# 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 March 31, 2004                                    

|[   ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------
|      | For the transition period from ___________ to _____________                       

Commission file number
000-22503

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:  On May 5, 2004, 1,342,018 shares of the issuer's common stock, par value $1.00 per share, were issued
and outstanding.  The board of directors declared a 3 for 2 stock split on the issuer's common stock in the form of a
50% stock dividend.  The stock dividend will be payable June 2, 2004 to shareholders of record as of May 12, 2004.

Transitional Small Business Disclosure
Format (check one):   Yes    NoX

---

# PART IFINANCIAL INFORMATION 
Item 1.   Financial Statements.

# Beach First National
Bancshares, Inc. and Subsidiary Myrtle Beach, South Carolina 
Consolidated Condensed Balance Sheets

|                                                | March 31, | 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                     |           |             
|Cash value of life insurance                    |           |             
|Other assets                                    |           |             
|                                                |           |             
|Total assets                                    |           |             
|                                                |           |             
|LIABILITIES AND SHAREHOLDERS' EQUITY            |           |             
|LIABILITIES:                                    |           |             
|Deposits                                        |           |             
|Noninterest bearing deposits                    |           |             
|Interest bearing deposits                       |           |             
|                                                |           |             
|Total deposits                                  |           |             
|Advances from Federal Home Loan Bank            |           |             
|Other liabilities                               |           |             
|                                                |           |             
|Total liabilities                               |           |             
|                                                |           |             
|SHAREHOLDERS' EQUITY:                           |           |             
|Common stock, $1 par value; 10,000,000 shares   |           |             
|authorized; 2,013,027 issued and outstanding at |           |             
|March 31, 2004 and 1,318,368 at March 31, 2003  |           |             
|and 1,323,768 at December 31, 2003              |           |             
|Paid-in capital                                 |           |             
|Retained earnings                               |           |             
|Accumulated other comprehensive income          |           |             
|                                                |           |             
|Total shareholders' equity                      |           |             
|                                                |           |             
|Total liabilities and shareholders' equity      |           |             
|                                                |           |             

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

2

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# Beach First National
Bancshares, Inc, and Subsidiary Myrtle Beach, South
CarolinaConsolidated Condensed Statements of Income (unaudited)

|                                                     | Three Months Ended
|---------------------------------------------------- | ------------------
|
|
|INTEREST INCOME                                      |                   
|Interest and fees on loans                           |                   
|Investment securities                                |                   
|Federal funds sold                                   |                   
|                                                     |                   
|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 on sale of investment securities                |                   
|Income from cash value life insurance                |                   
|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                  |                   
|                                                     |                   
|Weighted average common shares outstanding - basic   |                   
|Weighted average common shares outstanding - diluted |                   

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

3

---

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

|                                             |  |  |  |           | 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, MARCH 31, 2003                      |  |  |  | 1,318,368 |             | $
|                                             |  |  |  |           |             |  

|                                              |  |  |  |           | Accumulated |  
|--------------------------------------------- |  |  |  | --------- | ----------- | -
|
|
|
|
|BALANCE, DECEMBER 31, 2003                    |  |  |  | 1,323,768 |             | $
|Net income                                    |  |  |  | -         |             |  
|Other comprehensive income, net of taxes:     |  |  |  |           |             |  
|Unrealized gain on investment securities      |  |  |  | -         |             |  
|Less reclassification adjustments for losses  |  |  |  |           |             |  
|included in net income                        |  |  |  | -         |             |  
|                                              |  |  |  |           |             |  
|Comprehensive income                          |  |  |  | -         |             |  
|Exercise of stock options                     |  |  |  | 18,250    |             |  
|Declaration of 3 for 2 stock split payable on |  | 
|June 2, 2004                                  |  |  |  | 671,009   |             |  
|                                              |  |  |  |           |             |  
|BALANCE, MARCH 31, 2004                       |  |  |  | 1,342,018 |             | $
|                                              |  |  |  |           |             |  

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

4

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Beach First National
Bancshares, Inc. and Subsidiary Myrtle Beach, South Carolina 
Consolidated Condensed Statements of Cash Flows(Unaudited)

|                                                            | Three Months Ended
|----------------------------------------------------------- | ------------------
|
|
|OPERATING ACTIVITIES                                        |                   
|Net income                                                  |                   
|Adjustments to reconcile net income to net cash provided by |                   
|(used in) operating activities:                             |                   
|Deferred income taxes                                       |                   
|Provisions for loan losses                                  |                   
|Depreciation and amortization                               |                   
|Accretion of deferred loan fees                             |                   
|Loss (Gain) on sale of investment securities                |                   
|Discount accretion and premium amortization                 |                   
|(Increase) decrease in other assets                         |                   
|Increase in other liabilities                               |                   
|                                                            |                   
|Net cash provided by operating activities                   |                   
|                                                            |                   
|INVESTING ACTIVITIES                                        |                   
|Purchase of investment securities                           |                   
|Purchase of FHLB stock                                      |                   
|Proceeds from sale of investment securities                 |                   
|Decrease (increase) in Federal funds sold                   |                   
|Increase in loans, net                                      |                   
|Purchase of premises and equipment                          |                   
|Purchase of life insurance contracts                        |                   
|                                                            |                   
|Net cash used in investing activities                       |                   
|                                                            |                   
|FINANCING ACTIVITIES                                        |                   
|Advances from Federal Home Loan Bank                        |                   
|Net increase (decrease) in deposits                         |                   
|Exercise of stock options                                   |                   
|                                                            |                   
|Net cash provided by financing activities                   |                   
|                                                            |                   
|Net increase (decrease) in cash and cash equivalents        |                   
|                                                            |                   
|CASH AND DUE FROM BANKS, BEGINNING                          |                   
|OF PERIOD                                                   |                   
|                                                            |                   
|CASH AND DUE FROM BANKS, 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)

# Note 1  Basis of Presentation

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 three month period ended March 31, 2004 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, 2003.

# Note 2  Principles of
Consolidation

The accompanying unaudited
consolidated condensed 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.

# Note 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. The board of directors has declared a 3 for 2 stock
split on the companys common stock in the form of a 50% stock dividend. The stock
dividend will be payable June 2, 2004 to shareholders of record as of May 12, 2004.

Shareholders of record will receive
one additional share for every two shares held as of the close of business on the record
date. Fractional shares resulting from the stock split will be paid in cash based on the
closing price as of the record date of May 12, 2004.

As a result of the common stock
dividend, earnings per share will be retroactively restated for all previous periods. As
restated, earnings per share for the three months ended March 31, 2004 were $0.15 per
share, compared to $0.10 for the same period a year ago.

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.

6

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

# For the Three Months
EndedMarch 31, 2004

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

# For the Three Months EndedMarch
31, 2003

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

# Note 4 
Stock-Based Compensation

The Company has a stock-based
employee compensation plan which is 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 stock-based employee
compensation cost is reflected in net income, as all stock 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 as if we had applied the fair value recognition provisions of Financial
Accounting Standards Board (FASB) SFAS No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation.

|                                                       | Three Months ended March 31
|------------------------------------------------------ | ---------------------------
|
|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

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

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 | loss of consumer confidence and economic disruptions resulting from terrorist activities;
| | - | -----------------------------------------------------------------------------------------

| | 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 $307,649, or $0.15 per common share, for the three months ended March 31,
2004 as compared to $202,928, or $0.10 per common share, for the three months ended March
31, 2003. The improvement in net income reflects the banks continued growth, as
average earning assets increased to $162.7 million during the first three months of 2004
from $111.1 million during the same period of 2003. The return on average assets for the
three

8

---

month period ended March 31 was .78%
in 2004 compared to .66% in 2003; this improvement is due in part to a 46.4% increase in
average earning assets from 2003. The return on average equity was 8.2% in 2004 versus
5.8% in 2003.

# Net Interest Income

During
the first three months of 2004, net interest income increased to $1,731,458 from
$1,237,450 in the same period of 2003. The growth in net interest income resulted from an
increase of $547,232 in interest income and an increase in interest expense of $53,224.
Interest income increased as a result of our continued growth, as average total loans
increased from $98.5 million in the first three months of 2003 to $140.7 million in the
same period in 2004. In addition, average securities increased to $15.0 million in the
first three months of 2003 compared to $9.6 million for the first three months of 2003.
Net interest spread, the difference between the rate we earn on interest-earning assets
and the rate we pay on interest-bearing liabilities, was 3.97% in the first three months
of 2004 compared to 4.07% during the same period of 2003. The net interest margin was
4.27% for the three month period ended March 31, 2004 compared to 4.47% for the same
period of 2003.

# Provision for Loan Losses

The
provision for loan losses was $215,000 for the first three months of 2004 and $68,000 for
the same period of 2003. The increase was the result of managements assessment of
the adequacy of the reserve for possible loan losses given the size, mix and quality of
the current loan portfolio. See also Allowance for Possible Loan Losses below.

# Non Interest Income

Noninterest
income was $227,768 in the first three months of 2004 compared to $282,655 in the same
period of 2003. Service fees on deposit accounts, generally the largest component of
noninterest income, increased from $121,382 in 2003 to $131,091 in 2004. Income from cash
value life insurance was $40,386 for the first three months of 2004 and 2003. Other income
increased to $56,294 in 2004 from $47,248 in the same period of 2003. Gains on sale of
investment securities were $73,639 for the first quarter of 2003 compared to $3 loss in
this period of 2004. Service fees on deposit accounts increased due to growth in the
number of deposit accounts as well as increased fee-related activities of customers.

# Non Interest Expense

Total
noninterest expense increased to $1,255,895 for the three month period ending March 31,
2004 from $1,129,996 for the three month period ended March 31, 2003. This represents an
11.1% increase in noninterest expense year to year. Salary, wages and benefits increased
$95,586, and occupancy increased $20,574, representing 92% of the total increase in
noninterest expenses, primarily due to the expansion of branch offices and asset growth
over this period in 2003. Most other noninterest expense categories had nominal increases
over this period 2003.

# BALANCE SHEET REVIEW

# Loans

At
March 31, 2004, net loans (total loans less the allowance for loan losses) totaled $142.3
million, an increase of $40.9 million from March 31, 2003. Average total loans increased
from $98.5 million with a yield of 7.10% in the first three months of 2003 to $140.7
million with a yield of 6.39% in 2004. 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.

9

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The
following table shows the composition of the loan portfolio by category at March 31, 2004
and 2003.

# Composition of Loan
Portfolio

|                                   | March 31, 2004 | March 31, 2003
|---------------------------------- | -------------- | --------------
|
|
|
|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 March 31, 2004 and 2003 was mortgage loans,
which represented 66.7% and 60.1% 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%. Management 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. 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
March 31, 2004, the bank had issued commitments to extend credit of $11.6 million through
various types of lending arrangements. The commitments expire over the next 36 months.
Past experience indicates that many of these commitments to extend credit will expire
unused. We believe that we have adequate sources of liquidity to fund commitments that are
drawn upon by the borrower.

In
addition to commitments to extend credit, we also issue standby letters of credit which
are assurances to a third party that they will not suffer a loss if our customer fails to
meet its contractual obligation to the third party. Standby letters of credit totaled $3.1
million at March 31, 2004. Past experience indicates that many of these standby letters of
credit will expire unused. However, through our various sources of liquidity, we believe
that we will have the necessary resources to meet these obligations should the need arise.

Since
loans typically provide higher yields than other types of earning assets, one of the
banks goals is for loans to represent the largest category of earning assets. As of
March 31, 2004, loans were 82.4% of earning assets, compared to 88.6% at March 31, 2003.

10

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# 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 income. 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.

At
March 31, 2004, the allowance for possible loan losses was $1,972,200, or 1.37% of
outstanding loans, compared to an allowance for possible loan losses of $1,343,082, or
1.31% of outstanding loans, at March 31, 2003. In the first three months of 2004, we had
one charge-off totaling $3,463, and in 2003, we had one charge-off totaling $696. We had
non-performing loans totaling $808,271 at March 31, 2004 and $416,462 at March 31, 2003.
While there can be no assurances, we do not expect significant losses relating to these
non-performing loans.

11

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# Allowance for Loan Losses

|                                      | Three months ending March 31,
|------------------------------------- | -----------------------------
|
|
|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 loans      |                              
|Allowance as a percent of total loans |                              
|Nonperforming loans as a              |                              
|Percentage of total loans             |                              
|Nonperforming loans as a              |                              
|Percentage of allowance               |                              

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 as of March 31, 2004. 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 March 31, 2004 |                        
| |  | -------------------- | -----------------------
|
| |  |                      | Residential real estate
| |  |                      | Commercial construction
| |  |                      | Commercial real estate 
| |  |                      | Commercial             
| |  |                      | Consumer               
| |  |                      | Other                  
| |  |                      | Unallocated            
| |  |                      | Special Allocated      
| |  |                      |                        
| |  |                      | Total allowance for    
| |  |                      | Loan losses            
| |  |                      |                        

# Investment Securities

Total
securities averaged $15.0 million in the first three months of 2004 and totaled $18.2
million at March 31, 2004. In the same period of 2003, total securities averaged $9.6
million and totaled $12.5 million at March 31, 2003. At March 31, 2004, our total
investment securities portfolio had a book value of $18.2 million and a market value of
$18.2 million for an unrealized net gain of $69,915. We primarily invest in U.S.
Government Agency and U. S. Agency mortgage backed securities.

12

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At
March 31, 2004, short-term investments totaled $12.2 million, compared to $13.7 million at
March 31, 2003. 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.

# Deposits and Other
Interest-Bearing Liabilities

Average
total deposits were $143.9 million and average interest-bearing deposits were $123.7
million in the first quarter of 2003. Average total deposits were $102.4 million and
average interest-bearing deposits were $88.2 million in the same period of 2003. The
following table sets forth our deposits by category as of March 31, 2004 and March 31,
2003.

# Deposits

|                                   | March 31, 2004 | March 31, 2003
|---------------------------------- | -------------- | --------------
|
|
|
|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 $113.5 million at March 31, 2004 compared to $85.7 million at March 31, 2003. 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 in the future. Core deposits as a percentage of
total deposits were approximately 75% at March 31, 2004 and 72% at March 31, 2003. Our
loan-to-deposit ratio was 93.5% at March 31, 2004 versus 85.1% at March 31, 2003. The
average loan-to-deposit ratio was 94.3% during the first three months of 2004 and 96.9%
during the same period of 2003.

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 $13.9 million during the first quarter of 2004 and
totaled $16.5 million at March 31, 2004. The following table reflects the current
borrowing terms.

| | FHLB Description | Balance | Current Rate      | Maturity Date
| | ---------------- | ------- | ----------------- | -------------
| |                  |         | CIP/EDP           |              
| |                  |         | CIP/EDP           |              
| |                  |         | Fixed Rate Credit |              
| |                  |         | Fixed Rate Credit |              
| |                  |         | Convertible       |              
| |                  |         |                   |              
| |                  |         |                   |              
| |                  |         |                   |              

13

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# 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 March
31, 2004, our total shareholders equity was $15.4 million ($14.2 million at the bank
level). We were considered to be well capitalized at both the holding company
and bank level for regulatory purposes at March 31, 2004, as our Tier 1 capital ratio was
10.4%(8.4% at the bank level), our total risk-based capital ratio was 11.6% (9.6% at the
bank level), and our Tier 1 leverage ratio was 8.8% (7.1% at the bank level).

We
anticipate that the bank will remain classified as well capitalized.
Nevertheless, we are currently reviewing additional sources of capital, including the
potential issuance of trust preferred securities in an amount up to $5.0 million during
the next quarter. These securities currently qualify in part as Tier 1 capital with the
balance qualifying as Tier 2 capital.

# LIQUIDITY AND INTEREST
RATE SENSITIVITY

Our
primary sources of liquidity are core deposits, scheduled repayments on our loans,
advances from the Federal Home Loan Bank and interest on, pay downs 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. 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 $9.5
million. We also have a line of credit with the Federal Home Loan Bank to borrow up to 75%
of our 1 to 4 family loans, resulting in an availability of funds of $2.7 million at March
31, 2004. FHLB has approved borrowings up to 15% of the banks total assets less
advances outstanding. The borrowings are available by pledging and purchasing additional
collateral and FHLB stock. At March 31, 2004, we had borrowed $16.5 million on this line.
We believe that its liquidity and ability to manage assets will be sufficient to meet its
cash requirements over the near term.

# IMPACT OF INFLATION

Unlike
most industrial companies, the assets and liabilities of financial institutions such as
the company and the 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, 2003 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.

14

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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.

# RECENTLY ISSUED
ACCOUNTING STANDARDS

The following is a summary of recent
authoritative pronouncements that affect accounting, reporting, and disclosure of
financial information by the Company:

In April 2003, the FASB issued SFAS
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, which amends and clarifies accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and loan commitments that relate to the
origination of mortgage loans held for sale, and for hedging activities under SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
149 clarifies under what circumstances a contract with an initial net investment meets the
characteristics of a derivative, clarifies when a derivative contains a financing
component, amends the definition of an underlying to conform it to language used in FIN
45, and amends certain other existing pronouncements. The pronouncement was generally
effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS
No. 149 did not have any 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, which establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities and
equity. SFAS 150 requires an issuer to classify certain financial instruments that include
certain obligations, such as mandatory redemption, repurchase of the issuers equity,
or settlement by issuing equity, previously classified as equity, as liabilities or assets
in come circumstances. SFAS No. 150 was generally effective for financial instruments
entered into or modified after May 31, 2003, and otherwise was effective at the beginning
of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150
did not have any impact on the financial condition or operating results of the Company.

In November 2002, the FASB issued
FASB Interpretation No. 45 (FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 elaborates on the disclosure to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees and
warranties that it has issued. FIN 45 requires a company, at the time it issues a
guarantee, to recognize an initial liability for the fair value of obligations assumed
under the guarantee. The initial recognition requirements of FIN 45 were effective for
guarantees issued or modified after December 31, 2002. The disclosure requirements were
effective for financial statements for periods ending after December 15, 2002. The
adoption of FIN 45 did not have any impact on the Companys financial position or
results of operations.

# 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 March 31, 2004.

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

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# PART II

# OTHER INFORMATION

# Item 1.   Legal
Proceedings.

There
are no material legal proceedings to which the company or any of its subsidiaries is a
party or of which any of their 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  See Exhibit Index attached hereto.

Exhibit        Description

31.1    Rule 13a-14(a) Certification of the
Chief Executive Officer.

31.2    Rule 13a-14(a) Certification of the
Chief Financial Officer.

32       Section 1350
Certifications.

(b)    
          Reports on Form 8-K No reports were filed on Form 8-K during the quarter
          ended March 31, 2004.

16

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SIGNATURES

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

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

|Date:  May 14, 2004 |  | By:  /s/ Walter E. Standish, III
        Walter E. Standish, III        
President/Chief Executive Officer
|------------------- |  | ----------------------------------------------------------------------------------------------------------

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

17

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INDEX TO EXHIBITS

ExhibitNumber           Description

31.1       Rule 13a-14(a) Certification of the
Chief Executive Officer.

31.2       Rule 13a-14(a) Certification of the
Chief Financial Officer.

32          Section 1350
Certifications.

18