EXHIBIT 99.1
                                                                 ------------
                             ISLANDS BANCORP
                           2348 Boundary Street
                    Beaufort, South Carolina 29903-6240
                             (843) 521-1968


                             March 29, 2002

Dear Shareholder:

You are cordially invited to attend our annual meeting of shareholders, which
will be held at the Conference Room of the Sleep Inn, 2523 Boundary Street,
Beaufort, South Carolina, on Tuesday, April 23, 2002, at 3:00 p.m.  I
sincerely hope that you will be able to attend the meeting, and I look
forward to seeing you.

The attached notice of the annual meeting and proxy statement describes the
formal business to be transacted at the meeting.  We will also report on our
operations since our opening in July 2001, as well as our plans for the
future.

To ensure the greatest number of shareholders will be present either in
person or by proxy, we ask that you mark, date, and sign the enclosed proxy
card, and return it to us in the envelope provided as soon as possible.  If
you attend the
meeting in person, you may revoke your proxy at the meeting and vote in
person.
You may revoke your proxy at any time before it is voted.

                                 Sincerely,



                                 William B. Gossett
                                 President and Chief Executive Officer



                               ISLANDS BANCORP
                            2348 Boundary Street
                     Beaufort, South Carolina 29903-6240
                               (843) 521-1968


                 NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD APRIL 23, 2002


The annual meeting of shareholders of Islands Bancorp will be held on
Tuesday, April 23, 2002, at 3:00 p.m., at the Conference Room of the Sleep
Inn, 2523 Boundary Street Beaufort, South Carolina, for the following
purposes:

     (1)   to elect five (5) persons to serve as Class III directors for a
           three-year term expiring in 2005;

     (2)   to approve the Islands Bancorp 2002 Stock Incentive Plan; and

     (3)   to transact any other business as may properly come before the
           meeting or any adjournments of the meeting.

     The board of directors has set the close of business on March 20, 2002,
as the record date for determining the shareholders who are entitled to
notice of, and to vote at, the meeting.

     We hope that you will be able to attend the meeting.  Whether or not you
plan to attend the meeting, we ask that you mark, date, sign, and return the
enclosed proxy card as soon as possible.  If you attend the meeting in
person, you may revoke your proxy at the meeting and vote your shares in
person.  You may revoke your proxy at any time before the proxy is exercised.


                              By Order of the Board of Directors,



                              William B. Gossett
                              President and Chief Executive Officer

March 29, 2002



                             ISLANDS BANCORP
                           2348 Boundary Street
                    Beaufort, South Carolina 29903-6240
                             (843) 521-1968

       __________________________________________________________

                  PROXY STATEMENT FOR 2002 ANNUAL MEETING
       __________________________________________________________


INTRODUCTION

TIME AND PLACE OF THE MEETING

     Our board of directors is furnishing this proxy statement in connection
with its solicitation of proxies for use at the annual meeting of
shareholders to be held on Tuesday, April 23, 2002, at 3:00 p.m., at the
Conference Room of the Sleep Inn, 2523 Boundary Street, Beaufort, South
Carolina, and at any adjournments of the meeting.


RECORD DATE AND MAILING DATE

     The close of business on March 20, 2002 is the record date for the
determination of shareholders entitled to notice of and to vote at the
meeting.  We first mailed this proxy statement and the accompanying proxy
card to shareholders on or about March 29, 2002.


NUMBER OF SHARES OUTSTANDING

     As of the close of business on the record date, the Company had
10,000,000 shares of common stock, no par value, authorized, of which 652,705
shares were issued and outstanding.  Each issued and outstanding share is
entitled to one vote on all matters presented at the meeting.


VOTING AT THE ANNUAL MEETING

PROPOSALS TO BE CONSIDERED

     Shareholders will be asked to consider the following two proposals at
the Annual Meeting:

     Proposal 1:  To elect five (5) persons to serve as Class III directors
                  of the Company for a three-year term expiring in 2005 (see
                  page 4 for a discussion of this proposal).

     Proposal 2:  To approve the Islands Bancorp 2002 Stock Incentive Plan
                  (see page 7 for a discussion of this proposal).


              THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
                         OF EACH OF THE PROPOSALS.


PROCEDURES FOR VOTING BY PROXY

     If you properly sign, return and do not revoke your proxy, the persons
appointed as proxies will vote your shares according to the instructions you
have specified on the proxy card.  If you sign and return your proxy card but
do not specify how the persons appointed as proxies are to vote your shares,
your proxy will be voted FOR the election of the director nominees, FOR
approval of the Islands Bancorp 2002 Stock Option Plan and in the best
judgment of the persons appointed as proxies as to all other matters properly
brought before the meeting.  If any nominee for election to the board of
directors named in this proxy statement becomes unavailable for election for
any reason, the proxy may be voted for a substitute nominee selected by the
board of directors.

     You can revoke your proxy at any time before it is voted by delivering
to William B. Gossett, President and Chief Executive Officer of the Company,
at the main office of the Bank, either a written revocation of the proxy or a
duly executed proxy bearing a later date or by attending the meeting and
voting in person.


REQUIREMENTS FOR SHAREHOLDER APPROVAL

     A quorum will be present at the meeting if a majority of the outstanding
shares of common stock entitled to vote at the meeting is represented in
person or by valid proxy.  We will count abstentions and broker non-votes,
which are described below, in determining whether a quorum exists.  Only
those votes actually cast for the election of a Director, however, will be
counted for purposes of determining whether a particular Director nominee
receives sufficient votes to be elected.  To be elected, a director nominee
must receive more votes than any other nominee for the particular seat on the
board of directors.  As a result, if you withhold your vote as to one or more
nominees, it will have no effect on the outcome of the election unless you
cast that vote for a competing nominee.  At the present time we do not know
of any competing nominees.

     ABSTENTIONS.  A shareholder who is present in person or by proxy at the
annual meeting and who abstains from voting on any or all proposals will be
included in the number of shareholders present at the annual meeting for the
purpose of determining the presence of a quorum.  Abstentions do not count as
votes in favor of or against a given matter.

     BROKER NON-VOTES.  Brokers who hold shares for the accounts of their
clients may vote these shares either as directed by their clients or in their
own discretion if permitted by the exchange or other organization of which
they are members.  Proxies that contain a broker vote on one or more
proposals but no vote on others are referred to as "broker non-votes" with
respect to the proposal(s) not voted upon.  Broker non-votes are included in
determining the presence of a quorum.  A broker non-vote, however, does not
count as a vote in favor of or against a particular proposal for which the
broker has no discretionary voting authority.

     Approval of the Islands Bancorp 2002 Stock Option Plan and any other
matter that may properly come before the annual meeting requires the
affirmative vote of a majority of shares of common stock present in person or
by proxy and entitled to vote on the matter.  Abstentions and broker non-
votes will be counted in determining the minimum number of votes required for
approval and will, therefore, have the effect of negative votes.


PROXY SOLICITATION

     The Company will pay the cost of proxy solicitation.  Our directors,
officers and employees may, without additional compensation, solicit proxies
by personal interview, telephone, fax, or otherwise.  We will direct
brokerage firms or other custodians, nominees or fiduciaries to forward our
proxy solicitation material to the beneficial owners of common stock held of
record by these institutions and will reimburse them for the reasonable out-
of-pocket expenses they incur in connection with this process.


                               PROPOSAL ONE:
                           ELECTION OF DIRECTORS

     The Company's Board of Directors consists of 14 members and is divided
into three classes.  Each class of directors serves a staggered three-year
term.  The term of each class expires at the annual meeting in the years
indicated below and upon the election and qualification of the director's
successor.  The board of director recommends that the shareholders elect the
persons identified below be elected as directors nominees to serve as Class
III directors for a three-year term expiring in 2005.  The following table
shows for each nominee and continuing director: (a) his or her name, (b) his
or her age at December 31, 2001, (c) how long he or she has been a director
of the Company, (d) his or her position(s) with the Company, other than as a
director, and (e) his principal occupation and business experience for the
past five years.
                         Director         Position with the Company
  Name (Age)              Since            and Business Experience
  ----------             --------         -------------------------

CLASS III DIRECTOR NOMINEES:
(Term Expiring 2005)

Avery E. Cleland (41)      1999     Chairman, President and owner of Cleland
                                    Construction Co., Inc. (subdivision,
                                    shopping mall, highway and public utility
                                    construction); Chairman of Carolina
                                    Asphalt Paving, Inc.; President of AE
                                    Cleland Construct, Inc.; President
                                    of Cleland Asphalt, Inc.; President of
                                    Thom Bee Inv., Inc.

Carl E. Lipscomb (64)      2002     Vice President of Argus Corp. (custom
                                    home construction and home renovation);
                                    Formerly President and Chief Executive
                                    Officer of Lipscomb Construction, Hilton
                                    Head, South Carolina (custom home
                                    construction in the Beaufort County
                                    area).

Dr. Narayan Shenoy (63)    2002     Anesthesiologist; Partner in Critical
                                    Health Systems, Inc., Columbia,
                                    South Carolina.

J. Frank Ward (55)         1999     Realtor with Coastal Carolina Realty;
                                    Sales Coordinator and Realtor,
                                    Renaissance Marketing, LLC, Beaufort,
                                    South Carolina from February 1998 to
                                    March 2002; prior to 1998, New
                                    Car Sales Manager, Toyota Center
                                    in West Columbia/Lexington, South
                                    Carolina.

Bruce K. Wyles (47)        1999     Dentist, sole proprietorship, Beaufort,
                                    South Carolina; Partner, B.K.W. Squared.

CLASS II DIRECTOR NOMINEES:
(Term Expiring 2004)

Daryl A. Ferguson (63)     2002     Co-Chairman of Hungarian Telephone
                                    Company, Budapest, Hungary and Stamford
                                    Connecticut (telecommunications); served
                                    as President and Chief Operating Officer
                                    of Citizens Utilities in Stamford,
                                    Connecticut from 1990 to 2000; CEO of
                                    Electric Lighthouse from 1992 to 2000.

Stancel E.
  Kirkland, Sr. (61)       2002     Country Chef, LLC (convenience store,
                                    restaurant operation); Managing Member of
                                    Bull Point Plantation, Seabrook, South
                                    Carolina (developer of residential
                                    communities); Attorney, Partner in the
                                    Kirkland Law Firm, Columbia, South
                                    Carolina, 1971 to 1999 and presently
                                    of counsel.

CLASS II CONTINUING DIRECTORS:
(Term Expiring 2004)

Paul M.
  Dunnavant, III (38)      1999     Treasurer of Islands Bancorp; Chief
                                    Financial Officer and Treasurer of Amick
                                    Farms, Inc., Batesburg, South Carolina
                                    (integrated poultry processing); Manager
                                    of Beaufort Properties, LLC; Treasurer
                                    of Team Amick Motor Sports, LLC; Manager
                                    of Waterside Properties, LLC

Edward J.
  McNeil, Jr. (47)         1999     Secretary of Islands Bancorp; President
                                    of Internal Medicine Healthcare, P.A.;
                                    practicing physician with Internal
                                    Medicine Health Care in Beaufort from
                                    January 1997 to December 1997 and from
                                    October 1999 to present.  Physician, Low
                                    Country Medical Group, Beaufort, South
                                    Carolina, from January 1998 to October
                                    1999, and with Southeast Health Care
                                    Association from January 1995 to December
                                    1996.

Frances K.
  Nicholson (47)           1999     Managing Partner of Nicholson Investments
                                    LLC (real estate leasing and securities
                                    portfolio company); Managing Partner of
                                    Big Nickel Properties, LLC.

CLASS I CONTINUING DIRECTORS:
(Term Expiring 2003)

William B. Gossett (58)    1999     President and Chief Executive Officer of
                                    Islands Bancorp; previously President and
                                    Chief Executive Officer of Liberty
                                    National Bank, Longwood, Florida.

Louis O. Dore (56)         1999     Attorney, Louis O. Dore, P.A., Beaufort,
                                    South Carolina.

Martha B. Fender (56)      1999     Vice President of Islands Bancorp;
                                    President and Owner of Coastal Carolina
                                    Realty, Inc.; Beaufort, South Carolina
                                    (real estate sales).

D. Martin Goodman (55)     1999     Chairman of the Board of Islands Bancorp;
                                    Area Manager of the University of South
                                    Carolina Small Business Development
                                    Center in Beaufort, South Carolina; Co-
                                    owner, with his wife, of Ollie's Seafood
                                    Restaurants in Beaufort, South Carolina.


                                PROPOSAL TWO:
         APPROVAL OF THE ISLANDS BANCORP 2002 STOCK INCENTIVE PLAN

INTRODUCTION

     On March 19, 2002, the Board of Directors of the Company adopted the
Islands Bancorp 2002 Stock Incentive Plan (the "Stock Incentive Plan"),
subject to approval of the shareholders of the Company.  At the annual
meeting, shareholders will be asked to consider and vote on the approval and
adoption of the Stock Incentive Plan. The Board of Directors believes that
the granting of stock options will assist the Company in its efforts to
attract and retain highly qualified persons to serve as officers,  employees
and directors.

     The Board of Directors has reserved 97,905 shares of Stock for issuance
under awards that may be made under the Stock Incentive Plan, subject to
adjustment as provided in the Stock Incentive Plan.

     Applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), restrict the Company's ability, in the absence of shareholder
approval, to grant incentive stock options under Code Section 421 and to
claim deductions which may otherwise be associated with the grant of
nonqualified options under Code Section 162(m).

     The following description of the Stock Incentive Plan is qualified in
its entirety by reference to the applicable provisions of the plan document,
which is attached as Appendix A.

TERMS OF THE STOCK INCENTIVE PLAN

     ADMINISTRATION.  The Stock Incentive Plan will be administered by a
subcommittee of the Board of Directors whose members are selected by the
Board (the "Administrative Committee").  When appointing members to the
Administrative Committee, the Board of Directors will consider the
advisability of complying with the disinterested standards contained in both
Section 162(m) of the Code and Rule 16b-3 under the Securities Exchange Act
of 1934, as amended.  The Administrative Committee will have at least two
members.  At the present time, Paul M. Dunnavant, III and Stancel E.
Kirkland, Sr. act as the Administrative Committee.  The Administrative
Committee has the authority to grant awards under the Stock Incentive Plan
and to make all other determinations that it may deem necessary or advisable
for the administration of the Stock Incentive Plan.

     STOCK OPTIONS.  The Stock Incentive Plan permits the Administrative
Committee to make awards of options to purchase shares of Stock and tax
reimbursement payments to eligible employees and directors of the Company and
its affiliates.  These discretionary awards may be made on an individual
basis or through a program approved by the Administrative Committee for the
benefit of a group of eligible persons.  The Stock Incentive Plan permits the
Administrative Committee to make awards of incentive stock options and
nonqualified stock options (collectively, "Stock Options").

     The number of shares of Stock as to which any Stock Option is granted
and to whom any Stock Option is granted will be determined by the
Administrative Committee, subject to the provisions of the Stock Incentive
Plan.  Stock Options may be made forfeitable or terminable under the terms
established by the Administrative Committee, to the extent not otherwise
inconsistent with the terms of the Stock Incentive Plan.  Stock Options
generally are not transferable or assignable during a holder's lifetime.

     The Administrative Committee will determine whether a Stock Option is an
incentive stock option or a nonqualified stock option at the time the option
is granted, and the option will be evidenced by a stock option agreement.
Stock Options may be made exercisable on terms established by the
Administrative Committee, to the extent not otherwise inconsistent with the
terms of the Stock Incentive Plan.  The Administrative Committee also may
accelerate the times at which a Stock Option may be exercised subsequent to
its grant.  No eligible employee may be granted during any single calendar
year rights to shares of Stock under Stock Options which, in the aggregate,
exceed 50,000 shares.

     The exercise price of a Stock Option will be set forth in the applicable
stock option agreement.  The exercise price of an incentive stock option may
not be less than the fair market value of the Stock on the date of the grant
nor less than 110% of the fair market value if the participant owns more than
10% of the outstanding Stock of the Company or any subsidiary.  At the time
an incentive stock option is exercised, the Company will be entitled to place
a legend on the certificates representing the shares of Stock purchased to
identify them as shares of Stock purchased upon the exercise of an incentive
stock option.  Nonqualified stock options may be made exercisable at a price
no less than 100% of the fair market value of the Stock on the date that the
option is granted.  The Administrative Committee may permit payment of an
option exercise price in the following ways:

     a)  in cash;
     b)  by the delivery of previously-owned shares of Stock;
     c)  satisfied through a cashless exercise executed through a broker; or
     d)  by having a number of shares of Stock otherwise issuable at the time
         of exercise withheld.

The Administrative Committee also may authorize financing by the Company to
assist a participant with payment of the exercise price.

     The term of a Stock Option will be specified in the applicable stock
option agreement.  The term of any incentive stock option may not exceed ten
years from the date of grant; however, any incentive stock option granted to
a participant who owns more than 10% of the Stock of the Company or any
subsidiary will not be exercisable after the expiration of five years from
the date the option is granted.  Subject to any further limitations in a
stock option agreement, in the event of a participant's termination of
employment, the term of an incentive stock option will expire, terminate and
become unexercisable no later than three months after the date of the
termination of employment; provided, however, that if termination of
employment is due to death or disability, up to one year may be substituted
for the three-month period.

     TAX REIMBURSEMENT PAYMENTS.  The Administrative Committee may make cash
tax reimbursement payments designed to cover tax obligations of recipients
that result from the exercise of a Stock Option.

     TERMINATION OF STOCK OPTIONS.  The terms of a particular Stock Option
may provide that they terminate, among other reasons:

     a)  upon the holder's termination of employment or other status with
         respect to the Company or any affiliate of the Company;
     b)  upon a specified date;
     c)  upon the holder's death or disability; or
     d)  upon the occurrence of a change in control of the Company.

Stock Options may include exercise rights for a holder's estate or personal
representative in the event of the holder's death or disability.  At the
Administrative Committee's discretion, Stock Options that are subject to
termination may be cancelled, accelerated, paid or continued, subject to the
terms of the applicable agreement reflecting the terms of a Stock Option and
to the provisions of the Stock Incentive Plan.

     REORGANIZATIONS.  The number of shares of Stock reserved for issuance in
connection with the grant  of a Stock Option, the exercise price of a Stock
Option and the annual limit on the number of shares of Stock that may be
granted to any employee during a calendar year are subject to adjustment in
the event of any recapitalization of the Company or similar event effected
without the receipt of consideration.

     In the event of specified corporate reorganizations, Stock Options may
be assumed, substituted, cancelled, accelerated, cashed-out or otherwise
adjusted by the Administrative Committee, provided that the adjustment is not
inconsistent with the terms of the Stock Incentive Plan or any agreement
reflecting the terms of a Stock Option.  The Company may also use the Stock
Incentive Plan to assume obligations previously incurred in favor of persons
who are eligible to participate under the Stock Incentive Plan.

     AMENDMENTS OR TERMINATION.  Although the Stock Incentive Plan may be
amended or terminated by the Board of Directors without shareholder approval,
the Board of Directors also may condition any amendment upon shareholder
approval if shareholder approval is deemed necessary or appropriate in
consideration of tax, securities or other laws.  No amendment or termination
by the Board of Directors may adversely affect the rights of a holder of a
Stock Incentive without the holder's consent.

     BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS.  Pursuant to William B.
Gossett's employment agreement with the Company, upon approval of the Plan by
the shareholders, we intend to grant Mr. Gossett an incentive stock option to
purchase 19,581 shares of common stock.  Pursuant to the employment
agreement, we expect that the exercise price will be $10.00 per share and
that the option will vest in equal annual one-third increments beginning on
the first anniversary of the date the bank opened for business.  We also
intend to grant options to purchase an aggregate of 7,000 shares to other
officers of the Bank.  The Administrative Committee will determine the terms
of these options.

FEDERAL INCOME TAX CONSEQUENCES

     The following discussion outlines generally the federal income tax
consequences of participation in the Stock Incentive Plan.  Individual
circumstances may vary and each participant should rely on his or her own tax
counsel for advice regarding federal income tax treatment under the Stock
Incentive Plan.

     INCENTIVE STOCK OPTIONS.  A participant will not recognize income and
will not be taxed upon the grant of an incentive stock option nor upon
exercise of all or a portion of the option.  Instead, the participant will be
taxed at the time he or she sells the shares of Stock purchased upon exercise
of the incentive stock option.  The participant will be taxed on the
difference between the price he or she paid for the Stock and the amount for
which he or she sells the Stock.  If the participant does not sell the shares
of Stock during the two-year period from the date of grant of the incentive
stock option and one-year period from the date the Stock is transferred to
him or her, the gain will be capital gain, and the Company will not be
entitled to a corresponding deduction.  If the participant sells the shares
of Stock at a gain prior to that time, the difference between the amount the
participant paid for the Stock and the lesser of fair market value on the
date of exercise or the amount for which the Stock is sold will be taxed as
ordinary income.  If the participant sells the shares of Stock for less than
the amount he or she paid for the Stock prior to the one- or two-year periods
indicated, no amount will be taxed as ordinary income and the loss will be
taxed as a capital loss.  Exercise of an incentive stock option may subject a
participant to, or increase a participant's liability for, the alternative
minimum tax.

     NONQUALIFIED OPTIONS.  A participant will not recognize income and will
not be taxed upon the grant of a nonqualified option or at any time prior to
the exercise of all or a portion of the option.  At the time the participant
exercises all or a portion of a nonqualified option, he or she will recognize
compensation taxable as ordinary income in an amount equal to the excess of
the fair market value of the Stock on the date the option is exercised over
the price paid for the Stock, and the Company will then be entitled to a
corresponding deduction.

     Depending upon the period shares of Stock are held after exercise, the
sale or other taxable disposition of shares acquired through the exercise of
a nonqualified option generally will result in a short- or long-term capital
gain or loss equal to the difference between the amount realized on the
disposition and the fair market value of the shares when the nonqualified
option was exercised.

     Special rules apply to a participant who exercises a nonqualified option
by paying the exercise price, in whole or in part, by the transfer of shares
of Stock to the Company.

SHAREHOLDER APPROVAL

     The Board of Directors seeks shareholder approval of the adoption of the
Stock Incentive Plan and the reservation of 97,905 shares of Stock for the
issuance of Stock Options under the Stock Incentive Plan because approval is
required under the Code as a condition to incentive stock option treatment
and will maximize the potential for deductions associated with any
nonqualified options granted under the Stock Incentive Plan.

     Approval of the Stock Incentive Plan requires the affirmative vote of
the holders of at least a majority of the outstanding shares of Stock
present, or represented and entitled to a vote, at the annual meeting.
Proxies received which contain no instructions to the contrary will be voted
for the approval of the adoption of the Stock Incentive Plan.

                      INDEPENDENT PUBLIC ACCOUNTANTS

     The Company has selected the accounting firm of Francis & Co., CPAs, to
serve as independent accountants of the Company for the fiscal year ending
December 31, 2002.  Francis & Co., CPAs, has served as the Company's
independent accounting firm since our inception in December 1998.

                              OTHER MATTERS

     The board of directors of the Company knows of no other matters that may
be brought before the meeting.  If, however, any matters other than those
described in the Notice of Annual Meeting of Shareholders, should properly
come before the meeting, votes will be cast pursuant to the proxies in
accordance with the best judgment of the proxyholders.

     If you cannot be present in person, you are requested to complete, sign,
date, and return the enclosed proxy promptly.  An envelope has been provided
for that purpose.  No postage is required if mailed in the United States.

March 29, 2002



                                                                APPENDIX A


                               ISLANDS BANCORP
                          2002 STOCK INCENTIVE PLAN



                              TABLE OF CONTENTS

                                                                .  PAGE
                                                                .  ----
SECTION 1  DEFINITIONS...............................................1
     1.1   DEFINITIONS...............................................1
SECTION 2  THE STOCK INCENTIVE PLAN..................................4
     2.1   PURPOSE OF THE PLAN.......................................4
     2.2   STOCK SUBJECT TO THE PLAN.................................4
     2.3   ADMINISTRATION OF THE PLAN................................4
     2.4   ELIGIBILITY AND LIMITS....................................4
SECTION 3  TERMS OF STOCK INCENTIVES.................................5
     3.1   GENERAL TERMS AND CONDITIONS..............................5
     3.2   TERMS AND CONDITIONS OF OPTIONS...........................6
           (a)   Option Price........................................6
           (b)   Option Term.........................................6
           (c)   Payment.............................................6
           (d)   Conditions to the Exercise of an Option.............6
           (e)   Termination of Incentive Stock Option...............7
           (f)   Special Provisions for Certain Substitute Options...7
     3.3   TREATMENT OF AWARDS UPON TERMINATION OF SERVICE...........7
SECTION 4  RESTRICTIONS ON STOCK.....................................7
     4.1   ESCROW OF SHARES..........................................7
     4.2   RESTRICTIONS ON TRANSFER..................................8
SECTION 5  GENERAL PROVISIONS........................................8
     5.1   WITHHOLDING...............................................8
     5.2   CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION............8
     5.3   CASH AWARDS...............................................9
     5.4   COMPLIANCE WITH CODE......................................9
     5.5   RIGHT TO TERMINATE SERVICE................................9
     5.6   RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS......9
     5.7   NON-ALIENATION OF BENEFITS...............................10
     5.8   TERMINATION AND AMENDMENT OF THE PLAN....................10
     5.9   STOCKHOLDER APPROVAL.....................................10
     5.10  CHOICE OF LAW............................................10
     5.11  EFFECTIVE DATE OF THE PLAN...............................10



                                ISLANDS BANCORP
                            2002 STOCK INCENTIVE PLAN


                             SECTION 1  DEFINITIONS

     1.1  DEFINITIONS.  Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, and the singular to include the plural,
unless the context clearly indicates otherwise, and the following capitalized
words and phrases are used herein with the meaning thereafter ascribed:

          (a)  "AFFILIATE" means

               (1)  any Subsidiary or Parent;

               (2)  an entity that directly or through one or more
intermediaries controls, is controlled by, or is under common control with
the Company, as determined by the Company; or

               (3)  any entity in which the Company has such a significant
interest that the Company determines it should be deemed an "Affiliate," as
determined in the sole discretion of the Company.

          (b)  "BANK" means Islands Community Bank, N.A.

          (c)  "BOARD OF DIRECTORS" means the board of directors of the
Company.

          (d)  "CAUSE" has the same meaning as provided in the employment
agreement between the Participant and the Company or Affiliate(s) on the date
of Termination of Service, or if no such definition or employment agreement
exists, "Cause" means conduct amounting to  (1) fraud or dishonesty against
the Company or Affiliate(s); (2) Participant's willful misconduct, repeated
refusal to follow the reasonable directions of the Board of Directors or
knowing violation of law in the course of performance of the duties of
Participant's service with the Company or Affiliate(s); (3) repeated absences
from work without a reasonable excuse; (4) repeated intoxication with alcohol
or drugs while on the Company's or Affiliate(s)' premises during regular
business hours; (5) a conviction or plea of guilty or nolo contendere to a
felony or a crime involving dishonesty; or (6) a breach or violation of the
terms of any agreement to which Participant and the Company or Affiliate(s)
are party.

          (e)  "CHANGE IN CONTROL" has the same meaning as provided in the
employment agreement between the Participant and the Company or Affiliate(s),
or if no such definition or employment agreement exists, "Change in Control
shall mean any one of the following events which may occur after the date the
Stock Incentive is granted:

               (1)  the acquisition by any individual, entity or "group,"
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended, (a "Person") of beneficial ownership
(within the meaning of Rule 13-d-3 promulgated under the Securities Exchange
Act of 1934) of voting securities of the Company or the Bank where such
acquisition causes any such Person to own thirty-five  percent (35%) or more
of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors;

               (2)  within any twelve-month period, the persons who were
directors of the Company or the Bank immediately before the beginning of such
twelve-month period (the "Incumbent Directors") shall cease to constitute at
least a majority of the Board of Directors of the Company or the Bank;
provided that any director who was not a director as of the beginning of such
twelve-month period shall be deemed to be an Incumbent Director if that
director were elected to the Board of Directors of the Company or the Bank
by, or on the recommendation of or with the approval of, at least two-thirds
of the directors who then qualified as Incumbent Directors; and provided
further that no director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
directors shall be deemed to be an Incumbent Director;

               (3)  a reorganization, merger or consolidation, with respect
to which persons who were the stockholders of the Company or the Bank
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities; or

               (4)  the sale, transfer or assignment of all or substantially
all of the assets of the Company or the Bank to any third party.

          (f)  "CODE" means the Internal Revenue Code of 1986, as amended.

          (g)  "COMMITTEE" means the committee appointed by the Board of
Directors to administer the Plan pursuant to Plan Section 2.3.  If the
Committee has not been appointed, the Board of Directors in its entirety
shall constitute the Committee.

          (h)  "DISABILITY" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or an Affiliate for the Participant.  If no long-
term disability plan or policy was ever maintained on behalf of the
Participant or, if the determination of Disability relates to an Incentive
Stock Option, Disability shall mean that condition described in Code Section
22(e)(3), as amended from time to time.  In the event of a dispute, the
determination of Disability shall be made by the Board of Directors and shall
be supported by advice of a physician competent in the area to which such
Disability relates.

          (i)  "DISPOSITION" means any conveyance, sale, transfer,
assignment, pledge or hypothecation, whether outright or as security, inter
vivos or testamentary, with or without consideration, voluntary or
involuntary.

          (j)  "FAIR MARKET VALUE" with regard to a date means:

               (1)  the price at which Stock shall have been sold on that
date or the last trading date prior to that date as reported by the national
securities exchange selected by the Committee on which the shares of Stock
are then actively traded or, if applicable, as reported by the NASDAQ Stock
Market;

               (2)  if such market information is not published on a regular
basis, the price of Stock in the over-the-counter market on that date or the
last business day prior to that date as reported by the NASDAQ Stock Market
or, if not so reported, by a generally accepted reporting service; or

               (3)  if Stock is not publicly traded, as determined in good
faith by the Committee with due consideration being given to (i) the most
recent independent appraisal of the Company, if such appraisal is not more
than twelve months old and (ii) the valuation methodology used in any such
appraisal.

For purposes of Paragraphs (1), (2), or (3) above, the Committee may use the
closing price as of the applicable date, the average of the high and low
prices as of the applicable date or for a period certain ending on such date,
the price determined at the time the transaction is processed, the tender
offer price for shares of Stock, or any other method which the Committee
determines is reasonably indicative of the fair market value.

          (k)  "INCENTIVE STOCK OPTION" means an incentive stock option, as
defined in Code Section 422, described in Plan Section 3.2.

          (l)  "NONQUALIFIED STOCK OPTION" means a stock option, other than
an option qualifying as an Incentive Stock Option, described in Plan Section
3.2.

          (m)  "OPTION" means a Nonqualified Stock Option or an Incentive
Stock Option.

          (n)  "OVER 10% OWNER" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than ten percent
(10%) of the total combined voting power of the Company or one of its Parents
or Subsidiaries, determined by applying the attribution rules of Code Section
424(d).

          (o)  "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, with respect to
Incentive Stock Options, at the time of granting of the Incentive Stock
Option, each of the corporations other than the Company owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.

          (p)  "PARTICIPANT" means an individual who receives a Stock
Incentive hereunder.

          (q)  "PLAN" means the Islands Bancorp 2002 Stock Incentive Plan.

          (r)  "STOCK" means the Company's no par value common stock.

          (s)  "STOCK INCENTIVE AGREEMENT" means an agreement between the
Company and a Participant or other documentation evidencing an award of a
Stock Incentive.

          (t)  "STOCK INCENTIVES" means, collectively, Incentive Stock
Options and Nonqualified Stock Options.

          (u)  "SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, with respect
to Incentive Stock Options, at the time of the granting of the Incentive
Stock Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in the chain.  A "Subsidiary" shall include any entity other
than a corporation to the extent permissible under Section 424(f) or
regulations or rulings thereunder.

          (v)  "TERMINATION OF SERVICE" means the termination of the service
relationship, whether employment or otherwise, between a Participant and the
Company and any Affiliates, regardless of the fact that severance or similar
payments are made to the Participant for any reason, including, but not by
way of limitation, a termination by resignation, discharge, death, Disability
or retirement.  The Committee shall, in its absolute discretion, determine
the effect of all matters and questions relating to a Termination of Service,
including, but not by way of limitation, the question of whether a leave of
absence constitutes a Termination of Service, or whether a Termination of
Service is for Cause.


                   SECTION 2  THE STOCK INCENTIVE PLAN

     2.1  PURPOSE OF THE PLAN.  The Plan is intended to (a) provide
incentives to employees and directors of the Company and its Affiliates to
stimulate their efforts toward the continued success of the Company and to
operate and manage the business in a manner that will provide for the long-
term growth and profitability of the Company; (b) encourage stock ownership
by employees and directors by providing them with a means to acquire a
proprietary interest in the Company by acquiring shares of Stock; and (c)
provide a means of obtaining and rewarding key personnel.

     2.2  STOCK SUBJECT TO THE PLAN.  Subject to adjustment in accordance
with Section 5.2, 97,905 shares of Stock (the "Maximum Plan Shares") are
hereby reserved exclusively for issuance upon exercise or payment pursuant to
Stock Incentives.  At such time as the Company is subject to Section 16 of
the Exchange Act, at no time shall the Company have outstanding Stock
Incentives subject to Section 16 of the Exchange Act and shares of Stock
issued in respect of Stock Incentives in excess of the Maximum Plan Shares.
The shares of Stock attributable to the nonvested, unpaid, unexercised,
unconverted or otherwise unsettled portion of any Stock Incentive that is
forfeited or cancelled or expires or terminates for any reason without
becoming vested, paid, exercised, converted or otherwise settled in full will
again be available for purposes of the Plan.

     2.3  ADMINISTRATION OF THE PLAN.  The Plan shall be administered by the
Committee.   The Committee shall consist of at least two members of the Board
of Directors.  During those periods that the Company is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934, the Board of
Directors shall consider whether each Committee member should qualify as an
"outside director" as defined in Treasury Regulations Section 1.162-27(e) as
promulgated by the Internal Revenue Service and a "non-employee director" as
defined in Rule 16b(3)(b)(3) as promulgated under the Exchange Act.  The
Committee shall have full authority in its discretion to determine the
employees and directors of the Company or its Affiliates to whom Stock
Incentives shall be granted and the terms and provisions of Stock Incentives
subject to the Plan.  Subject to the provisions of the Plan, the Committee
shall have full and conclusive authority to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine
the terms and provisions of the respective Stock Incentive Agreements and to
make all other determinations necessary or advisable for the proper
administration of the Plan.  The Committee's determinations under the Plan
need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not
such persons are similarly situated).  The Committee's decisions shall be
final and binding on all Participants.  Each member of the Committee shall
serve at the discretion of the Board of Directors and the Board of Directors
may from time to time remove members from or add members to the Committee.
Vacancies on the Committee shall be filled by the Board of Directors.

     The Committee shall select one of its members as chairman and shall hold
meetings at the times and in the places as it may deem advisable.  Acts
approved by a majority of the Committee in a meeting at which a quorum is
present, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee.

     2.4  ELIGIBILITY AND LIMITS.  Stock Incentives may be granted only to
employees and directors of the Company or any Affiliate; provided, however,
that an Incentive Stock Option may only be granted to an employee of the
Company or any Subsidiary.  In the case of Incentive Stock Options, the
aggregate Fair Market Value (determined as of the date an Incentive Stock
Option is granted) of stock with respect to which stock options intended to
meet the requirements of Code Section 422 become exercisable for the first
time by an individual during any calendar year under all plans of the Company
and its Parents and Subsidiaries shall not exceed $100,000; provided further,
that if the limitation is exceeded, the Incentive Stock Option(s) which cause
the limitation to be exceeded shall be treated as Nonqualified Stock
Option(s).   During such periods as required by Code Section 162(m) of the
Code and the regulations thereunder for compensation to be treated as
qualified performance based compensation, the maximum number of shares of
Stock with respect to which Options may be granted during any calendar year
to an employee may not exceed 50,000, subject to adjustment in accordance
with Section 5.2.  If, after grant, the exercise price of an Option is
reduced, the transaction shall be treated as the cancellation of the Option
and the grant of a new Option.  If an Option is deemed to be cancelled as
described in the preceding sentence, the Option that is deemed to be
cancelled and the Option that is deemed to be granted shall both be counted
against the Maximum Plan Shares and the maximum number of shares for which
Options may be granted to an employee during any calendar year.


                     SECTION 3  TERMS OF STOCK INCENTIVES

     3.1  GENERAL TERMS AND CONDITIONS.

          (a)  The number of shares of Stock as to which a Stock Incentive
shall be granted shall be determined by the Committee in its sole discretion,
subject to the provisions of Section 2.2, as to the total number of shares
available for grants under the Plan.  If a Stock Incentive Agreement so
provides, a Participant may be granted a new Option to purchase a number of
shares of Stock equal to the number of previously owned shares of Stock
tendered in payment of the Exercise Price (as defined below) for each share
of Stock purchased pursuant to the terms of the Stock Incentive Agreement.

          (b)  Each Stock Incentive shall be evidenced by a Stock Incentive
Agreement in such form and containing such terms, conditions and restrictions
as the Committee may determine is appropriate.  Each Stock Incentive
Agreement shall be subject to the terms of the Plan and any provision in a
Stock Incentive Agreement  that is inconsistent with the Plan shall be null
and void.

          (c)  The date a Stock Incentive is granted shall be the date on
which the Committee has approved the terms of, and satisfaction of any
conditions applicable to, the grant of the Stock Incentive and has determined
the recipient of the Stock Incentive and the number of shares covered by the
Stock Incentive and has taken all such other action necessary to complete the
grant of the Stock Incentive.

          (d)  The Committee may provide in any Stock Incentive Agreement (or
subsequent to the award of a Stock Incentive but prior to its expiration or
cancellation, as the case may be) that, in the event of a Change in Control,
the Stock Incentive shall or may be cashed out on the basis of any price not
greater than the highest price paid for a share of Stock in any transaction
reported by any market or system selected by the Committee on which the
shares of Stock are then actively traded during a specified period
immediately preceding or including the date of the Change in Control or
offered for a share of Stock in any tender offer occurring during a specified
period immediately preceding or including the date the tender offer
commences; provided that, in no case shall any such specified period exceed
three (3) months (the "Change in Control Price").  For purposes of this
Subsection, any Option shall be cashed out on the basis of the excess, if
any, of the Change in Control Price over the Exercise Price to the extent the
Option is then exercisable in accordance with the terms of the Option and the
Plan.

          (e)  Any Stock Incentive may be granted in connection with all or
any portion of a previously or contemporaneously granted Stock Incentive.
Exercise or vesting of a Stock Incentive granted in connection with another
Stock Incentive may result in a pro rata surrender or cancellation of any
related Stock Incentive, as specified in the applicable Stock Incentive
Agreement.

          (f)  Stock Incentives shall not be transferable or assignable
except by will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the Participant; in
the event of the Disability of the Participant, by the legal representative
of the Participant; or in the event of the death of the Participant, by the
personal representative of the Participant's estate or if no personal
representative has been appointed, by the successor in interest determined
under the Participant's will.

     3.2  TERMS AND CONDITIONS OF OPTIONS.  Each Option granted under the
Plan shall be evidenced by a Stock Incentive Agreement.  At the time any
Option is granted, the Committee shall determine whether the Option is to be
an Incentive Stock Option or a Nonqualified Stock Option, and the Option
shall be clearly identified as to its status as an Incentive Stock Option or
a Nonqualified Stock Option.  At the time any Incentive Stock Option is
exercised, the Company shall be entitled to place a legend on the
certificates representing the shares of Stock purchased pursuant to the
Option to clearly identify them as shares of Stock purchased upon exercise of
an Incentive Stock Option.  An Incentive Stock Option may only be granted
within ten (10) years from the earlier of the date the Plan is adopted by the
Board of Directors or approved by the Company's stockholders.  All Options
shall provide that the primary federal regulator of the Company may require a
Participant to exercise an Option in whole or in part if the capital of the
Company falls below minimum requirements and shall further provide that, if
the Participant fails to so exercise any such portion of the Option, that
portion of the Option shall be forfeited.

          (a)  OPTION PRICE.   Subject to adjustment in accordance with
Section 5.2 and the other provisions of this Section 3.2, the exercise price
(the "Exercise Price") per share of Stock purchasable under any Option shall
be as set forth in the applicable Stock Incentive Agreement.  With respect to
each grant of an Incentive Stock Option to a Participant who is not an Over
10% Owner, the Exercise Price per share shall not be less than the Fair
Market Value on the date the Option is granted.  With respect to each grant
of an Incentive Stock Option to a Participant who is an Over 10% Owner, the
Exercise Price shall not be less than 110% of the Fair Market Value on the
date the Option is granted.  With respect to each grant of a Nonqualified
Stock Option, the Exercise Price per share shall be no less than the Fair
Market Value.

          (b)  OPTION TERM.  The term of an Option shall be as specified in
the applicable Stock Incentive Agreement; provided, however that any Option
granted to a Participant shall not be exercisable after the expiration of ten
(10) years after the date the Option is granted and any Incentive Stock
Option granted to an Over 10% Owner shall not be exercisable after the
expiration of five (5) years after the date the Option is granted.

          (c)  PAYMENT.  Payment for all shares of Stock purchased pursuant
to the exercise of an Option shall be made in cash or, if the Stock Incentive
Agreement provides, in a cashless exercise through a broker.   In its
discretion, the Committee also may authorize (at the time an Option is
granted or thereafter) Company financing to assist the Participant as to
payment of the Exercise Price on such terms as may be offered by the
Committee in its discretion.  Payment shall be made at the time that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant.  The holder of an Option, as such, shall have none of the rights
of a stockholder.

          (d)  CONDITIONS TO THE EXERCISE OF AN OPTION.  Each Option granted
under the Plan shall be exercisable by the Participant or any other
designated person, at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Committee shall specify in the
Stock Incentive Agreement; provided, however, that subsequent to the grant of
an Option, the Committee, at any time before complete termination of such
Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, including, without limitation, upon a Change
in Control and may permit the Participant or any other designated person to
exercise the Option, or any portion thereof, for all or part of the remaining
Option term notwithstanding any provision of the Stock Incentive Agreement to
the contrary.

          (e)  TERMINATION OF INCENTIVE STOCK OPTION STATUS.  With respect to
an Incentive Stock Option, in the event of the Termination of Service of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate and become unexercisable no later than
three (3) months after the date of termination of employment; provided,
however, that in the case of a holder whose termination of employment is due
to death or Disability, up to one (1) year may be substituted for such three
(3) month period.  For purposes of this Subsection (e), Termination of
Service of the Participant shall not be deemed to have occurred if the
Participant is employed by another corporation (or a parent or subsidiary
corporation of such other corporation) which has assumed the Incentive Stock
Option of the Participant in a transaction to which Code Section 424(a) is
applicable.

          (f)  SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section 3.2, any Option
issued in substitution for an option previously issued by another entity,
which substitution occurs in connection with a transaction to which Code
Section 424(a) is applicable, may provide for an exercise price computed in
accordance with such Code Section and the regulations thereunder and may
contain such other terms and conditions as the Committee may prescribe to
cause such substitute Option to contain as nearly as possible the same terms
and conditions (including the applicable vesting and termination provisions)
as those contained in the previously issued option being replaced thereby.

     3.3  TREATMENT OF AWARDS UPON TERMINATION OF SERVICE.  Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who suffers a Termination of Service may be cancelled,
accelerated, paid or continued, as provided in the Stock Incentive Agreement
or, in the absence of such provision, as the Committee may determine.  The
portion of any award exercisable in the event of continuation or the amount
of any payment due under a continued award may be adjusted by the Committee
to reflect the Participant's period of service from the date of grant through
the date of the Participant's Termination of Service or such other factors as
the Committee determines are relevant to its decision to continue the award.


                        SECTION 4  RESTRICTIONS ON STOCK

     4.1  ESCROW OF SHARES.  Any certificates representing the shares of
Stock issued under the Plan shall be issued in the Participant's name, but,
if the Stock Incentive Agreement so provides, the shares of Stock shall be
held by a custodian designated by the Committee (the "Custodian").  Each
applicable Stock Incentive Agreement providing for transfer of shares of
Stock to the Custodian shall appoint the Custodian as the attorney-in-fact
for the Participant for the term specified in the applicable Stock Incentive
Agreement, with full power and authority in the Participant's name, place and
stead to transfer, assign and convey to the Company any shares of Stock held
by the Custodian for such Participant, if the Participant forfeits the shares
under the terms of the applicable Stock Incentive Agreement.  During the
period that the Custodian holds the shares subject to this Section, the
Participant shall be entitled to all rights, except as provided in the
applicable Stock Incentive Agreement, applicable to shares of Stock not so
held.  Any dividends declared on shares of Stock held by the Custodian shall,
as the Committee may provide in the applicable Stock Incentive Agreement, be
paid directly to the Participant or, in the alternative, be retained by the
Custodian until the expiration of the term specified in the applicable Stock
Incentive Agreement and shall then be delivered, together with any proceeds,
with the shares of Stock to the Participant or to the Company, as applicable.

     4.2  RESTRICTIONS ON TRANSFER.  The Participant shall not have the right
to make or permit to exist any Disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement.  Any Disposition of the shares of Stock issued under the
Plan by the Participant not made in accordance with the Plan or the
applicable Stock Incentive Agreement shall be void.  The Company shall not
recognize, or have the duty to recognize, any Disposition not made in
accordance with the Plan and the applicable Stock Incentive Agreement, and
the shares so transferred shall continue to be bound by the Plan and the
applicable Stock Incentive Agreement.


                      SECTION 5  GENERAL PROVISIONS

     5.1  WITHHOLDING.  The Company shall deduct from all cash distributions
under the Plan any taxes required to be withheld by federal, state or local
government.  Whenever the Company proposes or is required to issue or
transfer shares of Stock under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
any federal, state and local tax withholding requirements prior to the
delivery of any certificate or certificates for such shares.  A Participant
may pay the withholding obligation in cash, by tendering shares of Stock
which have been owned by the holder for at least six (6) months prior to the
date of exercise or, if the applicable Stock Incentive Agreement provides, a
Participant may elect to have the number of shares of Stock he is to receive
reduced by the smallest number of whole shares of Stock which, when
multiplied by the Fair Market Value of the shares of Stock determined as of
the Tax Date (defined below), is sufficient to satisfy federal, state and
local, if any, withholding obligation arising from exercise or payment of a
Stock Incentive (a "Withholding Election").  A Participant may make a
Withholding Election only if both of the following conditions are met:

          (a)  The Withholding Election must be made on or prior to the date
on which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed notice
of Withholding Election as prescribed by the Committee; and

          (b)  Any Withholding Election made will be irrevocable; however,
the Committee may, in its sole discretion, disapprove and give no effect to
the Withholding Election.

     5.2  CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION.

          (a)  The number of shares of Stock reserved for the grant of
Options, the maximum number of shares of Stock for which Options may be
granted to any employee during any calendar year, the number of shares of
Stock reserved for issuance upon the exercise of each outstanding Option, and
the Exercise Price of each outstanding Option shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock
resulting from a subdivision or combination of shares or the payment of an
ordinary stock dividend in shares of Stock to holders of outstanding shares
of Stock or any other increase or decrease in the number of shares of Stock
outstanding effected without receipt of consideration by the Company.

          (b)  In the event of any merger, consolidation, reorganization,
extraordinary dividend, spin-off, sale of substantially all of the Company's
assets, other change in the capital structure of the Company or its Stock
(including any Change in Control) or tender offer for shares of Stock, the
Committee, in its sole discretion, may make such adjustments with respect to
awards and take such other action as it deems necessary or appropriate to
reflect or in anticipation of such merger, consolidation, reorganization,
extraordinary dividend, spin-off, sale of substantially all of the Company's
assets, other change in capital structure or tender offer, including, without
limitation; the assumption of other awards, the substitution of new awards,
the adjustment of outstanding awards (with or without the payment of any
consideration), the acceleration of awards or the removal of restrictions on
outstanding awards, all as may be provided in the applicable Stock Incentive
Agreement or, if not expressly addressed therein, as the Committee
subsequently may determine in the event of any such merger, consolidation,
reorganization, extraordinary dividend, spin-off, sale of substantially all
of the Company's assets, other change in the capital structure of the Company
or its Stock or tender offer for shares of Stock or the termination of
outstanding awards in exchange for the cash value, as determined in good
faith by the Committee of the vested and/or unvested portion of the award.
The Committee's general authority under this Section 5.2 is limited by and
subject to all other express provisions of the Plan.  Any adjustment pursuant
to this Section 5.2 may provide, in the Committee's discretion, for the
elimination without payment therefor of any fractional shares that might
otherwise become subject to any Stock Incentive.

          (c)  The existence of the Plan and the Stock Incentives granted
pursuant to the Plan shall not affect in any way the right or power of the
Company to make or authorize any adjustment, reclassification, reorganization
or other change in its capital or business structure, any merger or
consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its business or assets, or any other corporate act or proceeding.

     5.3  CASH AWARDS.  The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times
and in such amounts as determined by the Committee in its discretion, a cash
amount which is intended to reimburse such person for all or a portion of the
federal, state and local income taxes imposed upon such person as a
consequence of the receipt of the Stock Incentive or the exercise of rights
thereunder.

     5.4  COMPLIANCE WITH CODE.  All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder shall be construed
in such a manner as to effectuate that intent.

     5.5  RIGHT TO TERMINATE SERVICE.  Nothing in the Plan or in any Stock
Incentive Agreement shall confer upon any Participant the right to continue
as an employee, director, organizer or officer of the Company or affect the
right of the Company to terminate the Participant's services at any time.

     5.6  RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS.  Each Stock
Incentive is subject to the condition that if at any time the Committee, in
its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Stock Incentive upon any
securities exchange or under any state or federal law is necessary or
desirable as a condition of or in connection with the granting of such Stock
Incentive or the purchase or delivery of shares thereunder, the delivery of
any or all shares pursuant to such Stock Incentive may be withheld unless and
until such listing, registration or qualification shall have been effected.
If a registration statement is not in effect under the Securities Act of 1933
or any applicable state securities laws with respect to the shares of Stock
purchasable or otherwise deliverable under Stock Incentives then outstanding,
the Committee may require, as a condition of exercise of any Option or as a
condition to any other delivery of Stock pursuant to a Stock Incentive, that
the Participant or other recipient of a Stock Incentive represent, in
writing, that the shares received pursuant to the Stock Incentive are being
acquired for investment and not with a view to distribution and agree that
the shares will not be disposed of except pursuant to an effective
registration statement, unless the Company shall have received an opinion of
counsel that such disposition is exempt from such requirement under the
Securities Act of 1933 and any applicable state securities laws.  The Company
may include on certificates representing shares delivered pursuant to a Stock
Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company,
in its discretion, shall deem appropriate.

     5.7  NON-ALIENATION OF BENEFITS.  Other than as specifically provided
herein, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge; and any attempt to do so shall be void.  No such benefit shall, prior
to receipt by the Participant, be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Participant.

     5.8  TERMINATION AND AMENDMENT OF THE PLAN.  The Board of Directors at
any time may amend or terminate the Plan without stockholder approval;
provided, however, that the Board of Directors may condition any amendment on
the approval of stockholders of the Company if such approval is necessary or
advisable with respect to tax, securities or other applicable laws.  No such
termination or amendment without the consent of the holder of a Stock
Incentive shall adversely affect the rights of the Participant under such
Stock Incentive.

     5.9  STOCKHOLDER APPROVAL.   The Plan must be submitted to the
stockholders of the Company for their approval within twelve (12) months
before or after the adoption of the Plan by the Board of Directors.

     5.10  CHOICE OF LAW.  The laws of the State of South Carolina shall
govern the Plan, to the extent not preempted by federal law.

     5.11  EFFECTIVE DATE OF THE PLAN.  The Plan was approved by the Board of
Directors as of March 19, 2002 and will be effective as of that date.


                                      ISLANDS BANCORP


                                      By: ______________________________

                                      Title: ___________________________

ATTEST:


__________________________________
Secretary

     [SEAL]



                               ISLANDS BANCORP
                                   PROXY
                      SOLICITED BY THE BOARD OF DIRECTORS
                     FOR THE ANNUAL MEETING OF SHAREHOLDERS
                     TO BE HELD ON TUESDAY, APRIL 23, 2002

     The undersigned hereby appoints William B. Gossett as proxy, with the
power to appoint his substitute, and hereby authorizes him to represent and
to vote, as designated below, all of the common stock of Islands Bancorp,
which the undersigned would be entitled to vote if personally present at the
annual meeting of shareholders to be held at the Conference Room of the Sleep
Inn, 2523 Boundary Street, Beaufort, South Carolina on Tuesday, April 23,
2002, at 3:00 p.m. and at any adjournments of the annual meeting, upon the
proposals described in the accompanying notice of the annual meeting and the
proxy statement relating to the annual meeting, receipt of which are hereby
acknowledged.

     THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSALS.

PROPOSAL 1:  To elect the five (5) persons listed below to serve as Class III
             directors of Islands Bancorp for a three-year term expiring at
             the 2005 annual meeting of shareholders and the two (2) persons
             listed below to serve as Class II directors of Islands Bancorp
             for a two-year term expiring at the 2004 annual meeting of
             shareholders:

             Class III Director Nominees    Class II Director Nominees
             ---------------------------    --------------------------
             (Term Expiring 2005)           (Term Expiring 2004)
             Avery E. Cleland               Daryl A. Ferguson
             Carl E. Lipscomb               Stancel E. Kirkland, Sr.
             Narayan Shenoy
             J. Frank Ward
             Bruce K. Wyles

             __  FOR all nominees listed    ___  WITHHOLD authority to vote
                 above (except as indi-          for all nominees listed
                 cated below)                    above

INSTRUCTION:  To withhold authority for any individual nominees, mark "FOR"
              above, and write the nominees' names in this space.
              _______________________________________________________

PROPOSAL 2:  To approve the Islands Bancorp 2002 Stock Incentive Plan:

             ___  FOR     ___  AGAINST     ___  ABSTAIN

     THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED SHAREHOLDER.  IF NO DIRECTION TO THE CONTRARY IS
INDICATED, IT WILL BE VOTED FOR THE PROPOSALS.  DISCRETIONARY AUTHORITY IS
HEREBY CONFERRED AS TO ALL OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL
MEETING.

     If stock is held in the name of more than one person, all holders must
sign.  Signatures should correspond exactly with the name or names appearing
on the stock certificate(s).  When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.  If a
corporation, please sign in full corporate name by president or other
authorized officer.  If a partnership, please sign in partnership name by
authorized person.

                              _________________________________________
                              Signature of Shareholder         Date


                              _________________________________________
                              Signature of Shareholder         Date


                              _________________________________________
                              Print Name(s) of Shareholder(s)

Please mark, sign and date this Proxy, and return it in the enclosed return-
addressed envelope.  No postage necessary.

  I WILL __   WILL NOT __   ATTEND THE ANNUAL SHAREHOLDERS MEETING.


               PLEASE RETURN PROXY AS SOON AS POSSIBLE
               ---------------------------------------