# U.S. 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 quarter ended June 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           |  | 58-1030117                          
|------------------------ |  | ------------------------------------
|(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(Issuer's telephone number)

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

State the number of shares  outstanding  of each of the  issuer's  classes of common  equity,  as of the latest
practicable  date:

On August 12, 2003, 1,318,368 shares of the issuer's common stock,  par value $1.00 per share,  were issued and outstanding.

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 Balance Sheets

|                                                    | June 30, | December 31,  
|--------------------------------------------------- | -------- | --------------
|
|
|ASSETS                                              |          |               
|Cash and due from banks                             |          | $    5,164,565
|Federal funds sold and short term investments       |          | 6,963,000     
|Investment securities available for sale            |          | 12,847,087    
|Loans, net                                          |          | 116,652,441   
|Federal Reserve Bank stock                          |          | 164,700       
|Federal Home Loan Bank stock                        |          | 325,000       
|Premises and equipment, net                         |          | 4,417,109     
|Other assets                                        |          | 4,553,952     
|                                                    |          |               
|Total assets                                        |          | $151,087,854  
|                                                    |          |               
|LIABILITIES AND SHAREHOLDERS' EQUITY                |         
|LIABILITIES:                                        |         
|Deposits                                            |         
|Noninterest bearing deposits                        |          | $  24,980,944 
|Interest bearing deposits                           |          | 104,082,120   
|                                                    |          |               
|Total deposits                                      |          | 129,063,064   
|Advances from Federal Home Loan Bank                |          | 6,500,000     
|Other liabilities                                   |          | 1,201,760     
|                                                    |          |               
|Total liabilities                                   |          | 136,764,824   
|                                                    |          |               
|SHAREHOLDERS' EQUITY:                               |         
|Common stock, $1 par value; 10,000,000 shares       |         
|authorized; 1,318,368 shares issued and outstanding |          | 1,318,368     
|Paid-in capital                                     |          | 11,787,899    
|Retained earnings                                   |          | 1,122,874     
|Accumulated other comprehensive income              |          | 93,889        
|                                                    |          |               
|Total shareholders' equity                          |          | 14,323,030    
|                                                    |          |               
|Total liabilities and shareholders' equity          |          | $151,087,854  
|                                                    |          |               

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

2

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# Beach First National
Bancshares, Inc. and SubsidiaryMyrtle Beach, South Carolina Consolidated
Statements of Income (Unaudited)

|                                             | Six Months Ended | Three Months Ended
|-------------------------------------------- | ---------------- | ------------------
|
|
|INTEREST INCOME                              |                  |                   
|Interest and fees on loans                   |                  |                   
|Investment securities                        |                  |                   
|Fed funds sold & 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             |                  |                   
|Legal and 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

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

|                                             |  |  |  |         | Accumulated |  
|-------------------------------------------- |  |  |  | ------- | ----------- | -
|
|
|
|BALANCE, DECEMBER 31, 2001                   |  |  |  | 737,368 |             | $
|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, JUNE 30, 2002                       |  |  |  | 737,368 |             | $
|                                             |  |  |  |         |             |  

|                                             |  |  |  |           | 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, JUNE 30, 2003                       |  |  |  | 1,318,368 |             | $
|                                             |  |  |  |           |             |  

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

4

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

|                                                                   | Six 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 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                                  |                 
|Purchase of Federal Home Loan Bank stock                           |                 
|Proceeds from sale or call of investment securities                |                 
|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                                               |                 
|Decrease in Federal funds purchased                                |                 
|Advances from Federal Home Loan Bank                               |                 
|Net increase in deposits                                           |                 
|                                                                   |                 
|Net cash provided by financing activities                          |                 
|                                                                   |                 
|Net increase (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

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

# 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 six month period ended June 30, 2003 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 intercompany 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 Six Months Ended |  |  
|----------------------------- | ------------------------ |  | -
|
|
|
|
|Basic EPS                     |                          |  | $
|Effect of Diluted Securities: |                          | 
|Stock options                 |                          |  |  
|                              |                          |  |  
|Diluted EPS                   |                          |  | $

6

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|                              | For the Three Months Ended |  |  
|----------------------------- | -------------------------- |  | -
|
|
|
|
|Basic EPS                     |                            |  | $
|Effect of Diluted Securities: |                            | 
|Stock options                 |                            |  |  
|                              |                            |  |  
|Diluted EPS                   |                            |  | $

# 4. 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    | Six Months Ended June 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 June 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

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# 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 OperationsEARNINGS REVIEW

Our net income was $413,484, or $.31
per common share, for the six months ended June 30, 2003 as compared to a net income of
$332,128, or $.25 per common share, for the six months ended June 30, 2002. Our net income
was $210,456, or $.16 per common share, for the three months ended June 30, 2003 as
compared to net income of $167,135, or $.13 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 $120.1 million during the first six months of 2003 from $80.0
million during the same period of 2002. This continued growth is the result of our local
ownership and management and the expansion into the North Myrtle Beach and Hilton Head
Island, South Carolina markets in 2002 and 2003. The return on average assets for the six
month period ended June 30 was .63% in 2003 compared to .79% in 2002. The return on
average equity was 5.89% in 2003 versus 5.03% in 2002.

# Net Interest Income

During the first half of 2003, net
interest income increased to $2,651,836, from $1,951,250 in the same period of 2002. The
growth in net interest income resulted from an increase of $949,141 in interest income,
and an increase in interest expense of $248,555 due to the reduction of interest rates and
the growth of the deposit base. For the three months ended June 30, 2003, net interest
income increased to $1,409,501 from $1,030,125 during the comparable period of 2002. The
net interest spread was 4.04% in the first six months of 2003 compared to 4.01% during the
same period of 2002. The net interest margin was 4.45% for the six month period ended June
30, 2003 compared to 4.92% for the same period of 2002.

8

---

Our primary source of revenue is net
interest income, which is the difference between income on interest-bearing assets and
interest paid on deposits and borrowings used to support such assets. Net interest income
is determined by the rates earned on our interest-earning assets and the rates paid on its
interest-bearing liabilities as well as the relative amounts of interest-bearing assets
and interest-bearing liabilities. Presented below are various components of assets and
liabilities, interest income and expense and yields/costs for the periods indicated.

# Provision for Loan Losses

To keep pace with the growth in the
loan portfolio, we increased the provision for loan losses to $291,000 for the first six
months of 2003 compared to $182,000 for the same period of 2002. For the three month
periods ending June 30, 2003 and 2002, these figures were $223,000 and $98,000,
respectively. The increases were 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. We anticipate loan growth will continue to be strong in 2003 and
that we 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
$581,410 in the first six months of 2003 from $261,422 in the same period of 2002. For the
three months ended June 30, 2003, noninterest income was $299,046 as compared to $140,716
in 2002. Service fees on deposit accounts, the largest component of noninterest income,
increased from $190,504 for the first six months of 2002 to $246,897 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 customers. Other income
increased to $199,702 for the first six months of 2003 compared to $70,726 for the same
period of 2002. For the three months ended June 30, 2003, other income was $112,068
compared to $36,168 in 2002. Other income increased primarily due to the banks
purchase of bank owned life insurance to help fund employee and director benefits
programs. Gain on sale of investment securities for the first six months of 2003 was
$134,811 and $192 for 2002. Gain or loss on sale of investment securities for the three
months ended June 30, 2003 was $61,463 and $(295) for 2002.

# Noninterest Expense

Total noninterest expense increased
from $1,499,811 for the six months ended June 30, 2002 to $2,286,114 for the same period
of 2003, and from $803,295 for the three months ended June 30, 2002 to $1,151,623 in the
same period of 2003. The increase in noninterest expense reflects an increase in most
expense categories as a result of the growth of our assets to $151.1 million at June 30,
2003 from $90.9 million at June 30, 2002. Salary and wages increased by $314,000 during
the six months ended June 30, 2003 and $144,013 during the three months ended June 30,
2003 compared to the same periods in 2002. Additionally, employee benefits increased by
$82,811 and $41,833 during these periods. These increases represent 50.5% and 53.4%,
respectively, of the total noninterest expense. We added twelve full time equivalents due
to branch openings in North Myrtle Beach, South Carolina in November 2002 and Hilton Head
Island, South Carolina in February 2003.

Advertising and public relations
expenses increased $41,554 during the first six months of 2003 and $6,940 in the three
months ended June 30, 2003, due to our expansion into the two new markets listed above.
Depreciation and occupancy expenses increased $112,314 in the first six months of 2003 and
$48,258 in the three months ended June 30, 2003. These increases are related to our
expansion into North Myrtle Beach and Hilton Head Island, South Carolina.

For the six month period ended June
30, 2003, other operating expenses increased to $380,735 from $207,964 during the same
period of 2002. During the three month period ended June 30, 2003, other operating
expenses increased to $194,351 in 2003 from $103,038 during the same period in 2002. Other
operating expenses increased primarily due to our new branch expansion, home equity loan
closing costs program and the increase in both loans and deposits.

9

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# BALANCE SHEET REVIEW

# Loans

At June 30, 2003, net loans (total
loans less the allowance for loan losses) totaled $116.7 million, an increase of $43.4
million from June 30, 2002. Average gross loans increased from $69.3 million with a yield
of 7.97% in the first six months of 2002 to $104.8 million with a yield of 6.99% during
the same 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.

Because loans typically provide
higher yields than other types of earning assets, one of our goals is for loans to
represent the largest category of earning assets. At June 30, 2003, loans were 87.0% of
earning assets, versus 86.4% at June 30, 2002.

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

|                                   | Composition of Loan Portfolio |  |  
|---------------------------------- | ----------------------------- |  | -
|
|
|
|
|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 June 30, 2003 and 2002 was mortgage loans, which represented 49.1% and 54.1%
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%. 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 June 30,
2003, we had issued commitments to extend credit of $13.6 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.

10

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At June 30, 2003, the bank had issued commitments to extend credit of $3.1 million through
various types of lending arrangements. The commitments expire over 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.

# 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.

At June 30, 2003, the allowance for
possible loan losses was $1,525,453, or 1.29% of total outstanding loans, compared to an
allowance for possible loan losses of $1,003,449, or 1.35% of total outstanding loans, at
June 30, 2002. We increased the allowance for possible loan losses by $522,004 over the
June 30, 2002 allowance in order to keep pace with the approximately $35.4 million growth
of our loan portfolio during the period.

In the first six months of 2003, we
had net charge-offs of $41,325. In the same period of 2002, there were $29,773 in net
charge offs. We had three non-performing loans totaling $308,253 at June 30, 2003.
Non-performing loans were $77,150 at June 30, 2002. While there can be no assurances, we
currently do not expect to incur any losses relating to these non-performing loans.

11

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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 six months ended June 30, 2003 and 2002.

Allowance for Loan
Losses

|                                       | Six months ending June 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              |                           
|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 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 June 30, 2003
|----------------------- | -------------------
|Residential real estate |                    
|Commercial construction |                    
|Commercial real estate  |                    
|Commercial              |                    
|Consumer                |                    
|Other                   |                    
|Unallocated             |                    
|Special Allocated       |                    
|                        |                    
|Total allowance for     |                    
|Loan losses             |                    
|                        |                    

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# Investment Securities

Total securities averaged $11.3
million in the first six months of 2003 and totaled $12.8 million at June 30, 2003. In the
same period of 2002, total securities averaged $6.7 million and totaled $6.9 million at
June 30, 2002. At June 30, 2003, our total investment securities portfolio had a book
value of $12.6 million and a market value of $12.8 million for an unrealized net gain of
$142,256. We primarily invest in U.S. Government Agency and Mortgage- backed securities.

At June 30, 2003, short-term
investments totaled $6.7 million compared to $4.7 million as of June 30, 2002. These funds
are one source of our 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 $110.5
million and average interest-bearing deposits were $94.5 million in the first half of
2003. Average total deposits were $70.5 million and average interest-bearing deposits were
$59.0 million in the same period of 2002. The following table sets forth our deposits by
category as of June 30, 2003 and June 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 $95.4 million at
June 30, 2003 compared to $59.2 million at June 30, 2002. A stable base of deposits is
expected 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 73.1% at June 30, 2003 and 77.4% at June 30, 2002. Our loan-to-deposit ratio
was 94.7% at June 30, 2003 versus 93.7% at June 30, 2002. The average loan-to-deposit
ratio was 92.65% during the first six months of 2003 and 93.75% 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 $6.2 million during the first quarter of 2003 and
totaled $6.5 million at June 30, 2003. We currently have two fixed rate advances, one for
$4.0 million obtained in July 2002 at a rate of 3.69% maturing in July 2005 and a $2.5
million advance obtained in February 2003 at a rate of 1.83% maturing in February 2004.

# 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. The Federal Reserve guidelines also contain an exemption from the capital
requirements for bank holding companies with less than $150 million

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in consolidated assets. At June 30,
2003, our total assets slightly exceeded $150 million, and consequently we will now be
subject to these capital guidelines 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 June 30,
2003, our total shareholders equity was $14.3 million ($12.9 million at the bank
level). We were considered to be well capitalized at both the holding company
and bank level for regulatory purposes at June 30, 2003, as our Tier 1 capital ratio was
11.69%(9.38% at the bank level), our total risk-based capital ratio was 12.94% (10.6% at
the bank level), and our Tier 1 leverage ratio was 10.20% (8.2% at the bank level).

# 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 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 $8.0 million at June 30, 2003. At June 30, 2003, we had borrowed
$6.5 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 ours 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, we seek 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

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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 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 are 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 June 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

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# PART II  OTHER
INFORMATION

# Item 1. Legal
Proceedings.

There
are no material legal proceedings to which we are 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.

There were two matters submitted to a
vote of security holders during the three months ended June 30, 2003 at the companys
annual meeting of shareholders held on April 23, 2003:

The
election of five members of the board of directors as Class II directors for a three-year
term.

Our board of directors is divided
into three classes with each class to be as nearly equal in number as possible. The three
classes of directors have staggered terms, so that the terms of only approximately
one-third of the board members will expire at each annual meeting of shareholders. The
current Class II directors are Michael Bert Anderson, O. Bartlette Buie, Michael D.
Harrington, Rick H. Seagroves and Walter E. Standish, III. The current Class I directors
are Raymond E. Cleary, III, Joe N. Jarrett, Jr., Richard E. Lester and Don J. Smith. The
current Class III directors are Leigh Ammons Meese, Samuel Robert Spann, Jr., B. Larkin
Spivey, and James C. Yahnis. The Class II directors were up for reelection at this
years annual meeting held April 23, 2003. Each of the existing Class II directors
were re-elected at the annual meeting. For Mr. Anderson, 1,038,306 votes were cast in
favor of his reelection as director, 1,500 votes were withheld. For Mr. Buie, 1,038,306
votes were cast in favor of his reelection as director, 1,500 votes were withheld. For Mr.
Harrington, 1,038,306 votes were cast in favor of his reelection as director, 1,500 votes
were withheld. For Mr. Seagroves, 1,038,306 votes were cast in favor of his reelection as
director, 1,500 votes were withheld. For Mr. Standish, 1,038,306 votes were cast in favor
of his reelection as director, 1,500 votes were withheld and. The terms of the Class III
directors will expire at the 2004 annual shareholders meeting, and the terms of the Class
I directors will expire at the 2005 annual shareholders meeting.

Approval of
the Amendment to the 1997 Stock Option Plan

The amendment to the plan increases
the number of shares of common stock that may be issued pursuant to options granted under
the plan from 110,000 to 180,000. The amendment to the 1997 Stock Option Plan was
approved. For the amendment to the 1997 Stock Option Plan, 897,585 votes were cast in
favor of the amendment, 100,852 were abstained and 41,289 were withheld.

There were no other matters voted on
by the companys shareholders at our annual meeting held on April 23, 2003.

# Item 5. Other Information

Not applicable.

16

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

(a)    
          Exhibits:

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

| | 32 | Certification 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
          quarter ended June 30, 2003.

The
Company filed a Form 8-K on April 15, 2003 to announce the earnings for the first quarter
ending March 30, 2003.

17

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# 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.
| |  | -------------------------------------

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

|Date:  August 12, 2003 |  | By:   /s/  Richard N. Burch                     
|---------------------- |  | ------------------------------------------------
|                       |  | Richard N. Burch                                
|                       |  | Chief Financial and Principal Accounting Officer

18

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INDEX TO EXHIBITS

Exhibit Number          Description

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

| | 32 | Certification 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19