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First Quarter Report to Stockholders

 Net income for the quarter ended March 31, 2003, was $1,387,650 or $0.48 per diluted share, a 7.7% increase over the same quarter last year.  Net income for the quarter ended March 31, 2002, was $1,288,502 or $0.45 per diluted share, which included a $285,728 after tax gain on sale of real estate.  Without the gain on sale of real estate, net income for the quarter ended March 31, 2002, would have been $1,002,744, which would have resulted in a 38.4% increase in income for the three months ended March 31, 2003, as compared to the same period last year.

 Total assets at March 31, 2003, were $512.6 million; stockholders’ equity was $39.8 million or $13.98 per share and represented 7.77% of assets.

 Effective December 31, 2002, we received permission from our regulators to change our charter to that of a state chartered commercial bank.    

On April 7, we introduced ‘Better Than Free Checking’.  This account is truly a free checking account and we anticipate the response to be good.  We also introduced ‘Overdraft Privilege’, a new service that will protect customers from the embarrassment and inconvenience associated with “bouncing” a check.  Coming in June will be ‘Online Banking’, a free state-of-the-art service.  These new services add to our product line as we continue to develop new bank services. 

                Construction of our new Monkey Junction (Wilmington) financial center will be completed in May.  We anticipate opening to the public in mid May with Grand Opening festivities to begin the first week in June.  The Morehead City (Highway 24) new financial center will open about six weeks after the Wilmington opening.

 Cooperative Bankshares, Inc. (NASDAQ: “COOP”) is the parent company of Cooperative Bank and Lumina Mortgage, Inc.  Chartered in 1898, Cooperative provides a full range of financial services through 17 financial centers in Eastern North Carolina.  Lumina Mortgage, Inc. is a mortgage brokerage firm, originating and selling residential mortgage loans through offices in Wilmington, North Carolina; North Myrtle Beach, South Carolina; and Virginia Beach, Virginia.