SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. N/A )

Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box: [ ] Confidential, for Use of
[ ] Preliminary proxy statement the Commission Only (as
[X] Definitive proxy statement permitted by Rule
[ ] Definitive additional materials 14a-6(e)(2)
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

ISLANDS BANCORP
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(Name of Registrant as Specified in its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transactions applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

- --------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------

(5) Total fee paid:

- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.

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

(1) Amount previously paid:

- --------------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement no.:

- --------------------------------------------------------------------------------

(3) Filing Party:

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(4) Date Filed:

ISLANDS BANCORP
2348 Boundary Street
Beaufort, South Carolina 29902
(843) 521-1968

March 28, 2003

Dear Shareholder:

You are cordially invited to attend our annual meeting of shareholders,
which will be held at the Conference Room of the Ramada Limited-Beaufort, 2001
Boundary Street, Beaufort, South Carolina, on Tuesday, April 22, 2003, at 3:00
p.m. I sincerely hope that you will be able to attend the meeting, and I look
forward to seeing you.

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

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

Sincerely,

/s/ William B. Gossett

William B. Gossett
President and Chief Executive Officer

ISLANDS BANCORP
2348 Boundary Street
Beaufort, South Carolina 29902
(843) 521-1968

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 2003

The annual meeting of shareholders of Islands Bancorp will be held on Tuesday,
April 22, 2003, at 3:00 p.m., at the Conference Room of the Ramada
Limited-Beaufort, 2001 Boundary Street, Beaufort, South Carolina, for the
following purposes:

(1) to elect four persons to serve as Class I directors for a three-year
term expiring in 2006; and

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

The board of directors has set the close of business on March 21, 2003, as
the record date for determining the shareholders who are entitled to notice of,
and to vote at, the meeting.

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

By Order of the Board of Directors,

/s/ William B. Gossett

William B. Gossett
President and Chief Executive Officer

March 28, 2003

ISLANDS BANCORP
2348 Boundary Street
Beaufort, South Carolina 29902
(843) 521-1968

__________________________________________________________

PROXY STATEMENT FOR 2003 ANNUAL MEETING
__________________________________________________________

INTRODUCTION

TIME AND PLACE OF THE MEETING

Our board of directors is furnishing this proxy statement in connection
with its solicitation of proxies for use at the annual meeting of shareholders
to be held on Tuesday, April 22, 2003, at 3:00 p.m., at the Conference Room of
the Ramada Limited-Beaufort, 2001 Boundary Street, Beaufort, South Carolina, and
at any adjournments of the meeting.

RECORD DATE AND MAILING DATE

The close of business on March 21, 2003 is the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
We first mailed this proxy statement and the accompanying proxy card to
shareholders on or about March 28, 2003.

NUMBER OF SHARES OUTSTANDING

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

VOTING AT THE ANNUAL MEETING

PROPOSAL TO BE CONSIDERED

Shareholders will be asked to consider the election of four persons to
serve as Class I directors of the Company for a three-year term expiring in
2006. The persons nominated to serve as Class I directors, as well as the
continuing Class II and Class II directors, are described beginning on page 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL.

PROCEDURES FOR VOTING BY PROXY

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

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

REQUIREMENTS FOR SHAREHOLDER APPROVAL

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

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

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

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

PROXY SOLICITATION

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

PROPOSAL ONE: ELECTION OF DIRECTORS

The Company's board of directors consists of 13 members and is divided into
three classes. Each class of directors serves a staggered three-year term. The
term of each class expires at the annual meeting in the years indicated below
and upon the election and qualification of the director's successor. The board
of director recommends that the shareholders elect the persons identified below
as directors nominees to serve as Class I directors for a three-year term
expiring in 2006. The following table shows for each nominee and continuing
director: (a) his or her name, (b) his or her age at December 31, 2002, (c) how
long he or she has been a director of the Company, (d) his or her position(s)
with the Company, other than as a director, and (e) his principal occupation and
business experience for the past five years.

DIRECTOR POSITION WITH THE COMPANY
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
- ----------------------------------- -------- -----------------------------------------------------------

CLASS I NOMINATED DIRECTORS:
(For Three-Year Term Expiring 2006)

William B. Gossett (59) 1999 President and Chief Executive Officer of Islands Bancorp;
previously President and Chief Executive Officer of
Liberty National Bank, Longwood, Florida.

Louis O. Dore (57) 1999 Attorney, Louis O. Dore, P.A., Beaufort, South Carolina.

Martha B. Fender (57) 1999 Vice President of Islands Bancorp; President and Owner of
Coastal Carolina Realty, Inc.; Beaufort, South Carolina
(real estate sales).

D. Martin Goodman (56) 1999 Chairman of the Board of Islands Bancorp; Area Manager
of the University of South Carolina Small Business
Development Center in Beaufort, South Carolina; Co-
owner, with his wife, of Ollie's Seafood Restaurants in
Beaufort, South Carolina.

CLASS III CONTINUING DIRECTORS:
(Term Expiring 2005)

Carl E. Lipscomb (65) 2002 Vice President of Argus Corp. (custom home construction
and home renovation); Formerly President and Chief
Executive Officer of Lipscomb Construction, Hilton Head,
South Carolina (custom home construction in the Beaufort
County area).

Dr. Narayan Shenoy (64) 2002 Anesthesiologist; Partner in Critical Health Systems, Inc.,
Columbia, South Carolina.

J. Frank Ward (56) 1999 Realtor with Coastal Carolina Realty; Sales Coordinator
and Realtor, Renaissance Marketing, LLC, Beaufort,
South Carolina from February 1998 to March 2002; prior
to 1998, New Car Sales Manager, Toyota Center in West
Columbia/Lexington, South Carolina.

Bruce K. Wyles (48) 1999 Dentist, sole proprietorship, Beaufort, South Carolina;
Partner, B.K.W. Squared.

DIRECTOR POSITION WITH THE COMPANY
NAME (AGE) SINCE AND BUSINESS EXPERIENCE
- ----------------------------------- -------- -----------------------------------------------------------

CLASS II CONTINUING DIRECTORS:
(Term Expiring 2004)

Daryl A. Ferguson (64) 2002 Co-Chairman of Hungarian Telephone Company,
Budapest, Hungary and Stamford, Connecticut
(telecommunications); served as President and Chief
Operating Officer of Citizens Utilities in Stamford,
Connecticut from 1990 to 2000; CEO of Electric
Lighthouse from 1992 to 2000.

Stancel E. Kirkland, Sr. (62) 2002 Country Chef, LLC (convenience store, restaurant
operation); Managing Member of Bull Point Plantation,
Seabrook, South Carolina (developer of residential
communities); Attorney, Partner in the Kirkland Law
Firm, Columbia, South Carolina, 1971 to 1999 and
presently of counsel.

Paul M. Dunnavant, III (39) 1999 Treasurer of Islands Bancorp; Chief Financial Officer of
Holmes Timber, Inc. and Atlantic Coast Homes, Inc. from
November 2002 to present, Batesburg, South Carolina;
Chief Financial Officer and Treasurer of Amick Farms,
Inc. from August 1993 to May 2002, Batesburg, South
Carolina (integrated poultry processing); Manager of
Beaufort Properties, LLC from August 1993 to October
2002; Treasurer of Team Amick Motor Sports, LLC from
August 1993 to May 2002; Manager of Waterside
Properties, LLC from August 1993 to October 2002.

Edward J. McNeil, Jr. (48) 1999 Secretary of Islands Bancorp; President of Internal
Medicine Healthcare, P.A.; practicing physician with
Internal Medicine Health Care in Beaufort from January
1997 to December 1997 and from October 1999 to present.
Physician, Low Country Medical Group, Beaufort, South
Carolina, from January 1998 to October 1999, and with
Southeast Health Care Association from January 1995 to
December 1996.

Frances K. Nicholson (48) 1999 Managing Partner of Nicholson Investments LLC (real
estate leasing and securities portfolio company); Managing
Partner of Big Nickel Properties, LLC.

MEETINGS AND COMMITTEES OF THE BOARD

During the year ended December 31, 2002, the board of directors of the
Company held three meetings and the board of directors of the Bank held twelve
meetings. The directors of the Bank are the same as those of the Company. Each
of the incumbent directors attended at least 75% of the total number of meetings
of the Company's board of directors and committees of the board on which he or
she serves, except for Messrs. Ferguson, Lipscomb and Wyles. The board of
directors of the Company does not have a nominating committee.

The board of directors has established a compensation committee for the
purpose of administering the Islands Bancorp 2002 Stock Incentive Plan. The
compensation committee members are Stancel E. Kirkland, Sr. and Paul M.
Dunnavant, III. The compensation committee held one meeting during the year
ended December 31, 2002.

The board of directors has established an audit committee, which reviews
the annual report and internal audit report of the independent public
accountants. The board of directors has not adopted a written audit committee
charter. The audit committee members are Louis O. Dore (Chairman), Edward J.
McNeil, Jr., Paul M. Dunnavant, III, Stancel E. Kirkland, Sr. and Narayan
Shenoy. Each of these members meets the requirement for independence as defined
by the National Association of Securities Dealers' listing standards. The audit
committee of the Company held one meeting and the audit committee of the Bank
held four meetings during the year ended December 31, 2002.

AUDIT COMMITTEE REPORT

The audit committee reports as follows with respect to the audit of the
Company's 2002 audited consolidated financial statements.

- The audit committee has reviewed and discussed the Company's 2002
audited consolidated financial statements with the Company's
management;

- The audit committee has discussed with the independent auditors
Frances & Co., CPAs, the matters required to be discussed by SAS 61,
which include, among other items, matters related to the conduct of
the audit of the Company's consolidated financial statements;

- The audit committee has received written disclosures and the letter
from the independent auditors required by Independence Standards Board
Standard No. 1 (which relates to the auditor's independence from the
corporation and its related entities) and has discussed with the
auditors the auditors' independence from the Company; and

- Based on review and discussions of the Company's 2002 audited
consolidated financial statements with management and discussions with
the independent auditors, as described above, the audit committee
recommended to the Board of Directors that the Company's 2002 audited
consolidated financial statements be included in the Company's Annual
Report on Form 10-KSB.

March 26, 2003 By: Louis O. Dore (Chairman)
Edward J. McNeil, Jr.
Paul M. Dunnavant, III
Stancel E. Kirkland, Sr.
Dr. Narayan Shenoy

EXECUTIVE OFFICERS

The following table shows for each executive officer of the Company: (a)
his name, (b) his age at December 31, 2002, (c) how long he has been an officer
of the Company, and (d) his positions with the Company and the Bank:

NAME (AGE) OFFICER SINCE POSITION WITH THE COMPANY AND THE BANK
- ----------------------- ------------- -------------------------------------------------

William B. Gossett (59) 1999 President and Chief Executive Officer of Islands
Bancorp; President and Chief Executive Officer of
Islands Community Bank, National Association

COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table presents the total compensation paid by the Company
during fiscal years 2002, 2001 and 2000 to its chief executive officer. No
other executive officer of the Company earned over $100,000 in salary and bonus
during fiscal years 2002, 2001 and 2000.

SUMMARY COMPENSATION TABLE

Annual Compensation Long-Term Compensation Awards
--------------------------------- -----------------------------
Compensation Salary Bonus Number of Securities
Year ($) ($) Underlying Options
------------ --------- -------- -----------------------------

William B. Gossett, 2002 $ 130,000 $ 10,000 19,581
President and Chief 2001 $ 130,000 $ 27,500 --
Executive Officer 2000 $ 132,917 -- --

We have omitted information on "perks" and other personal benefits because
the aggregate value of these items does not meet the minimum amount required for
disclosure under the Securities and Exchange Commission's regulations.

The following tables set forth information at December 31, 2002, and for
the fiscal year then ended, concerning stock options granted to the executive
officers listed in the Summary Compensation Table (above). The listed executive
officers did not exercise any options to purchase common stock of the Company
during 2002. We have not granted any stock appreciation rights, restrictive
stock or stock incentives other than stock options.

STOCK OPTION GRANTS IN FISCAL 2002

Percent of Total
Number of Options
Securities Granted to
Underlying Employees in Exercise Price
Name Options Granted Fiscal Year Per Share Expiration Date
- ------------------ ---------------- ------------- --------------- ---------------

William B. Gossett 19,581 73.67% $ 10.00 4/25/2012

FISCAL YEAR-END OPTION VALUES

Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at
Options December 31, 2002
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------- ------------- ------------- -------------

William B. Gossett 6,527 13,054 0 0

Because no public market exists for our common stock, we calculated the
In-the-Money value of unexercised options at fiscal year end based on the
per-share sales price of our common stock as of the date closest to December 31,
2002 as possible. Based on information known to us, this sale occurred on
December 18, 2002 at a sales price of $10.00 per share.

EMPLOYMENT AGREEMENT. On July 27, 1999, the Company entered into an
employment agreement with William B. Gossett pursuant to which Mr. Gossett
serves as president and chief executive officer of Islands 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 was $135,000.
Currently, under the agreement, Mr. Gossett's annual salary is $143,000. He also
received a bonus of $27,500 upon the opening of the Bank. 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 is 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 also
participates in the Bank's retirement, medical and other benefit programs.

Mr. Gossett is eligible to participate in any long-term equity incentive
program of Islands Bancorp and is eligible for the grant of stock options,
restricted stock and other awards under such program or any similar program
adopted by Islands Bancorp. Pursuant to Mr. Gossett's employment agreement, he
was granted an option to purchase 19,581 shares of Islands Bancorp's common
stock at a purchase price of $10.00 per share. One-third of the shares covered
by the option vest on each of the first, second and third anniversaries of the
date the Bank opened for business, subject to accelerated vesting upon a change
in control of the Company.

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 Company'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 Company 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 Company
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
Company or the Bank for employment and will not solicit customers of the Bank to
any other financial institution.

Upon termination of Mr. Gossett's employment by the Company or the Bank
without cause or for any reason following a change in control of the Company,
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.

COMPENSATION OF DIRECTORS

Neither the Company nor the Bank will compensate their directors until the
Company and the Bank have recovered all of their losses. Thereafter, the
Company and the Bank will adopt director compensation policies that conform to
applicable law.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number of shares of the Company's common
stock beneficially owned as of March 21, 2003 by (a) each director and executive
officer of the Company and (b) all executive officers and directors, as a group.
The information shown below is based upon information furnished to the Company
by the named persons. Unless otherwise indicated, each person is the record
owner and has sole voting and investment power with respect to his or her
shares. Other than the directors and executive officers listed below, we are
unaware of any holder of more than 5% of the Company's common stock.
Additionally, the address of each person is 2348 Boundary Street, Beaufort,
South Carolina 29902.

Information relating to beneficial ownership of the Company is based upon
"beneficial ownership" concepts set forth in the rules promulgated under the
Securities Exchange Act. Under these rules a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting power,"
which includes the power to vote or to direct the voting of a security, or
"investment power," which includes the power to dispose or to direct the
disposition of a security. Under the rules, more than one person may be deemed
to be a beneficial owner of the same securities. A person is also deemed to be
a beneficial owner of any security as to which that person has the right to
acquire beneficial ownership within sixty (60) days from the date of this
report. Except as otherwise indicated, each person is the sole beneficial owner
of the shares listed.

Louis O. Dore 11,050 3,668 14,718 2.2
Paul M. Dunnavant, III 12,100 4,017 16,117 2.5
Martha B. Fender 10,050 3,336 13,386 2.0
Daryl A. Ferguson 20,000 6,640 26,640 4.0
D. Martin Goodman 11,250 3,735 14,985 2.3 Includes 11,050 shares held jointly
with Mr. Goodman's spouse and
200 shares held jointly with his
children.
William B. Gossett 30,250 16,569 46,819 7.0 Includes 27,550 shares held jointly
with Mr. Gossett's spouse.

NUMBER OF SHARES
SUBJECT TO
NUMBER OF OPTIONS/WARRANTS AGGREGATE PERCENT
NAME OF SHARES EXERCISABLE NUMBER OF OF
BENEFICIAL OWNER HELD WITHIN 60 DAYS SHARES CLASS NATURE OF BENEFICIAL OWNERSHIP
- ------------------------- --------- ---------------- --------- ------- -----------------------------------
Stancel E. Kirkland, Sr. 20,000 6,640 26,640 4.0 Includes 4,000 shares held jointly
with Mr. Kirkland's spouse.
Carl E. Lipscomb 30,050 6,640 36,690 5.6 Includes 19,200 shares held jointly
with Mr. Lipscomb's spouse.
Edward J. McNeil, Jr. 11,050 3,668 14,718 2.2
Frances K. Nicholson 12,350 4,100 16,450 2.5
Narayan Shenoy 20,100 6,673 26,773 4.1
J. Frank Ward 11,270 3,741 15,011 2.3
Bruce K. Wyles 11,450 3,801 15,251 2.3 Includes 400 shares held jointly
with Mr. Wyles' children.
ALL DIRECTORS AND
EXECUTIVE OFFICERS AS A 210,970 73,228 284,198 39.2
GROUP (13 PERSONS)

RELATIONSHIPS AND RELATED TRANSACTIONS

From time to time our directors, officers and their affiliates, including
members of their families or businesses and other organizations with which they
are associated, may have banking transactions in the ordinary course of business
with the Bank. The Bank's policy is that any loans or other transactions with
those persons or entities (a) are made in accordance with applicable law and the
Bank's lending policies, (b) are 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) do not involve more than the normal risk of collectibility or present other
unfavorable features to the Company 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.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

During the fiscal year ended December 31, 2002, Section 16(a) of the
Securities Exchange Act of 1934 required the Company's directors and executive
officers and persons who own beneficially more than 10% of the Company's
outstanding common stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in their ownership of the
Company's common stock. Directors, executive officers and greater than 10%
shareholders are required to furnish the Company with copies of the forms they
file. To our knowledge, based solely on a review of a copy of these reports
furnished to the Company, during the fiscal year ended December 31, 2002,
Messrs. Ferguson, Shenoy, Kirkland and Lipscomb each filed late one Form 3
reporting their initial ownership of the Company's common stock and Messrs.
Wyles, Ward, Gossett, Dunnavant, Dore, Goodman, Nicholson, Fender and McNeil
each filed late one Form 4, each reporting two transactions in the Company's
common stock. Except as described in the previous sentence, all of our
directors and executive officers, who are listed above, complied with all
applicable Section 16(a) filing requirements.

INDEPENDENT PUBLIC ACCOUNTANTS

The Company has selected Francis & Co., CPAs to serve as its principal
accountant for the fiscal year-ending December 31, 2002. Francis & Co. has
served as the Company's principal accountant since 1998. A representative of
Francis & Co., CPAs is expected to be present at the meeting and will be given
the opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions from shareholders.

AUDIT FEES. In connection with services rendered in connection with the
audit of the Company's annual financial statements and the review of the
Company's interim financial statements, the Company has estimated that its total
audit fees for fiscal year 2002 were approximately $16,000. This figure is
based on an estimate provided by our accountants, Francis & Co., CPAs and
includes fees for services that were billed to the Company in fiscal year 2003
in connection with the 2002 fiscal year audit.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The Company
did not retain its principal accountant to perform Financial Information Systems
Design or Implementation services in fiscal year 2002.

OTHER FEES. During fiscal year 2002, the Company was billed $11,600 by its
principal accountant for services not described above. These "other fees" were
for services including tax advice and return preparation, assistance in
preparing filings with the Securities and Exchange Commission and internal audit
services.

The Audit Committee has considered the provision of non-audit services by
our principal accountants and has determined that the provision of such services
were consistent with maintaining the independence of the Company's principal
accountants.

SHAREHOLDERS PROPOSALS

Shareholder proposals submitted for consideration at the next annual
meeting of Shareholders must be received by the Company no later than December
1, 2003, to be included in the 2004 proxy materials. A shareholder must notify
the Company before February 1, 2004 of a proposal for the 2004 annual meeting
which the shareholder intends to present other than by inclusion in the
Company's proxy material. If the Company does not receive such notice prior to
February 1, 2004, proxies solicited by the management of the Company will confer
discretionary authority upon the management of the Company to vote upon any such
matter.

OTHER MATTERS

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

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

March 28, 2003

ISLANDS BANCORP
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 22, 2003

The undersigned hereby appoints William B. Gossett as proxy, with the power
to appoint his substitute, and hereby authorizes him to represent and to vote,
as designated below, all of the common stock of Islands Bancorp, which the
undersigned would be entitled to vote if personally present at the annual
meeting of shareholders to be held at the Conference Room of the Ramada
Limited-Beaufort, 2001 Boundary Street, Beaufort, South Carolina on Tuesday,
April 22, 2003, at 3:00 p.m. and at any adjournments of the annual meeting, upon
the proposal described in the accompanying notice of the annual meeting and the
proxy statement relating to the annual meeting, receipt of which are hereby
acknowledged.

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

PROPOSAL 1: To elect the four (4) persons listed below to serve as Class I
directors of Islands Bancorp for a three-year term expiring at
the 2006 annual meeting of shareholders:

WILLIAM B. GOSSETT LOUIS O. DORE
MARTHA B. FENDER D. MARTIN GOODMAN

[ ] FOR all nominees listed above (except as [ ] WITHHOLD authority to
indicated below) vote for all nominees
listed above

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

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

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

--------------------------------------------
Signature of Shareholder Date

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Print Name(s) of Shareholder(s)

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

I WILL __________ WILL NOT ___________ ATTEND THE ANNUAL SHAREHOLDERS MEETING.

PLEASE RETURN PROXY AS SOON AS POSSIBLE
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