<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20052

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

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2000
                                       or

                   TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

                         Commission File Number 0-23751

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

                             SouthBanc Shares, Inc.
             (Exact Name of Registrant as Specified in its Charter)

             Delaware                                       58-2361245
------------------------------------                        ----------
  (State or other jurisdiction of                        (I.R.S. employer
   incorporation or organization)                       identification no.)

                               907 N. Main Street
                         Anderson, South Carolina 29621
                         ------------------------------
                    (Address of Principal Executive Offices)

                                   (Zip Code)

                            (8 6 4 ) 2 2 5 - 0 2 4 1
         ---------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         (1)   Yes      X                 No
                     --------                  --------

$0.01 par value of common stock                       2,942,186
-------------------------------                       ---------
           (Class)                          (Outstanding at June 30, 2000)
<PAGE>

                      SouthBanc Shares, Inc. and Subsidiary

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 2000

                                TABLE OF CONTENTS

Item 1.  Financial Statements
         Consolidated Balance Sheets as of June 30, 2000 and
             September 30, 1999 (unaudited).................................. 3
         Consolidated Statements of Income for the Nine Months Ended
             June 30, 2000, and the Three Months Ended June 30, 2000
             (unaudited)..................................................... 4
         Consolidated Statements of Stockholders' Equity
             for the Nine Months Ended June 30, 2000 and 1999 (unaudited).... 5
         Consolidated Statements of Cash Flows for the Nine Months
             Ended June 30, 2000 and 1999 (unaudited)........................ 6
         Notes to Consolidated Financial Statements (unaudited).............. 8

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations for the Three Months Ended June 30,
         2000 and 1999 and the Nine Months Ended June 30, 2000 and 1999...... 10
         Liquidity and Capital Resources..................................... 15
         Capital Compliance.................................................. 16
         Impact of New Accounting Pronouncements............................. 16
         Effect of Inflation and Changing Prices............................. 17

Item 3.  Market Risk Disclosure.............................................. 17

Part II  Other Information
         Items:
         1.  Legal Proceedings............................................... 18
         2.  Changes in Securities and Use of Proceeds....................... 18
         3.  Defaults Upon Senior Securities................................. 18
         4.  Submission of Matters to a Vote of Senior Holders............... 18
         5.  Other Materially Important Events............................... 18

         Signatures.......................................................... 19

                                        2
<PAGE>

                      SouthBanc Shares, Inc. and Subsidiary
                     Consolidated Balance Sheets (Unaudited)

Item I - Financial Statements

<TABLE>
<CAPTION>
                                                                    June 30,        September 30,
                                                                  ------------------------------
                                                                      2000               1999
                                                                  ------------------------------
<S>                                                               <C>              <C>
Assets
------
Cash and cash equivalents                                         $  12,735,286    $  15,546,360
Investment securities available for sale (amortized
        cost of $20,225,948 at June 30, 2000,
        $17,673,222 at September 30, 1999)                           18,293,877       16,243,703
Federal Home Loan Bank stock, at cost                                 3,975,000        3,650,000
Mortgage-backed securities available for sale
        (amortized cost of $45,807,377 at June 30,
        2000, and $60,027,799 at Septemer 30, 1999)                  44,068,829       58,384,541
Loans receivable, (net of allowance for loan losses
        of $2,916,095 at June 30, 2000, and
        $2,617,662 at September 30, 1999)                           281,963,383      255,488,141
Investment in limited partnership                                     1,864,373        1,575,373
Real estate acquired in settlement of loans                             480,941          229,900
Real estate held for development                                      2,066,249        2,095,903
Premises and equipment, net                                           5,843,321        5,722,230
Accrued interest receivable
        Loans receivable                                              2,197,909        1,860,838
        Mortgage-backed and other securities                            378,782          453,968
Cash surrender value of life insurance                                8,173,059        7,865,743
Other                                                                 3,964,650        3,034,571
                                                                  -------------    -------------
                     Total Assets                                 $ 386,005,659    $ 372,151,271
                                                                  =============    =============

Liabilities and Stockholders' Equity
------------------------------------
Deposits                                                          $ 233,248,528    $ 221,257,085
Advances from the Federal Home Loan Bank ("FHLB")                    76,000,000       73,000,000
Securities sold under agreements to repurchase                       20,452,480       20,254,436
Advance payments by borrowers for property taxes and
     insurance                                                          322,763          438,484
Accrued interest payable                                              1,565,806        1,356,578
Accrued expenses and other liabilities                                4,029,869        3,094,136
                                                                  -------------    -------------
                     Total Liabilities                              335,619,446      319,400,719
                                                                  -------------    -------------

Commitments and contingencies - Note 17

Stockholders' Equity
--------------------
Preferred stock ($0.01 par value; authorized 250,000
        shares; none issued or outstanding at June 30,
        2000 and September 30, 1999)                                       --               --
Common stock ($0.01 par value; authorized 7,500,000
        shares; issued 4,324,940 and 4,306,410 shares
        at June 30, 2000 and September 30, 1999,
        respectively)                                                    43,249           43,220
Additional paid-in capital                                           57,888,364       57,741,324
Retained earnings, restricted                                        24,858,580       22,351,722
Treasury stock - at cost (1,382,754 shares)                         (27,640,042)     (22,515,585)
Accumulated other comprehensive loss, net                            (2,422,761)      (2,028,033)
Indirect guarantee of ESOP debt                                        (555,578)        (622,247)
Deferred compensation for Management
        Recognition Plan (MRP)                                       (1,785,599)      (2,219,849)
                                                                  -------------    -------------
                     Total stockholders' equity                      50,386,213       52,750,552
                                                                  -------------    -------------
                     Total liabilities and stockholders' equity   $ 386,005,659    $ 372,151,271
                                                                  =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                      SOUTHBANC SHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      For The Nine Months Ended      For The Three Months Ended
                                                                               June 30,                       June 30,
                                                                     ----------------------------   ----------------------------
                                                                         2000            1999            2000            1999
                                                                     ------------    ------------   ------------    ------------
<S>                                                                  <C>             <C>            <C>             <C>
Interest income:
       Loans                                                         $ 16,208,996    $ 14,139,772   $  5,592,598    $  4,800,983
       Mortgage-backed securities                                       2,530,124       3,700,940        840,300       1,244,596
       Other investments                                                1,470,823       1,740,958        489,564         523,266
                                                                     ------------    ------------   ------------    ------------
            Total interest income                                      20,209,943      19,581,670      6,922,462       6,568,845
                                                                     ------------    ------------   ------------    ------------
Interest expense:
       Interest on deposits:
            Transaction accounts                                          683,839         840,510        222,886         272,243
            Passbook accounts                                             528,083         463,720        194,865         160,456
            Certificate accounts                                        5,824,681       5,397,886      2,127,923       1,788,269
                                                                     ------------    ------------   ------------    ------------
            Total interest on deposits                                  7,036,603       6,702,116      2,545,674       2,220,968

       Interest on borrowings
            Total interest expense                                      4,212,609       3,408,426      1,543,742       1,112,569
                                                                     ------------    ------------   ------------    ------------
                                                                       11,249,212      10,110,542      4,089,416       3,333,537
                                                                     ------------    ------------   ------------    ------------

Net interest income                                                     8,960,731       9,471,128      2,833,046       3,235,308
Provision for loan losses                                                 435,000         330,000         75,000         170,000
                                                                     ------------    ------------   ------------    ------------
Net interest income after provision for loan losses                     8,525,731       9,141,128      2,758,046       3,065,308
                                                                     ------------    ------------   ------------    ------------
Other income:
       Loan and deposit account service charges                         2,950,894       2,518,824        994,800         924,004
       Gain (loss) on sale of investments                                 (94,702)        126,418             --        (170,888)
       Gain on sale of real estate acquired in settlement of loans         (1,564)         13,973         (6,188)         (9,310)
       Gain on sale of loans, net                                           3,071          88,070          3,071           6,892
       Gain on sale of real estate held for development                    84,183         300,889          1,534         128,216
       Earnings on bank owned life insurance                              343,884         321,300        110,328         107,100
       Other                                                              873,663       1,002,351        288,091         674,720
                                                                     ------------    ------------   ------------    ------------
            Total other income                                          4,159,399       4,391,825      1,391,636       1,660,734
                                                                     ------------    ------------   ------------    ------------

General and administrative expenses:
       Salaries and employee benefits                                   3,914,472       3,476,736      1,353,700       1,201,462
       Occupancy                                                          407,833         371,264        133,103         124,972
       Furniture and equipment expense                                    789,262         818,064        265,152         258,196
       FDIC insurance premiums                                             55,643          91,923         11,243          31,476
       Advertising                                                        148,858         136,685         63,464          75,444
       Data processing                                                    398,038         438,115        145,642         156,301
       Office supplies                                                    243,182         216,771         63,756          77,738
       Profit improvement program                                          94,280         207,185             --          84,000
       Other                                                              963,213         875,364        370,134         336,854
                                                                     ------------    ------------   ------------    ------------
            Total general and administrative expenses                   7,014,781       6,632,107      2,406,194       2,346,443
                                                                     ------------    ------------   ------------    ------------

Income before taxes                                                     5,670,349       6,880,846      1,743,488       2,379,599
Income taxes                                                            1,813,944       2,257,457        547,848         782,899
                                                                     ------------    ------------   ------------    ------------
Net income                                                           $  3,856,405    $  4,623,389   $  1,195,640    $  1,596,700
                                                                     ============    ============   ============    ============
Basic earnings per common share                                      $       1.30    $       1.34   $       0.42    $       0.51
                                                                     ============    ============   ============    ============
Diluted earnings per common share                                    $       1.23    $       1.26   $       0.40    $       0.48
                                                                     ============    ============   ============    ============
Weighted average shares outstanding:
       Basic                                                            2,969,066       3,463,213      2,863,797       3,137,542
                                                                     ============    ============   ============    ============
       Diluted                                                          3,136,679       3,670,966      3,023,757       3,350,282
                                                                     ============    ============   ============    ============
Cash dividends per common share                                      $       0.45    $       0.39   $       0.15    $       0.15
                                                                     ============    ============   ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       4
<PAGE>

                      SouthBanc Shares, Inc. and Subsidiary
                 Consolidated Statements of Stockholders' Equity
              Nine Months Ended June 30, 2000 and 1999 (Unaudited)

<TABLE>
<CAPTION>


                                                                       Additional     Retained
                                              Common        Common      Paid-in       Earnings
                                              Shares        Stock       Capital      Restricted
                                          ------------  ------------  ------------  ------------
<S>                                       <C>           <C>           <C>           <C>
Balance at September 30, 1998                4,306,410  $     43,064  $ 57,470,324  $ 18,154,380

Net income                                                                             4,623,389
Other comprehensive income/(loss)
     Unrealized loss on securities,  net
     Reclassification adjustment for
        gains realized in net income, net

Total other comprehensive income/(loss)
Comprehensive income

Exercise of stock options                       15,620           156        68,057
Reduction of ESOP debt
ESOP expense                                                               132,424
 Earned portion of MRP
 Dividends on common stock                                                           ( 1,292,375)
 Transfer from treasury stock
      to MRP                                    91,252                      22,813
Purchase of Treasury Stock                  (1,171,175)           --            --            --
                                          ------------  ------------  ------------  ------------

Balance at June 30, 1999                     3,242,107  $     43,220  $ 57,693,618  $ 21,485,394
                                          ============  ============  ============  ============

Balance at September 30, 1999                3,204,788  $     43,220  $ 57,741,324  $ 22,351,722

Net Income                                                                             3,856,405
Other comprehensive income:
     Unrealized loss on securities,  net
     Reclassification adjustment for
       losses realized in net income, net

Total other comprehensive income (loss)
Comprehensive income

Exercise of stock options                        2,910            29        25,725
Reduction of ESOP debt
ESOP compensation expense                                                  121,315
Earned portion of MRP
Dividends on common stock                                                             (1,349,547)
Purchase of treasury stock                    (265,512)
                                          ------------  ------------  ------------  ------------

Balance at June 30, 2000                     2,942,186  $     43,249  $ 57,888,364  $ 24,858,580
                                          ============  ============  ============  ============
</TABLE>

<TABLE>
<CAPTION>
                                           Accumulated                    Indirect
                                              Other                       Guarantee    Deferred
                                          Comprehensive                      of      Compensation
                                          Income (Loss),    Treasury        ESOP          for
                                               Net           Stock          Debt          MRP          Total
                                          -------------- ------------  ------------  -------------   ------------
<S>                                       <C>            <C>           <C>           <C>             <C>
Balance at September 30, 1998              $   180,009             --   ($  711,140)  ($  729,311)  $ 74,407,326

Net income                                                                                             4,623,389
Other comprehensive income/(loss)
     Unrealized loss on securities,  net     (1,453,404)                                              (1,453,404)
     Reclassification adjustment for
        gains realized in net income, net       (84,194)                                                 (84,194)
                                           ------------                                              -----------
Total other comprehensive income/(loss)      (1,537,598)                                              (1,537,598)
Comprehensive income                                                                                   3,085,791
                                                                                                     -----------
Exercise of stock options                                                                                 68,213
Reduction of ESOP debt                                                       66,670                       66,670
ESOP expense                                                                                             132,424
 Earned portion of MRP                                                                    218,037        218,037
 Dividends on common stock                                                                            (1,292,375)
 Transfer from treasury stock
      to MRP                                                1,830,515                  (1,853,328)            --
Purchase of Treasury Stock                           --   (23,540,883)           --            --    (23,540,883)
                                           ------------  ------------  ------------  ------------   ------------

Balance at June 30, 1999                   $ (1,357,589) $(23,540,883) $   (644,470) $ (2,364,602)  $(53,145,203)
                                           ============  ============  ============  ============   ============

Balance at September 30, 1999              $ (2,028,033) $ (22,515,585)$   (622,247) $ (2,219,849)  $ 52,750,552

Net Income                                                                                             3,856,405
Other comprehensive income:
     Unrealized loss on securities,  net       (457,231)                                                (457,231)
     Reclassification adjustment for
       losses realized in net income, net        62,503                                                   62,503
                                           ------------                                             ------------
Total other comprehensive income (loss)        (394,728)                                                (394,728)
Comprehensive income                                                                                   3,461,677
                                                                                                    ------------
Exercise of stock options                                                                                 25,754
Reduction of ESOP debt                                                       66,669                       66,669
ESOP compensation expense                                                                                121,315
Earned portion of MRP                                                                     434,250        434,250
Dividends on common stock                                                                             (1,349,547)
Purchase of treasury stock                                 (5,124,457)                                (5,124,457)
                                           ------------  ------------  ------------  ------------   ------------

Balance at June 30, 2000                   ($ 2,422,761) ($27,640,042) ($   555,578) ($ 1,785,599)  $ 50,386,213
                                           ============  ============  ============  ============   ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        5
<PAGE>

                      SouthBanc Shares, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
              Nine Months Ended June 30, 2000 and 1999 (Unaudited)

<TABLE>
<CAPTION>
                                                              ------------    ------------
                                                                  2000            1999
                                                              ------------    ------------
<S>                                                           <C>             <C>
Cash flows from operating activities:
     Net income                                               $  3,856,405    $  4,623,389
     Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation                                            645,358         657,043
           Accretion, net                                       (1,118,585)     (1,083,828)
           Provision for loan losses                               435,000         330,000
           (Gain) loss on sale of investments, net                  94,702        (126,418)
           (Gain) loss on sale of real estate                        1,564         (13,973)
           Gain on sale of loans, net                                   --         (88,070)
           Gain on sale of real estate held for
              development                                          (84,183)       (300,889)
           Deferred compensation                                   555,565         350,461
           Increase in accrued interest
              receivable and other assets                       (1,191,964)       (782,060)
           Decrease in other liabilities                         1,144,961         241,664
                                                              ------------    ------------
              Net cash provided by operating activities          4,338,823       3,807,319
                                                              ------------    ------------

Cash flows from investing activities:
     Increase in loans receivable, net                          (2,493,714)       (791,767)
     Purchases of loans receivable                             (25,000,555)    (24,253,800)
     Purchase of mortgage-backed securities                             --     (34,802,010)
     Purchases of investment securities                         (4,816,855)     (5,052,771)
     Purchases of FHLB stock                                    (1,975,000)     (1,060,800)
     Purchase of premises and equipment                           (766,449)       (187,512)
     Sales of loans receivable                                          --       7,476,562
     Proceeds from redemption of FHLB stock                      1,650,000       1,250,000
     Principal repayments on mortgage-backed securities          6,675,239      27,081,017
     Proceeds from maturities of investment securities           3,000,000         500,000
     Proceeds from sale of mortgage-backed securities,
        available for sale                                       7,439,993       9,384,356
     Proceeds from sale of investment securities, available
        for sale                                                        --      13,314,025
     Proceeds from sale of real estate owned                       367,250         242,908
     Proceeds from sale of real estate held for
        development                                                541,727         880,582
     Capital improvements of real estate held for
        development                                               (463,718)       (709,736)
                                                              ------------    ------------
              Net cash used in investing activities            (15,842,082)     (6,728,946)
                                                              ------------    ------------
</TABLE>

                                                                       Continued
                                       6
<PAGE>

                      SouthBanc Shares, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
              Nine Months Ended June 30, 2000 and 1999 (Unaudited)

<TABLE>
<CAPTION>
                                                                     -------------    -------------
                                                                          2000             1999
                                                                     -------------    -------------
<S>                                                                  <C>              <C>
Cash flows from financing activities:
     Increase in deposit accounts                                       11,991,443       17,217,671
     Proceeds from FHLB Advances                                       113,000,000       67,000,000
     Repayment of FHLB Advances                                       (110,000,000)     (61,000,000)
     Proceeds from securities sold under agreements
        to repurchase                                                      198,044          170,239
     Payment ot stock offering costs                                            --               --
     Exercise of stock options                                              25,754           68,213
     Purchase of Treasury stock                                         (5,124,457)     (23,540,883)
     Repayments of ESOP loan                                                66,669           66,670
     Dividends paid on common stock                                     (1,349,547)      (1,292,375)
     Decrease in advance payments by borrowers
        for property taxes and insurance                                  (115,721)         (27,002)
                                                                     -------------    -------------
              Net cash provided by (used for) financing activities       8,692,185       (1,337,467)
                                                                     -------------    -------------

Net increase (decrease) in cash and cash equivalents                    (2,811,074)      (4,259,094)

Cash and cash equivalents, beginning of year                            15,546,360       21,197,419
                                                                     -------------    -------------

Cash and cash equivalents, end of year                               $  12,735,286    $  16,938,325
                                                                     =============    =============

Supplemental disclosures:
     Cash paid during the year for
        Interest                                                     $  11,039,984    $  10,189,011
                                                                     =============    =============
        Taxes                                                        $   2,095,000    $   1,598,554
                                                                     =============    =============

Noncash investing activities:
     Additions to real estate acquired in settlement of loans        $     584,027    $     577,170
                                                                     =============    =============
     Loans receivable exchanged for mortgage-backed
        securities                                                   $          --    $          --
                                                                                      =============
     Change in unrealized net loss on securities
        available for sale, net of tax                               $    (394,728)   ($  1,537,598)
                                                                     =============    =============
     Increase in Employee Stock Ownership Plan
        debt guaranteed by the Bank                                  $     (66,669)   $     (66,670)
                                                                     =============    =============
</TABLE>


See accompanying notes to consolidated financial statements.


                                        7
<PAGE>

                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                      SouthBanc Shares, Inc. and Subsidiary
             Notes to Consolidated Financial Statements (Unaudited)


1.       Basis of Presentation
         ---------------------

         The accompanying unaudited consolidated financial statements for
         SouthBanc Shares, Inc. ("Company") were prepared in accordance with
         instructions for Form 10-Q and, therefore, do not include all
         disclosures necessary for a complete presentation of financial
         condition, results of operations, and cash flows in conformity with
         generally accepted accounting principles. All adjustments, consisting
         only of normal recurring accruals, which are, in the opinion of
         management, necessary for fair presentation of the interim consolidated
         financial statements have been included. The results of operations for
         the period ended June 30, 2000 are not necessarily indicative of the
         results that may be expected for the entire year. These consolidated
         financial statements do not include all disclosures required by
         generally accepted accounting principles and should be read in
         conjunction with the Company's audited consolidated financial
         statements and related notes for the year ended September 30, 1999.

2.       Principles of Consolidation
         ---------------------------

         The accompanying unaudited consolidated financial statements include
         the accounts of the Company, Perpetual Bank, a Federal Savings Bank,
         ("Bank"), and the Bank's wholly owned subsidiaries, Mortgage First
         Service Corporation and United Service Corporation, and United Service
         Corporation's wholly owned subsidiary, United Investment Services.

         United Service Corporation is a wholly-owned subsidiary of the Bank. At
         June 30, 2000, United Service had assets of $2.2 million. United
         Service is involved in two residential and two commercial real estate
         development projects.

         All significant intercompany items and transactions have been
         eliminated in consolidation.

3.       Payment of Dividends
         --------------------

         The payment of dividends by the Company depends primarily on the
         ability of the Bank to pay dividends to the Company. The payment of
         dividends by the Bank is subject to regulation by the Office of Thrift
         Supervision ("OTS"). The Bank may not declare or pay a cash dividend if
         the effect thereof would cause the capital of the Savings Bank to be
         reduced below regulatory capital requirements imposed by the OTS or
         below the liquidation account established by the Bank in connection
         with the conversion of the Bank's former mutual holding company
         (SouthBanc Shares, M.H.C.) from the mutual to stock form of
         organization.

         The Company's Board of Directors declared a cash dividend of $.15 per
         share to its shareholders during the quarter ended June 30, 2000,
         payable on July 18, 2000 to shareholders of record as of July 3, 2000.

4.       Earnings Per Share
         ------------------

         In February 1997, the Financial Accounting Standards Board (FASB)
         issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 specifies the
         computation, presentation and disclosure requirements for earnings per
         share (EPS) for entities with publicly held common stock or potential
         common stock such as options, warrants, convertible securities or
         contingent stock agreements if those securities trade in a public
         market.


                                       8
<PAGE>

4.       Earnings Per Share (Continued)
         ------------------------------

         This standard specifies computation and presentation requirements for
         both basic EPS and, for entities with complex capital structures,
         diluted EPS. Basic earnings per share are computed by dividing net
         income by the weighted average common shares outstanding. Diluted
         earnings per share is similar to the computation of basic earnings per
         share except that the denominator is increased to include the number of
         additional common shares that would have been outstanding if the
         dilutive potential common shares had been issued. The dilutive effect
         of options outstanding under the Company's stock option plan is
         reflected in diluted earnings per share by application of the treasury
         stock method. SFAS No. 128 is effective for reporting periods ending
         after December 15, 1997. The Company adopted SFAS No. 128 during the
         quarter ended December 31, 1997. Accordingly, all prior period earnings
         per share have been restated for the purchase of Treasury Stock.

         RECONCILIATION OF THE NUMERATORS AND DENOMINATORS OF THE BASIC AND
         DILUTED EPS COMPUTATIONS:

<TABLE>
<CAPTION>
                                             For the Nine Months Ended              For the Quarter Ended
                                                   June 30, 2000                         June 30, 2000
                                         ----------------------------------   ---------------------------------
                                           Income       Shares       Per       Income        Shares       Per
                                           (Numer-    (Denomi-      Share      (Numer-      (Denomi-     Share
                                             ator)      nator)      Amount       ator)        nator)     Amount
                                         ----------   ----------   --------   ----------    ---------   --------
         <S>                             <C>          <C>          <C>        <C>           <C>         <C>
         Basic EPS                       $3,856,405    2,969,066   $   1.30   $1,195,640    2,863,797   $  0.42
         Effect of Diluted Securities:
           Stock Options                          0       85,305                       0       77,652
           ESOP                                   0       82,308                       0       82,308
                                         ----------   ----------              ----------    ---------

         Diluted EPS                     $3,856,405    3,136,679   $   1.23   $1,195,640    3,023,757   $  0.40
</TABLE>

<TABLE>
<CAPTION>
                                             For the Nine Months Ended              For the Quarter Ended
                                                   June 30, 1999                         June 30, 1999
                                         ----------------------------------   ---------------------------------
                                           Income       Shares       Per       Income        Shares       Per
                                           (Numer-    (Denomi-      Share      (Numer-      (Denomi-     Share
                                             ator)      nator)      Amount       ator)        nator)     Amount
                                         ----------   ----------   --------   ----------    ---------   --------
         <S>                             <C>          <C>          <C>        <C>           <C>         <C>
         Basic EPS                       $4,623,389    3,463,213   $   1.34   $1,596,700    3,137,542   $   0.51
         Effect of Diluted Securities:
           Stock Options                          0      102,399                       0      107,386
           ESOP                                   0      105,354                       0      105,354
                                         ----------   ----------              ----------    ---------

         Diluted EPS                     $4,623,389    3,670,966   $   1.26   $1,596,700    3,350,282   $  0.48
</TABLE>


5.       Subsequent Event -- Merger with Heritage Bancorp, Inc.
         ------------------------------------------------------

         On July 31, 2000 , the Company merged with Heritage Bancorp, Inc.
         ("Heritage"). The Company is the surviving corporation in the merger
         and the transaction has been accounted for under the purchase method of
         accounting prescribed by generally accepted accounting principles.

         Each share of Heritage common stock was exchanged for either $17.65 in
         cash or .992 of a share of the Company common stock. The Company paid
         approximately $36.3 million in cash and issued approximately 1.8
         million shares in connection with the transaction.


                                       9
<PAGE>

5.       Subsequent Event -- Merger with Heritage Bancorp, Inc. (Continued)
         ------------------------------------------------------------------

         Heritage Federal Bank, the former subsidiary of Heritage that now is a
         subsidiary of the Company, operates four banking offices in the upstate
         region of South Carolina. At June 30, 2000, Heritage had total assets
         of $342.3 million, deposits of $209.6 million, and stockholders' equity
         of $71.4 million.


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Comparison of Financial Condition at  June 30, 2000 and September 30, 1999

Total assets increased 3.71% or $13.8 million to $386.0 million at June 30,
2000, from $372.2 million at September 30, 1999. Loans receivable increased
10.37% or $26.5 million to $282.0 million at June 30, 2000, from $255.5 million
at September 30, 1999. The increase in loans receivable resulted from growth in
first mortgage residential loans which increased $18.5 million to $163.2 million
at June 30, 2000, from $144.7 million at September 30, 1999, commercial real
estate which increased $8.5 million to $56.6 million at June 30, 2000, from
$48.1 million at September 30, 1999, commercial loans which increased $1.4
million to $16.8 million at June 30, 2000, from $15.4 million at September 30,
1999, consumer loans which increased $1.7 million to $23.7 million at June 30,
2000, from $22.0 million at September 30, 1999, offset by residential
construction loans which decreased $3.2 million to $24.6 million at June 30,
2000 from $27.8 million at September 30, 1999,

Cash and cash equivalents decreased 18.06% or $2.8 million to $12.7 million at
June 30, 2000, from $15.5 million at September 30, 1999.

Investment securities available-for-sale increased 12.96% or $2.1 million to
$18.3 million at June 30, 2000, from $16.2 million at September 30, 1999. A $2.0
million agency callable bond yielding 8.00% was called, a $1.0 million U. S.
Treasury note yielding 5.50% matured, and the Company purchased $4.8 million of
investments in publicly traded stocks.

Mortgage-backed securities available-for-sale decreased 24.49% or $14.3 million
to $44.1 million at June 30, 2000 from $58.4 million at September 30, 1999. The
Company sold $7.4 million FHLMC fixed rate mortgage-backed securities with
coupon rates between 7.50% and 8.00% maturing in twenty years. Principal
repayments on mortgage-backed securities were $6.7 million.

The Company's net investment in a limited partnership increased $0.3 million to
$1.9 million at June 30, 2000, from $1.6 million at September 30, 1999. The
investment is recorded under the equity method and the increase represents the
Company's portion of the earnings for the quarter. The limited partnership
invests in mortgage servicing rights tied to a national portfolio of residential
mortgage loans.

Real estate held for development was $2.1 million at June 30, 2000 and September
30, 1999. United Service Corporation sold seven single-family residential lots
in The Meadows Subdivision at a cost of $153,000. Forty-two lots remain
available for sale in Phase II in The Meadows residential subdivision and all
infrastructure has been completed. One tract of 8.0 acres and another tract of
5.0 acres remain available for sale in Perpetual Square, a commercial real
estate development. Northpark, an industrial park, has nineteen unsold acres of
land. During the nine months ended June 30, 2000, United Service Corporation
sold a one acre lot in Northpark at a cost of $28,000.

Deposits increased 5.38% or $11.9 million to $233.2 million at June 30, 2000,
from $221.3 million at September 30, 1999. The Company consolidated the number
of checking and statement saving accounts being offered and initiated a new
deposit fee schedule. Non interest bearing checking accounts decreased 19.75% or
$3.1 million to $12.6 million at June 30, 2000, from $15.7 million at September
30, 1999. Interest bearing checking accounts decreased 0.92% or $0.4 million to
$42.9 million at June 30, 2000, from $43.3 million at September 30, 1999.
Statement savings accounts increased 7.20% or $1.9 million to $28.3 million at
June 30, 2000, from $26.4 million at September 30, 1999.


                                       10
<PAGE>

Certificates of deposits increased 9.93% or $13.5 million to $149.4 million at
June 30, 2000, from $135.9 million at September 30, 1999.

Advances from the Federal Home Loan Bank ("FHLB") increased 4.11% or $3.0
million to $76.0 million at June 30, 2000, from $73.0 million at September 30,
1999. The advances were used to fund loan originations and loan purchases from a
mortgage banking company in which Mortgage First Service Corporation, a
subsidiary of the Bank, has a one-third equity interest.

Stockholders' equity decreased 4.55% or $2.4 million to $50.4 million at June
30, 2000, from $52.8 million at September 30, 1999. Retained earnings were
offset by dividends paid in the amount of $1.3 million. Common stock repurchased
through the common stock repurchase programs is recorded on the Company's
balance sheet as Treasury Stock, a contra-equity account. During the nine months
ended June 30, 2000, the Company repurchased 265,512 shares at an average cost
of $19.30 per share and a total cost of $5.1 million.

Accumulated other comprehensive loss net increased $0.4 million to $2.4 million
at June 30, 2000, from $2.0 million at September 30, 1999, due to a decrease in
the market value of the investment securities available for sale and
mortgage-backed securities available for sale resulting from an increase in
interest rates in the securities markets.

Deferred compensation for Management Recognition Plan (MRP) decreased $0.4
million to $1.8 million at June 30, 2000, from $2.2 million at September 30,
1999, due to the amortization of the cost of the MRP.

Comparison of Operating Results for the Three Months Ended June 30, 2000 and
1999

Net Income
----------

Net income for the three months ended June 30, 2000, decreased to $1.2 million
or $0.42 basic earnings per share and $0.40 diluted earnings per share, compared
to $1.6 million or $0.51 basic earnings per share and $0.48 diluted earnings per
share for the same three months a year ago.

Net Interest Income
-------------------

Net interest income was $2.8 million for the three months ended June 30, 2000,
and $3.1 million for the three months ended June 30, 1999. Total interest income
increased 5.37% or $354,000 to $6.9 million for the three months ended June 30,
2000, from $6.6 million for the three months ended June 30, 1999, due primarily
to a higher average balance of outstanding loans which increased $41.7 million
or 17.72% to an average of $277.0 million yielding 8.08% for the three months
ended June 30, 2000, from $235.3 million yielding 8.16% for the three months
ended June 30, 1999. Interest income on mortgage-backed securities decreased
32.53% or $405,000 to $0.8 million for the three months ended June 30, 2000, as
the average balance decreased $30.9 million to $45.1 million for the three
months ended June 30, 2000, from $76.0 million for the three months ended June
30, 1999 due to sales and principal repayments on mortgage-backed securities.
Interest income on other investments decreased 6.50% or $34,000 due primarily to
a lower balance of investment securities and interest bearing securities which
decreased 18.85% or $5.9 million, to an average balance of $25.4 million
yielding 7.75% for the three months ended June 30, 2000, from $31.3 million
yielding 6.69% for the three months ended June 30, 1999.

Interest Expense
----------------

Interest expense on deposits increased 14.63% or $325,000 as the average
outstanding balance of deposits increased 2.34% or $5.3 million to $232.0
million at an average cost of 4.39% for the three months ended June 30, 2000,
from $226.7 million at an average cost of 3.92% for the three months ended June
30, 1999. Interest on borrowings increased $431,000 to $1.5 million for the
three months ended June 30, 2000, from $1.1 million for the three months ended
June 30, 1999, as the average borrowings increased 9.56% or $8.3 million to
$95.1 million at an average cost of 6.49% for the three months ended June 30,
2000, from $86.8 million at an average cost of 5.13% for the three months ended
June 30, 1999.


                                       11
<PAGE>

Provisions for Loan Losses
--------------------------

Provisions for loan losses are charges to earnings to bring the total allowance
for loan losses to a level considered adequate by management to provide for
management's best estimate of inherent loan losses. In determining the adequacy
of the allowance for loan losses, management evaluates various factors including
the market value of the underlying collateral, growth, and composition of the
loan portfolio, the relationship of the allowance for loan losses to outstanding
loans, loss experience, delinquency trends and economic conditions. Management
evaluates the carrying value of loans periodically, and the allowance for loan
losses is adjusted accordingly.

The provision for loan losses decreased 55.9% or $95,000, to $75,000 for the
three months ended June 30, 2000, from $170,000 for the three months ended June
30, 1999, as charge-offs were $26,000 for the three months ended June 30, 2000,
compared to $59,000 for the three months ended June 30, 1999.

Non-performing assets at June 30, 2000, were $5.4 million, consisting of $2.1
million of residential construction loans, $481,000 of real estate acquired in
settlement of loans, $1.4 million of single family residential loans, $1.3
million of commercial real estate loans, $138,000 of commercial loans, and
$49,000 of consumer loans.

Non-performing assets at September 30, 1999, were $2.6 million, consisting of
$88,000 of residential mortgage construction loans, $208,000 of real estate
acquired in settlement of loans, $1,184,000 of single family residential loans,
$873,000 of commercial real estate loans, $126,000 of commercial loans, and
$86,000 of consumer loans.

The allowance for loan losses to total loans was 1.01% at June 30, 2000 and at
September 30, 1999.

Other Income
------------

Total other income decreased 16.2%, or $269,000, to $1.4 million for the three
months ended June 30, 2000, from $1.7 million for the three months ended June
30, 1999. Loan and deposit service charges increased $71,000 to $995,000 from
$924,000 for the three months ended June 30, 1999, as a result of an increase to
the fee structure of deposit accounts. There was no gain (loss) on sale of
investments for the three months ended June 30, 2000, compared to a loss of
$171,000 for the three months ended June 30, 1999. Gain (loss) on sale of real
estate acquired in settlement of loans was a loss of $6,000 for the three months
ended June 30, 2000, compared to a loss of $9,000 for the three months ended
June 30, 1999.

Gain on sale of loans was $3,000 for the three months ended June 30, 2000,
compared to a gain of $7,000 for the three months ended June 30, 1999. Gain on
sale of real estate held for development was $2,000 for the three months ended
June 30, 2000, as two residential lots and one residential house were sold by
United Service Corporation in The Meadows residential subdivision compared to
$128,000 for the three months ended June 30, 1999, as two lots (five acres of
land) were sold in the Northpark Industrial Park. Earnings on bank owned life
insurance increased 2.80% or $3,000 to $110,000 for the three months ended June
30, 2000, compared to $107,000 for the three months ended June 30, 1999. Other
income decreased $387,000 to $288,000 for the three months ended June 30, 2000,
compared to $675,000 for the three months ended June 30, 1999, due to a decrease
in the Bank's portion of earnings of the investment in limited partnership
because the prepayment rates on the underlying mortgages have increased at a
lower rate when compared to the same three months a year ago. Earnings on the
investment in limited partnership decreased $310,000 to $90,000 for the three
months ended June 30, 2000 compared to $400,000 for the three months ended June
30, 1999.

General and Administrative Expense
----------------------------------

Salaries and employee benefits increased 12.66% or $152,000 to $1.4 million for
the three months ended June 30, 2000, from $1.2 million for the three months
ended June 30, 1999, due to the expense of the 1999 Management Recognition Plan
(MRP) and additional overtime expense involved with the anticipated Heritage
merger. Office occupancy increased 6.40% or $8,000 to $133,000 for the three
months ended June 30, 2000, from $125,000 for the three months


                                       12
<PAGE>

ended June 30, 1999, due to an increase in building maintenance. Furniture and
equipment expenses increased 2.71% or $7,000 to $265,000 for the three months
ended June 30, 2000 from $258,000 for the three months ended June 30, 1999, due
to increases in depreciation expense and equipment maintenance expense.
Advertising decreased 16.00% or $12,000 to $63,000 for the three months ended
June 30, 2000, from $75,000 for the three months ended June 30, 1999 due to a
decrease in the purchase of specialty items. Data processing decreased 6.41% or
$10,000 to $146,000 for the three months ended June 30, 2000, from $156,000 for
the three months ended June 30, 1999 due to Year 2000 computer and computer
software testing incurred in the three months ending June 30, 1999. Office
supplies decreased 17.95% or $14,000 to $64,000 for the three months ended June
30, 2000, from $78,000 for the three months ended June 30, 1999, due to a
decrease in the purchase of data processing supplies. There was no profit
improvement program expense for the three months ended June 30, 2000 compared to
$84,000 for the three months ended June 30, 1999 as the two year program has
been concluded. The profit improvement program included consultant fees for
sales training, staff realignment, and product fee enhancement. Other operating
expenses increased 9.79% or $33,000 to $370,000 for the three months ended June
30, 2000, from $337,000 for the three months ended June 30, 1999, due to an
increase in real estate owned expenses.

Income Taxes
------------

Income taxes decreased 30.01% or $235,000 to $548,000 for the three months ended
June 30, 2000, from $783,000 for the three months ended June 30, 1999. This was
due to a decrease in income before taxes of 26.76% or $637,000 to $1,743,000
from $2,380,000 for the nine months ended June 30, 2000 and 1999, respectively.

Comparison of Operating Results for the Nine Months Ended June 30, 2000 and 1999

Net Income
----------

Net income for the nine months ended June 30, 2000, decreased to $3.9 million or
$1.30 basic earnings per share and $1.23 diluted earnings per share, compared to
$4.6 million or $1.34 basic earnings per share and $1.26 diluted earnings per
share for the same nine months a year ago.

Net Interest Income
-------------------

Net interest income was $9.0 million for the nine months ended June 30, 2000,
and $9.5 million for the nine months ended June 30, 1999. Total interest income
increased 3.21% or $628,000 to $20.2 million for the nine months ended June 30,
2000, from $19.6 million for the nine months ended June 30, 1999, due primarily
to a higher average balance of outstanding loans which increased $34.8 million
or 14.85% to an average of $269.1 million yielding 8.03% for the nine months
ended June 30, 2000, from $234.3 million yielding 8.05% for the nine months
ended June 30, 1999. Interest income on mortgage-backed securities decreased
31.64% or $1,171,000 to $2.5 million for the nine months ended June 30, 2000, as
the average balance of mortgage backed securities decreased $29.0 million to
$47.9 million for the nine months ended June 30, 2000 from $76.9 million for the
nine months ended June 30, 1999 due to sales and principal repayments on
mortgage-backed securities. Interest income on other investments decreased
15.51% or $270,000 due primarily to a lower balance of investment securities and
interest bearing securities which decreased 26.18% or $9.4 million, to an
average balance of $26.5 million yielding 7.39% for the nine months ended June
30, 2000, from $35.9 million yielding 6.46% for the nine months ended June 30,
1999.

Interest Expense
----------------

Interest expense on deposits increased 5.00% or $335,000 as the average
outstanding balance of deposits increased 2.45% or $5.4 million to $225.5
million at an average cost of 4.16% for the nine months ended June 30, 2000,
from $220.1 million at an average cost of 4.06% for the nine months ended June
30, 1999. Interest on borrowings increased $805,000 to $4.2 million for the nine
months ended June 30, 2000, from $3.4 million for the nine months ended June 30,
1999, as the average borrowings increased 6.82% or $6.0 million to $94.0 million
at an average cost of 5.98% for the nine months ended June 30, 2000 from $88.0
million at an average cost of 5.16% for the nine months ended June 30, 1999.


                                       13
<PAGE>

Provision For Loan Losses
-------------------------

Provisions for loan losses are charges to earnings to bring the total allowance
for loan losses to a level considered adequate by management to provide for
management's best estimate of inherent loan losses. In determining the adequacy
of the allowance for loan losses, management evaluates various factors including
the market value of the underlying collateral, growth, and composition of the
loan portfolio, the relationship of the allowance for loan losses to outstanding
loans, loss experience, delinquency trends and economic conditions. Management
evaluates the carrying value of loans periodically, and the allowance for loan
losses is adjusted accordingly.

The provision for loan losses increased 31.82% or $105,000 to $435,000 for the
nine months ended June 30, 2000, from $330,000 for the nine months ended June
30, 1999 as charge offs were $176,000 for the nine months ended June 30, 2000,
compared to $116,000 for the nine months ended June 30, 1999, and non-performing
assets at June 30, 2000 were $5.4 million compared to $2.6 million at September
30, 1999.

Other Income
------------

Total other income decreased 4.87% or $213,000 to $4.2 million for the nine
months ended June 30, 2000, from $4.4 million for the nine months ended June 30,
1999. Loan and deposit service charges increased $432,000 to $3.0 million from
$2.5 million for the nine months ended June 30, 2000, as a result of an increase
to the fee structure of deposit accounts. Gain (loss) on sale of investments was
a loss of $95,000 for the nine months ended June 30, 2000, compared to a gain of
$126,000 for the nine months ended June 30, 1999. Gain (loss) on sale of real
estate acquired in settlement of loans was a loss of $2,000 for the nine months
ended June 30, 2000, compared to a gain of $14,000 for the nine months ended
June 30, 1999.

Gain on sale of loans was $3,000 for the nine months ended June 30, 2000,
compared to a gain of $88,000 for the nine months ended June 30, 1999. Gain on
sale of real estate held for development was $84,000 for the nine months ended
June 30, 2000, as nine residential lots were sold by the United Service
Corporation in The Meadows residential subdivision one residential house and two
lots in the Northpark Industrial Park compared to $300,000 for the nine months
ended June 30, 1999, as thirteen residential lots were sold in The Meadows and
one five acre tract of commercial real estate sold in Perpetual Square. Earnings
on bank owned life insurance increased 7.17% or $23,000 to $344,000 for the nine
months ended June 30, 2000, compared to $321,000 for the nine months ended June
30, 1999 due to an annual yield adjustment. Other income decreased $128,000 to
$874,000 for the nine months ended June 30, 2000, compared to $1,002,000 for the
nine months ended June 30, 1999, due to a decrease in the Bank's portion of
earnings of the investment in limited partnership because the prepayment rates
on the underlying mortgages for the nine months ended June 30, 2000 have
increased at a lower rate when compared to the nine months end June 30, 1999.
Earnings on the investment in limited partnership decreased $461,000 to $289,000
for the nine months ended June 30, 2000, compared to $750,000 for the nine
months ended June 30, 1999.

General and Administrative Expense
----------------------------------

Salaries and employee benefits increased 12.57% or $437,000 to $3.9 million for
the nine months ended June 30, 2000, from $3.5 million for the nine months ended
June 30, 1999, due to the expense of the 1999 Management Recognition Plan (MRP).
Office occupancy increased 9.97% or $37,000 to $408,000 for the nine months
ended June 30, 2000 from $371,000 for the nine months ended June 30, 1999, due
to an increase in building maintenance. Furniture and equipment expenses
decreased 3.55% or $29,000 to $789,000 for the nine months ended June 30, 2000
from $818,000 for the nine months ended June 30, 1999 due to decreases in
depreciation expense and equipment maintenance expense. Advertising increased
8.76% or $12,000 to $149,000 for the nine months ended June 30, 2000 from
$137,000 for the nine months ended June 30, 1999 due to a checking account
promotion.

Data processing decreased 9.13% or $40,000 to $398,000 for the nine months ended
June 30, 2000 from $438,000 for the nine months ended June 30, 1999 due to Year
2000 computer and computer software testing for the nine months ended June 30,
1999. Office supplies increased 11.98% or $26,000 to $243,000 for the nine
months ended June 30, 2000 from $217,000 for the nine months ended June 30,
1999, due to an increase in the purchase of data processing supplies. The profit
improvement program expense decreased 54.59% or $113,000 to $94,000 for the


                                       14
<PAGE>

nine months ended June 30, 2000 from $207,000 for the nine months ended June 30,
1999 as the two year program has been concluded. The profit improvement program
included consultant fees for sales training, staff realignment and product fee
enhancement. Other operating expenses increased 10.06% or $88,000 to $963,000
for the nine months ended June 30, 2000 from $875,000 for the nine months ended
June 30, 1999 due to increased telephone, postage, real estate owned expenses,
and a decrease in deferred loan expense.

Income Taxes
------------

Income taxes decreased 19.63% or $443,000 to $1,814,000 for the nine months
ended June 30, 2000 from $2,257,000 for the nine months ended June 30, 1999.
This was due to a decrease in income before taxes of 17.60% or $1,211,000 to
$5.7 million from $6.9 million for the nine months ended June 30, 2000 and 1999,
respectively.

Liquidity and Capital Resources
-------------------------------

The Company's primary sources of funds are deposits, repayment of loan
principal, and repayment of mortgage backed securities and collateralized
mortgage obligations, and, to a lesser extent, maturities of investment
securities, and short-term investments and operations. While scheduled loan
repayments and maturing investments are relatively predictable, deposit flows
and early loan repayments are more influenced by interest rates, general
economic conditions, and competition. The Company attempts to price its deposits
to meet its asset/liability objectives consistent with local market conditions.
Excess balances are invested in overnight funds. In addition, the Company is
eligible to borrow funds from the Federal Home Loan Bank ("FHLB") of Atlanta.
Under OTS regulations, a member thrift institution is required to maintain an
average daily balance of liquid assets (cash, certain time deposits and savings
accounts, bankers' acceptances, and specified U. S. government, state or federal
agency obligations and certain other investments) equal to a monthly average of
not less than a specified percentage of its net withdrawable accounts plus
short-term borrowings. This liquidity requirement, which is currently 4.0%, may
be changed from time to time by the OTS to any amount within the range of 4.0%
to 10.0%, depending upon economic conditions and the savings flow of member
associations. Monetary penalties may be imposed for failure to meet liquidity
requirements. The liquidity of the Company at June 30, 2000 was 11.32%.

The primary investing activity of the Company is lending. During the nine months
ended June 30, 2000, the Company originated $64.8 million of loans and no loans
were sold. The Company also purchased $25.0 million of loans. The retained
originations were primarily funded by principal repayments of loans and
mortgage-backed securities and collateralized mortgage obligations, and FHLB
advances.

Liquidity management is both a short and long-term responsibility of management.
The Company adjusts its investments in liquid assets based upon management's
assessment of (i) expected loan demand, (ii) projected loan sales, (iii)
expected deposit flows, (iv) yields available on interest-bearing deposits, and
(v) liquidity of its asset/liability management program. Excess liquidity is
generally invested in interest-bearing overnight deposits and other short-term
government and agency obligations. If the Company requires funds beyond its
ability to generate them internally, it has additional borrowing capacity with
the FHLB and collateral eligible for repurchase agreements.

The Company anticipates that it will have sufficient funds available through
normal loan repayments to meet current loan commitments. At June 30, 2000, the
Company had outstanding commitments to originate loans of approximately $68.3
million which is comprised of $37.8 million adjustable rate commitments and
$30.5 million fixed rate commitments.

Certificates of deposit scheduled to mature in one year or less at June 30,
2000, totaled $121.5 million. Based upon management's experience and familiarity
with the customers involved and the Company's pricing policy relative to that of
its perceived competitors, management believes that a significant portion of
such deposits will remain with the Company.


                                       15
<PAGE>

Capital Compliance
------------------

The Company is not subject to any regulatory capital requirements. The Bank's
actual capital and ratios as required by the OTS, as well as those required to
be considered well capitalized according to the Prompt Corrective Action
Provisions are presented in the following table. As of June 30, 2000, the most
recent notification from the OTS categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risked-based, and Tier I core ("leverage") ratios as set forth in the table.
There are no conditions or events since that notification that management
believes have changed the Bank's category.

<TABLE>
<CAPTION>
                                                                                           To Be Well
                                                                                        Capitalized Under
                                                                For Capital Adequacy    Prompt Corrective
                                               Actual                 Purposes          Action Provisions
                                               ------                 --------          -----------------
                                         Amount      Ratio        Amount      Ratio     Amount       Ratio
                                         ------      -----        ------      -----     ------       -----
                                                                        (Dollars in Thousands)
<S>                                     <C>          <C>         <C>          <C>       <C>          <C>
As of June 30, 2000:

Tangible Capital (To Total Assets)      $39,723      10.58%      $ 5,632      1.50%$        --         --%

Core Capital (To Total Assets)           39,723      10.58%       15,020      4.00%     18,775       5.00%

Tier I Capital (To Risk-Based Assets)    39,723      15.65%           --        --      15,228       6.00%

Risk-Based Capital (To Risk-Based
     Assets)                             42,388      16.70%       20,303      8.00%     25,379      10.00%
</TABLE>

If the Bank were to fail to meet the minimum capital requirements, it will be
required to file a written capital restoration plan with regulatory agencies and
would be subject to various mandatory and discretionary restrictions on its
operations.

Impact of New Accounting Pronouncements
---------------------------------------

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." All derivatives are to be measured at fair
value and recognized in the balance sheet as assets or liabilities. This
statement's effective date was delayed by the issuance of SFAS No. 137
"Accounting for Derivative Instruments and hedging Activities - Deferral of the
Effective Date of SFAS 133", and is effective for fiscal years and quarters
beginning after June 15, 2000. The Company does not expect that the adoption of
SFAS No. 133 will have a material impact on the presentation of the Company's
financial results or financial position.

Accounting standards that have been issued by the FASB that will not require
adoption until a future date and will impact the preparation of the financial
statements will not have a material effect upon adoption.



Effect of Inflation and Changing Prices
---------------------------------------

The Consolidated Financial Statements and related financial data presented
herein have been prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") which require the measurement of financial position and
operating results in terms of historical dollars, without considering the
changes in relative purchasing power of money over time due to inflation. The
primary impact of inflation on operations of the Company is reflected in
increased operating costs. Unlike most industrial companies, virtually all the
assets and liabilities of a financial institution are monetary in nature. As a
result, interest rates generally have a more significant impact on a financial
institution's performance than do general levels of inflation. Interest rates do
not necessarily move in the same direction or to the same extent as the prices
of goods and services.


                                       16
<PAGE>

ITEM 3 - Market Risk Disclosure
-------------------------------

There have been no material changes to the market risk information set forth
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Market Risk and Asset Liability Management" in the Company's
Annual Report for the year ended September 30, 1999.



                                       17
<PAGE>

                                     PART II

Item 1.           Legal Proceedings
-----------------------------------

The Company is not a party to any legal proceedings at this time. The Savings
Bank from time to time and currently is involved as plaintiff or defendant in
various legal actions incident to its business. These actions are not believed
to be material, either individually or collectively, to the consolidated
financial condition or results of operations of the Savings Bank.

Item 2.           Changes in Securities and Use of Proceeds
-----------------------------------------------------------

None

Item 3.           Defaults Upon Senior Securities
-------------------------------------------------

Not applicable

Item 4.           Submission of Matters to a Vote of Security Holders
---------------------------------------------------------------------

None

Item 5.           Other Information
-----------------------------------

None

Item 6.           Exhibits and Reports on Form 8-K
--------------------------------------------------

<TABLE>
<CAPTION>
         <S>                                                                    <C>
                  2        Agreement and Plan of Merger                         *
                  3(a)     Certificate of Incorporation of the Company          **
                  3(b)     Bylaws of the Company                                **
                  10.1     Employment Agreement between SouthBanc Shares,
                           Inc. and Robert W. Orr                               ***
                  10.2     Employment Agreement between SouthBanc Shares,
                           Inc. and Thomas C. Hall                              ***
                  10.3     Employment Agreement between SouthBanc Shares,
                           Inc. and Barry C. Visioli                            ***
                  10.4     Employment Agreement between Perpetual Bank,
                           A Federal Savings Bank and Robert W. Orr             ***
                  10.5     Employment Agreement between Perpetual Bank,
                           A Federal Savings Bank and Thomas C. Hall            ***
                  10.6     Employment Agreement between Perpetual Bank,
                           A Federal Savings Bank and Barry C. Viosoli          ***
                  10.7     1998 Stock Option Plan                               ****
                  10.8     1998 Management Development and Recognition Plan     ****
                  10.9     Supplemental Executive Retirement Agreement with
                           Robert W. Orr                                        ***
                  10.10    Supplemental Executive Retirement Agreement with
                           Thomas C. Hall                                       ***
                  10.11    Supplemental Executive Retirement Agreement with
                           Barry C. Visioli                                     ***
                  27       Financial Data Schedule
</TABLE>

                                       18
<PAGE>

                  *        Incorporated by reference to the Company's Current
                           Report on Form 8-K filed February 22, 2000

                  **       Incorporated by reference to the Company's
                           Registration Statement on Form S-1, as amended (File
                           No. 333-42517)

                  ***      Incorporated by reference to the Company's Annual
                           Report on Form 10-K for the year ended September 30,
                           1999.

                  ****     Incorporated by reference to the Company's Definitive
                           Proxy Statement dated December 18, 1998.

B.       Reports on Form 8-K
         -------------------

                  No reports on Form 8-K were filed during the quarter ended
June 30, 2000.



                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               SouthBanc Shares, Inc.


Date:    August 14, 2000                       /s/ Robert W. Orr
                                               --------------------------------
                                               Robert W. Orr
                                               President and Managing Officer
                                               (Duly Authorized Representative)




Date:     August 14, 2000                      /s/ Thomas C. Hall
                                               ---------------------------------
                                               Thomas C. Hall
                                               Chief Financial Officer


                                       19