North Carolina		56-1456589
(State of incorporation)		(I.R.S. Employer Identification No.)

		June 30, (unaudited)						December 31,
		2002			2001			2001
		(in thousands, except share data)
ASSETS
Cash and due from banks		$  12,379			$  14,189			$  13,490
Federal funds sold		8,364			159			127
Investment securities—Available for sale (amortized cost of $154,926, $165,619 and $161,685)		157,780			167,009			163,150
Loans:
Loans held for sale		979			2,557			12,836
Loans held for investment		387,285			386,385			378,796
Less allowance for loan losses		(4,672	)		(4,353	)		(4,417	)
Net loans		383,592			384,589			387,215
Premises and equipment, net		10,310			9,438			10,268
Other assets		19,224			18,663			19,492
Total Assets		$591,649			$594,047			$593,742
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand deposits		$  52,692			$  46,823			$  49,089
Interest-bearing deposits:
Demand, savings and money market deposits		155,486			131,366			140,496
Time deposits of $100,000 or more		103,674			102,102			109,187
Other time deposits		169,936			205,005			181,458
Total deposits		481,788			485,296			480,230
Retail repurchase agreements		14,681			13,635			14,812
Federal Home Loan Bank advances		30,000			25,000			30,000
Federal funds purchased		—			4,375			6,000
Other liabilities		6,179			7,486			6,793
Total Liabilities		532,648			535,792			537,835
Shareholders’ equity:
Preferred stock—$10.00 par value; authorized 200,000 shares, none issued		—			—			—
Common stock—$2.50 par value; authorized 10,000,000 shares, issued shares—4,755,497, 5,047,292 and 4,763,261		11,889			12,618			11,908
Surplus		29			2,653			—
Retained earnings		45,199			42,066			43,032
Accumulated other comprehensive income		1,884			918			967
Total Shareholders’ Equity		59,001			58,255			55,907
Total Liabilities and Shareholders’ Equity		$591,649			$594,047			$593,742

		Three Months Ended June 30, (unaudited)				Six Months Ended June 30, (unaudited)
		2002		2001		2002		2001
		(in thousands, except per share data)
Interest Income
Interest and fees on loans		$6,690		$8,053		$13,446		$16,604
Interest and dividends on investment securities:
Taxable income		2,288		2,171		4,508		3,969
Non-taxable income		286		238		583		481
Other interest income		17		57		46		142
Total interest income		9,281		10,519		18,583		21,196
Interest Expense
Deposits		2,820		5,116		5,928		10,452
Retail repurchase agreements		62		119		124		243
Federal Home Loan Bank advances		365		320		726		601
Federal funds purchased		5		10		8		38
Total interest expense		3,252		5,565		6,786		11,334
Net Interest Income		6,029		4,954		11,797		9,862
Provision for loan losses		530		165		1,040		285
Net Interest Income After Provision for Loan Losses		5,499		4,789		10,757		9,577
Noninterest Income
Service charges on deposit accounts		689		648		1,361		1,229
Annuity and brokerage commissions		86		53		140		114
Cardholder and merchant services income		190		157		354		295
Other service charges, commissions and fees		186		173		386		365
Bank owned life insurance		152		159		304		316
Net gain on sales of loans		258		175		670		429
Other income		124		123		158		166
Total noninterest income		1,685		1,488		3,373		2,914
Noninterest Expense
Personnel expense		2,680		2,300		5,235		4,489
Net occupancy expense		246		203		493		404
Furniture and equipment expense		373		345		744		701
Data processing services		216		174		413		341
Other expense		1,035		1,049		2,090		1,975
Total noninterest expense		4,550		4,071		8,975		7,910
Income Before Income Taxes		2,634		2,206		5,155		4,581
Income taxes		760		608		1,476		1,301
Net Income		$1,874		$1,598		$  3,679		$3,280
Net income per common share:
Basic		$    .39		$    .32		$      .77		$      .65
Diluted		.38		.31		.75		.64
Weighted average number of shares outstanding:
Basic		4,754,396		5,062,678		4,757,903		5,062,635
Diluted		4,900,892		5,133,881		4,885,328		5,137,616
Cash dividends declared per common share		$    .14		$    .12		$      .28		$      .24

		Common Stock						Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
		Shares			Amount
		(in thousands, except share data)
Balance, December 31, 2000		5,059,641			$12,649			$2,836			$40,000			$  (363	)		$55,122
Comprehensive income:
Net income		—			—			—			3,280			—			3,280
Other comprehensive income:
Unrealized securities gains net of income taxes of $659		—			—			—			—			1,281			1,281
Total comprehensive income		—			—			—			—