Registration Statement No. 333-

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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ISLANDS BANCORP
(Name of Small Business Issuer in Its Charter)
South Carolina 6021 57-1082388
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation or Classification Code Number)
Organization) Number)

500 Carteret Street, Suite A
Beaufort, South Carolina 29902
(843) 470-9962
(Address and Telephone Number of Principal Executive Offices
and Intended Principal Place of Business)

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William B. Gossett
President and Chief Executive Officer, Islands Bancorp
500 Carteret Street, Suite A
Beaufort, South Carolina 29902
(843) 470-9962
(Name, Address and Telephone Number of Agent For Service)
Copy to:
William S. McMaster
Nexsen Pruet Jacobs & Pollard, LLP
1141 Main Street
P.O. Drawer 2426
Columbia, SC 29201
(803) 253-8217
(803) 253-8277 (Fax)

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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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CALCULATION OF REGISTRATION FEE

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Title of Each Class Proposed Maximum Proposed Maximum
of Securities to Amount to be Offering Price Aggregate Amount of
be Registered Registered (1) Per Unit Offering Price Registration Fee
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Common Stock (1)....... 1,210,115 $10.00 $ 12,101,150 $3,365.00
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Warrants (2)........... 210,115 $ 0.00 $ 0.00 $ 0.00

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(1) Includes 210,115 shares issuable upon exercise of common stock purchase
warrants reserved for issuance to directors of the registrant.
(2) Represents common stock purchase warrants reserved for issuance to
directors of the registrant.

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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell the securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
This is a preliminary prospectus that is not yet complete. December 13, 1999

ISLANDS BANCORP

A Holding Company for

ISLANDS COMMUNITY BANK, N.A. (In Organization)

Common Stock
Purchase Price $10.00 Per Share

630,000 shares (Minimum) 1,000,000 shares (Maximum)

Islands Bancorp is offering shares of its common stock to organize Islands
Community Bank, N.A., a proposed national bank to be headquartered in Beaufort,
South Carolina. We will be the sole shareholder of Islands Community Bank after
it is organized. We expect the bank to open in the second quarter of 2000.
Islands Community Bank is expected to be a community-oriented financial
institution focused on providing a full range of personalized commercial and
consumer banking services and products designed to meet the needs of
individuals and businesses in our community. This is our initial public
offering, and no public market currently exists for our shares.

We will deposit all subscription funds with an independent escrow agent who
will hold the money until we have received subscriptions for at least 630,000
shares and have received preliminary approval from the bank regulatory agencies
to acquire the stock of Islands Community Bank. We have scheduled the offering
to end on April 30, 2000, but we may extend it to December 31, 2000. If we do
not receive subscriptions for 630,000 shares by the end of the offering period,
we will return all subscription funds to subscribers, without interest. The
minimum subscription amount is 100 shares per investor. Our directors will
receive warrants to purchase one share of common stock for $10.00 per share for
every share they purchase in the offering.

Investing in our common stock involves a high degree of risk. It is not a
deposit or an account, and it is not insured by the FDIC or any other
government agency. We urge you to read carefully the "Risk Factors" section
beginning on page 6, along with the rest of this prospectus, before you make
your investment decision. You should not invest in this offering unless you can
afford to lose your entire investment.

We will be offering the shares through the efforts of our officers and
directors. We may also engage the services of a sales agent to assist in the
offering. If we utilize a sales agent, we anticipate that the sales agent will
be paid no more than an eight percent commission for each share sold. In our
computation of the commissions in the table below, we have assumed that 200,000
of the shares will be sold through a sales agent. See "The Offering."

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Selling Agent Proceeds to
Price to Public Commissions Islands Bancorp
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Per Share ........................ $10.00 $0.80 $9.20
Total Minimum..................... $6,300,000 $160,000 $6,140,000
Total Maximum..................... $10,000,000 $160,000 $9,840,000

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
December , 1999

Table of Contents

Page
----

Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Offering............................................................. 11
Use of Proceeds.......................................................... 14
Capitalization........................................................... 15
Dividend Policy.......................................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Proposed Business of the Bancorp and the Bank............................ 18
Supervision and Regulation............................................... 24
Management............................................................... 28
Security Ownership of Management......................................... 33
Transactions with Management............................................. 34
Description of Securities................................................ 36
Legal Matters............................................................ 39
Experts.................................................................. 39
Additional Information................................................... 40
Index to Financial Statements............................................ F-1
Subscription Offer Forms

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You should rely only on the information contained in this prospectus. We
have not authorized anyone to give any information that is different. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted. The information in this prospectus is complete and accurate as of
the date on the cover, but the information may change in the future.

Until , all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
It does not contain all of the information you should consider before investing
in our common stock. To fully understand this offering, you should read the
entire prospectus carefully, including the risk factors and the financial
statements.

Islands Bancorp and Islands Community Bank

Islands Bancorp is a South Carolina corporation that was incorporated on
July 23, 1999 to organize and serve as the holding company for Islands
Community Bank, N.A., a proposed national bank. The bank will operate as a
community bank emphasizing prompt, personalized customer service to the
individuals and businesses located in Beaufort County, South Carolina,
including the City of Beaufort, and its neighboring islands and communities.

We have filed an application for a charter to be granted to the bank by the
Office of the Comptroller of the Currency and an application for insurance of
its deposits to be obtained from the FDIC. We intend to apply to the Board of
Governors of the Federal Reserve System for authority to become a bank holding
company once the bank's charter is granted and insurance is obtained.

We hope to receive all necessary regulatory approvals by the end of March,
2000. At that point, if at least the minimum number of shares are sold in this
offering, we anticipate beginning operations out of a temporary facility to be
located at the intersection of Sea Island Parkway (federal highway 21) and
state highway 802 on Lady's Island, South Carolina. This site is approximately
two miles from downtown Beaufort and is currently under contract by the
Bancorp. We expect construction of our permanent facility at this site to be
completed in the second quarter of 2001.

Our Market Area

Our primary service area consists of a large portion of Beaufort County. It
includes the City of Beaufort and the adjacent communities of Port Royal and
Burton. It also includes the islands that are northeast of the Broad River and
south of the Coosaw River. Some of the major islands are Lady's Island, Fripp
Island, Parris Island, St. Helena Island, Hunting Island, Port Royal Island,
Dataw Island and Harbor Island. Located in the southernmost corner of coastal
South Carolina, Beaufort County is one of the fastest growing counties in South
Carolina, in terms of both population and commercial growth. The City of
Beaufort serves as the commercial and retail center for communities in the
southern corner of South Carolina and is considered a key economic focal point
of the Beaufort County area. According to CACI Marketing Systems, the 1998
population of Beaufort County was approximately 109,200 and is expected to grow
to approximately 123,700 in 2003. We anticipate that the deposit base in the
Beaufort County area will grow as its population and economic activity continue
to increase. As of June 30, 1998, there were eight commercial banks represented
in the Beaufort market with aggregate deposits of approximately $402 million.

Our Market Opportunity

We believe an attractive opportunity exists in our primary service area for
a locally headquartered community bank that focuses on personalized service to
individuals and businesses. The banking industry in our primary service area
has experienced significant consolidation in recent years principally as the
result of the liberalization of interstate banking and branching laws. Many of
our area's former community banks have been acquired by large regional
financial institutions headquartered outside our market area. As a result, none
of the eight commercial banks operating in our primary service area as of
November 30, 1999 were headquartered in Beaufort or Beaufort County. This
consolidation in the banking industry has also resulted in the dissolution of
local boards of directors and the dislocation of management and customer
service personnel with extensive banking experience and strong ties to our
local community. Accordingly, we believe that many customer relationships in
the Beaufort market have been disrupted as the bigger financial institutions
have increasingly

focused their attention on larger corporate customers, standardized loan and
deposit products and other services. Generally, these products and services are
offered by less personalized delivery systems. We believe this has created a
demand for the delivery of higher quality, personalized banking services to
individuals and small to medium-sized businesses. For these reasons, we believe
we have a unique opportunity to attract and retain experienced and talented
individuals who are familiar with the banking needs of the local community. As
a locally owned community bank headquartered in Beaufort, we will offer
convenient service, local decision-making and competitive loans. Additionally,
by focusing our operations on the community we serve, we believe that we will
be able to respond to changes in the Beaufort market more quickly than large,
centralized institutions.

Our Organizers

Beaufort Bancorp was organized by ten individuals residing or doing business
in Beaufort County. These organizers have advanced approximately $100,000 and
have guaranteed a $90,000 line of credit that the Bancorp obtained from a third
party bank in order to pay organizational and offering expenses. Our organizers
all currently serve as directors of the Bancorp and have also agreed to serve
as directors of the bank. Our directors will not be compensated for their
services until the bank becomes cumulatively profitable. For the names of and
biographical information about our organizers, see "Management--Directors and
Executive Officers of the Bancorp and the Bank."

The board of directors of the Bancorp consists of the ten organizers and our
President and Chief Executive Officer, all of whom are also expected to be the
directors of the bank. All of our directors have significant business interests
in Beaufort County and are active participants in the Beaufort community. The
directors intend to utilize their diverse backgrounds and their extensive local
business relationships to attract customers from all segments of our community.
In connection with the initial organization and capitalization of the Bancorp,
each of these directors purchased 50 shares of common stock of the Bancorp at
$10.00 per share. In addition to these shares, the directors and executive
officers have indicated their intent to purchase an aggregate of approximately
135,000 more shares of common stock in the offering. In that event, the
directors and executive officers will own an amount of shares equal to
approximately 21 percent of the shares of stock to be outstanding after this
offering, assuming the completion of the minimum offering of 630,000 shares.
See "Security Ownership of Management." We believe that our directors'
ownership interests in the Bancorp should encourage their active participation
in growing our business.

The Offering

Common stock offered................ Minimum: 630,000 shares
Maximum: 1,000,000 shares
Common stock outstanding
prior to this offering............. 550 shares
Common stock to be outstanding
after this offering................ Minimum: 630,550 shares
Maximum:1,000,550 shares
Price to public..................... $10.00 per share
Net proceeds........................ $6,040,000 if the minimum number of shares of common
stock are sold and $9,740,000 if the maximum number
of shares are sold. These amounts are net of the
payment of an eight percent sales agent commission
on up to 200,000 shares sold and the payment of
offering and organizational expenses estimated at
$100,000.

Use of proceeds..................... We will use the proceeds of the offering as follows:
.To pay the offering expenses;
.To reimburse the organizational expenses incurred
by
the organizers;
.To repay the line of credit guaranteed by the
organizers;
.To capitalize the bank; and
.To add to the working capital of the Bancorp.
If the ultimate net proceeds of the offering are
greater than $7 million, then we may invest all or a
portion of the excess in the capital of the bank.
Any balance will be retained as working capital of
the Bancorp.
The bank will use the funds it receives from the
Bancorp as follows:
.To pay expenses;
.To purchase the site for its initial offices;
.To build and furnish its offices; and
.To provide working capital to operate the bank.
Offering conditions................. We must satisfy the following conditions to complete
the offering:
.At least $6,300,000 must be deposited in an escrow
account with an independent escrow agent;
.The Federal Reserve Board must approve our
application to become a bank holding company;
.We must obtain preliminary approval from the Office
of the Comptroller of the Currency to charter the
bank;
.The Federal Deposit Insurance Corporation must
approve the bank's application for deposit
insurance; and
.We must not have cancelled this offering before
funds are withdrawn from the subscription escrow
account.
Escrow arrangements................. Until we have satisfied all of the offering
conditions, we will place all funds in an escrow
account. If we have not satisfied the offering
conditions by December 31, 2000, we will return to
the subscribers all funds placed in the escrow
account, without interest. Once we have satisfied
all of the offering conditions, the escrow agent
will release all funds to the Bancorp. Any funds
received after that time will not be placed in
escrow, but will be immediately available for use by
the Bancorp. At that point, all subscribers may lose
a portion of their investment if either the Bancorp
or the bank does not receive final regulatory
approval.

Plan of Distribution

Our officers and directors are expected to handle the sale of substantially
all of the shares of common stock in this offering. They will not be paid any
fees or commissions for their efforts. In addition, we may engage a registered
broker-dealer as our sales agent to use its best efforts to assist us in the
sale of shares above the minimum offering of 630,000 shares. If we utilize a
sales agent, we anticipate that the sales agent will be paid not more than an
eight percent commission on each share sold. See "The Offering--Plan of
Distribution."

RISK FACTORS

An investment in our common stock involves a significant degree of risk. You
should not invest in our common stock unless you can afford to lose your entire
investment. You should consider carefully the following risk factors and other
information included in this prospectus before you decide to purchase any
shares of our common stock. You should also carefully read the cautionary
statement following the "Risk Factors" regarding the use of forward-looking
statements.

We have no operating history upon which to predict whether we will ever be
successful.

Neither the Bancorp nor the bank has any operating history on which to base
an assessment of the risk that they may be unsuccessful. The Bancorp was only
recently formed, and the bank is not expected to receive final approval from
regulatory authorities to begin operations until after this offering is
completed. Consequently, you will not have access to historical information
that would be helpful in deciding whether to invest in the Bancorp. You should
consider the risk of an investment in the Bancorp in light of the expenses,
complications and delays frequently encountered in connection with the
development of a new bank.

We will incur substantial start-up expenses, and there is a risk that we may
never become profitable.

We will be the sole shareholder of the bank, and it will be our only
operating asset. This means that our success, and any return on your investment
in our common stock, will depend entirely on the operations of the bank. If the
bank is ultimately unsuccessful, you may not recover all or any part of your
investment in the common stock. Typically, new banks are not profitable in the
first year of operation and sometimes they are not profitable for several
years. In order for us to become profitable, the bank will need to attract a
large number of customers to deposit and borrow money. Additionally, many of
the bank's loans initially will be new loans to new borrowers. Accordingly, it
will take several years to determine the borrowers' payment histories. As a
result, management will not be able to evaluate reliably the quality of the
loan portfolio until that time.

Delay in regulatory approvals could increase our pre-opening expenses and
postpone any revenue realization.

Although we expect to receive all regulatory approvals to begin operations
in the second quarter of 2000, we can give no assurance as to when, if ever,
these events will occur. Any delay in beginning our operations will increase
our pre-opening expenses and postpone realization of potential revenue by the
bank. A delay will cause our accumulated deficit to increase as a result of our
lack of revenues and our continuing operating expenses, such as salaries and
other administrative expenses.

If we fail to receive necessary regulatory approvals, you could lose a portion
of your investment.

If the conditions for releasing subscription funds from the escrow account
are satisfied and we release the funds, but fail to receive final regulatory
approval, we would seek to dissolve and liquidate the Bancorp. Upon
liquidation, we would return to subscribers all of their funds, without
interest, less all expenses incurred by the Bancorp. Consequently, subscribers
whose funds are originally placed in escrow, but became available to the
Bancorp, may lose a portion of their investment. In addition, funds available
for return to subscribers could be reduced by amounts necessary to satisfy
claims of creditors. See "The Offering--Failure of Bank to Begin Operations."

We will be competing with many other larger financial institutions which may
have an adverse effect on our success.

As a new bank in an established market, we expect to encounter strong
competition from existing banks and other types of financial institutions
operating in our market area and elsewhere. Our relatively small size may
affect our ability to compete effectively with these institutions in attracting
deposits and offering other

financial services. We will compete with numerous other lenders and deposit-
takers including other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies and brokerage and
investment banking firms. These institutions may have competitive advantages
over the bank because they have greater capitalization and other resources, and
they can offer potential depositors higher lending limits and other services
which the bank may not be able to offer. Although we will compete primarily
with other financial institutions in our market area, we may also compete with
Internet banks and financial institutions located throughout the United States
for products such as large certificates of deposit. We are aware of a proposed
new community bank that plans to commence operations in our primary service
area in the first half of 2000. If that occurs, we would also face competition
with that community bank.

All of our competitors actively solicit business from residents of Beaufort
County. Some of these institutions are not subject to the same degree of
regulation as we will be, and some have greater resources than will be
available to us. Because of this competition, we may have to pay higher rates
of interest to attract deposits. We can offer you no assurance that the bank
will be successful in attracting the deposits it will need to sustain its
growth.

Because of the Glass-Steagal Act, the commercial banking business has
enjoyed legal barriers to entry by non-banking enterprises. It is possible that
the United States Congress will repeal the Glass-Steagal Act in the near
future. If this happens, the bank may face even greater competition in its
primarily service area from large, well-capitalized enterprises. At the same
time, regulations may prevent the Bancorp and the bank from diversifying into
non-banking businesses. See "Supervision and Regulation."

Our initial lending limit will be lower than many of our competitors, which may
discourage potential customers and limit our growth.

At least initially, the bank will have less capital than many of its
competitors. This means that its legally mandated lending limits would be lower
than those of these competitors. These lower lending limits may discourage
potential borrowers who have lending needs that exceed our limits, which may
restrict our ability to grow. Until the bank is profitable, we will lose money,
which will decrease our capital and therefore our lending limit. We may try to
serve the needs of our borrowers by selling loan participations to other
institutions, but this strategy may not succeed.

Departures of our key personnel or directors will impair our operations.

William B. Gossett will be our President and Chief Executive Officer. He
will be instrumental in our organization and will be the key management
official in charge of our daily business operations. Although we have entered
into an employment agreement with Mr. Gossett, we cannot be assured of his
continued service, and he would be difficult to replace. Additionally, our
directors' community involvement, diverse backgrounds and extensive local
business relationships are important to our success. Our growth could be
adversely affected if the composition of our board of directors changes
materially. See "Management."

Changes in interest rates may decrease our net interest income.

The bank's operations will depend substantially on its net interest income,
which is the difference between the interest income earned on its loans and
other assets and the interest expense paid on its deposits and other
borrowings. This difference is largely affected by changes in market interest
rates and other economic factors beyond the control of the bank. Any increase
or decrease in interest rates could have a material adverse effect on our net
interest income, capital, and liquidity and may decrease or eliminate our
profitability.

Our success will depend significantly upon general economic conditions in
Beaufort County.

A prolonged economic dislocation or recession affecting Beaufort County
could cause the bank's non-performing assets to increase, causing operating
losses, impaired liquidity and the erosion of capital. Such an economic
dislocation or recession could result from a variety of causes, including
natural disasters such as hurricanes or tornadoes, or a prolonged downturn in
various industries including the real estate development, resort and retirement
industries, upon which the economy of Beaufort County is highly dependent.
Moreover, as many of our shareholders are expected to be residents of the
Beaufort County area, a prolonged downturn in the economy of Beaufort County
could result in sales of large amounts of our common stock.

Because the offering price cannot be supported by value of assets or earnings,
you may be overpaying for the shares.

We set the offering price at $10.00 per share on the basis of the start-up
capital needs of the bank and the offering prices of other newly-organized bank
holding companies. This price bears no relationship to assets, book value,
earnings or other established criteria of value. As a result, you may be
overpaying for the shares.

You may have difficulty in selling your shares because of the absence of an
active public market.

There is no established market for the common stock. A public market having
depth and liquidity depends on having enough buyers and sellers at any given
time. Because the size of this offering is relatively small, it is unlikely
that there will be enough shareholders or outstanding shares to support an
active trading market. Consequently, you should only invest in the common stock
if you have a long-term investment intent. If an active market does not
develop, you may be required to locate a buyer on your own and may not be able
to do so.

The shares of common stock are not insured bank deposits.

Although deposits at the bank will be insured by the FDIC to the maximum
amount permitted by law, shares of the Bancorp common stock are not bank or
deposit accounts. Consequently, our common stock is not insured by the FDIC or
any other governmental agency.

We intend to grant warrants and stock options to the directors and to some of
our employees which, if exercised, would reduce your percentage ownership in
the Bancorp.

If the offering is unsuccessful, the organizers will lose the funds of
approximately $100,000 which they have advanced toward organizational and
offering expenses and the $5,500 they paid to purchase shares of the Bancorp.
They will also be obligated to repay the line of credit obtained to pay a
portion of such expenses which they have personally guaranteed. In recognition
of these financial risks, and their willingness to serve as directors without
pay until the bank is cumulatively profitable, we intend to grant to each of
the directors who purchases shares in this offering one warrant to purchase one
additional share of common stock for each share of common stock the director
purchases in this offering, up to an aggregate maximum for all directors of
210,115 shares. On the basis of the amount of shares our directors have
indicated they intend to purchase in this offering, we intend to issue to the
directors warrants to purchase up to an aggregate of 135,000 shares of common
stock. See "Management--Stock Warrants of Directors" and "Security Ownership of
Management." In addition, we intend to establish an incentive stock option plan
which will allow us to grant stock options to officers and other employees who
are contributing significantly to the management or operation of the business
of the Bancorp or the bank. Under this plan, we intend to reserve a number of
shares of common stock for the issuance of options equal to 15% of the shares
outstanding after this offering.

Any future exercise of the organizer's warrants or any options that may be
granted under the stock option plan would reduce your percentage ownership in
the Bancorp. For example, prior to the exercise of their warrants, the
organizers will own approximately 21.4 percent of the shares outstanding. This
assumes the sale of only the minimum number of shares in this offering and the
purchase by the organizers of the aggregate number of shares of common stock
they have indicated they intend to purchase. See "Security Ownership of
Management." If the organizers exercised all of their warrants, they would own
approximately 35.3 percent of the outstanding shares. Again, this assumes the
sale of only the minimum number of shares in this offering and the purchase by
the organizers of the aggregate number of shares of common stock they have
indicated they intend to purchase.

Anti-takeover provisions in our articles of incorporation and state corporate
laws could deter or prevent take-over attempts by a potential purchaser of our
common stock and deprive you of the opportunity to obtain a takeover premium
for your shares.

In many cases, shareholders receive a premium for their shares when a
company is purchased by another. Various provisions in our articles of
incorporation and bylaws and state corporate laws could deter and make it more
difficult for a third party to bring about a merger, sale of control, or
similar transaction without approval of our board of directors. These
provisions tend to perpetuate existing management. As a result, you may be
deprived of opportunities to sell some or all of your shares at prices that
represent a premium over market prices. These provisions, which could make it
less likely that a change in control will occur, include:

. provisions in our articles of incorporation establishing three classes of
directors with staggered terms, which means that only one-third of the
members of the board of directors is elected each year and each director
serves for a term of three years.

. provisions in our articles of incorporation authorizing the board of
directors to issue a series of preferred stock without shareholder action,
which issuance could discourage a third party from attempting to acquire, or
make it more difficult for a third party to acquire, a controlling interest
in the Bancorp.

. provisions in our bylaws relating to meetings of shareholders which limit
who may call a meeting and what matters will be voted upon.

. state law provisions that require two-thirds of the shareholders to approve
mergers and similar transactions, and amendments to the articles of
incorporation.

See "Description of Securities--Change of Control and Anti-takeover
Effects".

We do not expect to pay dividends on our common stock for at least several
years.

The Bancorp will initially have no source of income other than dividends
that it receives from the bank. Our ability to pay dividends to you will
therefore depend on the bank's ability to pay dividends to the Bancorp. The
bank intends to retain future earnings, if any, to improve the bank's capital
structure to support future growth. In addition, there are regulatory
restrictions on the amount of dividends the bank can pay. Consequently, we do
not plan to pay dividends until we recover any losses that we may have incurred
and become profitable. Additionally, our future dividend policy will depend on
our earnings, capital requirements, financial condition and other factors that
the board of directors of the Bancorp and the bank consider relevant. See
"Dividend Policy."

You may suffer dilution in your interests in common stock if we offer
additional shares of common stock in the future.

The directors of the Bancorp believe that the sale of the minimum number of
630,000 shares of common stock in this offering will provide adequate capital
to sustain the bank during its initial years of operations. See "Use of
Proceeds." There is no present intent to offer for sale additional shares of
common stock over and above the maximum number of one million shares. However,
the bank's success will depend on a number of

factors, including the factors set forth in this "Risk Factors" section of the
prospectus. Accordingly, no assurance can be given that, in the future, the
Bancorp will not have to seek additional capital by offering and selling
additional shares of common stock in order to continue to operate, satisfy
regulatory requirements or achieve successful operations. See "Supervision and
Regulation -- Capital Adequacy Requirements." If it becomes necessary to raise
additional capital to support the bank's operations, there is no assurance that
additional capital will be available to the bank, that additional capital can
be obtained on terms favorable to the bank or that the price of which
additional shares may be offered by the Bancorp in the future will not be less
than the subscription price in this offering. The effect on existing
shareholders of sales of additional shares of common stock cannot presently be
determined. However, those sales could have a dilutive effect on the interests
of subscribers who purchase common stock in this offering.

Government regulation may have an adverse impact on our operations and growth.

Bank holding companies and banks are subject to extensive state and federal
government supervision and regulation. These regulations are generally intended
to provide protections for depositors and borrowers, rather than for the
benefit of shareholders. These and other restrictions limit the manner in which
we may conduct our business and obtain financing, including our ability to
attract deposits, make loans and achieve satisfactory interest spreads. In
addition, the burden imposed by federal and state regulations may place us at a
competitive disadvantage as compared to competitors which are less regulated.
Applicable laws, regulations, interpretations and enforcement policies may be
subject to significant future changes. Our ability to achieve profitability and
grow could be adversely affected by the state and federal banking laws and
regulations. See "Supervision and Regulation."

It is possible that either our computer systems, or those of our data
processing vendor or loan customers, will fail to properly accommodate year
2000 dates.

As a financial institution, we expect to be heavily dependent upon computers
for the conduct of our business. As the year 2000 approaches, an important
business issue has emerged regarding the ability of existing software programs
and operating systems to recognize the year 2000 and other year 2000-sensitive
dates. This could result in a system failure or miscalculations causing
disruption of operations. We will not purchase our information systems or
commence our banking operations until several months after January 1, 2000.
Accordingly, we expect to be in a position to avoid much of the uncertainty
surrounding year 2000 compliance in our operating systems that would otherwise
exist if these systems were purchased and in operation prior to that date. In
any event, we intend to utilize third-party vendors to provide our primary
banking computer applications, including core processing systems. The bank will
depend on the efforts of these third party vendors to ensure that their data
processing systems accommodate year 2000 information. Although we intend to
require vendor certification regarding year 2000 readiness before we purchase
any equipment, we cannot verify independently that the equipment will, in fact,
be year 2000 compliant. In addition, the bank could be affected by year 2000
problems experienced by others over which it will have no control. These
parties include our customers, service providers, vendors, customers' vendors,
correspondent banks, government agencies, and the financial services industry
in general. We plan to include Year 2000 criteria in our loan approval process
and are developing a plan to address other year 2000 issues. Nevertheless, it
may be difficult to identify all problems, and any such problems could have a
significant adverse impact on the bank's operations, and in turn, the financial
condition and results of operations of the Bancorp.

Note Regarding Forward-looking Statements

Some of the statements contained in this prospectus discuss future
expectations or state other "forward-looking" information. Such statements can
be identified by the use of forward-looking words such as "may," "will,"
"expect," "anticipate," "estimate" or other similar words. Those statements
could be affected by known and unknown risks, uncertainties and other factors
that could cause the actual results to differ materially from those
contemplated by the statements. When considering such forward-looking
statements, you should keep in mind the preceding risk factors and other
cautionary statements in this prospectus.

THE OFFERING

We are offering a minimum of 630,000 shares and a maximum of 1,000,000
shares of common stock at a public offering price of $10.00 per share. This
offering is intended to raise gross proceeds of between $6,300,000 and
$10,000,000. The minimum purchase for any investor is 100 shares and the
maximum purchase is 4.99 percent of the aggregate shares subscribed in the
offering, although we may accept subscriptions for more or less. We must
receive your subscription for shares before midnight, Eastern Standard Time, on
April 30, 2000, unless all of the shares are sold earlier, or unless the
offering is terminated or extended. We reserve the right to terminate the
offering at any time or to extend the expiration date up to December 31, 2000.
Extension of the expiration date might cause an increase in our expenses. We do
not have to give you any prior written notice of an extension. If we extend the
offering, subscriptions we have already accepted will still be binding. We may
also terminate the offering at any time prior to the sale of the minimum number
of shares offered in this offering by providing you with written notice of such
termination. In such event, we will cause all subscription funds to be refunded
to you, without interest.

Conditions of the Offering

The offering is conditioned upon fulfillment of the following conditions on
or prior to the expiration date of the offering. The offering conditions are as
follows:

. At least $6,300,000 must be deposited with the escrow agent in the
subscription escrow account;

. We must receive approval from the Federal Reserve Board of our
application to become a bank holding company;

. We must receive preliminary approval from the Office of the Comptroller
of the Currency to charter the bank;

. The bank must receive approval of its application for deposit insurance
from the FDIC; and

. We must not have terminated this offering prior to the time funds are
withdrawn from the subscription escrow account.

Escrow of Subscription Funds

Until the offering conditions above have been met, all subscriptions and
documents tendered by investors will be placed in an escrow account with an
independent escrow agent, The Bankers Bank. Under the terms of the escrow
agreement, if all of the offering conditions are met, the Bancorp may certify
this fact to the escrow agent and the escrow agent will release all funds, with
interest earned on the funds, to the Bancorp.

The escrow agent has not investigated the desirability, advisability or
merits of a purchase of the shares of common stock in this offering. The escrow
agent will invest escrowed funds in deposit accounts or certificates of deposit
which are fully insured by the FDIC or another agency of the United States
government, short-term securities issued or fully guaranteed by the United
States government, and/or federal funds. The Bancorp will invest all funds
obtained after the release of the funds from the escrow account and before it
invests capital into the bank in a similar manner. The Bancorp will use the
offering proceeds to purchase capital stock of the bank and to repay expenses
incurred in the organization of the Bancorp and the bank. See "Use of
Proceeds."

If the offering conditions are not satisfied by the expiration date, the
escrow agent will promptly return to the subscribers their proportionate share
of the funds from the escrow account, without interest. If the offering
conditions are not satisfied, the expenses incurred by the Bancorp will be
borne by the organizers and not by the shareholders. If all of the offering
conditions are satisfied, and the Bancorp withdraws the funds from the
subscription escrow account, all profits and earnings on such account will
belong to the Bancorp. If subscriptions for 630,000 shares of common stock are
received and accepted before the expiration date, a minimum closing will be
held at the Bancorp's offices. At that minimum closing, the funds will be
released from the subscription escrow account to the Bancorp and the
subscribers will become shareholders of the Bancorp.

Failure of Bank to Begin Operations

If the conditions for releasing subscription funds from the escrow account
are met and the funds are released, but we do not receive final regulatory
approval to operate the bank, or if the bank does not open for any other
reason, our board of directors intends to propose that the shareholders approve
a plan to liquidate the Bancorp. Upon liquidation, the Bancorp would be
dissolved and the Bancorp's net assets, consisting primarily of the funds
received in this offering, less the costs and expenses we have incurred, would
be distributed to the shareholders other than the organizers, who will not
receive any distribution until all of the shareholders have received their
initial investments. If our expenses exceed the amounts by which the organizers
have contributed toward payment of such expenses, subscribers whose funds were
originally placed in escrow but became available to the Bancorp may lose a
portion of their investment.

It is also possible that the amount returned to subscribers may be further
reduced by amounts paid to satisfy claims of creditors. Once the Bancorp issues
shares of common stock following the release of funds from the escrow account,
the offering proceeds will be considered part of the Bancorp's general
corporate funds and may be subject to the claims of creditors of the Bancorp.
These claims would include claims against the Bancorp that may arise out of
actions of its officers, directors or employees. It is possible, therefore,
that one or more creditors may seek to attach the proceeds of the offering
before the Bancorp begins banking operations. If such an attachment occurred
and it became necessary to return funds to shareholders because of failure to
obtain all necessary regulatory approvals, the payment process might be delayed
further.

Plan of Distribution

We expect that the common stock will be sold by the Bancorp exclusively
through the efforts of our officers and directors. Our officers and directors
may also elect to have their selling efforts supplemented by a licensed broker-
dealer acting as a sales agent. In such event, the sales agent would be engaged
to offer the common stock on a best efforts basis to the general public.

No fees, commissions or other remuneration will be paid to any of our
officers or directors in connection with his or her solicitation activities. We
anticipate that if we engage a sales agent, we will pay the agent a commission
of no more than eight percent of the gross proceeds from the sales of shares
sold by the agent. We expect that our arrangement with any sales agent will
also include our obligation to reimburse the sales agent for some portion of
its out-of-pocket expenses in connection with the offering. We may also be
required to indemnify the sales agent against liabilities it may be exposed to
in connection with the offering, including liabilities under federal securities
laws.

None of our officers and directors who will participate in the offer and
sale of shares of common stock is affiliated with a securities broker or
dealer, and none of these persons is, or intends to become, registered or
licensed as a broker or dealer or an agent of a broker or dealer. We believe
that each of our personnel who will assist in sales activities in connection
with this offering will be exempt from federal registration as a broker or
dealer as provided in Rule 3a4-1 under the Securities Exchange Act of 1934.

Purchases of Common Stock by Our Directors

Each of our directors has purchased 50 shares of common stock of the
Bancorp. The directors have also indicated their intent to purchase up to an
aggregate of 135,000 additional shares of the common stock in this offering.
The aggregate of these shares will constitute approximately 21.5 percent of the
630,550 shares to be outstanding upon completion of the minimum offering, or
13.6 percent of the 1,000,550 shares to be outstanding should the maximum
number of shares be sold. The directors may also purchase shares in this
offering in excess of these amounts, although they have not indicated an intent
to do so. Because purchases by the directors may be substantial, you should not
assume that the sale of a specified minimum offering amount indicates the
merits of this offering. All purchases of shares by the directors will be made
at the same public offering price of $10.00 per share paid by other investors
in this offering and will count toward the achievement of the minimum offering.
The directors have represented to the Bancorp that any of these purchases will
be made for investment purposes only, and not with a view to the resale of the
shares. See "Security Ownership of Management."

In consideration for their efforts in organizing the Bancorp and the bank,
and in recognition of financial risk of loss undertaken by each of them in
connection with the funding of the organizational expenses of the Bancorp and
the bank, each of our directors who purchases shares in this offering will be
granted one warrant for each share of common stock the director purchases. The
warrants are expected to be granted to the directors for no additional
consideration upon completion of this offering. Each warrant will entitle the
director to purchase, at any time within ten years from the date the bank opens
for business, one additional share of our common stock at a price of $10.00 per
share. The warrants will provide the directors with an opportunity to profit
from any future increase in the market value of our common stock, or any
increase in the net worth of the bank, without paying for the warrant shares up
front. See "Management--Stock Warrants of Directors."

If each of our directors purchases the number of shares he or she has
indicated he or she intends to purchase in this offering, and also exercises
his or her warrants in full, the directors' aggregate ownership of the Bancorp
would be 35.3 percent based on the minimum offering and 23.8 percent based on
the maximum offering. Consequently, any future exercise of the warrants by our
directors will reduce your percentage ownership interest in the Bancorp.

How to Subscribe

The minimum subscription is 100 shares or $1,000, but we reserve the right
to accept subscriptions for less than the minimum subscription. If you desire
to purchase shares of the common stock of the Bancorp, you must:

. Complete and sign the Subscription Offer Form accompanying this prospectus;

. Make full payment for the purchase price for the shares in United States
currency by check, bank draft or money order payable to "The Bankers Bank--
Islands Bancorp Escrow Account"; and

. Deliver the executed Subscription Offer Form, in person or by mail, together
with full payment for the purchase price, to 500 Carteret Street, Suite A,
Beaufort, South Carolina 29902.

We reserve the right to disregard any subscription which is not fully paid
when we receive it. No subscription will be binding until we have accepted it,
and we may refuse to accept any subscription for shares, in whole or in part,
for any reason. In determining which subscriptions to accept, in whole or in
part, we may take into account the order in which we receive subscriptions and
a subscriber's potential to do business with, or to refer customers to, the
bank. In the event we reject all or part of your subscription, the escrow agent
will refund by mail all or the appropriate portion of the amount paid in by you
with the subscription, without interest, promptly after the rejection. In the
event we do not satisfy the conditions to release the funds from the escrow
account, all subscription proceeds will be returned promptly by mail in full,
without interest. After a subscription is accepted and proper payment is
received, we will not cancel it unless all other accepted subscriptions are
also cancelled.

If we engage a sales agent to assist us in this offering, consistent with
Rule 15c2-4 under the Securities Exchange Act of 1934, the sales agent will
transmit all subscribers' checks to the escrow agent not later than the close
of the next business day. The sales agent will be entitled to any commission
only after the conditions to the release of subscription proceeds from the
escrow agent to us are satisfied and the proceeds are actually released to us.

Certificates representing shares of common stock of the Bancorp will be
issued as soon as practicable after funds are released to us from the
subscription escrow account.

If you have any questions about the offering or how to subscribe, please
call William B. Gossett, our President and Chief Executive Officer, at (843)
470-9962. If you subscribe, you should retain a copy of the completed
subscription documents for your records.

USE OF PROCEEDS

The gross proceeds from the sale of shares of common stock offered by the
Bancorp will be $6,300,000 assuming the sale of a minimum of 630,000 shares,
and $10,000,000 assuming the sale of a maximum of 1,000,000 shares. We have set
forth below a description of our anticipated use of the proceeds of the
offering by the Bancorp and by the bank based on our plans and estimates of our
start-up expenses. The sales agent's commission reflects an eight percent
commission on the sale of 200,000 shares. The following numbers are estimates
only, and the actual numbers may be different. The following presentation
assumes that the offering proceeds are released from escrow and the bank is
capitalized on May 1, 2000. We cannot assure you that the bank will be
capitalized at that time or ever. If the opening of the bank is delayed, our
expenses will be substantially higher.

Minimum Offering Maximum Offering
(630,000 shares) (1,000,000 shares)
---------------- -----------------

Gross proceeds from offering............... $6,300,000 $10,000,000
Sales agent's commission................... 160,000 160,000
---------- -----------
Net proceeds to the Bancorp................ $6,140,000 $ 9,840,000
========== ===========
Anticipated use of proceeds by the Bancorp:
Offering and organizational expenses
funded by organizers' advances.......... 100,000 100,000
Investment in the common stock of the
bank.................................... 6,000,000 7,000,000
Working capital.......................... 40,000 2,740,000
---------- -----------
Total.................................... $6,140,000 $ 9,840,000
========== ===========

Anticipated use of capital by the bank:

As reflected below, a minimum of $6,000,000 will be invested by the Bancorp
to capitalize the bank. The land upon which the bank's main office will be
located is under contract by the Bancorp for a purchase price of $1 million.
This contract will be assigned to the bank prior to the closing of the real
estate acquisition. We expect that construction of the bank's main office at
this site will commence shortly following the closing of the bank's purchase of
the real estate. That closing is expected to occur on or before May 31, 2000.
The estimated cost of the building is approximately $1,050,000. See "Proposed
Business of the Bancorp and the Bank--Facilities." If the total offering
proceeds exceed $7 million, we may invest all or a portion of the excess in the
bank. We will retain any proceeds which are not invested in the bank and will
initially invest them in United States government securities or deposit them
with the bank. These funds will be held by us for the operational expenses of
the Bancorp and for other general corporate purposes, including the provision
of additional capital to the bank, if necessary. We may also use the proceeds
to expand, for example, by opening additional branches or acquiring other
financial institutions. We do not currently have any definitive plans for
expansion.

Minimum Offering Maximum Offering
(630,000 shares) (1,000,000 shares)
---------------- ------------------

Organizational and pre-opening expenses... $ 352,700 $ 352,700
Land and bank facility.................... 2,050,000 2,050,000
Furniture, fixtures and equipment......... 420,000 420,000
Working capital........................... 3,177,300 4,177,300
---------- ----------
Total..................................... $6,000,000 $7,000,000
========== ==========

CAPITALIZATION

The following table shows the Bancorp's capitalization as of September 30,
1999 and the pro forma consolidated capitalization of the Bancorp and the bank,
as adjusted to give effect to the sale of the minimum and maximum number of
shares in this offering and after deducting estimated sales agent commissions
and estimated expenses of the offering. The Bancorp's capitalization as of
September 30, 1999 reflects the purchase of an aggregate of 550 shares of
common stock at a purchase price of $10.00 per share by each of our directors
shortly following the incorporation of the Bancorp. The "As Adjusted" columns
reflect the estimated costs of organizing the Bancorp and organizing and
preparing to open the bank through the expected opening date, which is
anticipated to be in the second quarter of 2000. See "Use of Proceeds."

September 30, As Adjusted for As Adjusted for
1999 Minimum Offering Maximum Offering
Shareholders' Equity: ------------- ---------------- ----------------

Common stock , no par value per
share, 10,000,000 shares
authorized, 550 shares issued
and outstanding, 630,550
shares issued and outstanding
as adjusted (minimum
offering), 1,000,550 shares
issued and outstanding
(maximum offering)............ $ 5,500 $6,140,000 $9,840,000
Preferred stock, undesignated
par value, 2,000,000 shares
authorized; no shares issued
and outstanding 0 0 0
Accumulated deficit during pre-
opening stage................. (96,832) (452,700) (452,700)
-------- ---------- ----------
Total shareholder's equity..... $(91,332) $5,687,300 $9,387,300
======== ========== ==========
Book value per share........... $ N/A $ 9.02 $ 9.38
======== ========== ==========

DIVIDEND POLICY

The Bancorp and the bank are both start-up operations. In order to preserve
capital to facilitate growth and expansion of the bank, we do not anticipate
paying cash dividends on the shares of common stock in the near future. Our
board of directors intends to reinvest earnings for a period of time as is
necessary to ensure the success of the operations of the bank. Our board of
directors will make a determination whether to pay cash dividends on the basis
of operating results, financial condition, tax considerations and other
relevant factors. Our ability to pay any dividends will depend on the ability
of the bank to pay dividends to us, which depends on the profitability of the
bank. The bank similarly does not anticipate paying cash dividends to us in the
near future in order to preserve its capital to facilitate growth and expansion
of its business. Payment of cash dividends by the bank is also limited by
regulatory requirements and limitations. See "Supervision and Regulation--
Dividends."

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

Since December 10, 1998, our organizers have been engaged in activities to
establish the Bancorp and the bank. On July 23, 1999, we incorporated the
Bancorp to serve as the holding company for the bank. On August 25, 1999, we
succeeded to all of the assets and liabilities of the partnership through which
the organizers' activities had been conducted. We are still in the development
stage and will remain in that stage until the bank opens for business. Since
December 10, 1998, our main activities have been centered on:

. seeking, interviewing and selecting the directors and officers for the
Bancorp and the bank,

. identifying and acquiring our permanent principal office and banking
site,

. applying for a national bank charter,

. applying for FDIC deposit insurance,

. applying to become a bank holding company, and

. raising equity capital through this offering.

Funding of Our Initial Operations

Our operations from December 10, 1998 through the closing date of this
offering have been and will continue to be funded through:

. advances from our organizers in the aggregate amount of $100,000,

. a line of credit obtained by the Bancorp from GrandSouth Bank in the
amount of $90,000, and

. the purchase by our directors of an aggregate of $5,500 of our common
stock (550 shares).

As of November 30, 1999, approximately $60,000 was outstanding on the line
of credit. This line of credit has been guaranteed by each of our organizers,
bears interest at the annual rate of GrandSouth Bank's prime rate and is due on
March 7, 2000. We are currently in the process of obtaining a line of credit
from another third party bank to replace and repay the GrandSouth Bank line of
credit. We expect that this replacement line of credit will be in place by
February 2000. It will also be guaranteed by each of our organizers. We intend
to use the proceeds of this offering to repay the advances of the organizers
and the line of credit. See "Use of Proceeds."

We believe the minimum net proceeds from the minimum offering will be
adequate capital to support the growth of both the Bancorp and the bank for
their initial years of operations. We do not anticipate that the Bancorp will
need to raise additional funds to meet expenditures required to operate the
business of the Bancorp or the bank over the next twelve months. All
anticipated material expenditures during that period are expected to be
provided for out of the proceeds of this offering. See "Use of Proceeds."

Financial Results

Total organizational costs as of September 30, 1999 amounted to $66,351.
From December 10, 1998 to September 30, 1999, the net loss of the Bancorp
amounted to $96,832. The estimated net loss for the period from October 1, 1999
through May 1, 2000, the anticipated opening date for the bank, is $246,000.
This amount is attributable to estimated expenses for salaries and benefits of
approximately $151,000, legal and professional fees of approximately $30,000
and other pre-opening expenses of approximately $65,000.

Initially, the bank anticipates deriving its income principally from
interest charged on loans and, to a lesser extent, from interest earned on
investments, fees received in connection with the origination of loans and
miscellaneous fees and service charges. Its principal expenses are anticipated
to be interest expense on deposits and operating expenses. The funds for these
activities are anticipated to be provided principally by operating revenues,
deposit growth, purchase of federal funds from other banks, repayment of
outstanding loans and sale of loans and investment securities.

Operating Facilities

The Bancorp has entered into an agreement for the purchase of approximately
1.5 acres of land at the intersection of Sea Island Parkway (federal highway
21) and state highway 802 in Lady's Island, South Carolina to be used as the
site for the main office of the bank. The purchase price under the agreement is
$1 million. The purchase agreement is expected to be assigned from the Bancorp
to the bank upon the commencement of the bank's operations. Promptly following
that assignment, the bank is expected to close the purchase. The Bancorp is
entitled to extend the closing date of the land purchase beyond the scheduled
closing date of February 5, 2000 in return for the non-refundable payment to
Hird Island Investments, Inc. of $10,000 for each 30-day extension. The closing
date may not be extended beyond August 3, 2000. For additional information
regarding our acquisition of this site, see "Proposed Business of the Bancorp
and the Bank--Facilities."

We expect that construction of the bank's main office building at this site
will commence shortly following the closing of the bank's purchase of the real
estate. That closing is expected to occur on or before May 31, 2000. The
estimated cost of the building is approximately $1,050,000. The bank will fund
the purchase of the real estate acquisition and the construction of its main
building with a portion of the net proceeds received from the issuance of its
common stock to the Bancorp. See "Use of Proceeds." Pending the completion of
the bank's permanent facility, we expect to commence the bank's operations from
temporary modular facilities located at this site.

PROPOSED BUSINESS OF THE BANCORP AND THE BANK

Background

The Bancorp was incorporated as a South Carolina corporation on July 23,
1999 to serve as a bank holding company for the bank. The Bancorp plans to use
$6 million of the net proceeds of this offering to capitalize the bank through
the Bancorp's purchase of 600,000 shares of the bank's common stock at $10.00
per share. This purchase price has been established at the level that is
intended to provide the bank with the total amount of capital and surplus
sufficient to meet the minimum capitalization level set for the bank by the
Office of the Comptroller of the Currency. The Bancorp will be the bank's sole
shareholder. The Bancorp initially will engage in no business other than owning
and managing the bank.

We have organized the Bancorp as a holding company to make it easier for the
bank to serve its future customers. The holding company structure is expected
to provide flexibility for expansion of the Bancorp's banking business. This
could occur through the possible acquisition by the Bancorp of other financial
institutions and the provision of additional capital for banking-related
services which the traditional commercial bank may not provide under existing
laws. A holding company structure should make it easier for the Bancorp to
raise capital for the bank because the Bancorp will be able to issue securities
without the need for prior banking regulatory approval. The proceeds of
securities issued by the Bancorp can be invested by the Bancorp in the bank as
primary capital.

The Bancorp has no present plans to acquire any operating subsidiaries other
than the bank. However, it is expected that the Bancorp may make additional
acquisitions in the event that the bank becomes profitable and the acquisitions
are deemed to be in the best interests of the Bancorp and its shareholders. Any
acquisitions will be subject to regulatory approvals and requirements. See
"Supervision and Regulation."

Once the bank has received approvals from the Office of the Comptroller of
the Currency and the FDIC, the Bancorp will apply to the Federal Reserve Board
and the South Carolina State Board of Financial Institutions for approval to
capitalize the bank. If these agencies grant the necessary approvals, the
Bancorp will become a bank holding company within the meaning of the Bank
Holding Company Act of 1956 and the South Carolina Bank Holding Company Act
upon its purchase of the bank's common stock. See "Supervision and Regulation."

The bank is currently being organized under the laws of the United States as
a national bank whose deposits are insured by the FDIC. The bank will not be
authorized to conduct its banking business until it obtains a charter from the
Office of the Comptroller of the Currency. The issuance of the charter will
depend, among other things, upon the bank's receipt of at least $6 million in
capital from the Bancorp and upon compliance with other standard conditions
expected to be imposed by the FDIC and the Office of the Comptroller of the
Currency. These conditions are generally designed to familiarize the bank with
operating requirements and to prepare it to begin business operations. We
expect to receive preliminary approval from the Office of the Comptroller of
the Currency and from the FDIC by the end of March, 2000.

Immediately upon obtaining all regulatory approvals and being capitalized,
the bank will engage in attracting deposits from the general public and will
make commercial, consumer and real estate loans. We anticipate that the bank
will commence operations on or about May 1, 2000, assuming completion by that
date of at least the minimum offering of shares of common stock.

Business Strategy of the Bank

The bank's business strategy for its initial years of operation will rely
principally upon local advertising and promotional activity and upon personal
contacts by its directors, officers and shareholders to attract business and to
acquaint potential customers with the bank's personalized services. Our
marketing approach will emphasize the advantages of dealing with an
independent, locally owned and headquartered commercial bank to meet the
particular needs of individuals, professionals and small to medium-sized
businesses. We intend to emphasize a high degree of personalized client service
in order to be able to serve each customer's banking needs. In particular, we
intend to

. respond to credit requests more quickly (in some cases within the same
day);

. be more flexible in approving complex loans based on a combination of
collateral quality, financial strength, market tenure and personal
knowledge of the customer;

. cross-train our staff to ensure that customers' questions can be
resolved by the first person contacted;

. require that our staff and officers operate with the attitude that the
customer deserves to be treated politely and efficiently; and

. have our employees personally greet customers as they enter the bank.

We expect that these approaches will produce a competitive edge that will
enable the bank to capture a significant share of the existing and future
growth in our market.

We will continually evaluate all banking services as to their profitability
and make efforts to modify the bank's business plan if the plan does not prove
successful. We believe that the bank's business plan will make it profitable by
the end of its third year of operations. However, it has been the experience in
the banking industry for new financial institutions to lose money in the first
several years of operations. There can be no assurance as to when, if ever, the
bank's operations will become profitable.

The Banks Primary Service Area

The bank's primary service area will be in Beaufort County, South Carolina,
including the towns of Beaufort, Port Royal and Burton, as well as many
neighboring islands. Some of the major islands are Lady's Island, Fripp Island,
Parris Island, St. Helena Island, Hunting Island, Port Royal Island, Dataw
Island and Harbor Island. The primary service area from which the bank expects
to draw at least 75 percent of its business is defined as the area northeast of
the Broad River, northwest of the Atlantic Ocean and south of the Coosaw River.
According to CACI Marketing Systems, the 1998 population in our primary service
area was approximately 63,800. It has been projected to rise to approximately
70,800 by the Year 2003.

Services and retail trade industries employ approximately two-thirds of the
work force and account for almost two-thirds of the payroll dollars in Beaufort
County. In 1998, the primary service area had a median household income of
$39,408, which is projected to increase to $44,665 by 2003, with more than 48
percent of the households in the primary service area having an annual income
over $35,000.

The Beaufort County area has a lower unemployment rate that the state of
South Carolina and its climate and geography have encouraged strong population
and economic growth. The premier resort destinations of Hilton Head Island,
Fripp Island and Dafuskie Island have also given the Beaufort County area a
higher profile regionally and nationally. Beaufort County has many positive
attributes that contribute to the area's business growth and stability. These
include easy access to Interstate Highway 95, rail service, and an employment
base comprised substantially of federal, state and local government employers.
These include the United States Marine Corps recruit depot at Parris Island,
the Marine Corps Air Station, the Beaufort Naval Hospital and the Beaufort
County Board of Education. This employment base, along with the real estate and
tourism industries, form the core of the area's economy.

Competition

As a commercial bank, the bank will compete primarily with other financial
institutions for deposits. In turn, our deposit base will directly affect our
loan activities and general growth. Primary methods of competition include
interest rates on deposits and loans, service charges on deposit accounts,
convenience of office locations, flexible office hours, and the range of
financial services offered. The bank will face strong competition in its
primary service area with other commercial banks, savings and loan
associations, credit unions, finance companies and brokerage firms.

The Beaufort County area is currently served by at least eight commercial
banks with a total of fifteen offices holding over $402 million in deposits as
of June 30, 1998. There are also two credit unions. We are also aware of a
proposed new community bank that plans to commence operations in our primary
service area during the first half of 2000. A number of the existing
competitors are well established in the Beaufort County area. These competitors
have substantially greater resources and lending limits than the bank will
have, and offer services, including extensive and established branch networks
and trust services, that we either do not expect to provide or will not provide
initially. As a result of these competitive factors, the bank may have to pay
higher interest rates to attract depositors or extend credit with lower
interest rates to attract borrowers. Among the larger competitors operating in
our primary service area are Wachovia, Regions Bank, Firstbank, NA, Branch
Banking and Trust, Bank of America and Palmetto State Bank. Due to the growth
of the bank's primary service area, it is anticipated that additional
competition will continue to be created by new entrants to the financial
services market. We believe that the advantage of being a locally owned and
managed community bank headquartered in Beaufort will provide the bank with a
unique opportunity to obtain a share of those institutions' deposits.

Deposit Activities

The bank will offer a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement accounts, savings accounts, and other
time deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposits. All deposit accounts will be insured by
the FDIC up to the maximum amount permitted by law. The bank's transaction
accounts and time certificates will be tailored to its principal market area at
competitive rates. The sources of deposits will be residents, businesses and
employees of businesses within the bank's primary service area. These deposits
are expected to be obtained through the personal solicitation of the bank's
officers and directors, direct mail solicitations, and advertisements published
in the local media.

Lending Activities

General.

The bank will use its deposits, together with borrowings and other sources
of funds, to originate and purchase loans. It will offer a full range of short
and medium-term small business and commercial, consumer and real estate loans.
The bank intends to generally allocate its loan portfolio as follows: small
business and commercial loans, 19 percent; real estate loans, 42 percent; and
consumer loans, 39 percent. Management intends to originate loans and to
participate with other banks with respect to loans which exceed the bank's
lending limits. The bank intends to develop a loan approval process which will
provide for various levels of officer lending authority. When a loan amount
exceeds an officer's lending authority, it will be transferred to an officer
with a higher limit, with ultimate lending authority resting with the Loan
Committee of the bank's board of directors.

The risk of nonpayment of loans is inherent in making all loans. However,
management intends to carefully evaluate all loan applicants and to attempt to
minimize its credit risk exposure by use of thorough loan application and
approval procedures that will be established for each category of loan prior to
beginning operations. In determining whether to make a loan, the bank will
consider the borrower's credit history, analyze the borrower's income and
ability to service the loan, and evaluate the need for collateral to secure
recovery in the event of default. The bank will maintain an allowance for loan
losses based upon management's assumptions and judgments regarding the ultimate
collectibility of loans in its portfolio and based upon a percentage of the
outstanding balances of specific loans when their ultimate collectibility is
considered questionable. Risks with regard to specific categories of loans are
described below.

Lending activities will be directed primarily to individuals and businesses
in the bank's primary service area whose demands for funds fall within the
bank's legal lending limits and which are also potential deposit customers of
the bank. The following is a description of each of the major categories of
loans anticipated to be made by the bank.

Commercial Loans.

Commercial lending activities will be directed principally toward businesses
whose demand for funds falls within the bank's anticipated lending limits. This
category of loans includes loans made to individuals, partnerships or corporate
borrowers, and obtained for a variety of business purposes. Particular emphasis
will be placed on loans to small to medium-sized professional firms, retail and
wholesale businesses, light industry and manufacturing concerns operating in
and around the primary service area. The bank considers "small businesses" to
include commercial, professional and retail businesses with annual gross sales
of less than $15 million or annual operating costs of less than $3 million.
Within small business lending, the bank intends to focus on niches in the
market and expects to offer small business loans utilizing government
enhancements, such as the Small Business Administration's 7(a) program. The
types of commercial and small business loans provided will include principally
term loans with variable interest rates secured by equipment, inventory,
receivables and real estate, as well as secured and unsecured working capital
lines of credit. Risks of these types of loans depend on the general business
conditions of the local economy and the local business borrower's ability to
sell its products and services in order to generate sufficient business profits
to repay the loan under the agreed upon terms and conditions. Personal
guarantees may be obtained from the principals of business borrowers and third
parties to further support the borrower's ability to service the debt and
reduce the risk of nonpayment.

Consumer and Installment Loans.

Consumer loans will include lines of credit and term loans secured by second
mortgages on the residences of borrowers for a variety of purposes including
home improvements, education and other personal expenditures. Consumer loans
will also include installment loans to individuals for personal, family and
household purposes, including automobile loans to individuals and pre-approved
lines of credit. Consumer loans will generally involve more risk than first
mortgage loans because the collateral for a defaulted loan may not provide an
adequate source of repayment of the principal due to damage to the collateral
or other loss of value while the remaining deficiency often does not warrant
further collection efforts. In addition, consumer loan performance is dependent
upon the borrower's continued financial stability and is, therefore, more
likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy. Various federal and state laws also limit the amount that can be
recovered.

Real Estate Loans. The bank will make commercial real estate loans,
construction and development loans, and residential real estate loans. These
loans include commercial loans where the bank takes a security interest in real
estate out of an abundance of caution and not as the principal collateral for
the loan, but will exclude home equity loans, which are classified as consumer
loans. Interest rates for all categories may be fixed or adjustable, and will
more than likely be fixed for shorter-term loans. The bank will compete for
real estate loans with competitors who are well established in the Beaufort
County area and have greater resources and lending limits. As a result, we may
have to charge lower interest rates to attract borrowers.

Commercial Real Estate. The bank expects to offer commercial real estate
loans to developers of both commercial and residential properties. The bank
intends to manage its credit risk by actively monitoring such measures as
advance rate, cash flow, collateral value and other appropriate credit factors.
Risks associated with commercial real estate loans include the general risk of
the failure of each commercial borrower, which will be different for each type
of business and commercial entity. We will evaluate each business on an
individual basis and attempt to determine its business risks and credit
profile. Management will attempt to reduce credit risks in the commercial real
estate portfolio by emphasizing loans on owner-occupied office and retail
buildings where the loan-to-value ratio, established by independent appraisals,
does not exceed 80 percent. In addition, we may also require personal
guarantees of the principal owners.

Construction and Development Loans. Construction and development loans will
be made both on a pre-sold and speculative basis. If the borrower has entered
into an arrangement to sell the property prior to beginning construction, the
loan will be considered to be on a pre-sold basis. If the borrower has not
entered

into an agreement to sell the property prior to beginning construction, the
loan will be considered to be on a speculative basis. Residential and
commercial construction loans will be made to builders and developers and to
consumers who wish to build their own home. The term of construction and
development loans will generally be limited to 18 months, although payments may
be structured on a longer amortization basis. The ratio of the loan principal
to the value of the collateral as established by independent appraisal will not
exceed 75 percent. Speculative loans will be based on the borrower=s financial
strength and cash flow position. Loan proceeds will be disbursed based on the
percentage of completion and only after the project has been inspected by an
experienced construction lender or appraiser. These loans generally command
higher rates and fees commensurate with the risks warranted in the construction
lending field. The risk in construction lending is dependent upon the
performance of the builder and building the project to the plans and
specifications of the borrower and the bank's ability to administer and control
all phases of the construction disbursements. Upon completion of the
construction, management anticipates that the mortgage will be converted to a
permanent loan and may be sold to an investor in the secondary mortgage market.

Residential Real Estate Loans. Residential real estate loans will be made to
qualified individuals for the purchase of existing single-family residences in
our primary service area. These loans will be made consistent with the bank's
appraisal policy and real estate lending policy which will detail maximum loan-
to-value ratios and maturities. We expect these loan-to-value ratios will be
sufficient to compensate for fluctuations in real estate market value and to
minimize losses that could result from a downturn in the residential real
estate market. Mortgage loans that do not conform to the bank's policies will
be sold in the secondary markets. The risk of these loans depends on the
salability of the loan to national investors and on interest rate changes. The
bank intends to limit interest rate risk and credit risk on these loans by
locking in the interest rate for each loan with the secondary market investor
and receiving the investor's underwriting approval before originating the loan.
The bank will retain loans for its portfolio when it has sufficient liquidity
to fund the needs of the established customers and when rates are favorable to
retain the loans. The loan underwriting standards and policies will generally
be the same for both loans sold in the secondary market and those retained in
the bank's portfolio.

Asset and Liability Management

The primary assets of the bank will consist of its loan portfolio and its
investment accounts. Its liabilities will consist primarily of its deposits.
Our objective is to support asset growth primarily through growth of core
deposits, which include deposits of all categories made by individuals,
partnerships, corporations and other entities. Consistent with the requirements
of prudent banking necessary to maintain liquidity, we will seek to match
maturities and rates of loans and the investment portfolio with those of
deposits, although exact matching is not always possible. Management will seek
to invest the largest portion of the bank's assets in commercial, consumer and
real estate loans. We anticipate that loans will be limited to less than 75
percent of deposits and capital funds. This ratio may be exceeded, however, in
the initial period of operation. We anticipate that the bank's investment
account will consist primarily of marketable securities of the United States
Government, federal agencies and state and municipal governments, generally
with varied maturities.

We expect that the bank's asset/liability mix will be monitored on a regular
basis with a monthly report detailing interest-sensitive assets and interest-
sensitive liabilities prepared and presented to the board of directors. The
objective of this policy is to control interest-sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the bank's earnings.

Correspondent Banking

Correspondent banking involves the providing of services by one bank to
another bank which, from an economic or practical standpoint, cannot provide
that service for itself. The bank may purchase correspondent services offered
by larger banks, including check collections, purchase of federal funds,
securities safekeeping, investment services, coin and currency supplies,
overline and liquidity loan participations, and sales of loans to or
participations with correspondent banks. We anticipate that we will sell loan
participations to correspondent banks with respect to loans which exceed our
lending limits. As compensation for services provided by a correspondent bank,
we may maintain balances with correspondents in non-interest bearing accounts.

Other Banking Services

Other anticipated services include cash management services, safe deposit
boxes, traveler's checks, direct deposit of payroll and social security checks,
wire transfers, telephone banking, and automatic drafts for various accounts.
We plan to offer a debit card, VISA(R) and/or MasterCard(R) credit card
services through a correspondent bank as an agent for the bank. We also plan to
offer extended banking hours, both drive-in and lobby, and an after-hours
depository. We expect to become associated with a shared network of automated
teller machines that our customers will be able to use throughout our primary
service area and other regions. We also intend to associate with a third party
Internet banking service provider that will enable us to provide our customers
with a cost effective, secure and reliable Internet banking solution. We do not
plan to exercise trust powers during our initial years of operation.

Employees

When it begins operations, the bank is anticipated to have approximately
eleven full-time employees and no part-time employees. We do not expect that
the Bancorp will have any employees other than its officers who are also
employees of the bank. We anticipate that in its first year of operation, the
bank will hire five additional persons on a full-time basis and one additional
person on a part-time basis, subject to the bank's needs.

Facilities

The temporary office for the Bancorp is located at 500 Carteret Street,
Suite A, in downtown Beaufort, South Carolina. This office space, consisting of
approximately 500 square feet, is part of the executive offices of Renaissance
Marketing, LLC. This space is being provided to the Bancorp at no charge by
Renaissance Marketing, LLC. Veronica C. Clardy, a director of the Bancorp, is a
principal and executive officer of Renaissance Marketing, LLC.

The Bancorp has entered into an agreement with Hird Island Investments, Inc.
for the purchase of approximately 1.5 acres of land at the intersection of Sea
Island Parkway (federal highway 21) and state highway 802 in Lady's Island,
South Carolina to be used as the site for the main office of the bank. Hird
Island Investments, Inc. is owned 50% by Veronica C. Clardy, a director of the
Bancorp, and 50% by the spouse of Martha B. Fender, a director of the Bancorp.
See "Transactions With Management." The purchase agreement with Hird Island
Investments, Inc. is expected to be assigned from the Bancorp to the bank upon
the commencement of the bank's operations. Promptly following that assignment,
the bank is expected to close the purchase of the real estate. The Bancorp is
entitled to extend the closing date of the land purchase beyond the scheduled
closing date of February 5, 2000 in return for the non-refundable payment to
Hird Island Investments, Inc. of $10,000 for each 30-day extension. The closing
date may not be extended beyond August 3, 2000.

We expect that construction of the bank's main office at this site will
commence shortly following the closing of the bank's purchase of the real
estate. That closing is expected to occur on or before May 31, 2000. The
estimated cost of the building is approximately $1,050,000. The bank will fund
the purchase of this real estate acquisition and the construction of the main
building with a portion of the net proceeds received from the issuance of its
common stock to the Bancorp. See "Use of Proceeds." Pending the completion of
the bank's permanent facility, we expect to commence the bank's operations from
temporary modular facilities located at this site.

Legal Proceedings

Neither the Bancorp, the bank, nor any of their properties are subject to
any legal proceedings as of the date of this prospectus.

SUPERVISION AND REGULATION

General

The Bancorp and the bank will be subject to an extensive collection of state
and federal banking laws and regulations which impose specific requirements and
restrictions on, and provide for general regulatory oversight with respect to,
virtually all aspects of the Bancorp's and the bank's operations. Each will
also be affected by government monetary policy and by regulatory measures
affecting the banking industry in general. The actions of the Federal Reserve
System affect the money supply, and in general, the lending abilities of the
bank in increasing or decreasing the costs and availability of funds to the
bank. Additionally, the Federal Reserve System regulates the availability of
bank credit in order to combat recession and curb inflationary pressures in the
economy by open market operations in United States government securities,
changes in the discount rate on member bank borrowings, changes in the reserve
requirements against bank deposits and limitations on interest rates which
banks may pay on time and savings deposits.

The following is a brief summary of some of the statutes, rules and
regulations affecting the Bancorp and the bank. This summary is qualified in
its entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of the Bancorp and the bank.
Any change in applicable laws or regulations may have a material adverse effect
on the business and prospects of these entities.

The Bancorp

The Bancorp is a bank holding company within the meaning of the Federal Bank
Holding Company Act of 1956 and the South Carolina Banking and Branching
Efficiency Act of 1996. The Bancorp will be registered with both the Federal
Reserve System and the South Carolina State Board of Financial Institutions.
The Bancorp is required to file with both of these agencies annual reports and
other information regarding its business operations and those of any
subsidiary. It is also subject to the supervision of, and to regular
examinations by, these agencies. The regulatory requirements to which the
Bancorp will be subject also set forth various conditions regarding the
eligibility and qualifications of its directors and officers.

The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve Board before:

. acquiring all or substantially all of the assets of a bank,

. acquiring direct or indirect ownership or control of more than five
percent of the voting shares of any bank, or

. merging or consolidating with another bank holding company.

Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than five percent of the voting shares of any company engaged in any business
other than the business of banking or managing and controlling banks. Some of
the activities the Federal Reserve Board has determined by regulation to be
proper incidents to the business of banking, and thus permissible for bank
holding companies, include:

. making or servicing loans and certain types of leases,

. engaging in certain insurance and discount brokerage activities,

. performing certain data processing services,

. acting in certain circumstances as a fiduciary or investment or
financial advisor,

. owning savings associations, and

. making investments in corporations or projects designed primarily to
promote community welfare.

In determining whether an activity is so closely related to banking as to be
permissible for bank holding companies, the Federal Reserve Board is required
to consider whether the performance of the particular activities by a bank
holding company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased competition and
gains in efficiency that outweigh possible adverse effects such as undue
concentration of resources, decreased or unfair competition, conflicts of
interests and unsound banking practices. Generally, bank holding companies are
required to obtain prior approval of the Federal Reserve Board to engage in any
new activity not previously approved by the Federal Reserve Board. Despite
prior approval, the Federal Reserve Board may order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that the
holding company's continued ownership, activity or control constitutes a
serious risk to the financial safety, soundness or stability of any of its bank
subsidiaries.

The Bank Holding Company Act and the Federal Change in Bank Control Act,
together with regulations promulgated by the Federal Reserve Board, require
that, depending on the particular circumstances, either the Federal Reserve
Board's approval must be obtained or notice must be furnished to the Federal
Reserve Board and not disapproved prior to any person or company acquiring
control of a bank holding company, such as the Bancorp, subject to certain
exemptions. Control is conclusively presumed to exist when an individual or
company acquires 25 percent or more of any class of voting securities of the
bank holding company. Control is rebuttably presumed to exist if a person
acquires 10 percent or more, but less than 25 percent, of any class of voting
securities and either the bank holding company has registered securities under
Section 12 of the Securities Exchange Act of 1934 or no other person owns a
greater percentage of that class of voting securities immediately after the
transaction. The Bancorp may be required to register its common stock under
Section 12 of the Securities Exchange Act of 1934 once its common stock is held
by more than 500 shareholders of record. The regulations provide a procedure
for challenge of the rebuttable control presumption.

The Federal Reserve Board, pursuant to regulation and published policy
statements, has maintained that a bank holding company must serve as a source
of financial strength to its subsidiary banks. In adhering to the Federal
Reserve Board policy, the Bancorp may be required to provide financial support
to a subsidiary bank at a time when, absent such Federal Reserve Board policy,
the Bancorp may not deem it advisable to provide such assistance. Under the
Bank Holding Company Act, the Federal Reserve Board may also require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Board's determination that the activity or control constitutes a serious risk
to the financial soundness or stability of any subsidiary depository
institution of the bank holding company. Further, federal bank regulatory
authorities have additional discretion to require a bank holding company to
divest itself of any bank or nonbank subsidiary if the agency determines that
divestiture may aid the depository institution's financial condition.

Under the South Carolina Banking and Branching Efficiency Act, the Bancorp
must obtain the approval of the South Carolina State Board of Financial
Institutions before the Bancorp acquires all or substantially all of the assets
of a bank or any other bank holding company or more than five percent of the
voting shares of any bank or any other bank holding company, or merges or
consolidates with any other bank holding company.

Under the Glass-Steagal Act of 1933, the Bancorp will be prohibited from
owning subsidiaries that are engaged principally in the issue, flotation,
underwriting, public sale or distribution of securities.

The Bank

As a national bank, the bank is subject to the supervision of the Office of
the Comptroller of the Currency and, to a limited extent, the FDIC and the
Federal Reserve Board. The bank's deposits will be insured by the FDIC for a
maximum of $100,000 per depositor. For this protection, the bank will pay a
semi-annual statutory assessment and will have to comply with the rules and
regulations of the FDIC. The Office of the Comptroller of the Currency and the
FDIC will regulate and monitor all areas of the bank's operations, including:

. security devices and procedures,

. adequacy of capitalization and loss reserves,

. loans,

. investments,

. borrowings,

. deposits,

. mergers,

. issuances of securities,

. payment of dividends,

. interest rates payable on deposits,

. interest rates or fees chargeable on loans,

. establishment of branches,

. corporate reorganizations,

. maintenance of books and records, and

. adequacy of staff training to carry out safe lending and deposit
gathering practices.

In addition, the bank will be prohibited from engaging in tie-in arrangements
in connection with any extension of credit, or the providing of any property or
service. The regulatory requirements to which the bank will be subject also set
forth various conditions regarding the eligibility and qualification of its
officers and directors.

Capital Adequacy Requirements

Both the Bancorp and the bank will be subject to regulatory capital
requirements imposed by the Federal Reserve Board and the Office of the
Comptroller of the Currency which vary based on differences in risk profiles.
The capital adequacy guidelines issued by the Federal Reserve Board are applied
to bank holding companies on a consolidated basis with the banks owned by the
holding company. The Office of the Comptroller of the Currency's risk-based
capital guidelines apply directly to national banks, such as the bank,
regardless of whether they are a subsidiary of a bank holding company. Both
agency's requirements, which are substantially similar, provide that banking
organizations must have capital (as defined in the rules) equivalent to eight
percent of risk-weighted assets. The risk weights assigned to assets are based
primarily on credit risks. Depending upon the riskiness of a particular asset,
it is assigned to a risk category. For example, securities with an
unconditional guarantee by the United States government are assigned to the
lowest risk category. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to
determine the weighted values, which are added together to determine total
risk-weighted assets.

Both the Federal Reserve Board and the Office of the Comptroller of the
Currency have also adopted minimum capital leverage ratios to be used in tandem
with the risk-based guidelines in assessing the overall capital adequacy of
banks and bank holding companies. The guidelines define a two-tier capital
framework. Tier 1 capital consists of common and qualifying preferred
shareholder's equity, less goodwill and other adjustments. Tier 2 capital
consists of mandatory convertible, subordinated, and other qualifying term
debt, preferred stock not qualifying for Tier 1, and a limited allowance for
credit losses up to a designated percentage

of risk-weighted assets. Under the guidelines, institutions must maintain a
specified minimum ratio of "qualifying" capital to risk-weighted assets. At
least 50 percent of an institution's qualifying capital must be "core" or "Tier
1" capital, and the balance may be "supplementary" or "Tier 2" capital. The
guidelines imposed on the bank will include a minimum leverage ratio standard
of capital adequacy. The leverage standard requires top-rated institutions to
maintain a minimum Tier 1 capital to assets ratio of three percent, with
institutions receiving less than the highest rating required to maintain a
ratio of four percent or greater, based upon their particular circumstances and
risk profiles.

Federal bank regulatory authorities have adopted regulations revising the
risk-based capital guidelines to further ensure that the guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse
effect that changes in market interest rates may have on a bank's financial
condition and is inherent to the business of banking. Under the regulations,
when evaluating a bank's capital adequacy, the revised capital standards now
explicitly include a bank's exposure to declines in the economic value of its
capital due to changes in interest rates. The exposure of a bank's economic
value generally represents the change in the present value of its assets, less
the change in the value of its liabilities, plus the change in the value of its
interest rate off-balance sheet contracts. The Office of the Comptroller of the
Currency's risk assessment approach used to evaluate a bank's capital adequacy
for interest rate risk relies on a combination of quantitative and qualitative
factors. Banks that are found to have high levels of exposure or weak
management practices will be directed by the Office of the Comptroller of the
Currency to take corrective action.

The foregoing capital guidelines could affect the bank in several ways. If
the bank grows rapidly, its capital base may become insufficient to support
continued growth, making an additional capital infusion necessary. The capital
guidelines could also impact the bank's ability to pay dividends. It is
expected that the bank's capital levels will initially be more than adequate.
Rapid growth, poor loan portfolio performance or poor earnings performance, or
a combination of these factors, could change our capital position in a
relatively short period of time. Failure to meet these capital requirements
would require the bank to develop and file a plan with the Office of the
Comptroller of the Currency describing the means and a schedule for achieving
the minimum capital requirements. In addition, we would not be able to receive
regulatory approval of any application that required consideration of capital
adequacy, such as a branch or merger application, unless we could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.

Dividends

The ability of the Bancorp to pay cash dividends will depend entirely upon
the amount of dividends paid by the bank. The Bancorp is subject to the South
Carolina state business corporation law requirements that dividends may be paid
only if the dividend payment would not render the Bancorp insolvent or unable
to meet its obligations as they come due. The Bancorp is not presently subject
to any direct legal or other regulatory restrictions on dividends.

The bank is subject to regulatory restrictions on the payment of dividends,
including the prohibition of payment of dividends from the bank's capital. All
dividends of the bank must be paid out of undivided profits then on hand, after
deducting expenses, including losses and bad debts. In addition, the bank is
prohibited from declaring a dividend on its shares of common stock until its
surplus equals its stated capital, unless there has been transferred to surplus
not less than one-tenth of the bank's net income of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the Office of the Comptroller of the Currency is required if the total of
all dividends declared by the bank in any calendar year exceeds the total of
its net income for that year combined with its retained net income for the
preceding two years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.

Other Regulations

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

. Federal Truth-In-Lending Act governing disclosures of credit terms to
consumer borrowers,

. Community Reinvestment Act of 1977 requiring financial institutions to
meet their obligations to provide for the total credit needs of the
communities they serve, including investing their assets in loans to low
and moderate-income borrowers,

. Home Mortgage Disclosure Act of 1975 requiring financial institutions to
provide information to enable public officials to determine whether a
financial institution is fulfilling its obligations to meet the housing
needs of the community it serves,

. Equal Credit Opportunity Act prohibiting discrimination on the basis of
race, creed or other prohibitive factors in extending credit,

. Fair Credit Reporting Act governing the manner in which consumer debts
may be collected by collection agencies, and

. the rules and regulations of various federal agencies charged with the
responsibility of implementing such federal laws.

The deposit operations of the bank will also be subject to the:

. Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures
for complying with administrative subpoenas of financial records, and

. Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve Board to implement that act, which govern automatic deposits to,
and withdrawals from, deposit accounts and customers' rights and
liabilities arising from the use of automated teller machines and other
electronic banking services.

Interstate Banking and Branching

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, eligible bank holding companies in any state are permitted, with Federal
Reserve Board approval, to acquire banking organizations in any other state. As
such, all regional compacts and substantially all then-existing regional
limitations on interstate acquisitions of banking organizations have been
eliminated. The Interstate Banking and Branching Efficiency Act removed
substantially all of the then-existing prohibitions on interstate branching by
banks. The authority of a national bank to establish and operate branches
within a state continues to be subject to applicable state branching laws.
Subject to these laws, a bank operating in any state may now establish one or
more branches within any other state without the establishment of a separate
banking structure within the other state. Under current South Carolina law, the
bank may open branch offices throughout South Carolina with the prior approval
of the Office of the Comptroller of the Currency. In addition, with prior
regulatory approval, the bank will be able to acquire existing banking
operations in South Carolina. Although the Interstate Banking and Branching
Efficiency Act has the potential to increase the number of competitors in the
market area of the bank, we cannot predict the actual impact of such
legislation on the competitive position of the bank.

MANAGEMENT

Directors and Executive Officers of the Bancorp and the Bank

Set forth below is information regarding the directors and executive
officers of the Bancorp. The President and Chief Executive Officer and each of
the directors of the Bancorp are expected to hold these same positions with the
bank. The Bancorp, as the sole shareholder of the bank, will nominate each of
the following individuals to serve as a director of the bank at the bank's
first shareholders meeting. That meeting is expected

to convene shortly after the bank receives its charter. Directors of the bank
will serve for a term of one year and will be elected by the Bancorp each year
at the bank's annual meeting of shareholders. The bank's officers will be
appointed by its board of directors and will hold office at the will of its
Board.

Under the articles of incorporation of the Bancorp, the board of directors
is divided into three classes of directors that serve staggered three-year
terms. The members of one class are elected at each annual meeting of
shareholders and hold office until the third annual meeting following their
election, or until their successors are elected and qualified. The terms of
office of the classes of directors expire as follows: Class I at the 2000
annual meeting of shareholders, Class II at the 2001 annual meeting of
shareholders, and Class III at the 2002 annual meeting of shareholders.
Executive officers of the Bancorp serve at the discretion of the board of
directors. Unless otherwise set forth below, each of the individuals listed
below has served as a director of the Bancorp since its incorporation on July
23, 1999.

Name Age Position with Bancorp
- ---- --- ---------------------

William B. Gossett...... 56 President and Chief Executive Officer, Class I Director
Veronica C. Clardy...... 53 Class II Director
Avery E. Cleland........ 39 Class III Director
Louis O. Dore........... 54 Class I Director
Paul M. Dunnavant, III.. 35 Treasurer, Class II Director
Martha B. Fender........ 54 Vice President, Class I Director
D. Martin Goodman....... 53 Chairman of the Board, Class I Director
Edward J. McNeil, Jr.... 45 Secretary, Class II Director
Frances K. Nicholson.... 45 Class II Director
J. Frank Ward........... 52 Class III Director
Bruce K. Wyles.......... 45 Class III Director

William B. Gossett has served as the President and Chief Executive Officer
of the Bancorp since its inception on July 23, 1999, and will be the President
and Chief Executive Officer of the bank. Prior to joining the Bancorp, he
served for 16 years as the President and Chief Executive Officer of Liberty
National Bank in Longwood, Florida. Liberty National Bank, which Mr. Gossett
helped organize, was named by the American Bankers Association as Florida's
Most Profitable Bank and was listed in the Nation's 50 Most Profitable Banks
since 1992. Liberty National Bank operated three banking offices in Greater
Orlando, Florida and had loan production offices in Jacksonville and Tampa,
Florida. During his years with Liberty National Bank, Mr. Gossett developed a
reputation for his small business and entrepreneurial financing expertise. He
served as a frequent local and national speaker on small business and minority
financing. In 1973, Mr. Gossett was selected to organize and charter Tropic
Bank of Seminole (formerly known as Atlantic Bank of Casselberry) where he
served as President and Chief Executive Officer for seven years. Prior to
joining Tropic Bank of Seminole, Mr. Gossett served as a Commercial Loan
Officer with Atlantic National Bank of Jacksonville, Florida. Mr. Gossett has
been very involved in professional and civic activities. He is past Chairman of
the Bank Operations Committee of the Independent Bankers Association of
America, as well as a past member of its Lending Issues Sub-Committee, its
Policy Development Committee, and its Long-Term Planning Committee. He is past
Chairman of the District Advisory Committee of the United States Small Business
Administration, Jacksonville, Florida and a member of the Wholesale Financial
Services Advisory Group of the American Bankers Association.

Veronica C. Clardy has served as the President and controlling shareholder
of Ausper Construction Incorporated in Beaufort, South Carolina since she
started the company in 1994. Ausper is the parent company of Renaissance
Marketing LLC which specializes in real estate development and sales. In
September 1999, she retired from the South Carolina Department of Public Safety
where she had been employed for over twenty-five years, having most recently
served as the manager of its Belton, South Carolina office.

Avery E. Cleland has served as President of Cleland Construction Co., Inc.
since 1986 and is currently its sole shareholder. Under his leadership, Cleland
Construction has grown from a small land site development

company into a multi-company enterprise specializing in subdivision, shopping
mall, highway and public utility construction. Mr. Cleland currently serves as
Chairman of the Jasper County Council and is active in many community
organizations.

Louis O. Dore has practiced as a trial lawyer in Beaufort, South Carolina
since 1976, and has practiced with Louis O. Dore, P.A. since he formed the firm
in 1991. He is a member of the Beaufort County and South Carolina Bar
Associations and the Advisory Board of Branch Banking and Trust in Beaufort.
His past activities include service on the Boards of Trustees of Beaufort
Memorial Hospital, Penn Community Services, and Benedict College (Columbia,
South Carolina); and service as Chairman of the Beaufort County Democratic
Party, Chairman of the South Carolina Board of Education, and a member of the
South Carolina Democratic Party Executive Council. Mr. Dore has served as a
director of the Bancorp since August 17, 1999.

Paul M. Dunnavant, III has served as Chief Financial Officer and Treasurer
of Amick Farms, Inc., an integrated poultry processor, in Batesburg, South
Carolina for over six years. Prior to joining Amick Farms, Inc. in 1993, Mr.
Dunnavant was employed for six years by Arthur Andersen & Co. in Columbia,
South Carolina, having served as Tax Manager for two of the six years. Mr.
Dunnavant is a Certified Financial Planner, a Certified Public Accountant, a
member of the South Carolina Association of CPA's, a member of the Palmetto
Baptist Foundation Development Board and a member of the Deacon Board of First
Baptist Church of Columbia, South Carolina.

Martha B. Fender has served as President and owner of Coastal Carolina
Realty, Inc. since 1987, having joined that firm in 1984. For the past fifteen
years, Mrs. Fender has also been actively involved in multiple positions with
the Child Abuse Prevention Association for the Open Arms Shelter for Abused and
Neglected Children in Beaufort, including service in various executive offices
and as a member of its board of directors, service as Chairman of the Building
and Personnel Committees, and service for eleven years as the Volunteer Shelter
Administrator. She is a member of the National Association of Realtors, the
South Carolina Association of Realtors and the Beaufort Board of Realtors where
she has held various executive officer and committee chairman positions since
1989.

D. Martin Goodman has served as Area Manager of the University of South
Carolina Small Business Development Center in Beaufort, South Carolina since
July 1992. He has been the co-owner, with his wife, of Ollie's Seafood
Restaurants in Beaufort since 1996. Prior to moving to Beaufort in 1991, Mr.
Goodman held various management positions with several companies in the United
States tire industry. Mr. Goodman is a Director of Mainstreet Beaufort, USA,
past President of the Greater Beaufort Chamber of Commerce, Board Member of the
Beaufort County Economic Development Board, Advisory Board Member of the
Business Department of the Technical College of the Lowcountry, Finance
Committee Chairman of Carteret Street United Methodist Church and has served as
President and is a Board Member of the Beaufort Small Business Assistance
Corporation.

Edward J. McNeil, Jr. has served as a practicing physician with Low Country
Medical Group, specializing in internal medicine, since January 1998. He
currently serves as Medical Director for his multi-speciality group, as well as
Lab Director. Prior to joining Low Country Medical Group, Dr. McNeil had
practiced as a physician with Internal Medicine Health Care in Beaufort from
January 1997 to December 1997, and with Southeast Health Care Association from
January 1995 to December 1996. Prior to that, he had operated his own medical
practice in Beaufort since 1987. Dr. McNeil is currently a Member of the
American Medical Association as well as the South Carolina Medical Association.
He also serves as the Medical Director for Care One Home Health Agency and is a
member as well as Chairman of the Trustee Board and Steward Board at Wesley
United Methodist Church.

Frances K. Nicholson has served since 1992 as the manager and principal
owner of Nicholson Investments LLC, a real estate leasing and securities
portfolio company; since 1998 as the manager and principal owner of Big Nickel
Properties, LLC, a manager of rental properties; and since 1992 as the business
manager and a principal of Carolina Capital Leasing, Inc., an equipment and
vehicle sales and leasing

company. Mrs. Nicholson was a buyer and product manager for a large
distribution company from 1985 to 1990 and served as a part-time faculty member
of Southern State Community College in Wilmington, Ohio from 1991 to 1992. She
currently serves as an Executive Board Member of J.L. Mann High School and is a
sustaining member of the Junior League of Greenville. Mrs. Nicholson has served
as a director of the Bancorp since August 17, 1999.

J. Frank Ward has served as Sales Coordinator and Realtor with Renaissance
Marketing, LLC in Beaufort, South Carolina since February 1998. Prior to
joining Renaissance Marketing, LLC, Mr. Ward was employed with Toyota Center in
West Columbia/Lexington, South Carolina for 21 years, spending the last 12
years of that period as new car sales manager. He has been a Mason since 1976
and a Shriner since 1980.

Bruce K. Wyles has served as a practicing dentist in Beaufort, South
Carolina since 1983 and is a real estate investor.

Remuneration of Directors

The directors of the Bancorp and the bank have not received and will not
receive any fees or other compensation in connection with the organization of
the Bancorp or the bank. We do not intend to pay director's fees until the bank
is cumulatively profitable. In addition, after the offering, we expect to adopt
a stock option plan which will permit the Bancorp to grant options to its
officers, directors and employees. We anticipate that we will initially
authorize the issuance of a number of shares under the stock option plan equal
to 15 percent of the shares outstanding after the offering. We will not issue
stock options at less than the fair market value of the common stock on the
date of grant.

Employment Agreement

On July 27, 1999, we entered into an employment agreement with William B.
Gossett pursuant to which Mr. Gossett serves as President and Chief Executive
Officer of the Bancorp and, upon its organization, the bank, for a term of five
years. The agreement automatically renews for additional two-year terms unless
either party notifies the other party of its intent not to renew at least 180
days prior to the end of the then current term. Mr. Gossett's initial annual
base salary under the agreement is $135,000. His annual salary becomes $130,000
effective August 1, 2000. He is also entitled to receive a bonus of $10,000
upon the opening of the bank, which bonus may increase to $27,500 based upon
the board of directors' consideration of various factors. For each year
following the first full calendar year of the bank's operations, Mr. Gossett is
also entitled to a bonus of five percent of the bank's net income if the board
of directors determines the bonus is appropriate in light of its analysis of
various performance criteria.

In addition to his salary and bonus compensation, Mr. Gossett will be
provided with an automobile, or an automobile allowance; life insurance of
$300,000 payable to his spouse and heirs; and reimbursement for automobile
expenses, club dues, business expenses, and moving and relocation expenses. He
will also participate in the bank's retirement, medical and other benefit
programs.

Mr. Gossett will be eligible to participate in any long-term equity
incentive program of the Bancorp and will be eligible for the grant of stock
options, restricted stock and other awards under such program or any similar
program adopted by the Bancorp. Upon closing of this offering, or as soon after
the closing as an appropriate stock option plan is adopted by the Bancorp, Mr.
Gossett will be granted options to purchase a number of shares of the Bancorp's
common stock equal to three percent of the number of shares sold in this
offering at a purchase price of $10.00 per share. One-third of the shares
covered by the option will vest on each of the first, second and third
anniversaries of the date the bank opens for business, subject to accelerated
vesting upon a change in control of the Bancorp.

The employment agreement with Mr. Gossett also provides that during the term
of his employment and for a period expiring on the earlier to occur of (a) one
year after termination of his employment for any reason

other than without cause, (b) six months after expiration of the employment
agreement where expiration results from Mr. Gossett's timely notification of
his intent not to renew the agreement, and (c) the expiration of the agreement
where expiration results from the Bancorp's or the bank's timely notification
to Mr. Gossett of its intent not to renew the agreement, Mr. Gossett will not
compete, directly or indirectly, with the Bancorp or the bank, or any of their
subsidiaries, or have more than a two percent passive investment in any
financial institution that maintains an office or branch within 25 miles of
each location where the Bancorp or the bank maintains an office or branch at
any time during Mr. Gossett's employment under the agreement. The agreement
also provides that during the term of his employment and for a period expiring
on the earlier to occur of one year after termination of his employment for any
reason and one year following the expiration of the agreement, Mr. Gossett will
not solicit employees of the bank or the Bancorp for employment and will not
solicit customers of the bank to any other financial institution.

Upon termination of Mr. Gossett's employment by the Bancorp or the bank
without cause or for any reason following a change in control of the Bancorp,
Mr. Gossett will be entitled to a lump sum severance payment equal to two times
his base salary in effect at the time, plus any accrued bonus, and all of his
outstanding options will immediately vest. If the Bancorp terminates Mr.
Gossett's employment as a result of abandoning its effort to organize the bank,
Mr. Gossett will be entitled to any earned but unpaid portion of his base
salary and a cash lump sum severance payment equal to the amount of his base
salary in effect at the time of the termination that would have been payable to
him for the period from the date of such termination to the later to occur of
July 27, 2000 and the date 120 days following the date of such termination.

Stock Warrants of Directors

Each of the directors has devoted substantial time and effort in the
activities necessary to organize the Bancorp and the bank, including attendance
at meetings over a period of several months. In addition, each of the
organizers has undertaken a substantial financial risk of loss in connection
with the funding of the organizational expenses of the Bancorp and the bank. In
consideration for these efforts and in recognition of these risks, upon
completion of this offering, each of the directors who purchases shares in this
offering will be granted, for no additional consideration, one warrant for each
share of common stock the director purchases in the offering, up to an
aggregate maximum for all directors of 210,115 shares. Each warrant will
entitle the director to purchase, at any time within ten years from the date
the bank opens for business, one additional share of our common stock at a
price of $10.00 per share. The warrants will not be immediately exercisable.
The right to exercise the warrants will vest for one-third of the shares
covered by the warrants on each of the first three anniversaries of the date
the bank opened for business, so long as the director has served continuously
as a director of the Bancorp and the bank from its opening until that
particular anniversary date. All of the warrants, however, will become vested
upon a change in control of the Bancorp or the bank, or sale of all or
substantially all of their assets.

Whether the grant of warrants will occur at all, and the term of the
warrants, are still to be approved by the Office of the Comptroller of the
Currency. One of the conditions for the Office of the Comptroller of the
Currency's approval is likely to be that the Bancorp has the right, upon notice
from any regulatory authority, to require immediate exercise or forfeiture of
the warrants if, in the opinion of the Office of the Comptroller of the
Currency, the exercise is reasonably necessary in order to inject additional
capital into the bank.

Director Liability and Indemnification

The articles of incorporation of the Bancorp contain a provision which,
subject to certain limited exceptions, limits the liability of a director to
the Bancorp or its shareholders for any breach of duty as a director. There is
no limitation of liability for:

. a breach of the director's duty of loyalty to the corporation or its
shareholders;

. an act or omission not undertaken in good faith;

. an act or omission which involves gross negligence, intentional
misconduct or a knowing violation of law;

. any transaction from which the director derives an improper personal
benefit; or

. as to any payments of a dividend or any other type of distribution that
is illegal under Section 33-8-330 of the South Carolina Business
Corporation Act of 1988.

In addition, if the South Carolina Business Corporation Act is amended to
authorize further elimination or limitation of the liability of a director,
then the liability of each director will be eliminated or limited to the
fullest extent permitted by such provisions, as so amended, without further
action by the shareholders, unless the law requires such action. The provision
does not limit the right of the Bancorp or its shareholders to seek injunctive
or other equitable relief not involving payments in the nature of monetary
damages.

The bylaws of the Bancorp provide that the Bancorp shall indemnify its
directors to the maximum extent provided by the South Carolina Business
Corporation Act. This protection is broader than the protection expressly
mandated in Section 33-8-520 of the South Carolina Business Corporation Act.
That statutory section provides that a company must indemnify a director or an
officer only to the extent that the director has been wholly successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that the person was a director or officer. This requirement
would include indemnifying directors against expenses, including attorney's
fees, actually and reasonably incurred in connection with the matter.

In addition to this mandatory indemnification right, our bylaws make
mandatory the indemnification permitted, but not mandated, by Section 33-8-510
of the South Carolina Business Corporation Act. Accordingly, under our bylaws,
the Bancorp shall indemnify a director where (a) the director conducted himself
or herself in good faith, (b) the director reasonably believed that conduct in
the director's official capacity with the Bancorp was either in the Bancorp's
best interest or was not opposed to the best interest of the Bancorp; and (c)
in the case of any criminal proceeding, the director had no reasonable cause to
believe the director's conduct was unlawful.

Our board of directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors,
subject to all of the accompanying conditions and obligations. The board of
directors intends to extend indemnification rights to all of its executive
officers.

The Securities and Exchange Commission has informed us that indemnification
for officers, directors, and controlling persons for liabilities arising under
the Securities Act of 1933 is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.

We have the power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee, or agent against any liability
asserted against him or incurred by him in any such capacity, whether or not we
would have the power to indemnify him against such liability under the bylaws.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth the number and percentage of outstanding
shares of common stock beneficially owned as of the date of this prospectus by
the officers and directors of the Bancorp, and the proposed officers and
directors of the bank. The following table also sets forth the anticipated
purchases by these individuals in this offering and the percentage of common
stock to be owned by each of them assuming completion of the minimum offering
of 630,000 shares.

The amounts in the table below include, for each individual, 50 shares of
common stock which were purchased by the individual prior to the offering at a
purchase price of $10.00 per share. The table does not include shares which may
be purchased by the individuals pursuant to their exercise of warrants that are
expected to be granted to them upon completion of the offering. For additional
information regarding the grant of these warrants, see "Management--Stock
Warrants of Directors."

Beneficial ownership, as reflected in the table, is determined in accordance
with the rules and regulations of the Securities and Exchange Commission. It
generally includes securities of which a person has or shares the power to vote
or to direct the vote, or has or shares the power to dispose or to direct the
disposition. A person is also deemed to be a beneficial owner of any security
of which that person has the right to acquire beneficial ownership within 60
days, including shares of common stock subject to currently exercisable stock
options or warrants. The percentage ownership has been calculated on the
assumption that the Bancorp has completed the minimum offering of 630,000
shares.

Shares Anticipated to Be Beneficially Owned
After the Offering
Percentage of
Name Number of Shares Total Shares
- ---- ----------------------- -------------------------

William B. Gossett........... 30,050 4.8%
Avery E. Cleland............. 10,050 1.6
Veronica C. Clardy........... 15,050 2.4
Louis O. Dore................ 10,050 1.6
Paul M. Dunnavant, III....... 10,050 1.6
Martha B. Fender............. 10,050 1.6
D. Martin Goodman............ 10,050 1.6
Edward J. McNeil, Jr......... 10,050 1.6
Frances K. Nicholson......... 10,050 1.6
J. Frank Ward................ 10,050 1.6
Bruce K. Wyles............... 10,050 1.6
----------------------- --------------------
Total...................... 135,550 21.7%
======================= ====================

TRANSACTIONS WITH MANAGEMENT

Transactions in the Ordinary Course of Business

Once the bank opens for business, it is anticipated that our directors,
officers and their affiliates, including members of their families or
businesses and other organizations with which they are associated, will have
banking and other transactions in the ordinary course of business with the
bank. It will be the policy of the bank that any loans or other transactions
with those persons or entities (a) will be made in accordance with applicable
law and the bank's lending policies, (b) will be made on substantially the same
terms, including price, interest rates and collateral, as those prevailing at
the time for comparable transactions with other unrelated parties of similar
standing, and (c) will not be expected to involve more than the normal risk of
collectibility or present other unfavorable features to the Bancorp and the
bank. In addition, all future transactions with our directors, officers and
their affiliates are intended to be on terms no less favorable than could be
obtained from an unaffiliated third party, and must be approved by a majority
of our directors, including a majority of the directors who do not have an
interest in the transaction.

Operating Facilities

The temporary office for the Bancorp and the bank is located at 500 Carteret
Street, Suite A, in downtown Beaufort, South Carolina. This office space,
consisting of approximately 500 square feet, is part of the executive offices
of Renaissance Marketing, LLC. This space is being provided to us at no charge
by Renaissance Marketing, LLC. Veronica C. Clardy, a director of the Bancorp,
is a principal and executive officer of Renaissance Marketing, LLC.

The Bancorp has entered into a contract to purchase from Hird Island
Investments, Inc. the 1.5 acres of real property on which our permanent banking
facility is to be built. The purchase price under the contract is $1 million.
Hird Island Investments, Inc., is owned 50 percent by Veronica C. Clardy and 50
percent by the spouse of Martha B. Fender. Ms. Clardy and Ms. Fender are
directors of the Bancorp and are proposed directors of the bank. The purchase
of this site is conditioned on our receipt of appraisals from two independent
third party appraisers which value the property at or above the purchase price
in the contract. Our board of directors approved this purchase by the unanimous
vote of all of the directors who had no interest in the transaction. Their
approval followed their determination that the contemplated purchase was on
terms no less favorable to the Bancorp than if the purchase was between the
Bancorp and unrelated third parties. The site being purchased is part of a six
acre tract that was acquired by Hird Island Investments, Inc. in October 1999
from two unrelated third parties. In connection with that earlier purchase, the
sellers' broker was a company that is wholly owned by Ms. Fender. Renaissance
Marketing, LLC acted as broker for Hird Island Investments, Inc. No broker
commissions or similar fees will be paid by any party in our acquisition of the
site from Hird Island Investments, Inc.

Funding by the Organizers

In order to fund various costs and expenses associated with the development
and organization of the Bancorp and the bank, we obtained a $90,000 line of
credit from GrandSouth Bank. As of November 30, 1999, approximately $60,000 was
outstanding under this line of credit. Each of the organizers has personally
guaranteed the line of credit. We intend to repay the line of credit with a
portion of the net proceeds from this offering of common stock. See "Use of
Proceeds."

In addition to the line of credit described above, each of the organizers
has advanced $10,000 pursuant to an Organizer Contribution Agreement to fund
various costs and expenses associated with the development and organization of
the Bancorp and the bank. The Bancorp intends to repay the $100,000 aggregate
amount advanced by the organizers pursuant to that agreement using a portion of
the net proceeds from this offering of common stock. See "Use of Proceeds."

Warrants

In consideration for their efforts in organizing the Bancorp and the bank,
and in recognition of financial risk of loss undertaken by each of them in
connection with the funding of the organizational expenses of the Bancorp and
the bank, upon completion of this offering, each of the directors who purchases
shares in this offering will be granted, for no additional consideration, one
warrant for each share of common stock the director purchases. Each warrant
will entitle the director to purchase, at any time within ten years from the
date the bank opens for business, one additional share of our common stock at a
price of $10.00 per share. See "Management--Stock Warrants of Directors."

DESCRIPTION OF SECURITIES

The authorized capital stock of the Bancorp is 12,000,000 shares, consisting
of 10,000,000 shares of common stock, no par value per share, and 2,000,000
shares of preferred stock, the par value, rights and preferences of which may
be designated as the board of directors may determine. As of the date of this
prospectus, 550 shares of common stock were outstanding and no shares of
preferred stock were outstanding.

Common Stock

Subject to the rights of the holders of any outstanding shares of preferred
stock and any restrictions that may be imposed by any lender to the Bancorp,
holders of common stock are entitled to receive ratably dividends, if any,
declared by the board of directors out of funds legally available for
dividends. See "Dividend Policy." In the event of the liquidation, dissolution
or winding up of the Bancorp, holders of common stock are entitled to share
ratably, based on the number of shares held, in the assets, if any, remaining
after payment of all the debts and liabilities of the Bancorp and the
liquidation preference of any outstanding series of preferred stock.

Holders of common stock are entitled to one vote per share for each share
held of record on any matter submitted to the holders of common stock for a
vote. Because holders of common stock do not have cumulative voting rights with
respect to the election of directors, the holders of a majority of the shares
of common stock represented at a meeting can elect all of the directors.
Holders of common stock do not have preemptive or other rights to subscribe for
or purchase any additional shares of capital stock issued by the Bancorp or to
convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock.

Preferred Stock

The authorized shares of preferred stock may be issued in one or more
series, and the board of directors is authorized, without further action by the
shareholders, to designate the rights, preferences, limitations and
restrictions of and upon shares of each series, including dividend, voting,
redemption and conversion rights. The board of directors also may designate par
value, preferences in liquidation, as well as any sinking fund terms and the
number of shares constituting any series or the designation of such series. The
Bancorp believes that the availability of preferred stock issuable in series
will provide increased flexibility for structuring possible future financings
and acquisitions, if any, and in meeting other corporate needs. It is not
possible to state the actual effect of the authorization and issuance of any
series of preferred stock upon the rights of holders of common stock until the
board of directors determines the specific terms, rights and preferences of a
series of preferred stock. However, the effects might include, among other
things, restricting dividends on the common stock, diluting the voting power of
the common stock, or impairing liquidation rights of such shares without
further action by holders of the common stock. In addition, the board of
directors is authorized at any time to issue preferred stock with voting,
conversion or other features that may have the effect of impeding or
discouraging a merger, tender offer, proxy contest, the assumption of control
by a holder of a large block of the securities of the Bancorp or the removal of
incumbent management. Issuance of preferred stock could also adversely affect
the market price of the common stock. The Bancorp has no present plan to issue
any shares of preferred stock.

Change of Control and Anti-takeover Effects

General. Our articles of incorporation and bylaws and South Carolina state
law contain provisions designed to enhance the ability of the board of
directors to deal with attempts to acquire control of the Bancorp. These
provisions may be deemed to have an anti-takeover effect and may discourage
takeover attempts which have not been approved by the board of directors. This
would include takeover attempts that some of our shareholders may deem to be in
their best interest. These provisions may also adversely affect the price that
a potential purchaser will be willing to pay for our common stock and deprive
you of the opportunity

to obtain a takeover premium for your shares. To the extent that takeover
attempts are discouraged, temporary fluctuations in the market price of the
common stock resulting from actual or rumored takeover attempts may be
inhibited. These provisions also could make the removal of incumbent management
more difficult and may permit a minority of our directors and the holders of a
minority of our outstanding voting stock to prevent, discourage or make more
difficult a merger, tender offer or proxy contest, even though the transaction
may be favorable to the interests of shareholders. These provisions could also
potentially adversely affect the market price of the common stock.

The following briefly summarizes protective provisions contained in the
articles of incorporation and South Carolina law and is not intended to be a
complete description of all the features and consequences of these provisions.
The following is qualified in its entirety by reference to the articles of
incorporation and the relevant provisions of South Carolina law.

Classified Board of Directors. Our articles of incorporation and bylaws
provide for a classified board of directors so that, as nearly as possible,
one-third of the board of directors is elected each year to serve a three-year
term. This classification would delay an attempt by dissatisfied shareholders
or anyone who obtains a controlling interest in the Bancorp to elect a new
board of directors, because, absent the removal, resignation or death of the
members of the Board, it would take three annual meetings of shareholders to
change fully the composition of the Board, and at least two annual meetings to
change a majority of the directors.

Authorized but Unissued Stock. The authorized but unissued shares of common
stock and preferred stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the board of directors to issue shares of stock to persons
friendly to existing management. This may have the effect of discouraging
attempts to obtain control of the Bancorp through a proxy contest, tender
offer, merger or otherwise, thereby protecting the continuity of current
management.

Evaluation of Acquisition Proposals. Our articles of incorporation expressly
permit the board of directors, when evaluating any proposed tender or exchange
offer, any merger, consolidation or sale of substantially all of the assets of
the Bancorp, or any similar extraordinary transaction, to consider (a) all
relevant factors including, without limitation, the social, legal, and economic
effects on the employees, customers, suppliers, and other constituencies of the
Bancorp and its subsidiaries, on the communities and geographical areas in
which the Bancorp and its subsidiaries operate or are located, and on any of
the business and properties of the Bancorp or any of its subsidiaries, and (b)
the consideration being offered, not only in relation to the then current
market price for the Bancorp's outstanding shares of capital stock, but also in
relation to the then current value of the Bancorp in a freely negotiated
transaction and in relation to the board of directors' estimate of the future
value of the Bancorp as an independent going concern. The board of directors
believes that these provisions are in the long-term best interests of the
Bancorp and its shareholders.

Advance Notice Requirements. Our bylaws set forth advance notice procedures
in connection with shareholder proposals at shareholder meetings and
nominations of directors, other than by the board of directors. Specifically,
notice of a shareholder proposal as well as a nomination for the election of
any director by a shareholder must be received by the Bancorp on or before 90
days prior to the shareholders' meeting at which the proposal or nomination is
to be considered. Proposals which fail to be made in accordance with the notice
requirements may be rejected by the Bancorp.

Director Nomination Requirements. Our bylaws require that any shareholder
proposing to nominate an individual for election as a director provide in the
notice of nomination (a) a representation of the shareholder's status as a
record holder of common stock and the shareholder's intent to appear at the
meeting to make the nomination; (b) a description of any arrangements between
the shareholder and the nominee regarding the making of the nomination; (c) the
name of and other biographical information regarding the nominee; and (d) a
statement that the nominee has consented to the nomination. The chairman of any
shareholders' meeting may,

for good cause shown, waive the operation of these provisions. These provisions
could reduce the likelihood of third-party nominations of directors.

Supermajority Voting on Significant Transactions. South Carolina law
provides that, unless a corporation's articles of incorporation provide for a
higher or lower vote, significant corporation actions, such as a merger, share
exchange or sale of all or substantially all of the corporation's assets, must
be approved by the holders of two-thirds of the shares entitled to vote on the
matter. Our articles of incorporation do not provide for a different vote
requirement. Consequently, a two-thirds shareholder vote is required to approve
any of such transactions involving the Bancorp.

Control Share Acquisitions. We are currently subject to the South Carolina
control share acquisitions statute which is designed to afford shareholders of
public corporations in South Carolina and meet share ownership requirements set
forth in the statute protection against acquisitions in which a person, entity
or group seeks to gain voting control of the public corporation. With
enumerated exceptions, the statute provides that shares of a public corporation
acquired within certain specific ranges will not possess voting rights in the
election of directors unless the voting rights are approved by a majority vote
of the public corporation's disinterested shareholders. Disinterested shares
are shares other than those owned by the acquiring person or by a member of a
group with respect to a control share acquisition, or by any officer of the
corporation or any employee of the corporation who is also a director. The
specific acquisition ranges that trigger the statute are: acquisitions of
shares possessing one-fifth or more but less than one-third of all voting
power; acquisitions of shares possessing one-third or more but less than a
majority of all voting power; or acquisitions of shares possessing a majority
of more of all voting power. Under certain circumstances, the statute permits
the acquiring person to call a special shareholders meeting for the purpose of
considering the grant of voting rights to the holder of the control shares.
Unless otherwise provided in a corporation's articles of incorporation or
bylaws before a control share acquisition has occurred, in the event the shares
acquired in a control share acquisition are accorded full voting rights and the
acquiring person has acquired a majority or more of all voting power, then all
shareholders of the public corporation have dissenter's rights to receive fair
value for their shares. There is currently no provision in our articles or our
bylaws limiting or eliminating such rights. The statute also enables a
corporation to provide the redemption under certain circumstances of control
shares with no voting rights. Among the acquisitions specifically excluded from
the statute are acquisitions consummated pursuant to a merger or plan of share
exchange in compliance with law if the public corporation is a party to the
agreement of merger or plan or share exchange. A corporation may opt-out of the
statute by so providing in its articles of incorporation. We have not opted out
of the statute.

Business Combinations with Interested Shareholders. We are also currently
subject to the South Carolina business combination statute which, with
enumerated exceptions, places restrictions on mergers, consolidations, sales of
assets, liquidations, reclassifications or other similar kinds of transactions
with or between a public corporation in South Carolina and any person who owns,
directly or indirectly, 10% or more of the voting power of the outstanding
voting shares of the public corporation. The statute provides that the public
corporation may not engage in any business combination with any 10% or greater
shareholder of the corporation for a period of two years following the date the
person became a 10% shareholder unless before the date the person became a 10%
shareholder either (a) the business combination or (b) the purchase of shares
that first made the shareholder a 10% shareholder is approved by a majority of
the "disinterested" members of the board of directors of the corporation. A
member of the board is "disinterested" if the director is not a present or
former officer or employee of the public corporation or a related corporation.
The statute further provides that, subject to various exceptions, a public
corporation may not engage at any time in a business combination with a 10%
shareholder unless the business combination complies with all of the
requirements of the public corporation's articles of incorporation and either
(a) the business combination is approved by the board of directors of the
public corporation before the date the shareholder first became a 10%
shareholder, or the purchase of shares made by the 10% shareholder on the date
the shareholder first became a 10% shareholder has been approved by the board
of directors of the public corporation before the date the shareholder first
became a 10% shareholder, (b) the business combination is approved by the
affirmative vote of the holders of a

majority of the outstanding voting shares not beneficially owned by the 10%
shareholder proposing the business combination at a meeting called for that
purposes no earlier than two years after the date the shareholder first became
a 10% shareholder, or (c) the business combination meets specified fair price
and form of consideration requirements. A company may opt-out of the business
combination statute by so providing in its articles of incorporation. We have
not opted out of the statute.

Transfer Agent and Registrar

Unless we otherwise become required by law or administrative action to
appoint an independent transfer agent and registrar, or our board of directors
otherwise deems it appropriate to do so, we will act as transfer agent and
registrar for our common stock.

Shares Eligible for Future Sale

Upon completion of the offering, we will have a minimum of 630,550 shares
and a maximum of 1,000,550 shares of common stock outstanding. Except for the
550 shares purchased originally by the directors and any shares held by
affiliates, all of the shares will be freely tradeable without restriction or
registration under the Securities Act of 1933. Affiliates of the Bancorp will
need to comply with the resale limitations of Rule 144 under the Securities Act
of 1933. Rule 144 defines an "affiliate" of a company as a person who directly,
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the company. Affiliates of a company
generally include its directors, officers and principal shareholders. An
expected total of 135,000 shares owned directly or indirectly by our directors
will be eligible for public sale under Rule 144 following the offering.

Purchasers of the common stock in this offering or on the open market may
resell those shares immediately, although as noted above, affiliates of the
Bancorp will be subject to the volume and other limitations of Rule 144. In
general, under Rule 144, as currently in effect, affiliates will be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of one percent of the outstanding shares of common stock or the average
weekly trading volume during the four calendar weeks preceding his or her sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about the
Bancorp. Rule 144 also requires persons holding restricted securities to hold
the shares for at least one year prior to resale. The 550 shares originally
purchased by the directors constitute restricted securities and will be subject
to this resale limitation.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for the
Bancorp by Nexsen Pruet Jacobs & Pollard, LLP, Columbia, South Carolina.

EXPERTS

The financial statements of the Bancorp as of September 30, 1999, included
in this prospectus have been examined by Francis and Company, CPAs, independent
public accountants, as stated in their opinion, and have been so included in
reliance upon the opinion, which has been rendered upon the authority of said
firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Bancorp has filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act of 1933. That
registration statement covers the common stock offered in this offering. As
permitted by the rules and regulations of the Securities and Exchange
Commission, this prospectus does not contain all of the information contained
in that registration statement and its exhibits, and references made to that
registration statement and its exhibits for further information concerning and
the securities offered hereby.

Each statement contained in this prospectus as to the contents of a document
filed as an exhibit to the Registration Statement is qualified by reference to
that exhibit for a complete statement of its terms and conditions. Copies of
this materials, as well as periodic reports and information filed by the
Bancorp, can be obtained upon payment of the fees prescribed by the Securities
and Exchange Commission, or may be examined at the offices of the Securities
and Exchange Commission without charge, at the public reference section of the
SEC, Room 1024, 450 Fifth Street, NW, Washington, DC 20549.

The SEC also maintains a website that contains reports, proxy and
information statements and other information regarding registrants such as the
Bancorp that file electronically with the Securities and Exchange Commission.
The address of the SEC's website is http://www.sec.gov.

We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC You should rely only on information in
this prospectus and in our related registration statement in making an
investment decision. If other available information is inconsistent with
information in this prospectus, including information in public files or
provided by the Office of the Comptroller of the Currency and the FDIC, such
other information is superseded by the information in this prospectus.
Projections appearing in the applications to such agencies were based on
assumptions that the organizers believed were reasonable at the time, but which
may have changed or may otherwise be wrong. The Bancorp and the bank
specifically disclaim all projections for purposes of this prospectus and
caution prospective investors against placing reliance on them for purposes of
making an investment decision.

INDEX TO FINANCIAL STATEMENTS

Page Number
-----------

Independent Auditors' Report................................................ F-2

Balance Sheet as of September 30, 1999...................................... F-3

Statement of Operations
from inception, December 10, 1998 through September 30, 1999 and from
January 1, 1999 through September 30, 1999................................ F-4

Statement of Changes in Stockholders' Equity
from inception, December 10, 1998 through September 30, 1999 and from
January 1, 1999 through September 30, 1999................................ F-5

Statement of Cash Flows
from inception, December 10, 1998 through September 30, 1999 and from
January 1, 1999 through September 30, 1999................................ F-6

Notes to Financial Statements............................................... F-7

F-1

INDEPENDENT AUDITOR' REPORT

To the Board of Directors
Islands Bancorp (In organization)
Beaufort, South Carolina

We have audited the accompanying balance sheet of Islands Bancorp (in
organization) Beaufort, South Carolina, (the "Company") a development stage
enterprise, as of September 30, 1999 and the related statements of operations,
changes in stockholders' equity and cash flows from inception, December 10,
1998 through September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Islands Bancorp (in
organization) as of September 30, 1999, and the results of its operations and
its cash flows for the period from inception, December 10, 1998 through
September 30, 1999, in conformity with generally accepted accounting
principles.

/s/ FRANCIS & CO., CPAs
Atlanta, Georgia
October 10, 1999

F-2

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Balance Sheet

September 30,
1999
-------------

ASSETS

Cash................................................................... $28,266
Property and equipment, net............................................ 29,975
Deferred registration costs............................................ 20,900
Other assets........................................................... 1,888
-------
Total Assets........................................................... $81,029
=======
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Current liabilities
Accounts payable..................................................... $ 12,363
Advances from organizers............................................. 100,000
Notes payable........................................................ 40,484
--------
Total current liabilities.......................................... $152,874
--------
Long term liabilities
Notes payable........................................................ $ 19,514
--------
Total long term liabilities........................................ $ 19,514
--------
Commitments and contingencies (Note 3)

Stockholders' Equity (Note 1):
Common stock, zero par value,
10,000,000 shares authorized,
550 shares issued and outstanding................................... $ 5,500
(Deficit) accumulated during
the development stage............................................... (96,832)
--------
Total Stockholders' Equity......................................... (91,332)
--------
Total Liabilities and
Stockholders' Equity................................................. $ 81,029
========

Refer to notes to the financial statements.

F-3

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Statement of Operations

From inception, For the
December 10, 1998 nine-month
through period ended
September 30, September 30,
1999 1999
----------------- -------------

Revenues:
Interest income................................ $ -- $ --
-------- --------
Total revenues................................ -- --
-------- --------
Expenses:
Organizational expenses........................ $ 66,351 $ 61,101
Salaries and benefits.......................... 22,299 22,299
Depreciation expense........................... 1,764 1,764
Other expenses................................. 6,418 6,418
-------- --------
Total expenses................................ $ 96,832 $ 91,582
-------- --------
Net (loss)...................................... $(96,832) $(91,582)
======== ========
Basic (loss) per share (Note 2) ................ $(176.06) $(166.51)
======== ========

Refer to notes to the financial statements.

F-4

Statement of Changes in Stockholders' Equity
from inception, December 10, 1998 through September 30, 1999

Common (Deficit)
Stock Accumulated
zero Additional During Total
Par Paid-in- the Development Stockholders'
Value Capital Stage Equity
------ ---------- --------------- -------------

Net (loss), 1998................ $ -- $ -- $ (5,250) $ (5,250)
------ ---- --------- ---------
Balance,
December 31, 1999.............. $ -- $ -- $ (5,250) $ (5,250)
====== ==== ========= =========
Issuance of 550 shares
of Common stock................ $5,500 $ -- $ -- $ 5,500
Net (loss) for the
nine-month period ended
September 30, 1999............. -- -- (91,582) (91,582)
------ ---- --------- ---------
Balance,
September 30, 1999............. $5,500 $ -- $ (96,832) $ (91,332)
====== ==== ========= =========

Refer to notes to the financial statements.

F-5

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Statement of Cash Flows

From inception, For the
December 10, 1998 nine-month
through period ended
September 30, 1999 September 30, 1999
------------------ ------------------

Cash flows from pre-operating activities
of the development stage:
Net (loss)............................. $(96,832) $(91,582)

Adjustments to reconcile net (loss) to net cash used
by pre-operating activities of the development stage:
Increase in registration costs........................ (20,900) (20,900)
Increase in accounts payable.......................... 12,363 12,363
(Increase) in other assets............................ (1,888) (1,888)
Depreciation expense.................................. 1,764 1,764
---------- ----------
Net cash used by pre-operating activities of the
development stage..................................... $ (105,493) $ (100,243)
---------- ----------
Cash flows from investing activities:
Purchase of fixed assets............................... $ (31,739) $ (31,739)
---------- ----------
Net cash used in investing activities.................. (31,739) $ (31,739)
---------- ----------
Cash flows from financing activities:
Issuance of common stock............................... $ 5,500 $ 5,500
Advances from organizers............................... 100,000 90,000
Increase in notes payable.............................. 59,998 59,998
---------- ----------
Net cash provided from financing activities............ $ 165,498 $ 155,498
---------- ----------
Net increase in cash................................... $ 28,266 $ 23,516
Cash, beginning of period.............................. -- 4,750
---------- ----------
Cash, end of period.................................... $ 28,266 $ 28,266
========== ==========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest............................................... $ 61 $ 61
========== ==========
Income taxes........................................... $ -- $ --
========== ==========

Refer to notes to the financial statements.

F-6

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Notes to Financial Statements
September 30, 1999

Note 1--Summary of Organization

Islands Bancorp (in organization) (the "Company") is a proposed one-bank
holding company with respect to a de novo bank, Islands Community Bank, N.A.,
Beaufort, South Carolina (the "Bank"). Prior to the Company's incorporation on
July 23, 1999, a group of organizers, on December 10, 1998 formed a
partnership, NBB Partnership (the "Partnership"), to facilitate in the initial
process of organizing and forming both the Company and the Bank. All assets,
liabilities, rights, revenues and expenses acquired, incurred or undertaken by
the Partnership from inception have been transferred, by mutual agreement of
the Board of Directors of the Company and the partners of the Partnership, to
the Company. Accordingly, all financial transactions undertaken by the
Partnership from inception until July 23, 1999 are reflected in the Company's
financial statements as of September 30, 1999.

The Company filed applications with the Office of the Comptroller of the
Currency (the "OCC") to charter the Bank and with the Federal Deposit
Insurance Corporation (the "FDIC") to insure deposits up to $100,000 per
depositor. Once preliminary approvals on the above applications are obtained,
an application for prior approval to form a bank holding company will be filed
with the Federal Reserve Board (the "FRB").

The Company is authorized to issue up to 10.0 million shares of its zero
par value per share common stock ("Common Stock"). Each share is entitled to
one vote and shareholders have no preemptive, cumulative voting or conversion
rights. The organizers capitalized the Company by acquiring 550 shares of the
Company's Common Stock for an aggregate amount of $5,500. The organizers
intend to purchase additional shares of Common Stock in the public offering.

The Company intends to file a Registration Statement on Form SB-2 with the
Securities and Exchange Commission offering for sale a minimum of 630,000 and
maximum of 1,000,000 shares of its zero par value Common Stock (the
"Offering"). The sales price for each share of Common Stock is $10.00. All
subscription proceeds will be held by an Escrow Agent pending acceptance of
subscriptions, completion of the Offering, and the receipt of preliminary
approvals from the OCC, FDIC and the FRB. If the sale of the minimum (630,000)
shares of Common Stock is not accomplished by the expiration date, as
extended, all subscriptions will be canceled and all proceeds returned,
without interest, to the subscribers.

If the sale of the minimum (630,000) shares of Common Stock is accomplished
and all preliminary regulatory approvals obtained, the Company will capitalize
the Bank and commence banking operations.

The Company is also authorized to issue of up to 2.0 million shares of
Preferred Stock. The Company's Board of Directors may, without further action
by the shareholders, direct the issuance of Preferred Stock for any proper
corporate purpose with preferences, voting powers, conversion rights,
qualifications, special or relative rights and privileges which could
adversely affect the voting power or other rights of shareholders of Common
Stock. As of September 30, 1999, there were no shares of the Company's
Preferred Stock issued or outstanding.

The Company's Articles of Incorporation and Bylaws contain certain
provisions that might be deemed to have potential defensive "anti takeover"
effects. These certain provisions include: (i) provisions relating to meetings
of shareholders which limit who may call meetings and what matters will be
voted upon; (ii) the ability of the Board of Directors to issue additional
shares of authorized Preferred Stock without shareholder approval, thus
retaining the ability to dilute any potential acquirer attempting to gain
control by purchasing Company stock; (iii) a staggered Board of Directors,
limiting the ability to change the members of the Board in a timely manner,
and (iv) a provision that requires two-thirds of the shareholders to approve
mergers and similar transactions, and amendments to the articles of
incorporation.

F-7

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Notes to Financial Statements
September 30, 1999

The organizers of the Company will receive one warrant, at no additional
cost, for each share of Common Stock purchased by that organizer in the
Offering. Each warrant entitles its holder to purchase one share of the
Company's Common Stock for $10.00 for a period of ten years from the date the
Bank opens for business. The warrants will vest equally on each of the first
three anniversaries of the date which the Bank opens for business, and may be
exercised either in whole or in part. All warrants are subject to approval by
the banking regulatory agencies.

The Company is a development stage enterprise as defined by the Financial
Accounting Standards Board Statement No. 7, "Accounting and Reporting by
Development Stage Enterprises," as it devotes substantially all its efforts to
establishing a new business, its planned principal operations have not
commenced and there has been no significant revenue from the planned principal
operations.

Note 2--Summary of Significant Accounting Policies

Basis of Accounting. The accounting and reporting policies of the Company
conform to generally accepted accounting principles and to general practices in
the banking industry. The Company uses the accrual basis of accounting by
recognizing revenues when they are earned and expenses in the period incurred,
without regard to the time of receipt or payment of cash. The Company has
adopted a fiscal year that ends on December 31, effective for the period ending
December 31, 1999.

Organizational Expenses. Organizational costs are costs that have been
incurred in the expectation that they will generate future revenues or
otherwise benefit periods after the Company reaches the operating stage.
Organizational costs generally include incorporation, legal and accounting fees
incurred in connection with establishing the Company. In accordance with recent
accounting pronouncements, all organizational expenses have been expensed when
incurred.

Deferred Registration Costs. Deferred registration costs are deferred and
incremental costs incurred by the Company in connection with the underwriting
and issuance of its own Common Stock. Deferred registration costs do not
include any allocation of salaries, overhead or similar costs. In a successful
offering, deferred registration costs are deducted from the Company's Common
Stock account. Registration costs associated with an unsuccessful offering are
charged to operations in the period during which the offering is deemed
unsuccessful.

Income Taxes. The Company will be subject to taxation whenever taxable
income is generated. As of September 30, 1999, no income taxes had been accrued
since no taxable income had been generated.

Basic (Loss) Per Share. Basic loss per share of $(176.06) is based on 550
shares outstanding for the period from inception, December 10, 1998 through
September 30, 1999. Note that the above result may not be indicative of future
performance primarily due to (i) the fact that the number of outstanding shares
will increase significantly and (ii) planned principal operations have not
commenced.

F-8

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Notes to Financial Statements
September 30, 1999

Note 2--Summary of Significant Accounting Policies (continued)

Statement of Cash Flows. The statement of cash flows was prepared using the
indirect method. Under this method, net loss was reconciled to net cash flows
from pre-operating activities by adjusting for the effects of current assets
and short term liabilities.

Note 3--Commitments and Contingencies

In connection with the Company's formation and the organization of its
subsidiary Bank, the Company has entered into two separate agreements with a
bank consulting firm and an accounting firm. The consulting firm's
responsibilities are to assist the organizers in preparing and filing all
applications with the Bank's regulatory authorities (OCC, FDIC, FRB). The
accounting firm's responsibilities are to perform an audit and prepare a report
on the Company's financial statements as of September 30, 1999. The aggregate
cost of the above services is estimated to approximate $55,000. The Company
also engaged a law firm to prepare and file all organizational and
incorporation papers, as well as prepare a Registration Statement on Form SB-2.
The law firm is compensated for its services based on an hourly basis.

On July 27, 1999, the Company entered into an employment agreement (the
"Agreement") with the proposed president and chief executive officer (the
"CEO") of both the Company and the Bank. The Agreement covers a period of five
years with a renewal option for an additional two-year period. The initial
annual base salary is $135,000, and becomes $130,000 effective August 1, 2000.
The CEO is also entitled to receive a bonus of $10,000 upon opening of the
Bank, which bonus may increase to $27,500 based on other factors considered by
the Company's Board of Directors. For each year following the first full
calendar year of the Bank's operations, the CEO is also entitled to a bonus of
five percent of the Bank's net income if the board of directors determines the
bonus is appropriate in light of its analysis of various performance criteria.
Additionally, when a stock option plan is adopted, the CEO will be granted
options to purchase Company's shares equal to three percent of the number of
shares sold in the Offering. The Agreement provides for other customary
benefits such as health and life insurance, retirement benefits, club dues, use
of an automobile and relocation expenses. The Agreement also includes a non-
compete clause prohibiting the CEO, once he ceases to serve in the Company,
from competing against the Company and/or its subsidiary Bank for a certain
period of time and within certain geographical boundaries.

On September 7, 1999, the Company borrowed under an unsecured line of credit
arrangement, $90,000 at a prime rate of interest for a period of ninety days.
As of September 30, 1999, $30,000 was outstanding on the above line.

On August 6, 1999, the Company borrowed $31,739 to purchase an automobile.
The loan, which is secured by the above automobile, amortizes over thirty six
months at an interest rate of 0.9 percent. The outstanding balance on this loan
as of September 30, 1999 was $29,998.

The organizers advanced $10,000 each or $100,000 in the aggregate to the
Company in order to fund a portion of the pre-operating activities. The
advances are interest-free and will be repaid only after the successful
completion of the minimum Offering (630,000 shares) is accomplished.

Note 4--Related Party Transactions

Please refer to Note 1 regarding all assets, liabilities, rights, revenues
and expenses undertaken by the Partnership, all of which have been assumed by
and transferred to the Company.

F-9

Islands Bancorp (in organization)
(A Development Stage Enterprise)
Notes to Financial Statements
September 30, 1999

Please refer to Note 1 for a discussion concerning the organizers' warrants.

Please refer to Note 3 concerning interest-free advances made by the
organizers as well as a description of the CEO's employment Agreement.

F-10

SUBSCRIPTION OFFER FORMS

Two Subscription Offer Forms are attached hereto. Any prospective investor
desiring to purchase common stock should complete and execute one Subscription
Offer Form and mail or deliver it, together with full payment, to:

Islands Bancorp
500 Carteret Street, Suite A
Beaufort, South Carolina 29902
Attention: William B. Gossett

If you ordered through a broker-dealer, please deliver a completed
Subscription Offer Form to your account representative.

Payments for common stock subscribed may be made by check, draft or money
order payable to "The Bankers Bank--Islands Bancorp Escrow Account."
Subscribers should carefully read the terms and conditions contained in the
Subscription Offer Form before subscribing for common stock. Any questions
concerning subscriptions or the offering may be directed to the Bancorp at
(843) 470-9962.

Stock will be registered in the name of the subscriber as that name appears
on the Subscription Offer Form. Stock ownership must be registered in one of
the following ways:

Individual Subscribers

In completing the name of the investor on the Subscription Offer Form,
please include the investor=s first name in full (instead of using only an
initial), middle initial and last name. Please omit words of limitation that do
not affect ownership rights, such as "special account," "single man," and
"personal property," etc.

Joint Subscribers

Joint ownership of stock by two or more persons will be inscribed on the
certificate as either Joint Tenants, or Tenants in Common, as indicated by the
investor. On the Subscription Offer Form, names should be joined by the word
"and," and not by the word "or." Please omit titles such as "Mrs.," "Dr.," etc.
The designation "Joint Tenancy with Right of Survivorship and not as Tenants in
Common" may be specified to identify two or more owners where ownership is
intended to pass automatically to the surviving owner(s). The designation
"Tenants in Common" may also be specified to identify two or more owners. When
stock is held as tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All joint owners must agree to the transfer or sale of
shares held in this form of ownership. Please consult your attorney for full
details regarding the legal effect of joint ownership.

Entity Subscribers

Stock may be held by corporations or partnerships. In that case, please
include the entire official name of the entity, including designations such as
"Inc.," "Co.," "Ltd.," etc.

IRA and Retirement Accounts

In most cases, you may use funds in an IRA or other retirement account to
purchase the common stock. If you wish to purchase common stock through your
IRA or other retirement account, please contact your own broker-dealer.

Uniform Transfers to Minors

Stock may be held in the name of a custodian for a minor under the Uniform
Transfers to Minor Act. There may only be one custodian and one minor
designated on a stock certificate. The standard abbreviation of custodian is
"CUST," while the description "Uniform Transfers to Minors Act" is abbreviated
"UTMA." For example, stock held by Mary B. Smith as custodian for John L.
Smith under the South Carolina Uniform Transfers to Minors Act will be
abbreviated: MARY B. SMITH CUST JOHN L. SMITH UTMA.

Fiduciaries

Information provided with respect to stock to be held in a fiduciary
capacity must contain the following:

1.The name(s) of the fiduciaries.

2. The fiduciary capacity, either as Administrator, Conservator, Committee,
Executor, Trustee, Personal Representative, or Custodian.

3. The type of document governing the fiduciary relationship. Generally,
the relationships are either a form of trust agreement or court order.
Without the existence of a document establishing a fiduciary
relationship, the stock may not be registered in a fiduciary capacity.

4. The date of the document governing the relationship, except with respect
to a trust created by a will.

5. Either the name of the beneficiary, or the name of the maker, donor, or
testator.

Example: JOHN Q. PUBLIC, TRUSTEE FOR MARY Q. PUBLIC
UNDER AGREEMENT DATED 9/1/95.

ALL INFORMATION REQUESTED ON THE SUBSCRIPTION OFFER FORM IS IMPORTANT AND
SHOULD BE COMPLETED.

THE SECOND COPY OF THE SUBSCRIPTION OFFER FORM SHOULD BE RETAINED FOR YOUR
RECORDS.

For Internal Use (Do Not Fill In) Paid with Subscription $
---------------
No of Shares Requested Refund (if any) $
------------- ---------------
No. of Shares Accepted Balance Due (if any) $
------------- ---------------

SUBSCRIPTION OFFER FORM

ISLANDS BANCORP

Beaufort, South Carolina

The undersigned, having received and reviewed the prospectus dated ,
2000, of Islands Bancorp (the "Bancorp"), a South Carolina corporation and the
holding company for the proposed Islands Community Bank, N.A. (in
organization), and in sole reliance on the information contained therein,
hereby subscribes for the number of shares of the common stock, no par value
per share, of the Bancorp (the "Common Stock") indicated below at a purchase
price of $10.00 per share. The minimum subscription is 100 shares. No one
person may purchase that number of shares which when added to shares of the
Bancorp already owned, would equal more than 4.99 percent of the Bancorp's
issued and outstanding shares after the offering. The Bancorp reserves the
right to waive that restriction or otherwise to limit or restrict the amount of
shares that may be purchased by any individual or group.

The subscription is payable in United States dollars by check, bank draft or
money order payable to "The Bankers Bank--Islands Bancorp Escrow Account" in
the amount indicated below, representing the payment of $10.00 per share
multiplied by the number of shares of common stock subscribed. The total
subscription price must be paid at the time this Subscription Offer Form is
executed.

In connection with this subscription, the undersigned acknowledges and
agrees that:

1. This Subscription Offer may not be withdrawn, cancelled, terminated or
revoked once it is tendered to the Bancorp, and this Subscription Offer
shall survive the death or disability of the undersigned.

2. The Bancorp shall have the right to accept or reject a subscription in whole
or in part, for any reason whatsoever. The Bancorp also reserves the right
to cancel any accepted Subscription Offer for any reason, or for no reason,
until the date the shares purchased through this offering are issued. If
this subscription is accepted in part, the undersigned agrees to purchase
the accepted number of shares subject to the terms of this Subscription
Offer. This subscription is nonassignable and nontransferable, except with
the written consent of the Bancorp.

3. All terms of the offering as described in the prospectus are incorporated
herein by reference, and this Subscription Offer is made in accordance with
and subject to those terms and conditions. The undersigned has read the
prospectus and understands it, or has had it explained to him/her by his/her
legal representative. By his/her signature below, the undersigned
acknowledges and confirms that, in making a decision to purchase common
stock of the Bancorp, the undersigned has relied solely upon the information
contained in the prospectus, and confirms that this Subscription Offer is
made in accordance therewith.

4. If the undersigned is an individual, the undersigned is a bona fide resident
of the state listed in the undersigned's address indicated below, and the
undersigned has no present intention of moving from that state of residency.
If the undersigned is an entity, the undersigned is organized and its
principal office is located in the state listed in the undersigned's address
herein, and the undersigned has no present intention of changing the state
of its organization or moving its principal office.

5. SUBSTITUTE FORM W-9: Under penalties of perjury, I certify that (1) the
Social Security Number or Taxpayer Identification Number given below is
correct; and (2) I am not subject to backup withholding. (Instruction: You
must cross out Item (2) directly above if you have been notified by the
Internal Revenue Service that you are subject to backup withholding because
of underreporting interest or dividends on your tax return and you have not
subsequently been notified by the Internal Revenue Service that you are no
longer subject to backup withholding.)

THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR PERSON AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE ENTIRE AMOUNT INVESTED.

The undersigned has signed this Subscription Offer on the date indicated
below, and hereby requests that certificates evidencing shares of common stock
of the Bancorp purchased pursuant to this Subscription Offer be registered in
the name and form of ownership described below.

- ---------------------------- ---------------------------------------------
Number of Shares Subscribed: Print or type the full name or names in which
(Minimum 100 shares) stock is to be registered

$
- ---------------------------- ---------------------------------------------
Total subscription price at Signature of Subscriber
$10.00 per share

Date:
- ---------------------------- ---------------------------------------------
Signature of Subscriber

SUBSCRIBER RESIDENCE
ADDRESS: IF SUBSCRIBER IS AN ENTITY:

By:
- ---------------------------- ---------------------------------------------
Subscriber's Street Address (signature of authorized representative
(P.O Box Not Acceptable)

Print Name:
- ---------------------------- ---------------------------------------------
City/State/Zip Code

Title or Office:
---------------------------------------------

- ---------------------------- ---------------------------------------------
Area Code and Telephone Social Security or Federal Taxpayer
Number Identification Number

Legal form of ownership desired (check one):
[ ] Individual [ ] Join Tenants With Right of [ ] Other (describe)
Survivorship

[ ] Tenants in Common [ ] Uniform Transfers to
Minors Act

If purchasing through a broker/dealer, please complete the following:

Name of Broker/Dealer: Street Address:
---------------- ----------------------
Name of Account Rep: City, State, Zip:
------------------ --------------------
Account Number: Phone Number ( )
----------------------- --------------------

Complete all blanks on this Subscription Offer Form, make check, draft or money
order payable in the amount of $10.00 for each share subscribed payable to "The
Bankers Bank--Islands Bancorp Escrow Account" and mail or deliver this executed
Subscription Offer Form and check, draft or money order to:

ISLANDS BANCORP
500 Carteret Street, Suite A
Beaufort, South Carolina 29902
Attention: William B. Gossett

Any questions concerning subscriptions or the offering may be directed to the
above address or to (843) 470-9972.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Except as hereinafter set forth, there is no statute, charter provision,
bylaw, contract or other arrangement under which any controlling person,
director or officer of the Registrant is insured or indemnified in any manner
against liability which such person may incur in such person's capacity as
such.

The bylaws of the Registrant provide that the Registrant shall indemnify its
directors to the maximum extent provided by the South Carolina Business
Corporation Act. This protection is broader than the protection expressly
mandated in Section 33-8-520 of the South Carolina Business Corporation Act.
That statutory section provides that a company must indemnify a director or an
officer only to the extent that the director has been wholly successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that the person was a director or officer. This requirement
would include indemnifying directors against expenses, including attorney's
fees, actually and reasonably incurred in connection with the matter.

In addition to this mandatory indemnification right, the Registrant's bylaws
make mandatory the indemnification permitted, but not mandated, by Section 33-
8-510 of the South Carolina Business Corporation Act. Accordingly, under our
bylaws, the Registrant shall indemnify a director where (a) the director
conducted himself or herself in good faith, (b) the director reasonably
believed that conduct in the director's official capacity with the Registrant
was either in the Registrant's best interest or was not opposed to the best
interest of the Registrant; and (c) in the case of any criminal proceeding, the
director had no reasonable cause to believe the director's conduct was
unlawful.

The Securities and Exchange Commission has informed the Registrant that
indemnification for officers, directors, and controlling persons for
liabilities arising under the Securities Act of 1933 is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

The Registrant has the power to purchase and maintain insurance on behalf of
any person who is or was a director or officer against any liability asserted
against him or incurred by him in any such capacity, whether or not we would
have the power to indemnify him against such liability under the bylaws.

Item 25. Other Expenses of Issuance and Distribution.

The expenses in connection with the sale of the shares of common stock
(excluding any selling agent commissions) are estimated as follows:

Securities and Exchange Commission registration fee............. $ 3,365
Printing and engraving expenses................................. 30,000
Legal fees and expenses......................................... 50,000
Accounting fees and expenses.................................... 4,000
Blue Sky fees and expenses...................................... 1,000
Miscellaneous................................................... 11,635
--------
TOTAL.......................................................... $100,000
========

II-1

Item 26. Recent Sales of Unregistered Securities.

In connection with its initial capitalization, on August 17, 1999, the
Registrant issued a total of 50 shares of its common stock to each of its 11
directors at a purchase price of $10.00 per share, for a total purchase price
of $5,500 for an aggregate of 550 shares. Each purchaser represented the
purchaser=s intention to acquire the securities for investment purposes only
and not for resale or distribution. Each of the purchasers was a director
and/or officer of the Registrant at the time of purchase, and the Registrant
believes that each purchaser had access to detailed information with respect to
the Registrant and possessed requisite financial sophistication. All of such
shares were issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act, and Rule 506 under Regulation D promulgated
thereunder, as transactions, not involving a general solicitation, in which the
purchasers were purchasing for investment.

Item 27. Exhibits.

Number Exhibit
- ------ -------

3.1 Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4.1 Specimen common stock certificate. See Exhibits 3.1 and 3.2 for provisions in the
Articles of Incorporation and Bylaws of the Registrant defining the rights of
holders of common stock.
5.1 Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
10.1 Employment Agreement dated as of July 27, 1999 between the Registrant and William
B. Gossett.
10.2 Form of Organizers Warrant Agreement.
10.3 Assignment and Assumption Agreement dated August 25, 1999, between the Registrant
and NBB General Partnership.
10.4 Contract of Sale dated December 5, 1999 between the Registrant and Hird Island
Investments, Inc.
10.5 Escrow Agreement dated November 23, 1999 between the Registrant and The Bankers
Bank.
10.6 Loan Agreement dated September 7, 1999 between the Registrant and GrandSouth
Bank, as extended on December 7, 1999, and form of Guaranty Agreement issued to
GrandSouth Bank by each of the organizers of the Registrant.
23.1 Consent of Nexsen Pruet Jacobs & Pollard, LLP. (contained in Exhibit 5.1)
23.2 Consent of Francis & Co., CPAs.
24.1 Powers of Attorney (filed as part of the signature page to the registration
statement).
27.1 Financial Data Schedule (for electronic filing purposes).

II-2

Item 28. Undertakings.

The Registrant hereby undertakes to do the following:

(a) The Registrant will:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.

(iii) Include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.

II-3

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Beaufort, state of South Carolina, on December 10, 1999.

ISLANDS BANCORP

/s/ William B. Gossett
By: _________________________________
William B. Gossett
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints William B. Gossett and D. Martin Goodman,
and each of them acting individually, as his attorney-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorney to any and all amendments to said Registration
Statement.

Signature Title Date
--------- ----- ----

/s/ William B. Gossett President, Chief Executive December 10, 1999
______________________________________ Officer (principal
William B. Gossett executive officer) and
Director

/s/ D. Martin Goodman Chairman of the Board December 10, 1999
______________________________________
D. Martin Goodman

/s/ Martha B. Fender Vice President and December 10, 1999
______________________________________ Director
Martha B. Fender

/s/ Paul M. Dunnavant, III Treasurer (principal December 10, 1999
______________________________________ financial and accounting
Paul M. Dunnavant, III officer) and Director

/s/ Edward J. McNeil, Jr. Secretary and Director December 10, 1999
______________________________________
Edward J. McNeil, Jr.

/s/ Veronica C. Clardy Director December 10, 1999
______________________________________
Veronica C. Clardy

/s/ Avery E. Cleland Director December 10, 1999
______________________________________
Avery E. Cleland

/s/ Louis O. Dore Director December 10, 1999
______________________________________
Louis O. Dore

/s/ Frances K. Nicholson Director December 10, 1999
______________________________________
Frances K. Nicholson

/s/ J. Frank Ward Director December 10, 1999
______________________________________
J. Frank Ward

/s/ Bruce K. Wyles Director December 10, 1999
_____________________________________
Bruce K. Wyles

II-4

Exhibit Index

Number Exhibit
- ------ -------

3.1 Articles of Incorporation of the Registrant.

3.2 Bylaws of the Registrant.

4.1 Specimen common stock certificate. See Exhibits 3.1 and 3.2 for
provisions in the Articles of Incorporation and Bylaws of the
Registrant defining the rights of holders of common stock.

5.1 Opinion of Nexsen Pruet Jacobs & Pollard, LLP.

10.1 Employment Agreement dated as of July 27, 1999 between the
Registrant and William B. Gossett.

10.2 Form of Organizers Warrant Agreement.

10.3 Assignment and Assumption Agreement dated August 25, 1999, between
the Registrant and NBB General Partnership.

10.4 Contract of Sale dated December 5, 1999 between the Registrant and
Hird Island Investments, Inc.

10.5 Escrow Agreement dated November 23, 1999 between the Registrant and
The Bankers Bank.

10.6 Loan Agreement dated September 7, 1999 between the Registrant and
GrandSouth Bank, as extended on December 7, 1999, and form of
Guaranty Agreement issued to GrandSouth Bank by each of the
organizers of the Registrant.

23.1 Consent of Nexsen Pruet Jacobs & Pollard, LLP. (contained in Exhibit
5.1)

23.2 Consent of Francis & Co., CPAs.

24.1 Powers of Attorney (filed as part of the signature page to the
registration statement).

27.1 Financial Data Schedule (for electronic filing purposes).