SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934.

(Amendment No. )

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12

FIRST SOUTH BANCORP, INC
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[x] No Fee Required.
[ ] $125 per Exchange Act Rules 0-11(e)(1)(ii), 14a-6(i)(1) or Item 22(a)(2)
of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

4) Proposed maximum aggregate value of transaction:

5) Total fee paid

[ ] Fee paid previously with preliminary materials

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

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FIRST SOUTH BANCORP, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO OUR SHAREHOLDERS:

NOTICE IS HEREBY GIVEN THAT the Annual Meeting of the Shareholders of First
South Bancorp, Inc. will be held at the 1460 John B. White, Sr. Blvd. (Second
Floor), Spartanburg, South Carolina, on Wednesday, May 17, 2006, at 3:00 p.m.,
for the following purposes:

(1) To elect two directors to each serve for a three-year term, or until their
successors are duly elected and qualified; and

(2) To ratify the selection of Cherry, Bekaert & Holland, L.L.P. as the
Company's independent auditors; and

(3) To act upon other such matters as may properly come before the meeting or
any adjournment thereof.

Only shareholders of record at the close of business on April 5, 2006, are
entitled to notice of and to vote at the meeting. In order that the meeting can
be held, and a maximum number of shares can be voted, whether or not you plan to
be present at the meeting in person, please fill in, date, sign and promptly
return the enclosed form of proxy. The Company's Board of Directors unanimously
recommends a vote FOR approval of all of the proposals presented.

Returning the signed proxy will not prevent a record owner of shares from
voting in person at the meeting.

Included herewith is the Company's 2006 Proxy Statement. Also included is
the Company's 2005 Annual Report to Shareholders.

By Order of the Board of Directors

April 17, 2006 V. Lewis Shuler
Secretary

FIRST SOUTH BANCORP, INC.
1450 John B. White Sr. Blvd.
Spartanburg, South Carolina 29306
(864) 595-0455

PROXY STATEMENT

This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of First South Bancorp, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held at 3:00 p.m. on
Wednesday, May 17, 2006 at the 1460 John B. White Sr. Blvd. (Second Floor),
Spartanburg, South Carolina. A Notice of Annual Meeting is attached hereto, and
a form of proxy is enclosed. This statement was first mailed to shareholders on
or about April 17, 2006, in connection with the solicitation. The cost of this
solicitation is being paid by the Company. The only method of solicitation to be
employed, other than use of the proxy statement, is personal, telephone or other
electronic contact by directors and regular employees of the Company.

ANNUAL REPORT

The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 2005, including financial statements, is enclosed herewith. Such
Annual Report to Shareholders does not form any part of the material for the
solicitation of proxies.

REVOCATION OF PROXY

Any record shareholder who executes and delivers a proxy has the right to
revoke it at any time before it is voted. The proxy may be revoked by a record
shareholder by delivering to Barry L. Slider, President, First South Bancorp,
Inc., 1450 John B. White Sr. Blvd., Spartanburg, South Carolina 29306 or by
mailing to Mr. Slider at Post Office Box 1928, Spartanburg, South Carolina
29304, an instrument which by its terms revokes the proxy. The proxy may also be
revoked by a record shareholder by delivery to the Company of a duly executed
proxy bearing a later date. Written notice of revocation of a proxy or delivery
of a later dated proxy will be effective upon receipt thereof by the Company.
Attendance at the Annual Meeting will not in itself constitute revocation of a
proxy. However, any shareholder who desires to do so may attend the meeting and
vote in person in which case the proxy will not be used.

QUORUM AND VOTING

At the close of business on April 5, 2006, there were outstanding
1,750,444 shares of the Company's common stock (no par value). Each share
outstanding will be entitled to one vote upon each matter submitted at the
meeting. Only stockholders of record at the close of business on April 5, 2006
(the "Record Date"), shall be entitled to notice of and to vote at the meeting.

One-third of the shares entitled to be voted at the Annual Meeting
constitutes a quorum. If a share is represented for any purpose at the Annual
Meeting by the presence of the registered owner or a person holding a valid
proxy for the registered owner, it is deemed to be present for purposes of
establishing a quorum. Therefore, valid proxies which are marked "Abstain" or
"Withhold" and shares that are not voted, including proxies submitted by brokers
that are the record owners of shares (so-called "broker non-votes"), will be
included in determining the number of votes present or represented at the Annual
Meeting. If a quorum is not present or represented at the meeting, the
shareholders entitled to vote, present in person or represented by proxy, have
the power to adjourn the meeting from time to time. If the meeting is to be
reconvened within thirty days, no notice of the reconvened meeting will be given
other than an announcement at the adjourned meeting. If the meeting is to be
adjourned for thirty days or more, notice of the reconvened meeting will be
given as provided in the Bylaws. At any reconvened meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally noticed.

If a quorum is present at the Annual Meeting, directors will be elected by
a plurality of the votes cast by shares present and entitled to vote at the
Annual Meeting. "Plurality" means that if there are more nominees than positions
to be filled, the individuals who receive the largest number of votes cast for
the positions to be filled will be elected as directors. Cumulative voting is
not permitted. Votes that are withheld or that are not voted in the election of
directors will have no effect on the outcome of election of directors. If a
quorum is present all other matters that may be considered and acted upon at the
Annual Meeting will be approved if the number of shares of Common Stock voted in
favor of the matter exceeds the number of shares of Common Stock voted against
the matter.

ACTIONS TO BE TAKEN BY THE PROXIES

The persons named as proxies were selected by the Board of Directors of
the Company. When the form of proxy enclosed is properly executed and returned,
the shares that it represents will be voted at the meeting. Each proxy, unless
the shareholder otherwise specifies therein, will be voted "FOR" the election of
the persons named in this Proxy Statement as the Board of Directors' nominees
for election to the Board of Directors and FOR ratification of Cherry, Bekaert &
Holland, L.L.P. as independent auditors for the year ended December 31, 2006. In
each case where the shareholder has appropriately specified how the proxy is to
be voted, it will be voted in accordance with his specifications. As to any
other matter of business which may be brought before the Annual Meeting, a vote
may be cast pursuant to the accompanying proxy in accordance with the best
judgment of the persons voting the same, but the Board of Directors does not
know of any such other business.

SHAREHOLDER PROPOSALS

Any shareholder who wishes to submit proposals for the consideration of
the shareholders at the next Annual Meeting may do so by mailing them in writing
to Barry L. Slider, President, First South Bancorp, Inc., Post Office Box 1928,
Spartanburg, South Carolina 29304, or by delivering them in writing to Mr.
Slider at the Company's main office, 1450 John B. White Sr. Blvd., Spartanburg,
South Carolina 29306. Such written proposals must be received prior to December
19, 2006, for inclusion, if otherwise appropriate, in the Company's Proxy
Statement and form of Proxy relating to that meeting. With respect to any
shareholder proposal not received by the Company prior to March 2, 2007, proxies
solicited by management of the Company will be voted on the proposal in the
discretion of the designated proxy agents.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The number of shares owned and the percentage of outstanding common stock
such number represents at March 31, 2006, for all directors and executive
officers of the Company and for all persons who are currently beneficial owners
of 5% or more of the Company's common stock is set forth below.

Number of Shares % of Outstanding
Name (and Address of 5% Owners) Beneficially Owned Common Stock
- ------------------------------------------- -------------------------------- -------------------------------

Harold E. Fleming, M.D. (1) 25,976 1.48
Joel C. Griffin 27,097 1.55
Roger A. F. Habisreutinger (2) 133,685 7.64
408 Main Street
Spartanburg, SC
Herman E. Ratchford 223,619 12.77
3808 Edgewater Drive
Gastonia, NC
Chandrakant V. Shanbhag (3) 123,588 7.06
1614 Holly Berry Lane
Spartanburg, SC
V. Lewis Shuler (4) 38,903 2.19
Barry L. Slider (5) 90,683 5.05
David G. White (6) 53,096 3.03
-------
All directors and executive
officers as a group (8 persons)(7) 716,647 39.26

- --------------------
(1) Includes 150 shares owned by a family member of Dr. Fleming as to which he
disclaims beneficial ownership.
(2) Includes 30,620 shares owned jointly with his wife; 12,500 shares owned by
his wife; 43,285 shares owned by three children and two grandchildren and
34,184 owned by a trust as to which Mr. Habisreutinger disclaims beneficial
ownership.
(3) Includes 45,000 shares owned jointly with his wife and 300 shares owned by
minor children.
(4) Includes 1,200 shares owned jointly with a family member; and 28,453 shares
subject to presently exercisable options.

(5) Includes 10,500 shares owned jointly with his wife; 300 shares owned by
children; 8,100 shares owned by his wife as to which Mr. Slider disclaims
beneficial ownership; and 46,512 shares subject to presently exercisable
options.
(6) Includes 750 shares owned by minor children and 900 shares owned by his
wife as to which Mr. White disclaims beneficial ownership.
(7) Includes 74,965 shares subject to currently exercisable options.

Except as otherwise indicated, to the knowledge of management, all shares are
owned directly with sole voting power.

ELECTION OF DIRECTORS

At the Annual Meeting, three directors are to be elected to hold office
for a term of three years until the 2009 Annual Meeting of Shareholders, or
until their successors are duly elected and qualified. The Board has nominated
Roger A. F. Habisreutinger and Chandrakant V. Shanbhag for election to such
positions. No other nominations have been made in writing and given to the
Secretary of the Company in accordance with the procedures set forth below under
"--Committees of the Board of Directors." Accordingly, no other nominations are
permitted to be made.

It is the intention of the persons named in the enclosed form of proxy
to vote for the election as directors of Messrs. Habisreutinger and Shanbhag.
Unless a contrary specification is indicated, the enclosed form of proxy will be
voted FOR such nominees. In the event that any such nominee is not available by
reason of any unforeseen contingency, it is intended that the persons acting
under the proxy will vote for the election, in his stead, of such other person
as the Board of Directors of the Company may recommend. The Board of Directors
has no reason to believe that any of the nominees will be unable or unwilling to
serve if elected.

MANAGEMENT OF THE COMPANY

Directors

The table below shows, as to each director, his name, age, positions
held with the Company and principal occupation for the past five years and the
period during which he has served as a director of the Company. Directors of the
Company serve until the Annual Meeting for the year indicated or until their
successors are elected and qualified. Each of the persons listed in the table as
a nominee is a Board of Directors' nominee for election as a director of the
Company.

NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE*
- ---- --- -------------------- ---------------

Nominees for the Board of Directors whose terms of office will continue
until the Annual Meeting of Shareholders of the Company in 2009 are:

Roger A. F. Habisreutinger 64 Chairman of the Board of the Company and First 1996
South Bank; President, Champion Investment Corp.

Chandrakant V. Shanbhag 56 Chief Executive Officer, D.C. Motors & Control, 1996
Inc.

Members of the Board of Directors whose terms of office will continue
until the Annual Meeting of Shareholders of the Company in 2008 are:

Herman E. Ratchford 73 Chairman and Chief Executive Officer, Triangle 1998
Real Estate of Gastonia (construction)

David G. White 50 Attorney 1996

Members of the Board of Directors whose terms of office will continue
until the Annual Meeting of Shareholders of the Company in 2007 are:

Harold E. Fleming 65 Physician, Cardio Medical Associates 1996

Joel C. Griffin 52 President, Griffin Gear, Inc. (specialized gear 1996
manufacturing)

Barry L. Slider 53 President & Chief Executive Officer of the 1996
Company and First South Bank (since 1996),
Senior Vice President, Branch Banking & Trust
Company, Spartanburg, S.C. (1985-1995)

- -------------------------
*Includes membership on the Board of Directors of First South Bank prior to
organization of the Company as a holding company for First South Bank in 1999.
Each person also currently serves as a director of First South Bank.

Neither the principal executive officers nor any directors or director
nominees are related by blood, marriage or adoption in the degree of first
cousin or closer.

Executive Officers

Set forth below is information about the business background, age and
positions with the Company of each executive officer of the Company.

Barry L. Slider President and Chief Executive Officer

V. Lewis Shuler Executive Vice President and Chief Financial Officer

Information about Mr. Slider is set forth above under "-Directors." Mr.
Shuler (age 62) served as Senior Vice President/Treasurer of First Community
Bank from 1987 to 1996 prior to becoming Executive Vice President and Chief
Financial Officer of First South Bank and the Company in 1996.

Meetings of the Board of Directors

During the last full fiscal year, ending December 31, 2005, the Board
of Directors of the Company met 12 times (includes meetings of First South Bank
Board of Directors). Each director attended a minimum of 75% of the total number
of meetings of the Board of Directors and committees of which he was a member.

The Company encourages, but does not require, its directors to attend
annual meetings of shareholders. Last year, all of the Company's directors
attended the annual meeting of shareholders.

Committees of the Board of Directors

Nominating Committee

The Board of Directors does not have a separate nominating committee.
Rather, the entire Board of Directors acts as nominating committee. Based on the
Company's size, the small geographic area in which it does business and the
desirability of directors being a part of the communities served by the Company
and familiar with the Company's customers, the Board of Directors does not
believe the Company would derive any significant benefit from a separate
nominating committee. The members of the Board of Directors are not all
independent as defined in The Nasdaq Stock Market, Inc. Marketplace Rules, as
modified or supplemented. The Company does not have a Nominating Committee
charter.

In recommending director candidates, the Board takes into consideration
such factors as it deems appropriate based on the Company's current needs. These
factors may include diversity, age, skills such as understanding of banking and
general finance, decision-making ability, interpersonal skills, experience with
businesses and other organizations of comparable size, community activities and
relationships, and the interrelationship between the candidate's experience and
business background and other Board members' experience and business background,
as well as the candidate's ability to devote the required time and effort to
serve on the Board. The Board does not have any specific process for identifying
director candidates. Such candidates are routinely identified through personal
and business relationships and contacts of the directors and executive officers.

The Board will consider for nomination by the Board director candidates
recommended by shareholders if the shareholders comply with the following
requirements. If a shareholder wishes to recommend a director candidate to the
Board for consideration as a Board of Directors' nominee, such shareholder must
submit in writing to the Board the recommended candidate's name, a brief resume
setting forth the recommended candidate's business and educational background
and qualifications for service, and a notarized consent signed by the
recommended candidate stating the recommended candidate's willingness to be
nominated and to serve. This information must be delivered to the Chairman of
the Company at the Company's address and must be received no later than January
15 in any year to be considered as a potential Board of Directors' nominee at
the Annual Meeting of Shareholders for that year. The Board may request further
information if it determines a potential candidate may be an appropriate
nominee. Director candidates recommended by shareholders that comply with these
requirements will receive the same consideration that the Board's candidates
receive.

Director candidates recommended by shareholders will not be considered
for recommendation by the Board as potential Board of Directors' nominees if the
shareholder recommendations are received later than January 15 in any year.
However, shareholders may nominate director candidates for election at the
annual meeting, but no person who is not already a director may be elected at an
annual meeting of shareholders unless that person is nominated in writing at
least 60 days prior to the meeting. Such nominations, other than those made by
or on behalf of the existing management of the Company, must be made in writing
and must be delivered or mailed to the President of the Company, not less than
60 days prior to any meeting of Shareholders called for the election of
Directors. Nominations not made in accordance with these requirements may be
disregarded by the presiding officer of the meeting, and upon his instructions,
the vote tellers shall disregard all votes cast for each such nominee.

Audit Committee

The Company has an Audit Committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee
provides general oversight of financial reporting and the adequacy of the
internal controls of the Company. The Audit Committee functions by meeting with
the independent auditors and by contact with members of management concerned
with financial and control functions. The Audit Committee is comprised of
Messrs. Harold. E. Fleming, Chairman,, Herman E. Ratchford, Chandrakant V.
Shanbhag, and David G. White and met four times in 2005. Each member of the
Audit Committee is independent as defined in The Nasdaq Stock Market, Inc.
Marketplace Rules, as modified or supplemented. The Audit Committee operates
under a written charter adopted by the Board of Directors.

Compensation Committee

The Compensation Committee reviews the compensation policies of the
Company and recommends to the Board the compensation levels and compensation
programs for the executive officers of the Company. Members of the Compensation
Committee are Messrs. White (Chairman), Habisreutinger, Shanbhag, and Ratchford.
The Compensation Committee met one time during 2005.

Shareholder Communications with the Board of Directors

Any shareholder who wishes to send communications to the Board of
Directors should mail them addressed to the intended recipient by name or
position in care of: Corporate Secretary, First South Bancorp, Inc., 1450 John
B. White, Sr. Boulevard, Spartanburg, South Carolina 29306. Upon receipt of any
such communications, the Corporate Secretary will determine the identity of the
intended recipient and whether the communication is an appropriate shareholder
communication. The Corporate Secretary will send all appropriate shareholder
communications to the intended recipient. An "appropriate shareholder
communication" is a communication from a person claiming to be a shareholder in
the communication the subject of which relates solely to the sender's interest
as a shareholder and not to any other personal or business interest.

In the case of communications addressed to the Board of Directors, the
Corporate Secretary will send appropriate shareholder communications to the
Chairman of the Board. In the case of communications addressed to the
independent or outside directors, the Corporate Secretary will send appropriate
shareholder communications to the Chairman of the Audit Committee. In the case
of communications addressed to committees of the board, the Corporate Secretary
will send appropriate shareholder communications to the Chairman of such
committee.

MANAGEMENT COMPENSATION

Executive Officer Compensation

The following table sets forth the remuneration paid during the years
ended December 31, 2005, 2004 and 2003 to the Chief Executive Officer and to
each other executive officer of the Company whose total salary and bonus
compensation in 2005 exceeded $100,000.

SUMMARY COMPENSATION TABLE

Number of
Securities
Annual Compensation(1) Underlying
---------------------- Options All Other
Name and Principal Position Year Salary Bonus Awarded(2) Compensation(3)
- --------------------------- ---- ------ ----- ---------- ---------------

Barry L. Slider 2005 214,350 60,900 2,545 11,051
President and Chief 2004 178,100 59,640 2,486 10,991
Executive Officer 2003 174,500 50,400 2,705 10,210

V. Lewis Shuler 2005 123,600 28,800 993 7,525
Executive Vice President 2004 121,250 28,200 1,152 7,410
2003 121,127 26,025 1,253 6,759

- ---------------------
(1) Perquisites and personal benefits did not exceed the lesser of $50,000 or
10% of salary plus bonus payments.
(2) Restated to reflect effect of 2-for-3 stock split on March 19, 2004.
(3) Contributions by the Company to the Bank's 401(k) Plan and life insurance
premiums.

Retirement Benefits

The Company has entered into Salary Continuation Agreements with each
of Barry L. Slider, the Chief Executive Officer, and V. Lewis Shuler, the
Executive Vice President and Secretary. The agreements provide for payments of
benefits to each of Messrs. Slider and Shuler commencing at their retirements at
age 65 or earlier in the event of death or disability. The agreement with Mr.

Slider provides for payment of an annual benefit of $45,230 increased by 2% each
year between 1999 and Mr. Slider's retirement date. The benefit is payable in
monthly installments beginning in the month after Mr. Slider's retirement and
continuing for 215 additional months.

The agreement with Mr. Shuler provides for payment of an annual benefit
of $20,484 increased by 2% each year between 1999 and Mr. Shuler's retirement
date. The benefit is payable in monthly installments beginning in the month
after Mr. Shuler's retirement and continuing for 215 additional months.

In the event either employee's employment with the Company is
terminated prior to his retirement for any reason other than good cause, death
or disability, each agreement provides that a retirement benefit will be paid
beginning at normal retirement age based on the amount stated above increased by
2% per year for the actual years such employee worked after 1999.

In the event either employee's employment with the Company is
terminated prior to the employee's retirement age due to disability, the
employee will receive an annual benefit of between $1,118 and $64,600, in the
case of Mr. Slider or between $1,657 and $24,000, in the case of Mr. Shuler,
based on the length of the employee's service from 1999 to the date of
termination of employment. Disability benefits will be paid monthly for 216
months.

In the event that the employee dies while in the employ of the Company,
his agreement provides that the employee's beneficiary shall receive an amount
between $11,030 and $637,097, in the case of Mr. Slider, and between $16,338 and
$236,697, in the case of Mr. Shuler.

These benefits were indirectly funded in 1999 through the purchase of
universal life insurance policies on the lives of Messrs. Slider and Shuler
which are owned by the Company and reflected in the Company's balance sheet as
other assets. Although the Company plans to use these policies to fund its
obligations under the agreements, its obligations are independent of the
policies.

1996 and 2005 Stock Option Plans

On April 17, 1996, the Board of Directors of First South Bank (the
"Bank") adopted the 1996 Stock Option Plan, which reserves 112,500 shares of
Common Stock (as adjusted to reflect 2-for-3 stock split on March 19, 2004) for
issuance pursuant to the exercise of options which may be granted pursuant to
the 1996 Stock Option Plan. The 1996 Stock Option Plan was approved by the
shareholders of the Bank at the 1997 Annual Meeting of Shareholders. Upon
acquisition of the Bank by the Company in 1999, the 1996 Stock Option Plan and
the outstanding options became the Plan and Options of the Company. Options
under the 1996 Stock Option Plan may be either "incentive stock options" within
the meaning of the Internal Revenue Code, or nonqualified stock options and may
be granted to persons who are employees of the Bank or any subsidiary (including
officers and directors who are employees) at the time of grant or, in the case
of nonqualified options, to persons who are not employees, such as directors.
Incentive stock options must have an exercise price not less than the fair
market value of the Common Stock at the date of grant, as determined by a
committee of the Board of Directors consisting of at least three non-employee
directors (the "Committee"). Other options shall have the exercise price set by
the Committee. The Committee may set other terms for the exercise of the options
but may not grant more than $100,000 of incentive stock options (based on the
fair market value of the optioned shares on the date of the grant of the option)
which first become exercisable in any calendar year. Payment for optioned shares
may be in cash, Common Stock or a combination of the two. The Committee also
selects the employees to receive grants under the Stock Option Plan and
determines the number of shares covered by options granted under the Stock
Option Plan. No options may be exercised after ten years from the date of grant
and options may not be transferred except by will or the laws of descent and
distribution. Incentive stock options may be exercised only while the optionee
is an employee of the Bank, within three months after the date of termination of
employment, within twelve months of disability, or within two years of death.
The terms and conditions of other options relating to termination of employment,
death or disability will be determined by the Committee. The 1996 Stock Option
Plan will terminate on April 16, 2006, and no options will be granted thereunder
after that date.

On March 16, 2005, the Board of Directors of the Company adopted the
2005 Stock Option Plan, which reserves 350,000 shares of Common Stock for
issuance pursuant to the exercise of options which may be granted pursuant to
the 2005 Stock Option Plan. The 2005 Stock Option Plan was approved by the
shareholders of the Company at the 2005 Annual Meeting of Shareholders. The Plan
is administered by the Board of Directors or a Committee appointed by the Board

of Directors. Options awarded under the Plan are "incentive stock options"
within the meaning of the Internal Revenue Code. Options may be granted pursuant
to the 2005 Stock Option Plan to persons who are employees of the Company or any
subsidiary (including directors who are employees) at the time of grant. The
Board of Directors or the Committee selects the persons to receive grants under
the 2005 Stock Option Plan and determines the number of shares covered by
options granted under the 2005 Stock Option Plan. Options granted under the 2005
Stock Option Plan are subject to the same limitations described above for
incentive stock options. All stock options will have such exercise prices as may
be determined by the Board of Directors or the Committee at the time of grant,
but such prices may not be less than the fair market value of the Common Stock
at the date of grant. The Board of Directors or the Committee may set other
terms for the exercise of the options but may not grant to any one holder more
than $100,000 of incentive stock options (based on the fair market value of the
optioned shares on the date of the grant of the option) which first become
exercisable in any calendar year. No options may be exercised after ten years
from the date of grant, and options may not be transferred except by will or the
laws of descent and distribution. Incentive stock options may be exercised only
while the optionee is an employee of the Company, within three months after the
date of termination of employment, or within twelve months of death or
disability, but only to the extent the option has not expired. The number of
shares reserved for issuance under the 2005 Stock Option Plan, the number of
shares covered by outstanding options and the exercise price of options will be
adjusted in the event of changes in the number of outstanding shares of common
stock effected without receipt of consideration by the Company. All outstanding
options will become immediately exercisable in the event of a change of control
of the Company (as defined in the 2005 Stock Option Plan). The Board of
Directors may alter, suspend or discontinue the 2005 Stock Option Plan, but may
not increase (except as discussed above) the maximum number of shares reserved
for issuance under the 2005 Stock Option Plan, materially increase benefits to
participants under the 2005 Stock Option Plan, or materially modify the
eligibility requirements under the 2005 Stock Option Plan without shareholder
approval or ratification. Unless earlier terminated, the 2005 Stock Option Plan
will terminate on March 18, 2015, and no options will be granted thereunder
after that date.

Option Grants In Last Fiscal Year

The following table presents information about options granted to the
persons named in the Summary Compensation Table in 2005.

Individual Grants
-----------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted(1) in 2005 (per share) Date
---- ---------- ------- ----------- ----

Barry L. Slider .................. 2,545 11.7% $33.00 12/31/2015
V. Lewis Shuler .................. 993 4.6% $33.00 12/31/2015

(1) Such options became fully exercisable on December 31, 2005.

Option Exercises and Year End Options Outstanding and Values

The following table presents information about options held by the
persons named in the Summary Compensation Table at December 31, 2005.

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Value Options 12/31/05(1) Options 12/31/05 (2)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------

Barry L. Slider 10,000 $256,700 46,512 0 $782,158 0
V. Lewis Shuler 0 0 28,453 0 $537,843 0

- ---------------
(1) Adjusted to reflect the effect of a 3-for-2 stock split on March 19, 2004.
(2) Based on exercise prices ranging from $7.33 to $35.00 per share and
assuming that the fair market value of the Bank's common stock on December
31, 2005 was $33.00 per share, as restated to reflect the effect of the
stock split.

Compensation of Directors

Directors receive compensation of $750 for each monthly meeting of the
Board of Directors attended. The Directors also received $500 for each committee
meeting attended. Directors received, in the aggregate, $106,050 in 2005.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Extensions of Credit. The Bank, in the ordinary course of its business,
makes loans to and has other transactions with directors, officers, principal
shareholders, and their associates. Loans are made on substantially the same
terms, including rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features. The Bank
expects to continue to enter into transactions in the ordinary course of
business on similar terms with directors, officers, principal stockholders, and
their associates. The aggregate dollar amount of such loans outstanding at
December 31, 2005 was $3,118,024. During 2005, $1,391,840 in new loans were made
and repayments totaled $2,319,133.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

As required by Section 16(a) of the Securities Exchange Act of 1934,
the Company's directors, its executive officers and certain individuals are
required to report periodically their ownership of the Company's Common Stock
and any changes in ownership to the Securities and Exchange Commission. Based on
a review of Section 16(a) reports available to the Company and any
representations made to the Company, it appears that all such reports for these
persons were filed in a timely fashion during 2005, with the exception of the
following: each of Messrs. Habisreutinger, Shanbhag, Slider and Shuler filed one
Form 4 late.

INDEPENDENT PUBLIC ACCOUNTANTS

Ratification of Accountants

The Board has selected Cherry, Bekaert & Holland, L.L.P., Certified
Public Accountants with offices in Spartanburg, South Carolina, to serve as the
Company's independent auditors for 2006. It is expected that representatives
from this firm will be present and available to answer appropriate questions at
the Annual Meeting, and will have the opportunity to make a statement if they
desire to do so.

The Board recommends that you vote FOR the ratification of the
selection of Cherry, Bekaert & Holland, L.L.P. as the Company's independent
auditors.

Fees Paid to Independent Auditors

Set forth below is information about fees billed by the Company's
independent auditors for audit services rendered in connection with the
consolidated financial statements and reports for the years ended December 31,
2005 and 2004, and for other services rendered during such years, on behalf of
the Company and the Bank, as well as all out-of-pocket expenses incurred in
connection with these services, which have been billed to the Company.

Audit Fees

Audit fees include fees billed for professional services rendered for
the audit of the Company's consolidated financial statements and review of the
interim condensed consolidated financial statements included in quarterly
reports, and services that are normally provided by the Company's independent
auditor in connection with statutory and regulatory filings or engagements, and
attest services, except those not required by statute or regulation. For the
years ended December 31, 2004 and 2005, respectively, Cherry, Bekaert & Holland,
L.L.P. billed the Company an aggregate of $33,100 and $41,100 for audit fees.

Audit-Related Fees

Audit-related fees include fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees". These services include employee benefit plan audits, attest
services that are not required by statute or regulation, and consultations
concerning financial accounting and reporting standards. For the years ended
December 31, 2004 and 2005, respectively, Cherry, Bekaert & Holland, L.L.P.
billed the Company an aggregate of $625 and $345 for audit-related fees.

Tax Fees

Tax fees include fees for tax compliance/preparation and other tax
services. Tax compliance/preparation include fees billed for professional
services related to federal, state and international tax compliance. Fees for
other tax services include any fees billed for other miscellaneous tax
consulting and planning and for individual income tax preparation. For the years
ended December 31, 2004 and 2005, respectively, Cherry, Bekaert & Holland,
L.L.P. billed the Company an aggregate of $6,250 and $925 for tax fees.

All Other Fees

There were no services other than those reported above, provided by
Cherry, Bekaert & Holland, L.L.P.

In making its decision to appoint Cherry, Bekaert & Holland, L.L.P. as
the Company's independent auditors for the fiscal year ending December 31, 2006,
the Audit Committee considered whether services other than audit and
audit-related services provided by that firm are compatible with maintaining the
independence of Cherry, Bekaert & Holland, L.L.P.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors

The Audit Committee pre-approves all audit and permitted non-audit
services (including the fees and terms thereof) provided by the independent
auditors, subject to limited exceptions for non-audit services described in
Section 10A of the Securities Exchange Act of 1934, which are approved by the
Audit Committee prior to completion of the audit. All audit and permitted
non-audit services were approved by the Audit Committee in 2005.

Audit Committee Report

The Audit Committee of the Board of Directors has reviewed and
discussed with management the Company's audited financial statements for the
year ended December 31, 2005. The Audit Committee has discussed with the
Company's independent auditors, Cherry, Bekaert, & Holland, L.L.P., the matters
required to be discussed by SAS 61, as modified or supplemented. The Audit
Committee has also received the written disclosures and the letter from Cherry,
Bekaert, & Holland, L.L.P., required by Independence Standards Board Standard
No. 1, as modified or supplemented, and has discussed with Cherry, Bekaert &
Holland, L.L.P., their independence. Based on the review and discussion referred
to above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2005 for filing with the Securities and
Exchange Commission.

Harold E. Fleming, Chairman Herman E. Ratchford
Chandrakant V. Shanbhag David G. White

The Audit Committee Report shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934 except to the extent the Company specifically incorporates
it by reference therein.

OTHER MATTERS

The Board of Directors knows of no other business to be presented at
the meeting of stockholders. If matters other than those described herein should
properly come before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote at such meeting in accordance with their best
judgment on such matters. If a shareholder specifies a different choice on the
Proxy, his or her shares will be voted in accordance with the specifications so
made.

Unless contrary instructions are indicated on the Proxy, all shares of
stock represented by valid proxies received pursuant to this solicitation, and
not revoked before they are voted, will be voted FOR the election of any or all
of the nominees for directors named herein and FOR ratification of Cherry,
Bekaert & Holland, L.L.P. as the Company's independent auditors.

AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB

Shareholders may obtain copies of the Company's annual report on Form
10-KSB required to be filed with the Securities and Exchange Commission for the
year ended December 31, 2005, free of charge by requesting such form in writing
from Barry L. Slider, President, First South Bank, Post Office Box 1928,
Spartanburg, South Carolina 29304. Copies may also be obtained from the SEC's
website at www.sec.gov.

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11

PROXY

FIRST SOUTH BANCORP, INC.

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 17, 2006

Barry L. Slider or V. Lewis Shuler, or either of them, with full power
of substitution, are hereby appointed as agent(s) of the undersigned to vote as
proxies for the undersigned at the Annual Meeting of Shareholders to be held on
May 17, 2006, and at any adjournment thereof, as follows:

1. ELECTION OF FOR all nominees listed WITHHOLD AUTHORITY
DIRECTORS TO below (except any I have to vote for all
HOLD OFFICE written below) [ ] nominees listed
FOR THE TERM below [ ]
SHOWN.

Three-Year Term: Roger A. F. Habisreutinger and Chandrakant V. Shanbhag

INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL(S) WRITE THE
NOMINEE'S(S') NAME(S) ON THE LINE BELOW.

________________________________________________________________________________

2. To ratify the selection of Cherry, Bekaert & Holland, L.L.P., as the
Company's independent auditors.

3. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be
brought before the meeting.)

THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.

Please sign exactly as name appears on this form. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title. If more
than one trustee, all should sign. All joint owners must sign.

Dated: ________________, 2006 ________________________________________

________________________________________