# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-QSB

|[X] | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|--- | ---------------------------------------------------------------------------------
|    | For the quarterly period ended September 30, 2003                                

|[   ] | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|----- | ----------------------------------------------------------------------------------
|      | For the transition period from ___________ to _____________                       

Commission file number
33-95562

BEACH FIRST NATIONAL BANCSHARES, INC.(Exact name of registrant as specified in its charter)

|South Carolina           |  | 57-1030117                          
|------------------------ |  | ------------------------------------
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

1550 Oak Street, Myrtle Beach, South Carolina 29577
(Address of principal executive offices)   (Zip Code)

(843) 626-2265(Telephone Number)

Not Applicable(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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. Yes X   No

State the number of shares  outstanding  of each of the  issuer's  classes of common  equity,  as of the latest
practicable  date:  1,318,368 shares of the issuer's common stock,  par value $1.00 per share,  were issued and outstanding as of
October 20, 2003.

Transitional Small Business Disclosure
Format (check one):   Yes X   No

---

# PART IFINANCIAL INFORMATION
Item 1.  Financial Statements.

# Beach First National
Bancshares, Inc. and SubsidiaryMyrtle Beach, South Carolina Consolidated Balance
Sheets

|                                                    | September 30, | December 31,
|--------------------------------------------------- | ------------- | ------------
|
|
|ASSETS                                              |               |             
|Cash and due from banks                             |               |             
|Federal funds sold and short term investments       |               |             
|Investment securities available for sale            |               |             
|Loans, net                                          |               |             
|Federal Reserve Bank stock                          |               |             
|Federal Home Loan Bank stock                        |               |             
|Premises and equipment, net                         |               |             
|Other assets                                        |               |             
|                                                    |               |             
|Total assets                                        |               |             
|                                                    |               |             
|LIABILITIES AND SHAREHOLDERS' EQUITY                |               |             
|LIABILITIES:                                        |               |             
|Deposits                                            |               |             
|Noninterest bearing deposits                        |               |             
|Interest bearing deposits                           |               |             
|                                                    |               |             
|Total deposits                                      |               |             
|Other borrowings                                    |               |             
|Other liabilities                                   |               |             
|                                                    |               |             
|Total liabilities                                   |               |             
|                                                    |               |             
|SHAREHOLDERS' EQUITY:                               |               |             
|Common stock, $1 par value; 10,000,000 shares       |               |             
|authorized; 1,318,368 shares issued and outstanding |               |             
|Paid-in capital                                     |               |             
|Retained earnings                                   |               |             
|Accumulated other comprehensive income (loss)       |               |             
|                                                    |               |             
|Total shareholders' equity                          |               |             
|                                                    |               |             
|Total liabilities and shareholders' equity          |               |             
|                                                    |               |             

The
accompanying notes are an integral part of these consolidated financial statements.

2

---

Beach First National
Bancshares, Inc. and SubsidiaryMyrtle Beach, South CarolinaConsolidated
Statements of Operations(Unaudited)

|                                    | Nine Months Ended | Three Months Ended
|----------------------------------- | ----------------- | ------------------
|
|
|INTEREST INCOME                     |                   |                   
|Interest and fees on loans          |                   |                   
|Investment securities               |                   |                   
|Federal funds sold and short term   |                   |                   
|Investments                         |                   |                   
|                                    |                   |                   
|Total interest income               |                   |                   
|                                    |                   |                   
|INTEREST EXPENSE                    |                   |                   
|Deposits                            |                   |                   
|Other borrowings                    |                   |                   
|                                    |                   |                   
|Total interest expense              |                   |                   
|Net interest income                 |                   |                   
|                                    |                   |                   
|PROVISION FOR POSSIBLE LOAN         |                   |                   
|LOSSES                              |                   |                   
|                                    |                   |                   
|Net interest income after provision |                   |                   
|for possible loan losses            |                   |                   
|                                    |                   |                   
|NONINTEREST INCOME                  |                   |                   
|Service fees on deposit accounts    |                   |                   
|Gain (loss) on sale of investment   |                   |                   
|Securities                          |                   |                   
|Other income                        |                   |                   
|                                    |                   |                   
|Total noninterest income            |                   |                   
|                                    |                   |                   
|NONINTEREST EXPENSES                |                   |                   
|Salaries and wages                  |                   |                   
|Employee benefits                   |                   |                   
|Supplies and printing               |                   |                   
|Advertising and public relations    |                   |                   
|Professional fees                   |                   |                   
|Depreciation and amortization       |                   |                   
|Occupancy                           |                   |                   
|Data processing fees                |                   |                   
|Other operating expenses            |                   |                   
|                                    |                   |                   
|Total noninterest expenses          |                   |                   
|                                    |                   |                   
|Income before income taxes          |                   |                   
|                                    |                   |                   
|INCOME TAX EXPENSE                  |                   |                   
|                                    |                   |                   
|Net income                          |                   |                   
|                                    |                   |                   
|BASIC NET INCOME PER COMMON         |                   |                   
|SHARE                               |                   |                   
|                                    |                   |                   
|DILUTED NET INCOME PER COMMON       |                   |                   
|SHARE                               |                   |                   
|                                    |                   |                   

The
accompanying notes are an integral part of these consolidated financial statements.

3

---

# Beach First National
Bancshares, Inc. and SubsidiaryConsolidated Statements of Changes in Shareholders Equity
(Unaudited)

|                                             |  |  |   | Accumulated |  |  
|-------------------------------------------- |  |  | - | ----------- |  | -
|
|
|
|BALANCE, DECEMBER 31, 2001                   |  |  | $ | 1,318,368   |  | $
|Net income                                   |  |  |   | -           |  |  
|Other comprehensive income, net of taxes:    |  | 
|Unrealized loss on investment securities     |  |  |   | -           |  |  
|Less reclassification adjustments for losses |  | 
|included in net income                       |  |  |   | -           |  |  
|Comprehensive income                         |  |  |   | -           |  |  
|                                             |  |  |   |             |  |  
|BALANCE, SEPTEMBER 30, 2002                  |  |  | $ | 1,318,368   |  | $
|                                             |  |  |   |             |  |  

|                                             |  |  |   | Accumulated |  |  
|-------------------------------------------- |  |  | - | ----------- |  | -
|
|
|
|BALANCE, DECEMBER 31, 2002                   |  |  | $ | 1,318,368   |  | $
|Net income                                   |  |  |   | -           |  |  
|Other comprehensive income, net of taxes:    |  | 
|Unrealized loss on investment securities     |  |  |   | -           |  |  
|Less reclassification adjustments for losses |  | 
|included in net income                       |  |  |   | -           |  |  
|Comprehensive income                         |  |  |   | -           |  |  
|                                             |  |  |   |             |  |  
|BALANCE, SEPTEMBER 30, 2002                  |  |  | $ | 1,318,368   |  | $
|                                             |  |  |   |             |  |  

The
accompanying notes are an integral part of these consolidated financial statements.

4

---

# Beach First National
Bancshares, Inc. and SubsidiaryMyrtle Beach, South CarolinaConsolidated
Statements of Cash Flows(Unaudited)

|                                                                   | Nine Months Ended
|------------------------------------------------------------------ | -----------------
|
|
|OPERATING ACTIVITIES                                               |                  
|Net income                                                         |                  
|Adjustments to reconcile net income to                             |                  
|net cash provided by operating activities:                         |                  
|Deferred income taxes                                              |                  
|Provisions for loan losses                                         |                  
|Depreciation and amortization                                      |                  
|Gain (Loss) on sale of investment securities                       |                  
|Increase (decrease) in other assets                                |                  
|Increase (decrease) in other liabilities                           |                  
|                                                                   |                  
|Net cash provided by operating activities                          |                  
|                                                                   |                  
|INVESTING ACTIVITIES                                               |                  
|Purchase of investment securities                                  |                  
|Proceeds from sale or call of investment securities                |                  
|Purchase of FHLB Stock                                             |                  
|Purchase of Federal Reserve Bank Stock                             |                  
|Decrease (increase) in Federal funds sold & short term investments |                  
|Increase in loans, net                                             |                  
|Purchase of premises and equipment                                 |                  
|                                                                   |                  
|Net cash used in investing activities                              |                  
|                                                                   |                  
|FINANCING ACTIVITIES                                               |                  
|Increase in Federal funds purchased & borrowings                   |                  
|Net increase in deposits                                           |                  
|                                                                   |                  
|Net cash provided by financing activities                          |                  
|                                                                   |                  
|                                                                   |                  
|Net decrease in cash and cash equivalents                          |                  
|CASH AND CASH EQUIVALENTS, BEGINNING                               |                  
|OF PERIOD                                                          |                  
|                                                                   |                  
|CASH AND CASH EQUIVALENTS, END OF                                  |                  
|PERIOD                                                             |                  
|                                                                   |                  
|CASH PAID FOR                                                      |                  
|Income taxes                                                       |                  
|                                                                   |                  
|Interest                                                           |                  
|                                                                   |                  

The
accompanying notes are an integral part of these consolidated financial statements.

5

---

# Beach First National
Bancshares, Inc.Notes to Consolidated Financial Statements (Unaudited)

| | The
accompanying unaudited consolidated financial statements for Beach First National
Bancshares, Inc. (Company) were prepared in accordance with instructions for
Form 10-QSB 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 nine month periods ended September 30, 2003 and 2002 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 December
31, 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 2.  Principles of
Consolidation

| | The
accompanying unaudited consolidated financial statements include the accounts of the
Company and its subsidiary, Beach First National Bank. All significant inter-company items
and transactions have been eliminated in consolidation.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3.  Earnings Per Share

| | The
Company calculates earnings per share in accordance with 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

# For the Nine Months Ended
September 30, 2003

|                              | Income | Shares | Per Share
|----------------------------- | ------ | ------ | ---------
|
|Basic EPS                     |        |        | $        
|Effect of Diluted Securities: |        |       
|Stock options                 |        |        |          
|                              |        |        |          
|Diluted EPS                   |        |        | $        

6

---

# For the Three Months Ended
September 30, 2003

|                              | Income | Shares | Per Share
|----------------------------- | ------ | ------ | ---------
|
|Basic EPS                     |        |        | $        
|Effect of Diluted Securities: |        |       
|Stock options                 |        |        |          
|                              |        |        |          
|Diluted EPS                   |        |        | $        

Note 2  Stock-Based
Compensation  Our stock-based employee compensation plan are
accounted for under the recognition and measurement principles of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and related Interpretations. No compensation cost is reflected in net
income, as all and options granted under these plans had an exercise price equal to the
market value of the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the fair value recognition
provisions of Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, had been applied to the Option Plans.

|                                    | Nine Months Ended September 30,
|----------------------------------- | -------------------------------
|
|Net Income, as reported             |                                
|Deduct:  Total stock-based employee |                                
|compensation expense determined     |                                
|under fair value based method for   |                                
|all awards, net of related tax      |                                
|effects                             |                                
|Pro forma net income                |                                
|                                    |                                
|Earnings per share:                 |                                
|Basic - as reported                 |                                
|                                    |                                
|Basic - pro forma                   |                                
|                                    |                                
|Diluted - as reported               |                                
|                                    |                                
|Diluted - pro forma                 |                                
|                                    |                                

|                                    | Three Months Ended September 30,
|----------------------------------- | --------------------------------
|
|Net Income, as reported             |                                 
|Deduct:  Total stock-based employee |                                 
|compensation expense determined     |                                 
|under fair value based method for   |                                 
|all awards, net of related tax      |                                 
|effects                             |                                 
|                                    |                                 
|Pro forma net income                |                                 
|                                    |                                 
|Earnings per share:                 |                                 
|Basic - as reported                 |                                 
|                                    |                                 
|Basic - pro forma                   |                                 
|                                    |                                 
|Diluted - as reported               |                                 
|                                    |                                 
|Diluted - pro forma                 |                                 
|                                    |                                 

7

---

Item 2.  
Managements Discussion and Analysis or Plan of Operation.

The following is our discussion and
analysis of certain significant factors that have affected our financial position and
operating results and those of our subsidiary, Beach First National Bank, during the
periods included in the accompanying financial statements. This commentary should be read
in conjunction with the financial statements and the related notes and the other
statistical information included in this report.

This report contains
forward-looking statements relating to, without limitation, future economic
performance, plans and objectives of management for future operations, and projections of
revenues and other financial items that are based on the beliefs of management, as well as
assumptions made by and information currently available to management. The words
may, will, anticipate, should,
would, believe, contemplate, expect,
estimate, continue, may, and intend, as
well as other similar words and expressions of the future, are intended to identify
forward-looking statements. Our actual results may differ materially from the results
discussed in the forward-looking statements, and our operating performance each quarter is
subject to various risks and uncertainties that are discussed in detail in our filings
with the Securities and Exchange Commission, including, without limitation:

| | o | significant increases in competitive pressure in the banking and financial services industries;
| | - | -----------------------------------------------------------------------------------------------

| | o | changes in the interest rate environment which could reduce anticipated or actual margins;
| | - | ------------------------------------------------------------------------------------------

| | o | changes in political conditions or the legislative or regulatory environment;
| | - | -----------------------------------------------------------------------------

| | o | general economic conditions, either nationally or regionally and especially in primary service area,
becoming less favorable than expected resulting in, among other things, a deterioration in credit quality;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | changes occurring in business conditions and inflation;
| | - | -------------------------------------------------------

| | o | changes in technology;
| | - | ----------------------

| | o | the level of allowance for loan loss;
| | - | -------------------------------------

| | o | the rate of delinquencies and amounts of charge-offs;
| | - | -----------------------------------------------------

| | o | the rates of loan growth;
| | - | -------------------------

| | o | adverse changes in asset quality and resulting credit risk-related
losses and expenses;
| | - | ---------------------------------------------------------------------------------------

| | o | changes in monetary and tax policies;
| | - | -------------------------------------

| | o | changes in the securities markets; and
| | - | --------------------------------------

| | o | other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.
| | - | --------------------------------------------------------------------------------------------------------------------

# Results of Operations
EARNINGS REVIEW

Our net income was $683,962, or $.52
per common share, for the nine months ended September 30, 2003 as compared to a net income
of $548,307, or $.42 per common share, for the nine months ended September 30, 2002. Our
net income was $270,479, or $.21 per common share, for the three months ended September
30, 2003 as compared to net income of $216,178, or $.16 per common share, for the same
period of 2002. The improvement in net income reflects the banks continued growth,
as average earning assets increased to $142.7 million during the first nine months of 2003
from $83.3 million during the same period of 2002. The improvement in net income also
reflects a gain on the sale of securities of $134,703 during the first nine months of
2003, compared to $525 during the first nine months of 2002. This continued growth is the
result of our local ownership and management and the expansion into North Myrtle Beach and
Hilton Head Island, South Carolina in 2002 and 2003, respectively. The return on average
assets for the nine month period ended September 30 was .59% in 2003 compared to .82% in
2002. The return on average equity was 6.44% in 2003 versus 5.48% in 2002.

# Net Interest Income

During the first nine months of 2003,
net interest income increased to $4,300,622, from $3,091,697 in the same period of 2002.
The growth in net interest income resulted from the 59% increase in outstanding loans and
the declining interest rate environment. For the three months ended September 30, 2003,
net interest income increased to $1,648,786 from $1,140,448 during the comparable period
of 2002. The net interest spread was 3.59% in the nine months of 2003

8

---

compared to 4.12% during the same period of 2002. The net interest margin was 4.03% for the nine month
period ended September 30, 2003 compared to 4.96% for the same period of 2002.

# Provision for Loan Losses

The provision for loan losses was
$566,000 for the first nine months of 2003 and $314,000 for the same period of 2002. For
the three month period ending September 30, 2003 and 2002, the provision was $275,000 and
$132,000, respectively. The increase in the provision for the nine month period ending
September 30, 2003 was the result of increased charge offs during this period combined
with 59% loan growth compared to 2002. The increase for the three month period was
increased loan demand and our managements assessment of the adequacy of the reserve
for possible loan losses given the size, mix and quality of the current loan portfolio.
Our management anticipates loan growth will continue to be strong in 2003 and that it will
continue to increase the amount of the provision for loan losses as the portfolio grows.
See also Allowance for Possible Loan Losses below.

# Noninterest Income

Noninterest income increased to
$768,205 in the first nine months of 2003 from $444,209 in the same period of 2002. For
the three months ended September 30, 2003, noninterest income was $186,794 as compared to
$182,787 for the same period in 2002. Service fees on deposit accounts, the largest
component of noninterest income, increased from $300,797 for the first nine months of 2002
to $364,145 during the same period of 2003. This category of noninterest income increased
due to growth in the number of deposit accounts as well as increased fee-related
activities of our customers. Other income increased to $269,357 for the first nine months
of 2003 compared to $142,887 for the same period of 2002. For the three months ended
September 30, 2003, other income was $69,655 compared to $72,160 in 2002. Other income
increased primarily due to the banks purchase of bank owned life insurance to help
fund employee and director benefit programs. The net gain on the sale of investment
securities was $134,703 compared to $525 for the nine month period ended September 30,
2003 and 2002, respectively.

# Noninterest Expense

Noninterest expenses totaled
$3,424,386 for the nine months ended September 30, 2003, an increase of $1,076,635 over
the $2,347,751 reported for the nine months ended September 30, 2002, and totaled
$1,138,271 for the three months ended September 30, 2003 compared to $847,942 in the same
period of 2002. As an annualized percentage of average total assets, our total noninterest
expenses declined from 3.51% in 2002 to 2.97% in 2003. While we have grown at a 30% rate
over year end 2002, we have been able to manage our expenses while accommodating our
growth. Salary, wages and employee benefits increased by $582,638 during the nine months
ended September 30, 2003 and $185,826 during the three months ended September 30, 2003
compared to the same periods in 2002. These increases are the results of personnel
additions made to our productive capacity, normal compensation adjustments, higher costs
associated with group insurance coverage and certain incentive awards.

Due to the opening of two new
branches in North Myrtle Beach and Hilton Head Island, South Carolina, advertising and
public relations expense increased by $50,810, depreciation and amortization increased by
$82,285, and occupancy increased by $102,714 during the nine months ended September 30,
2003 as compared to the same period in 2002. For the three months ended September 30,
2003, advertising and public relations expense increased by $9,255, depreciation and
amortization increased by $36,623, and occupancy increased by $36,064 as compared to the
same period in 2002.

For the nine month period ended
September 30, 2003, data processing expense increased to $226,572 from $156,091 during the
same period of 2002. During the three month period ended September 30, data processing
expense increased to $81,437 in 2003 from $63,369 in 2002. During this period, the bank
converted to a new data processing vendor, reducing our account processing costs; however,
additional features and functions were added to provide efficiency and competitive
advantages. In addition, the volume of loan and deposit accounts and associated
transaction activity has increased, thus increasing our data processing costs. The
category of other expenses increased to $523,801 for the first nine months of 2003
compared to $338,766 for the same period of 2002, and increased to $143,064 during the
three month period ended September 30, 2003 from $128,745 in the same period of 2002. This
increase was due to our new branch openings, home equity closing costs program and the
growth in loans and deposits.

9

---

# BALANCE SHEET REVIEW

# Loans

At September 30, 2003, net loans
(gross loans less unearned fees and the allowance for loan losses) totaled $128.5 million,
an increase of $47.7 million from September 30, 2002. Average total loans increased from
$72.1 million with a yield of 7.88% in the first nine months of 2002 to $126.4 million
with a yield of 6.08% in 2003. The interest rates charged on loans vary with the degree of
risk and the maturity and amount of the loan. Competitive pressures, money market rates,
availability of funds and government regulations also influence interest rates.

The
following table shows the composition of the loan portfolio by category at September 30,
2003 and 2002.

Composition of Loan Portfolio

|                                   | September 30, 2003 | September 30, 2002
|---------------------------------- | ------------------ | ------------------
|
|
|Commercial                         |                    |                   
|Real estate - construction         |                    |                   
|Real estate - mortgage             |                    |                   
|Consumer                           |                    |                   
|                                   |                    |                   
|Loans, gross                       |                    |                   
|                                   |                    |                   
|Unearned income                    |                    |                   
|Allowance for possible loan losses |                    |                   
|                                   |                    |                   
|Loans, net                         |                    |                   
|                                   |                    |                   

The principal component of our loan
portfolio at September 30, 2003 and 2002 was mortgage loans, which represented 62.6% and
62.8% of the portfolio, respectively. In the context of this discussion, a real
estate mortgage loan is defined as any loan, other than loans for construction
purposes, secured by real estate, regardless of the purpose of the loan. We follow the
common practice of financial institutions in our market area of obtaining a security
interest in real estate whenever possible, in addition to any other available collateral.
The collateral is taken to reinforce the likelihood of the ultimate repayment of the loan
and tends to increase the magnitude of the real estate loan portfolio component.
Generally, we limit the loan-to-value ratio to 80%. We will attempt to maintain a
relatively diversified loan portfolio to help reduce the risk inherent in concentrations
of collateral.

# Off Balance Sheet Risk

Through the operations of our bank,
we have made contractual commitments to extend credit in the ordinary course of our
business activities. These commitments are legally binding agreements to lend money to our
customers at predetermined interest rates for a specified period of time. At September 30,
2003, we had issued commitments to extend credit of $7.2 million through various types of
commercial and consumer lending arrangements. We evaluate each customers credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary
by us upon extension of credit, is based on our credit evaluation of the borrower.
Collateral varies but may include accounts receivable, inventory, property, plant and
equipment, commercial and residential real estate. We manage the credit risk on these
commitments by subjecting them to normal underwriting and risk management processes.

At September 30, 2003, the bank had
issued commitments to extend credit of $3.4 million through various types of lending
arrangements. The commitments expire over next 36 months. Past experience indicates that
many of these

10

---

commitments to extend credit will expire unused. We believe that it has
adequate sources of liquidity to fund commitments that are drawn upon by the borrower.

# Allowance for Possible
Loan Losses

There are risks inherent in making
all loans, including risks with respect to the period of time over which loans may be
repaid, risks resulting from changes in economic and industry conditions, risks inherent
in dealing with individual borrowers, and, in the case of a collateralized loan, risks
resulting from uncertainties about the future value of the collateral. To address these
risks, we have developed policies and procedures to evaluate the overall quality of our
credit portfolio and the timely identification of potential problem loans. We maintain an
allowance for possible loan losses which we establish through charges in the form of a
provision for loan losses. We charge loan losses and credit recoveries directly to this
allowance.

We attempt to maintain the allowance
at a level that will be adequate to provide for potential losses in our loan portfolio. To
maintain the allowance at an adequate level, we periodically make additions to the
allowance by charging an expense to the provision for loan losses on our statement of
operations. We evaluate the allowance for loan losses on an overall portfolio basis, as
well as allocating the allowance to loan categories. We consider a number of factors in
determining the level of this allowance, including our total amount of outstanding loans,
our amount of past due loans, our historic loan loss experience, general economic
conditions, and our assessment of potential losses, classified and criticized loans,
concentrations of credit and internal credit risk ratings. Our evaluation is inherently
subjective as it requires estimates that are susceptible to significant change. In
addition, regulatory agencies periodically review our allowance for loan losses as part of
their examination process, and they may require us to record additions to the allowance
based on their judgment about information available to them at the time of their
examinations. Our losses will undoubtedly vary from our estimates, and there is a
possibility that charge-offs in future periods will exceed the allowance for loan losses
as estimated at any point in time.

The following table sets forth
certain information with respect to our allowance for loan losses and the composition of
charge-offs and recoveries for the nine months ending September 30, 2003 and 2002.

# Allowance for Loan
Losses

|                                       | Nine months ending September 30,
|-------------------------------------- | --------------------------------
|
|Average total loans outstanding        |                                 
|Total loans outstanding at period end  |                                 
|Total nonperforming loans              |                                 
|Beginning balance of allowance         |                                 
|Loans charged off                      |                                 
|Total recoveries                       |                                 
|                                       |                                 
|Net loans charged off                  |                                 
|Provision for loan losses              |                                 
|                                       |                                 
|Balance at period end                  |                                 
|                                       |                                 
|Net charge-offs to average total loans |                                 
|Allowance as a percent of total loans  |                                 
|Nonperforming loans as a               |                                 
|percentage of total loans              |                                 
|Non performing loans as a              |                                 
|percentage of allowance                |                                 

11

---

The following table sets forth the
breakdown of the allowance for loan losses by loan category and the percentage of loans in
each category to total loans for the periods indicated. We believe that the allowance can
be allocated by category only on an approximate basis. The allocation of the allowance to
each category is not necessarily indicative of further losses and does not restrict the
use of the allowance to absorb losses in any category.

# Allocation of the
Allowance for Loan Losses

|                        | As of September 30, 2003
|----------------------- | ------------------------
|                        |                         
|Residential real estate |                         
|Commercial construction |                         
|Commercial real estate  |                         
|Commercial              |                         
|Consumer                |                         
|Other                   |                         
|Unallocated             |                         
|Special Allocated       |                         
|                        |                         
|Total allowance for     |                         
|Loan losses             |                         
|                        |                         

# Investment Securities

Total securities averaged $12.8
million in the first nine months of 2003 and totaled $13.1 million at September 30, 2003.
During the same period of 2002, total securities averaged $7.4 million and totaled $8.6
million at September 30, 2002. At September 30, 2003, our total investment securities
portfolio had a book value of $13,112,511 and a market value of $13,069,690 for an
unrealized net loss of $42,821. We primarily invest in U.S. Government Agencies and U.S.
Government Mortgage- backed securities.

At September 30, 2003, short-term
investments totaled $3,277,756 compared to $2,572,433 as of September 30, 2002. These
funds are one source of our banks liquidity and are generally invested in an earning
capacity on an overnight or short-term basis.

12

---

Deposits and Other
Interest-Bearing Liabilities

Average
total deposits were $131.2 million and average interest-bearing deposits were $107.2
million in the first nine months of 2003. Average total deposits were $73.5 million and
average interest-bearing deposits were $60.9 million in the same period of 2002.

The
following table sets forth our deposits by category as of September 30, 2003 and September
30, 2002.

|                                   | Deposits
|---------------------------------- | --------
|
|
|
|Demand deposit accounts            |         
|Interest bearing checking accounts |         
|Money market accounts              |         
|Savings accounts                   |         
|Time deposits less than $100,000   |         
|Time deposits of $100,000 or over  |         
|                                   |         
|Total deposits                     |         
|                                   |         

Internal growth, resulting primarily
from special promotions and increased advertising, generated the new deposits.

Core deposits, which exclude
certificates of deposit of $100,000 or more, provide a relatively stable funding source
for our loan portfolio and other earning assets. Our core deposits were $99.7 million at
September 30, 2003 compared to $62.3 million at September 30, 2002. We expect a stable
base of deposits to be our primary source of funding to meet both our short-term and
long-term liquidity needs. Core deposits as a percentage of total deposits were
approximately 76.0% at September 30, 2003 and 74.0% at September 30, 2002. Our
loan-to-deposit ratio was 95.3% at September 30, 2003 versus 94.2% at September 30, 2002.
The average loan-to-deposit ratio was 96.3% during the first nine months of 2003 and 94.2%
during the same period of 2002.

In addition to deposits, we obtained
funds from the Federal Home Loan Bank to help fund our loan growth. Average borrowings
from the Federal Home Loan Bank were $7.0 million during the third quarter of 2003 and
totaled $11.5 million at September 30, 2003. We currently have two fixed rate advances and
one convertible rate advance, one for $4.0 million obtained in July 2002 at a rate of
3.69% maturing in July 2005, a $2.5 million advance obtained in February 2003 at a rate of
1.83% maturing in February 2005 and a 5/2 convertible advance of $5.0 million at a rate of
1.86%.

# CAPITAL

Under the capital guidelines of the
Office of the Comptroller of the Currency and the Federal Reserve, we are required to
maintain a minimum total risk-based capital ratio of 8%, with at least 4% being Tier 1
capital, at both the bank and holding company levels.To be considered
well-capitalized, we must meet regulatory standards of 10% for total
risk-based capital and 6% for Tier 1 capital. Tier 1 capital consists of common
shareholders equity, qualifying perpetual preferred stock, and minority interest in
equity accounts of consolidated subsidiaries, less goodwill. In addition, we must maintain
a minimum Tier 1 leverage ratio (Tier 1 capital to total average assets) of at least 4%.
The well-capitalized standard for the Tier 1 leverage ratio is 5%. At
September 30, 2003, our total shareholders equity was $14.5 million ($13.3 million
at the bank level). We were considered to be well capitalized at both the
holding company and bank level for regulatory purposes at September 30, 2003, as our Tier
1 capital ratio was 10.9%(8.9% at the bank level), our total risk-based capital ratio was
12.2% (10.1% at the bank level), and our Tier 1 leverage ratio was 9.5% (7.7% at the bank
level).

13

---

# LIQUIDITY AND INTEREST
RATE SENSITIVITY

Our primary sources of liquidity are
core deposits, scheduled repayments on our loans and interest on and maturities of our
investments. All of our securities have been classified as available for sale.
Occasionally, we might sell investment securities in connection with the management of our
interest sensitivity gap or to manage cash availability. Our ability to maintain and
expand our deposit base and borrowing capabilities also serves as a source of liquidity.
We may also utilize our cash and due from banks, security repurchase agreements and
federal funds sold to meet liquidity requirements as needed. In addition, we have the
ability, on a short-term basis, to purchase federal funds from other financial
institutions. Presently, we have made arrangements with commercial banks for short-term
unsecured advances of up to $7,000,000 and secured advances of approximately $12,000,000
through the Federal Home Loan Bank. We believe that our existing stable base of core
deposits and other funding sources along with continued growth in our deposit base, are
adequate to meet our operating needs and we are not aware of any events which may result
in a significant adverse impact on liquidity.

# IMPACT OF INFLATION

Unlike most industrial companies, the
assets and liabilities of financial institutions such as our company and bank are
primarily monetary in nature. Therefore, interest rates have a more significant impact on
our performance than do the effects of changes in the general rate of inflation and
changes in prices. In addition, interest rates do not necessarily move in the same
magnitude as the prices of goods and services. As discussed previously, management seeks
to manage the relationships between interest sensitive assets and liabilities in order to
protect against wide rate fluctuations, including those resulting from inflation.

# CRITICAL ACCOUNTING
POLICIES

We have adopted various accounting
policies which govern the application of accounting principles generally accepted in the
United States in the preparation of our financial statements. Our significant accounting
policies are described in the footnotes to the consolidated financial statements at
December 31, 2002 as filed on our annual report on Form 10-KSB. Certain accounting
policies involve significant judgments and assumptions by us which have a material impact
on the carrying value of certain assets and liabilities. We consider these accounting
policies to be critical accounting policies. The judgments and assumptions we use are
based on historical experience and other factors, which we believe to be reasonable under
the circumstances. Because of the nature of the judgments and assumptions we make, actual
results could differ from these judgments and estimates which could have a material impact
on our carrying values of assets and liabilities and our results of operations.

We believe the allowance for loan
losses is a critical accounting policy that requires the most significant judgments and
estimates used in preparation of our consolidated financial statements. Refer to the
portion of this discussion that addresses our allowance for loan losses for a description
of our processes and methodology for determining our allowance for loan losses.

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-based CompensationTransition and
Disclosure, an amendment of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee compensation. SFAS
No. 148 also amends the disclosure provisions of SFAS No. 123 and Accounting
Pronouncement Board (APB) Opinion No. 28, Interim Financial
Reporting, to require disclosure in the summary of significant accounting policies
of the effects of an entitys accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim financial
statements. While SFAS No. 148 does not amend SFAS No. 123 to require companies
to account for employee stock options using the fair value method, the disclosure
provisions of SFAS No. 148 are applicable to all companies with stock-based employee
compensation, regardless of whether they account for that compensation using the fair
value method of SFAS No. 123 or the intrinsic value method of APB Opinion
No. 25. The provisions of SFAS No. 148 are effective for annual financial
statements for fiscal years ending after December 15, 2002, and for financial reports
containing condensed financial

14

---

statements for interim period beginning after December 15, 2002. The Company has adopted the disclosure provisions of SFAS
No. 148 which had no impact on the financial condition or operating results of the
Company.

In April 2003, the FASB issued SFAS
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other contracts and loan
commitments that relate to the origination of mortgage loans held for sale, and for
hedging activities under SFAS No. 133. SFAS No. 149 is generally effective for
contracts entered into or modified after June 30, 2003. The adoption of SFAS
No. 149 will not have a material impact on the financial condition or operating
results of the Company.

In May 2003, the FASB issued SFAS
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity. SFAS No. 150 establishes standards for how an
issuer classifies and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances.) Many of those
instruments were previously classified as equity. SFAS No. 150 is generally effective
for financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have a material impact on the financial
condition or operating results of the Company.

In June 2003, the American Institute
of Certified Public Accountants (AICPA) issued an exposure draft of a proposed Statement
of Position (SOP), Allowance for Credit Losses. The proposed SOP addresses the
recognition and measurement by creditors of the allowance for credit losses related to all
loans, as that term is defined in SFAS No. 114, Accounting by Creditors for Impairment
of a Loan. The proposed SOP provides that the allowance for credit losses reported on
a creditors balance sheet should consist only of (1) a component for individual loan
impairment recognized and measured pursuant to FASB Statement No. 114 and (2) one or more
components of collective loan impairment recognized pursuant to FASB Statement No. 5,
Accounting for Contingencies, and measured in accordance with the guidance in the
proposed SOP. The provisions of the proposed SOP would be effective for financial
statements for fiscal years beginning after December 15, 2003, with earlier application
permitted. The effect of initially applying the provisions of the proposed SOP would be
reported as a change in accounting estimate. Comments on the exposure draft were due by
September 19, 2003. The effect on the financial condition or operating results of the
Company related to the adoption of this proposed SOP have not been determined, but would
most likely be material.

# Item 3. Controls and
Procedures

As of the end of the period covered
by this report, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures as defined in
Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our current disclosure controls and procedures
are effective as of September 30, 2003.

The design of any system of controls
and procedures is based in part upon certain assumptions about the likelihood of future
events. There can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.

15

---

# PART II  OTHER
INFORMATION

# Item 1. Legal
Proceedings.

There
are no material legal proceedings to which we or any of our subsidiaries is a party or of
which any of our property is the subject.

# Item 2. Changes in
Securities.

Not
applicable.

# Item 3. Defaults Upon
Senior Securities.

Not
applicable.

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

Not
applicable.

# Item 5. Other
Information.

Not
applicable.

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

(a)    
          Exhibits:

10.1    
     Description of the Director Deferred Compensation Plan (Amended)

31        Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.

|32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. This exhibit is not filed for purposes
of Section 18 of the Securities Exchange Act of 1934 but is instead furnished as provided
by applicable rules of the Securities and Exchange Commission.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)    
              Reports on Form 8-K.

The following reports were filed on Form 8-K during the third quarter ended September 30,
2003.

The Company filed a Form 8-K on July 15, 2003 to announce the earnings for the second quarter
ending June 30, 2003.

16

---

SIGNATURES

In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
Exchange Act), the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| |  | BEACH FIRST NATIONAL BANCSHARES, INC.
| |  | -------------------------------------

|November 12, 2003 |  | By:  /s/ Walter E. Standish, III
        Walter E. Standish, III        
President and Chief Executive Officer
|----------------- |  | --------------------------------------------------------------------------------------------------------------

| |  | By:  /s/ Richard N. Burch
        Richard N. Burch       
Chief Financial and Principal Accounting Officer
| |  | ----------------------------------------------------------------------------------------------------------

17

---

INDEX TO EXHIBITS

ExhibitNumber    
    Description

|10.1 | Description of the Director Deferred Compensation Plan (Amended)
|---- | ----------------------------------------------------------------

|31 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|-- | --------------------------------------------------------------------------------------------------------------------------------

|32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. This exhibit is not filed for purposes
of Section 18 of the Securities Exchange Act of 1934 but is instead furnished as provided
by applicable rules of the Securities and Exchange Commission.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18