE. The FDIC has adopted a risk-based assessment system
for determining an insured depository institutions' insurance assessment rate.
The system that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. An institution is
placed into one of three capital categories: (1) well capitalized; (2)
adequately capitalized; or (3) undercapitalized. The FDIC also assigns an
institution to one of three supervisory subgroups, based on the FDIC's
determination of the institution's financial condition and the risk posed to the
deposit insurance funds. Assessments range from 0 to 27 cents per $100 of
deposits, depending on the institution's capital group and supervisory subgroup.
In addition, the FDIC imposes assessments to help pay off the $780 million in
annual interest payments on the $8 billion Financing Corporation bonds issued in
the late 1980s as part of the government rescue of the thrift industry.

         The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC.

         TRANSACTIONS WITH AFFILIATES AND INSIDERS. The bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which places limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.

         The bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.

         DIVIDENDS. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office 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 total of
its net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus.

         BRANCHING. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current South Carolina law, the bank may open
branch offices throughout South Carolina with the prior approval of the Office
of the Comptroller of the Currency. In addition, with prior regulatory approval,
the bank will be able to acquire existing banking operations in South Carolina.
Furthermore, federal legislation permits interstate branching, including
out-of-state acquisitions by bank holding companies, interstate branching by
banks if allowed by state law, and interstate merging by banks. South Carolina
law, with limited exceptions, currently permits branching across state lines
through interstate mergers.

                                       9
<PAGE>

         COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility.
Failure to adequately meet these criteria could impose additional requirements
and limitations on the bank.

         OTHER REGULATIONS. Interest and other charges collected or contracted
for by the bank are subject to state usury laws and federal laws concerning
interest rates. The bank's loan operations are also subject to federal laws
applicable to credit transactions, such as:

o        the federal Truth-In-Lending Act, governing disclosures of credit terms
         to consumer borrowers;
o        the Home Mortgage Disclosure Act of 1975, requiring financial
         institutions to provide information to enable the public and public
         officials to determine whether a financial institution is fulfilling
         its obligation to help meet the housing needs of the community it
         serves;
o        the Equal Credit Opportunity Act, prohibiting discrimination on the
         basis of race, creed or other prohibited factors in extending credit;
o        the Fair Credit Reporting Act of 1978, governing the use and provision
         of information to credit reporting agencies;
o        the Fair Debt Collection Act, governing the manner in which consumer
         debts may be collected by collection agencies; and
o        the rules and regulations of the various federal agencies charged with
         the responsibility of implementing such federal laws.

The deposit operations of the bank also are subject to:

o        the Right to Financial Privacy Act, which imposes a duty to maintain
         confidentiality of consumer financial records and prescribes procedures
         for complying with administrative subpoenas of financial records; and
o        the Electronic Funds Transfer Act and Regulation E issued by the
         Federal Reserve Board to implement that act, which governs automatic
         deposits to and withdrawals from deposit accounts and customers' rights
         and liabilities arising from the use of automated teller machines and
         other electronic banking services.

         CAPITAL REGULATIONS. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have not
received any notice indicating that either we or the bank is subject to higher
capital requirements. The current guidelines require all bank holding companies
and federally-regulated banks to maintain a minimum risk-based total capital
ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1 capital
includes common shareholders' equity, qualifying perpetual preferred stock, and
minority interests in equity accounts of consolidated subsidiaries, but excludes
goodwill and most other intangibles and excludes the allowance for loan and
lease losses. Tier 2 capital includes the excess of any preferred stock not
included in Tier 1 capital, mandatory convertible securities, hybrid capital
instruments, subordinated debt and intermediate term-preferred stock, and
general reserves for loan and lease losses up to 1.25% of risk-weighted assets.

         Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a

                                       10
<PAGE>

50% rating. Most investment securities are assigned to the 20% category, except
for municipal or state revenue bonds, which have a 50% rating, and direct
obligations of or obligations guaranteed by the United States Treasury or United
States Government agencies, which have a 0% rating.

         The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.

         The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Currently, we
qualify as "well capitalized."

         Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:

o        submit a capital restoration plan;
o        raise additional capital;
o        restrict their growth, deposit interest rates, and other activities;
o        improve their management;
o        eliminate management fees; or
o        divest themselves of all or a part of their operations.

         These capital guidelines can affect us in several ways. If we grow at a
rapid pace, our capital may be depleted too quickly, and a capital infusion from
our holding company may be necessary which could impact our ability to pay
dividends. Our capital levels currently are adequate; however, rapid growth,
poor loan portfolio performance, poor earnings performance, or a combination of
these factors could change our capital position in a relatively short period of
time. If we fail to meet these capital requirements, our bank would be required
to develop and file a plan with the Office of the Comptroller of the Currency
describing the means and a schedule for achieving the minimum capital
requirements. In addition, our bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless our bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time. Bank holding companies controlling financial institutions can be called
upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.

         ENFORCEMENT POWERS. The Financial Institution Report Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such



                                       11
<PAGE>

violations. Criminal penalties for some financial institution crimes have been
increased to 20 years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, banking agencies' power to issue
cease-and-desist orders were expanded. Such orders may, among other things,
require affirmative action to correct any harm resulting from a violation or
practice, including restitution, reimbursement, indemnification or guarantees
against loss. A financial institution may also be ordered to restrict its
growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.

         EFFECT OF GOVERNMENTAL MONETARY POLICIES. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.

ITEM 2.    DESCRIPTION OF PROPERTY

         MAIN OFFICE - Our main office facility opened on February 5, 2001 at
215 N. Pine Street, Spartanburg, South Carolina 29302, one block north of the
intersection of Main Street and Pine Street in downtown Spartanburg. The bank
owns the approximately 2.0 acre site and the 15,000 square foot building with
four drive-through banking stations and an automated teller machine. We had
previously operated our headquarters and a full-service branch in a temporary
facility across the street from our new main office facility at 451 E. St. John
Street, Spartanburg, South Carolina 29302 since the bank opened for business on
March 27, 2000.

         REIDVILLE ROAD OFFICE - We opened a 3,000 square foot branch office on
July 14, 2000 on the west side of Spartanburg on a one-acre outparcel of the Oak
Grove Shopping Center at 2680 Reidville Road, Spartanburg, South Carolina 29301.
The branch has four drive-through banking stations and an automated teller
machine. The bank leases the land and owns the building at this location.

         BOILING SPRINGS OFFICE - We have received approval from the Office of
the Comptroller of the Currency to open a 3,000 square foot branch office at
3006 Boiling Springs Road in northern Spartanburg County in Boiling Springs,
South Carolina 29316. We have purchased this site for approximately $365,000 and
construction of the building is expected to cost an additional $500,000, not
including the cost of furniture, fixtures and equipment. We expect to complete
construction of this facility in the third or fourth quarter of 2001.

         We continue to follow our strategy of growth and expansion and may
contract to open offices at additional sites in the next several years of
operation.

ITEM 3.    LEGAL PROCEEDINGS

         None.

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


         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.


                                       12
<PAGE>


ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our stock trades under the symbol "FNSC" on the OTC Bulletin Board.
Trading and quotations of the common stock have been limited and sporadic. The
ranges of prices known to management at which shares of stock have been traded
are $10.50 to $10.75. As of March 1, 2001, there were 550 shareholders of
record.

         All of our outstanding shares of stock of common stock are entitled to
share equally in dividends from funds legally available therefore, when, as and
if declared by the board of directors. We currently intend to retain earnings to
support operations and finance expansion and therefore we do not anticipate
paying cash dividends in the foreseeable future.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION

         First National Bancshares, Inc. was organized on July 14, 1999, and its
initial principal activities were related to its organization, conducting its
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
its 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 its main banking location. The bank opened its
Westside office on July 14, 2000.

RESULTS OF OPERATIONS

         At December 31, 2000, the end of the first partial year of operations,
we had total assets of $58,295,496. These assets consisted of cash and due from
banks of $994,505; federal funds sold of $7,990,000; securities available for
sale of $8,022,471; premises and equipment of $3,321,854; net loans of
$37,199,261 and other assets of $767,405. Our liabilities at December 31, 2000
were $47,321,112 and consisted of deposits of $46,386,471 and other liabilities
of $934,641. Stockholders' equity at December 31, 2000 was $10,947,384.

         Our net loss for the period ended December 31, 2000 was $665,132 or a
net loss of $.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."

         Included in the loss for the period ended December 31, 2000 is a
non-cash expense of $470,893 related to the provision for loan losses. The loan
loss reserve was $470,893 as of December 31, 2000 or 1.25% of gross loans. 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. At December 31,
2000, there were no nonperforming loans and we have had no net charge-offs since
commencing operations.

         Noninterest income in 2000 was $35,668, representing service charges on
deposit accounts of $19,995 and other fee income of $15,673. Noninterest expense
was $1,409,073, primarily consisting of $768,574 in salaries and employee
benefits incurred prior to the opening of the bank and through year-end, and
other expenses relating to our operation and of the bank.


                                       13
<PAGE>


NET INTEREST INCOME

         Net interest income, the largest component of our income, was
$1,179,166 for the period. Interest income for the period 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. Interest expense for the period
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.

         Our consolidated net interest margin for the period was 4.20% and our
earning assets averaged $28.2 million. The net interest margin is calculated as
net interest income divided by year-to-date average earning assets.

AVERAGE BALANCES, YIELDS AND RATES

         Average loans and investments for the period were $13.6 and $5.7
million, respectively. The average yield on loans and investments for the period
was 10.13% and 6.38%, respectively. The average balance of deposits for the
period was $18.2 million and the weighted rate on deposits was 6.28%.

         The following table sets forth, for the year ended December 31, 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. Because the bank did not open until March 27, 2000, we have omitted
similar data for 1999.

<PAGE>


                AVERAGE BALANCES, INCOME AND EXPENSES, AND RATES
                                           For the year ended
                                            December 31, 2000
                                          --------------------
                                         (dollars in thousands)
                                         -----------------------

                                    Average         Income/      Yield/
                                    Balance         Expense       Rate

Federal funds sold                     8,968           595         6.63%
Investment securities                  5,689           363         6.38%
Loans                                 13,568         1,374        10.13%
                                      ------         -----
     Total earning assets             28,225         2,332         8.26%
                                      ======         =====

Deposits                              18,241         1,146         6.28%

Net interest spread                                                1.98%
Net interest income/margin                                         4.20%

         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.


                                       14
<PAGE>


RATE/VOLUME ANALYSIS

         Net interest income can be analyzed in terms of the impact of changing
rates and changing volume. As this was the first period of operations for the
bank, all interest income and expense is attributable to volume and therefore we
have omitted the table analyzing the changes in net interest income as it would
not be meaningful.

LIQUIDITY AND INTEREST RATE SENSITIVITY

         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.

         Our primary sources of liquidity are a stable base of deposits,
scheduled repayments on our loans, and interest and maturities on our
investments. All of our securities have been classified as available-for-sale.
If necessary, we might sell a portion of our investment securities in connection
with the management of our interest sensitivity gap or to manage our liquidity.
We may also utilize our cash and due from banks and federal funds sold to meet
liquidity needs. Additionally, we have a federal fund purchased line of credit
with our correspondent bank in the amount of $3,000,000, on which no borrowings
have been drawn, that can be utilized if needed. We believe that our liquidity
and ability to manage assets will be sufficient to meet our cash requirements
over the near future.

         The principal 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.

         Because the bank has only been open since March 27, 2000 and maintained
approximately 14% of its total assets in federal funds sold at December 31,
2000, we are currently asset sensitive over all time frames. However, if 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.

INTEREST RATE SENSITIVITY ANALYSIS

         The following table presents our rate sensitivity at each of the time
intervals indicated as of December 31, 2000. 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.


                                       15
<PAGE>
<TABLE>
<CAPTION>

                                      Within        After three but        fter one but      After
                                       three         Within twelve         Within five        Five
                                      months            Months            A   Years          Years                 Total
                                      ------            ------                -----          -----                 -----
                                                                  (Dollars in Thousands)

<S>                              <C>                 <C>                 <C>              <C>             <C>
Interest-earning assets:
  Federal funds sold             $          7,990    $       ---         $       ---      $        ---    $          7,990
  Investment securities                     1,904          2,108               2,500             1,510               8,022

  Loans                                    16,160          7,687              13,757                66              37,670
                                          -------          -----             -------             ----                ------

Total earning assets             $         26,054    $     9,795         $    16,257      $      1,576    $         53,682

Interest-bearing liabilities:
  Money market and NOW           $          3,873    $       ---         $     9,131      $       ---     $         13,004
  Regular savings                              47            ---                 213              ---                  260
  Time deposits                             1,900         25,085               4,133              ---               31,118
                                           ------         ------              ------             ----               ------

Total interest-bearing

liabilities                      $          5,820    $    25,085         $    13,477       $      ---     $         44,382

Period gap                       $         20,234    $   (15,290)        $     2,780       $     1,576    $          9,300
Cumulative gap                   $         20,234    $     4,944         $     7,724       $     9,300    $          9,300

Ratio of cumulative gap to
total earning assets                       37.69%           9.21%             14.39%             17.32%

</TABLE>
LOAN PORTFOLIO

         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 were
$13.1 million for the year 2000. Total loans outstanding at December 31, 2000
were $37,670,154 before allowance for loan losses.

         The following table summarizes the composition of the loan portfolio at
December 31, 2000.

                                        Amount                 Percent of Total
                                 (Dollars in thousands)

Commercial                       $         7,953                  21.11%
Real estate - construction                   229                   0.61%
Real estate - mortgage                    27,040                  71.78%
Consumer and other                         2,533                   6.72%
Unearned income, net                         (85)                  (.22%)
                                 ----------------              ----------
Total Loans                      $        37,670                 100.00%

Allowance for loan losses        $          (471)

Total net loans                  $        37,199


                                       16
<PAGE>


         The principal component of our loan portfolio at year-end was mortgage
loans which represented 71.78% of the portfolio. 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.

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, 2000:
<TABLE>
<CAPTION>


                                             After one but
                                  One year   Within five         After
                                  or less      Years          five years      Total
                                  -------    -------------    ----------      -----
<S>                         <C>            <C>           <C>            <C>
Commercial                     $      6,650   $     1,303   $       0      $     7,953
Real estate - construction              229             0           0              229
Real estate - mortgage               12,021        15,019           0           27,040
Consumer and other                    1,218         1,231          84            2,533
                                -----------   -----------   ---------     ------------

Total loans                    $     20,118   $    17,553   $      84      $    37,755
Unearned income, net                                                       $       (85)

Total loans, net                                                           $    37,670
Loan maturing after one year with:
Fixed interest rates                                                       $    12,858
Floating interest rates                                                    $     4,779

</TABLE>

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. Thus, 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.

         Additions to the allowance for loan losses, which are expenses to the
provision for loan losses on our income statement, are made periodically to
maintain the allowance at an appropriate level based on management's analysis of
the potential risk in the loan portfolio. This analysis includes a review of
delinquency trends, actual losses, and internal credit ratings. We do not
allocate the allowance for loan losses to specific categories of loans but
evaluate the adequacy on an overall portfolio basis utilizing a risk grading
system.


                                       17
<PAGE>


         At December 31, 2000, the allowance for loan losses was $470,893, or
1.25% of outstanding loans of $37,670,154. The bank has not charged off any
loans since commencing operations. There were no non-accrual or non-performing
loans at December 31, 2000, nor any loans delinquent more than 90 days. The
provision for loan losses was made primarily as a result of management's
assessment of general loan loss risk as the bank recorded its first loans.

INVESTMENT PORTFOLIO

         At December 31, 2000, the investment securities portfolio represented
approximately 15% of our earning assets at $8,022,471. We were invested in U.S.
Government agency securities and mortgage-backed securities with a fair value of
$8,022,471 and an amortized cost of $7,973,320, for an unrealized gain of
$49,151.

         Contractual maturities and yields on our investments (all available for
sale) at December 31, 2000 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 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        $   3,586    6.81%    $     2,500     6.85%    $   ----          ---  $  6,086        6.82%
Mortgage-backed securities            ---     ---             ---      ----       1,936        6.94%     1,936        6.94%

                                 --------------------  ------------------------ --------------------- ----------------------
Total                           $   3,586    6.81%    $     2,500     6.85%    $  1,936        6.94%   $ 8,022        6.84%
</TABLE>

         At December 31, 2000, short-term investments comprised 14.8% of total
earning assets at $7,990,000. These funds were invested in federal funds sold on
an overnight basis. As the bank continues to grow, it is expected that there
will be a shift from overnight investments into the loan portfolio, primarily,
and into the investment securities portfolio, secondarily.

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

         Our primary source of funds for loans and investments is our deposits.
Average total deposits were $18.2 million and average interest-bearing deposits
were $16.9 million in 2000. The following is a table of deposits by category at
year-end.

                                                        Amount
                                                   (in thousands)      Percent

        Demand deposit accounts                      $  3,020          6.51%
        NOW accounts                                    2,966          6.39%
        Money market accounts                           9,022         19.45%
        Savings accounts                                  260          0.56%
        Time deposits less than $100,000               18,715         40.35%
        Time deposits of $100,000 or more              12,403         26.74%
                                                      -------         ------

        Total deposits                               $46,386         100.00%
                                                      =======        =======


                                       18
<PAGE>

         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 $33,983,664 at December 31, 2000. Our
loan-to-deposit ratio was 81.2% at year-end. The maturity distribution of our
time deposits of $100,000 or more at December 31, 2000 is as follows:

                                              Dollars in thousands
                                              --------------------

         Three months or less                     $   1,068
         Over three through twelve months            10,432
         Over twelve months                             903
                                                  ---------

         Total                                    $  12,403
                                                  =========

SHORT-TERM BORROWINGS

         As of December 31, 2000, we had no outstanding balances under
short-term borrowings. 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%.

RETURN ON EQUITY AND ASSETS

         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 2000. Since our inception, we have not paid cash
dividends.

                         Return on average assets                 -1.68%
                         Return on average equity                 -5.91%
                         Equity to assets ratio                   28.37%

CAPITAL RESOURCES

         Total shareholders' equity amounted to $10,974,384 at December 31,
2000. This is compared to $(212,846) at December 31, 1999. The increase resulted
from the completion of the initial public offering which began on November 10,
1999. The offering was completed on February 10, 2000 and raised approximately
$11,800,000 net of sales expenses and commissions. Of the proceeds, $11,000,000
was used to capitalize the bank. We retained the remaining offering proceeds to
provide additional capital for investment in the bank, if needed, or to fund
other activities which may from time to time be considered appropriate
investments of capital at some point in the future.

         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



                                       19
<PAGE>

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.

         The following table sets forth the company's and the bank's various
capital ratios at December 31, 2000. We are both subject to various regulatory
capital requirements administered by the federal banking agencies. At December
31, 2000, we both were in compliance with each of the applicable regulatory
capital requirements.

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

                        Total risk-based capital           26.93%       24.64%
                        Tier 1 risk-based capital          25.81%       23.53%
                        Leverage capital                   27.44%       27.05%

         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, 2000, there were no
significant firm commitments outstanding for capital expenditures. However, it
is our intention to begin construction during the first quarter of 2001 on our
third branch office building at a site in Boiling Springs, South Carolina in
northern Spartanburg County. It is expected that the total cost of the project
will be approximately $865,000 including the cost of the property which was
purchased in December of 2000 for $365,000 (excluding the cost of furniture,
fixtures and equipment).

LIQUIDITY MANAGEMENT

         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, 2000, our liquid assets, consisting of cash and due
from banks and federal funds sold, amounted to $8,984,505, representing 15.4% of
total assets. Investment securities amounted to $8,022,471, representing 13.8%
of total assets; 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.

         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 a federal funds
purchased line of credit with a correspondent bank in the amount of $3,000,000.
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.

IMPACT 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.

         Since most of the assets and liabilities of a financial institution are
monetary in nature, the effect of changes in interest rates will have a more
significant impact on our performance than will the effect of changing



                                       20
<PAGE>

prices and inflation in general. Interest rates may generally increase as the
rate of inflation increases, although not necessarily in the same magnitude.

ACCOUNTING AND FINANCIAL REPORTING ISSUES

         SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities", SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" and SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of FASB
Statement No. 133", establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or a firm
commitment, (b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment
in a foreign corporation. SFAS 137 amends SFAS 133 to delay the required
adoption date by one year. SFAS 138 amends SFAS 133 to address a limited number
of issues causing implementation difficulties. This statement is effective for
fiscal quarters in fiscal years beginning after June 15, 2000. We adopted this
statement January 1, 2001, with no expected material impact on our financial
statements.

INDUSTRY DEVELOPMENTS

         From time to time, various bills are introduced in the United States
Congress with respect to the regulation of financial institutions. Certain of
these proposals, if adopted, could significantly change the regulation of banks
and the financial services industry. We cannot predict whether any of these
proposals will be adopted, or if adopted, how these proposals would affect us.


                                       21
<PAGE>



ITEM 7.  FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report.............................................F-1

Consolidated Balance Sheets..............................................F-2

Consolidated Statements of Operations....................................F-3

Consolidated Statements of Changes in Shareholders' Equity...............F-4

Consolidated Statements of Cash Flows....................................F-5

Notes to Consolidated Financial Statements........................F-6 - F-21


                                       F-I


<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 sheet of First National
Bancshares, Inc. and subsidiary as of December 31, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. We have also audited the balance sheet of First National
Bancshares, Inc. as of December 31, 1999, and the related statements of
operations, stockholders' equity, and cash flows 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 2000 consolidated financial statements referred to above
presents fairly, in all material respects, the financial position of First
National Bancshares, Inc. and subsidiary as of December 31, 2000 and the results
of their operations and their cash flows for the year then ended in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the
1999 financial statements present fairly, in all material respects, the
financial position of First National Bancshares, Inc. as of December 31, 1999,
and the results of its operations and its cash flows for the period from July
14, 1999 through December 31, 1999, in conformity with U.S. generally accepted
accounting principles.

Spartanburg, South Carolina
February 22, 2001

                                         /s/ CRISP HUGHES EVANS LLP


                                      F-1
<PAGE>
<TABLE>
<CAPTION>




                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets

                           December 31, 2000 and 1999

                  ASSETS                                                          2000                 1999
                  ------                                                          ----                 ----

<S>                                                                       <C>                   <C>
Cash and due from banks                                                   $         994,505     $         126,121
Federal funds sold                                                                7,990,000                     -
Investment securities                                                                     -            11,197,367
Securities available for sale                                                     8,022,471                     -
Loans, net of allowance for loan losses of $470,893                              37,199,261                     -
Premises and equipment, net                                                       3,321,854                41,720
Deferred stock offering costs                                                             -                80,980
Other                                                                               767,405                22,270
                                                                            ---------------       ---------------

         Total assets                                                     $      58,295,496     $      11,468,458
                                                                           ================       ===============

   LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Deposits                                                               $      46,386,471     $               -
   Line of credit                                                                         -               390,000
   Stock subscription deposits                                                            -            11,284,050
   Accrued expenses and other liabilities                                           934,641                 7,254
                                                                            ---------------       ---------------
           Total liabilities                                                     47,321,112            11,681,304
                                                                            ---------------       ---------------

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 and 10 shares issued
     and outstanding at December 31, 2000 and 1999,
     Respectively                                                                    12,000                     -
   Additional paid-in capital                                                    11,791,311                   100
   Retained earnings (deficit)                                                     (878,078)             (212,946)
   Accumulated other comprehensive income                                            49,151                     -
                                                                            ---------------       ---------------
         Total shareholders' equity                                              10,974,384              (212,846)
                                                                            ---------------       ---------------

         Total liabilities and shareholders' equity                       $      58,295,496     $      11,468,458
                                                                           ================      ================


</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations

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

                                                                                  2000                 1999
                                                                                  ----                 ----

<S>                                                                       <C>                   <C>
Interest income:
   Loans                                                                  $       1,373,801     $               -
   Investment securities                                                            362,698                30,079
   Federal funds sold                                                               595,291                 2,998
                                                                           ----------------      ----------------
         Total interest income                                                    2,331,790                33,077
                                                                           ----------------      ----------------

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

Net interest income                                                               1,179,166                25,211

Provision for loan losses                                                           470,893                     -
                                                                           ----------------      ----------------

Net interest income after provision for loan losses                                 708,273                25,211
                                                                           ----------------      ----------------

Noninterest income                                                                   35,668                     -

Noninterest expense:
   Salaries and employee benefits                                                   768,574               112,731
   Professional fees                                                                 70,300                85,588
   Data processing                                                                   51,595                     -
   Public relations                                                                 110,072                     -
   Occupancy and equipment                                                          212,476                 6,151
   Telephone and supplies                                                            53,953                 6,749
   Other                                                                            142,103                26,938
                                                                           ----------------      ----------------
         Total noninterest expense                                                1,409,073               238,157
                                                                           ----------------      ----------------

Loss before income taxes                                                           (665,132)             (212,946)

Provision for income taxes                                                                -                     -
                                                                           ----------------      ----------------

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

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

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

</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

                                      F-3

<PAGE>

                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

           Consolidated Statements of Changes in Shareholders' Equity

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

<TABLE>
<CAPTION>                                                                                                     ACCUMULATED
                                                                    ADDITIONAL       RETAINED           OTHER             TOTAL
                                            COMMON STOCK              PAID-IN        EARNINGS       COMPREHENSIVE     SHAREHOLDERS'
                                       SHARES          AMOUNT         CAPITAL       (DEFICIT)          INCOME             EQUITY
                                       ------          ------       ----------      ---------       -------------     ------------

<S>                                 <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
                                       =========    ===========    ============   ============    ============       ============

</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.


                                      F-4
<PAGE>
                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

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

<S>                                                                    <C>                   <C>
Cash flows from operating activities:
   Net loss                                                               $        (665,132)    $        (212,946)
   Adjustments to reconcile net loss to cash provided by
     Operating activities:
     Provision for loan losses                                                      470,893                     -
     Depreciation                                                                    83,674                   301
     Deferred stock offering costs                                                        -               (80,980)
     Discount accretion                                                            (153,431)              (30,079)
     Changes in deferred and accrued amounts:
       Other assets                                                                (330,355)              (12,270)
       Accrued expenses and other liabilities                                       749,735                 7,254
                                                                           ----------------      ----------------
         Net cash provided by (used for) operating activities                       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                           44,965                     -
   Purchases of securities available for sale                                    (7,991,755)                    -
   Net increase in loans                                                        (37,670,154)                    -
   Net purchases of premises and equipment                                       (3,186,156)              (52,021)
   Purchase of FHLB and other stock                                                (333,800)                    -
                                                                           ----------------      ----------------
         Net cash used by investing activities                                  (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                                                      46,386,471                     -
                                                                           ----------------      ----------------
         Net cash provided by financing activities                               46,515,632            11,674,150
                                                                           ----------------      ----------------

         Net increase in cash and cash equivalents                                8,858,384               126,121

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

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

</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.


                                      F-5

<PAGE>


                 FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

           BUSINESS ACTIVITY AND ORGANIZATION - First National Bancshares, Inc.
           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 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 year 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.

           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 income in the
           consolidated statements of income.


                                       F-6
<PAGE>


           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.

           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.


                                      F-7
<PAGE>


           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.

           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 - Until the bank opened for business on March 27,
           2000, the company was accounted for as a development stage enterprise
           as defined by Statement of Financial Accounting Standards No. 7,
           "Accounting and Reporting by Development Stage Enterprises," as the
           company devoted substantially all of its efforts to establishing a
           new business. When the bank opened on March 27, 2000, certain
           reclassifications and adjustments were made to the financial
           statements to reflect that the company is now accounted for as an
           operating company. Such changes had no effect on net income or
           shareholders' equity 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 year ended December 31, 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


                                      F-8
<PAGE>

           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.

         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 $8,984,505
           and $126,121 at December 31, 2000 and 1999, respectively.

           Amounts paid for interest totaled $456,403 and $7,606 during the
           years ended December 31, 2000 and 1999, respectively.

           Noncash investing activities included $177,652 of premises additions
           included in accrued expenses and $49,151 of unrealized gains on
           available for sale securities.

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.



                                      F-9
<PAGE>


NOTE 4 - SECURITIES

           The amortized cost and fair values of securities, with gross
           unrealized holding gains and losses at December 31, 2000 and 1999,
           consisted of the following:

                          DECEMBER 31, 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
                       ===========    ============    ===========     ==========


                      DECEMBER 31, 1999
              ------------------------------------------------------------------
                                            GROSS         GROSS
                          AMORTIZED      UNREALIZED     UNREALIZED    FAIR
                             COST           GAINS         LOSSES     VALUE

 DEBT SECURITIES HELD TO
        MATURITY:
        U.S. Government
          Obligations   $    999,366  $          -   $    (2,491)   $   996,875
         U.S. Agency
          Obligations     10,198,001             -       (22,329)    10,175,672
                         -----------   -----------    ----------     ----------

                        $ 11,197,367  $          -   $   (24,820)   $11,172,547
                         ===========   ===========    ==========     ==========

           At December 31, 2000, securities with a carrying value of
           approximately $3,648,000, 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, 2000, 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.


                                      F-10

<PAGE>

                                                AMORTIZED          FAIR
                                                   COST           VALUE
                                                ---------         -----

       Due in one year or less                 $   3,578,165    $   3,586,125
       Due after one year, through five years      2,488,838        2,499,605
                                                   ---------        ---------
                                                   6,067,003        6,085,730
                                                   ---------        ---------
       Mortgage-backed securities                  1,906,317        1,936,741
                                                   ---------        ---------
                                               $   7,973,320    $   8,022,471
                                                   =========        =========

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, 2000. The amount of FHLB stock owned is determined based
           on the bank's balances of residential mortgages and advances from the
           FHLB and totaled $3,800 at December 31, 2000. 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 is as follows:
                                                                   DECEMBER 31,
                                                                       2000
                                                                       ----

              Commercial and industrial                         $    8,033,469
              Commercial secured by real estate                     22,017,360
              Real estate--residential mortgages                     5,251,227
              Installment and other consumer loans                   2,453,250
              Unearned income                                          (85,152)
                                                                 -------------
                    Total loans, net of unearned income             37,670,154

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

                    Total loans, net                            $   37,199,261
                                                                 =============

           Approximately $14.1 million of the loans were variable interest rate
           loans at December 31, 2000. The remaining portfolio was fixed
           interest rate loans. There were no non-accrual or impaired loans at
           December 31, 2000.

           Changes in the allowance for loan losses for the year ended December
           31, 2000, were as follows:

              Balance, beginning of period                     $             -
              Provision charged to operations                          470,893
              Loans charged off                                              -
              Recoveries on loans previously charged off                     -
                                                                --------------

              Balance, end of period                           $       470,893
                                                                ==============


                                      F-11
<PAGE>


           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, 2000, 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 $ 2.9 million at December 31, 2000. During 2000, new
           loans and advances on these lines of credit totaled approximately
           $3.2 million. At December 31, 2000, there were commitments to extend
           additional credit to related parties in the amount of approximately
           $1.3 million.

           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, 2000.

           NOTE 7 - PREMISES AND EQUIPMENT

           A summary of premises and equipment follows:

                                                           DECEMBER 31,
                                                   ----------------------------
                                                      2000              1999
                                                      ----              ----

              Land                              $      952,238    $            -
              Building and improvements                610,993                 -
              Furniture, fixtures and equipment        573,544            42,021
              Construction in progress               1,269,054                 -
                                                 -------------     -------------

                                                     3,405,829            42,021
              Accumulated depreciation                  83,975               301
                                                 -------------     -------------

                                                $    3,321,854    $       41,720
                                                 =============     =============


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

           The bank has 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 $46,100 and $3,900 for the years ended December
           31, 2000 and 1999, respectively.


                                      F-12
<PAGE>


           The annual minimum rental commitments under the terms of the
           company's noncancellable leases at December 31, 2000 are as follows:

              2001                               $      48,000
              2002                                      48,000
              2003                                      48,000
              2004                                      48,000
              2005                                      50,917
              Thereafter                               869,083
                                                  ------------
                    Total                        $   1,112,000
                                                  ============

NOTE 8 - DEPOSITS

           The aggregate amount of time deposits with a minimum denomination of
           $100,000 is approximately $12.4 million at December 31, 2000.

           The scheduled maturities of time deposits subsequent to December 31,
           2000, are as follows:

              One year or less                           $      26,985,381
              From one year to three years                       4,127,977
              After three years                                      4,835
                                                          ----------------

                    Total                                $      31,118,193
                                                          ================

NOTE 9 - LINES OF CREDIT

           During 1999, the company had established a $500,000 line of credit
           with a financial institution to fund operating expenses of the
           company during the development stage. The line was uncollateralized
           and was guaranteed by the organizers. The line accrued interest at
           the prime rate minus 1/2% and was paid off and cancelled on March 31,
           2000. At December 31, 1999, $390,000 was outstanding on this line of
           credit.

           At December 31, 2000, the bank had a short-term line of credit with a
           correspondent bank to purchase unsecured federal funds totaling
           $3,000,000. 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 from the FHLB. Borrowings under this
           arrangement can be made with various terms and repayment schedules
           and with fixed or variable rates of interest. Advances under this
           arrangement would be secured by the existing blanket lien on
           qualifying loans secured by first mortgages on 1-4 family residences.

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 year ending December
           31, 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:

                                      F-13
<PAGE>



                                                  2000             1999
                                                  ----             ----

 Income tax benefit at federal statutory rate   $   (226,145)   $     (72,402)
 Increase in valuation allowance                     214,809           79,429
 Other, net                                           11,336           (7,027)
                                                 -----------     ------------
 Income tax benefit                             $          -    $           -
                                                 ===========     ============


     The components of the deferred tax assets and liabilities are as
           follows:

                                                             DECEMBER 31,
                                                             -----------
                                                      2000                1999
                                                      ----                ----
       Deferred tax liability:
       Accrual to cash adjustment                      $         -   $    9,667
       Unrealized gain on securities available
                   For sale                                 18,186            -
                                                        ----------    ---------

           Total deferred tax liability                     18,186        9,667
                                                        ----------    ---------
     Deferred tax asset:
       Accrual to cash adjustment                           92,467            -

       Net operating loss carryforward                      85,454            -

       Deferred organizational and start-up costs          116,317       89,096
                                                        ----------    ---------
                  Deferred tax asset before valuation
                   Allowance                               294,238       79,429
       Valuation allowance                                (276,052)     (79,429)
                                                        ----------    ---------
           Net deferred tax asset                      $         -   $        -
                                                        ==========    =========

           The company has recorded a valuation allowance equal to the net
           deferred tax asset at December 31, 2000 and 1999, 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 unrealized gain
           on securities available for sale of $18,186 at December 31, 2000.
           This amount was recorded directly to shareholders' equity due to the
           company's net operating loss position.

           The company has federal operating loss carryforwards of approximately
           $251,000 that may be used to offset future taxable income and expire
           2020.



                                      F-14
<PAGE>


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.

           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, 2000 that
           the company and the bank meet all capital adequacy requirements to
           which they are subject. At December 31, 2000, 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, 2000 as well as the
           minimum calculated amounts for each regulatory-defined category.

<TABLE>
<CAPTION>
                                                         OVER TWELVE MONTHS

                                                                                        MINIMUM TO BE
                                                                                     CATEGORIZED AS WELL
                                                                                      CAPITALIZED UNDER
                                                            FOR CAPITAL               PROMPT CORRECTIVE
                                    ACTUAL                ADEQUACY PURPOSES           ACTION PROVISIONS
   ----------------------- -------------------------   ------------------------    ------------------------
                           AMOUNT           RATIO         AMOUNT       RATIO          AMOUNT       RATIO
<S>                      <C>             <C>         <C>               <C>        <C>           <C>
Consolidated:
     Total capital to
       risk-weighted
      Assets               $11,396,126     26.93%      $ 3,385,744       8.00%     $     N/A         N/A

     Tier 1 capital to
       risk-weighted
       Assets              $10,925,233     25.81%      $ 1,692,872       4.00%     $     N/A         N/A

     Tier 1 capital to
       Average assets      $10,925,233     29.68%      $ 1,472,275       4.00%     $     N/A         N/A

</TABLE>

                                                                     (continued)
                                      F-15

<PAGE>

<TABLE>
<CAPTION>
                                                                                          MINIMUM TO BE
                                                                                          CATEGORIZED AS WELL
                                                                                          CAPITALIZED UNDER
                                        ACTUAL                   FOR CAPITAL              PROMPT CORRECTIVE
                                                              ADEQUACY PURPOSES           ACTION PROVISIONS
                              -----------------------    ----------------------         ---------------------
                                 AMOUNT        RATIO          AMOUNT      RATIO          AMOUNT       RATIO

<S>                            <C>              <C>         <C>              <C>       <C>             <C>
          Bank:
          Total capital to
            risk-weighted
            Assets             $10,396,188      24.56%      $ 3,385,744      8.00%     $  4,232,000    10.00%
          Tier 1 capital to
            risk-weighted
            Assets             $ 9,925,295      23.45%      $ 1,692,872      4.00%     $  2,539,320     6.00%
          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, 2000, no cash
           dividends have been declared or paid by the bank.

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, 2000, 83,500 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, 2001, 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:

                                           YEARS ENDED DECEMBER 31, 2000
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
  ------------------------       -----------------------------------------------
     Net loss                          As reported                  $  665
                                       Pro forma                    $  876
     Basic and diluted loss per
       Share                           As reported                  $  .55
                                       Pro forma                    $  .73

  The following is a summary of the activity under the plans for the
  year ended December 31, 2000:
                                                                   WEIGHTED
                                                                    AVERAGE
                                                                EXERCISE PRICE
                                               SHARES              PER SHARE

     Outstanding, beginning of period                    -    $               -
     Granted                                       409,833                   10
     Cancelled                                           -                    -
     Exercised                                           -                    -
                                          ----------------     ----------------
     Outstanding, December 31                      409,833    $              10
                                          ================     ================
     Exercisable, December 31                            -    $               -
                                          ================     ================


                  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

$10                 409,833     9.25 years   $       10          -   $     -

  The weighted average fair value per share of options granted in 2000
  amounted to $3.15. 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%, risk-free interest rate of 5.50%, and expected life of the
  options of seven years. There were no cash dividends in 2000.

                                      F-17
<PAGE>


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 $7,232 was charged to operations in 2000 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 committed to fund approximately $280,000 in
           additional construction costs in connection with completing its new
           main office facility included in construction in progress at December
           31, 2000.

           The bank intends to begin construction on its third branch office
           facility in Boiling Springs during the first quarter of 2001 at an
           expected cost of $865,000, including the building site purchased in
           December 2000, but excluding the cost of furniture, fixtures and
           equipment. The company has entered into an employment agreement with
           its President and Chief Executive Officer that includes a 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,
           2000, the company and the bank were not involved with any litigation
           matters.

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, 2000, the company's commitments to extend additional
           credit totaled approximately $11.5 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 $87,380 at December 31, 2000.
           The credit risk involved in the underwriting of letters of credit is
           essentially the same as that involved in extending loan facilities to
           customers.


                                      F-18
<PAGE>

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 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, 2000 are as follows:

                                                  CARRYING            ESTIMATED
                                                   AMOUNT            FAIR VALUE
     Financial assets:
       Cash and due from banks                    $    994,505    $    994,505
       Federal funds sold                            7,990,000       7,990,000
       Investment securities available for sale      8,022,471       8,022,471
       Loans, net                                   37,199,261      37,379,000

     Financial liabilities:
       Deposits                                     46,386,471      47,844,000

                                      F-19
<PAGE>


NOTE 17 - PARENT COMPANY FINANCIAL INFORMATION

           The following is condensed financial information of First National
           Bancshares, Inc. (parent company only) at December 31, 2000 and for
           the year ended December 31, 2000.

  CONDENSED BALANCE SHEET

     Assets:
       Cash                                                  $       1,016,300
       Investment in bank subsidiary                                 9,974,445
                                                              ----------------
           Total                                             $      10,990,745
                                                              ================


     Liabilities and shareholders' equity:
       Accruals and other liabilities                        $          10,650
       Due to bank subsidiary                                            5,711
       Shareholders' equity                                         10,974,384
                                                              ----------------
           Total                                             $      10,990,745
                                                              ================


  CONDENSED STATEMENT OF INCOME
     Interest income                                         $         189,515
     Interest expense                                                   (6,481)
                                                              ----------------
           Net interest income                                         183,034
     Payment from bank subsidiary for organizational costs             402,480
     Noninterest expense                                              (175,941)
     Equity in undistributed net loss of bank subsidiary            (1,074,705)
                                                              ----------------

     Net loss before income taxes                                     (665,132)
     Income taxes                                                            -
                                                              ----------------
           Net loss                                          $        (665,132)
                                                              ================



                                      F-20
<PAGE>

 CONDENSED STATEMENT OF CASH FLOWS

    Operating activities:
      Net loss                                                $        (665,132)
      Adjustments to reconcile net loss to
        net cash provided by operating activities:
        Equity in undistributed net loss of bank subsidiary           1,074,705
        Discount accretion                                             (126,900)
        Decrease in other assets                                         92,650
        Increase in other liabilities                                     3,396
                                                               ----------------
          Net cash provided by operating activities                     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 in due to bank subsidiary                                  5,711
      Capital contribution to bank subsidiary                       (11,000,000)
                                                               ----------------
          Net cash provided by investing activities                     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                           890,179
    Balance, beginning of year                                          126,121
                                                               ----------------
    Balance, end of year                                      $       1,016,300
                                                               ================

NOTE 18 - SUBSEQUENT EVENTS

           On February 5, 2001, the company completed construction of its new
           main office building and moved its corporate headquarters and a
           branch office from its temporary location to this facility.

           On March 6, 2001, the company entered into an agreement to construct
           its third branch office building in Boiling Springs for approximately
           $500,000 (excluding the cost of furniture, fixtures and equipment).


                                      F-21

<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE


         None.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

         In response to this Item, the information contained on pages 3-7 of our
Proxy Statement for the Annual Meeting of Shareholders to be held on April 19,
2001 is incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION

         In response to this Item, the information contained on page 7 of our
Proxy Statement for the Annual Meeting of Shareholders to be held on April 19,
2001 is incorporated herein by reference.

ITEM 11. EXECUTIVE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

         In response to this Item, the information contained on page 8 of our
Proxy Statement for the Annual Meeting of Shareholders to be held on April 19,
2001 is incorporated herein by reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In response to this Item, the information contained on page 10 of our
Proxy Statement for the Annual Meeting of Shareholders to be held on April 19,
2001 is incorporated herein by reference.

ITEM 13.   EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)      The following documents are filed as part of this report:

1.1      Form of Sales Agency Agreement between First National Bancshares and
         J.C. Bradford and Company (incorporated by reference to Exhibit 1.1 of
         the Registration Statement on Form SB-2, File No. 333-70589).

3.1      Articles of Incorporation (incorporated by reference to Exhibit 3.1 of
         the Registration Statement on Form SB-2, File No. 333-70589).

3.2      Bylaws (incorporated by reference to Exhibit 3.2 of the Registration
         Statement on Form SB-2, File No. 333-70589).

4.1      See Exhibits 3.1 and 3.2 for provisions in First National Bancshares's
         Articles of Incorporation and Bylaws defining the rights of holders of
         the common stock (incorporated by reference to Exhibit 4.1 of the
         Registration Statement on Form SB-2, File No. 333-70589).

4.2      Form of certificate of common stock (incorporated by reference to
         Exhibit 4.2 of the Registration Statement on Form SB-2, File No.
         333-70589).

                                       22

<PAGE>


5.1      Opinion Regarding Legality (incorporated by reference to Exhibit 5.1 of
         the Registration Statement on Form SB-2, File No. 333-70589).

10.1     Employment Agreement dated July 20, 1999 between First National
         Bancshares and Jerry Calvert (incorporated by reference to Exhibit 10.1
         of the Registration Statement on Form SB-2, File No. 333-70589).

10.2     Form of Stock Warrant Agreement (incorporated by reference to Exhibit
         10.2 of the Registration Statement on Form SB-2, File No. 333-70589).

10.3     Line of Credit Promissory Note dated June 29,1999 between The Banker's
         Bank and First National Bank of Spartanburg (incorporated by reference
         to Exhibit 10.3 of the Registration Statement on Form SB-2, File No.
         333-70589).

10.4     Purchase and Sale Agreement dated June 8, 1999 between First National
         Bancshares, Inc. and HBJ Properties (incorporated by reference to
         Exhibit 10.4 of the Registration Statement on Form SB-2, File No.
         333-70589).

10.5     Lease Agreement dated July 12, 1999 between First National Bancshares,
         Inc. and Oak Grove Associates, LLC (incorporated by reference to
         Exhibit 10.5 of the Registration Statement on Form SB-2, File No.
         333-70589).

10.6     Form of Escrow Agreement between First National Bancshares, Inc. and
         The Bankers Bank (incorporated by reference to Exhibit 10.6 of the
         Registration Statement on Form SB-2, File No. 333-70589).

The exhibits listed above will be furnished to any security holder upon written
request to Ms. Kitty B. Payne, Chief Financial Officer, First National
Bancshares, Inc., Post Office Box 3508, Spartanburg, South Carolina 29304. The
Registrant will charge a fee of $.25 per page for photocopying such exhibit.

(b)      Reports on Form 8-K

         We did not file any reports on Form 8-K during the fourth quarter of
2000.


                                       23

<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                       FIRST NATIONAL BANCSHARES, INC.

Date:   March 15, 2001        By:      /s/ Jerry L. Calvert
       ------------------              -------------------------------------
                                       President and Chief Executive Officer

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jerry L. Calvert and Norman F. Pulliam as the
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the  requirements  of the Securities Act of 1933, this
Registration  Statement has been signed by the following in the capacities and
on the dates indicated.

Signature                         Title                        Date

/s/ C. Dan Adams                  Director                     March 15, 2001
------------------------------
C. Dan Adams

/s/ Mellnee G. Buchheit           Director                     March 15, 2001
------------------------------
Mellnee G. Buchheit

/s/ Jerry L. Calvert              Director,                    March 15, 2001
------------------------------    President,
Jerry L. Calvert                  Chief Executive Officer


/s/ Martha Cloud Chapman          Director                     March 15, 2001
------------------------------
Martha Cloud Chapman

/s/ W. Russel Floyd, Jr.          Director                     March 15, 2001
------------------------------
W. Russel Floyd, Jr.


/s/ C. Tyrone Gilmore, Sr.        Director                     March 15, 2001
------------------------------
C. Tyrone Gilmore, Sr.


/s/ Gaines W. Hammond, Jr., MD    Director                     March 15, 2001
------------------------------
Gaines W. Hammond, Jr., M.D.


                                       24
<PAGE>

/s/ Benjamin R. Hines             Director                     March 15, 2001
------------------------------
Benjamin R. Hines

/s/ William A. Hudson             Director                     March 15, 2001
------------------------------
William A. Hudson

/s/ Kitty B. Payne                Chief Financial Officer,     March 15, 2001
------------------------------    Principal Financial and
Kitty B. Payne                    Accounting Officer

/s/ Norman F. Pulliam             Director, Chairman           March 15, 2001
------------------------------    of the Board
Norman F. Pulliam


/s/ Peter E. Weisman              Director                     March 15, 2001
------------------------------
Peter E. Weisman

/s/ Donald B. Wildman             Director                     March 15, 2001
------------------------------
Donald B. Wildman

/s/ Coleman L. Young, Jr.         Director                     March 15, 2001
------------------------------
Coleman L. Young, Jr.


                                       25
<PAGE>

                                INDEX TO EXHIBITS

Exhibit
Number                     Description
-------                    -----------

1.1      Form of Sales Agency Agreement between First National Bancshares and
         J.C. Bradford and Company (incorporated by reference to Exhibit 1.1 of
         the Registration Statement on Form SB-2, File No. 333-70589).

3.1      Articles of Incorporation (incorporated by reference to Exhibit 3.1 of
         the Registration Statement on Form SB-2, File No. 333-70589).

3.2      Bylaws (incorporated by reference to Exhibit 3.2 of the Registration
         Statement on Form SB-2, File No. 333-70589).

4.1      See Exhibits 3.1 and 3.2 for provisions in First National Bancshares's
         Articles of Incorporation and Bylaws defining the rights of holders of
         the common stock (incorporated by reference to Exhibit 4.1 of the
         Registration Statement on Form SB-2, File No. 333-70589).

4.2      Form of certificate of common stock (incorporated by reference to
         Exhibit 1.1 of the Registration Statement on Form SB-2, File No.
         333-70589).

5.1      Opinion Regarding Legality (incorporated by reference to Exhibit 5.1 of
         the Registration Statement on Form SB-2, File No. 333-70589).

10.1     Employment Agreement dated July 20, 1999 between First National
         Bancshares and Jerry Calvert (incorporated by reference to Exhibit 10.1
         of the Registration Statement on Form SB-2, File No. 333-70589).

10.2     Form of Stock Warrant Agreement (incorporated by reference to Exhibit
         10.2 of the Registration Statement on Form SB-2, File No. 333-70589).

10.3     Line of Credit Promissory Note dated June 29,1999 between The Banker's
         Bank and First National Bank of Spartanburg (incorporated by reference
         to Exhibit 10.3 of the Registration Statement on Form SB-2, File No.
         333-70589).

10.4     Purchase and Sale Agreement dated June 8, 1999 between First National
         Bancshares, Inc. and HBJ Properties (incorporated by reference to
         Exhibit 10.4 of the Registration Statement on Form SB-2, File No.
         333-70589).

10.5     Lease Agreement dated July 12, 1999 between First National Bancshares,
         Inc. and Oak Grove Associates, LLC (incorporated by reference to
         Exhibit 10.5 of the Registration Statement on Form SB-2, File No.
         333-70589).

10.6     Form of Escrow Agreement between First National Bancshares, Inc. and
         The Bankers Bank (incorporated by reference to Exhibit 10.6 of the
         Registration Statement on Form SB-2, File No. 333-70589).