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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(MARK ONE)

 X    Annual Report under Section 13 or 15(d) of the Securities Exchange Act
---   of 1934
                   For the fiscal year ended December 31, 1998

                                    OR

      Transition Report under Section 13 or 15(d) of the Securities Exchange
---   Act of 1934
                       For the transition period from    to
                                                     ----  -----

                          Commission file no. 33-95562

                     BEACH FIRST NATIONAL BANCSHARES, INC. 
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

<TABLE>
<CAPTION>
           <S>                                                             <C>
                        South Carolina                                         57-1030117 
                  ---------------------------                              ------------------
                 (State or Other Jurisdiction                               (I.R.S. Employer
               of Incorporation or Organization)                           Identification No.)

                     1550 North Oak Street
                 Myrtle Beach, South Carolina                                     29577 
           ---------------------------------------                             -----------
           (Address of Principal Executive Offices)                            (Zip Code)
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                                 (843) 626-2265
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                 Issuer's Telephone Number, Including Area Code

        Securities registered pursuant to Section 12(b) of the Act: None

    Securities registered pursuant to Section 12(g) of the Act: Common Stock

        Check whether the issuer (1) 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 past 90 days.
Yes   X           No     
   ------           -----

        Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

        The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 12, 1999 was $ 6,169,095. This calculation is
based upon $11.50 , the last trade price of the common stock of which the
Company is aware. There is no active trading market for the common stock and
trades are limited and sporadic.

        There were 735,868 shares of the Company's common stock issued and
outstanding as of the record date, March 12, 1999.

        Transitional Small Business Disclosure Format. (Check one): Yes    No X
                                                                       ---   ---

                      DOCUMENTS INCORPORATED BY REFERENCE

        Company's 1998 Annual Report and Proxy Statement.

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ITEM 1.    DESCRIPTION OF BUSINESS

         This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
the Securities Exchange Act of 1934. These statements appear in a number of
places in this Report and include all statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy and operating strategy; and (iv) the declaration and payment of
dividends. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's filings with the Securities
and Exchange Commission.

GENERAL

         Beach First National Bancshares, Inc. (the "Company") was incorporated
as a South Carolina corporation on July 28, 1995, to serve as the holding
company Beach First National Bank (the "Bank"). The Bank commenced operations on
September 23, 1996. The Bank is organized as a national banking association
under the laws of the United States, and the Bank engages in a commercial
banking business from its main office located at the corner of Oak Street and
Sixteenth Avenue North in the City of Myrtle Beach, South Carolina, with
deposits insured by the FDIC.

MARKETING FOCUS

         Most of the banks in the Myrtle Beach area are now local branches of
large regional banks. Although size gives the larger banks certain advantages in
competing for business from large corporations, including higher lending limits
and the ability to offer services in other areas of South Carolina and the
Myrtle Beach area, the Company believes that there has been a void in the
community banking market in the Myrtle Beach area which the Bank can
successfully fill. As a result, the Company generally does not attempt to
compete for the banking relationships of large corporations, but concentrates
its efforts on small- to medium-sized businesses and on individuals.

BANKING SERVICES

         The Bank offers a full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, NOW accounts, savings accounts, and other time deposits of various
types, ranging from daily money market accounts to longer-term certificates of
deposit. The transaction accounts and time certificates are tailored to the
Bank's principal market area at rates competitive to those offered in the Myrtle
Beach area. In addition, the Bank offers certain retirement account services,
such as Individual Retirement Accounts (IRAs). All deposit accounts are insured
by the FDIC up to the maximum amount allowed by law (generally, $100,000 per
depositor, subject to aggregation rules). The Bank solicits these accounts from
individuals, businesses, associations and organizations, and governmental
authorities.

LENDING ACTIVITIES

         General. The Bank emphasizes a range of lending services, including
real estate, commercial and consumer loans, to individuals and small- to
medium-sized businesses and professional concerns that are located in or conduct
a substantial portion of their business in the Bank's market area.

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         Real Estate Loans. The loans secured generally by first or second
mortgages on real estate are one of the primary components of the Bank's loan
portfolio. These loans consist of commercial real estate loans, construction and
development loans, and residential real estate loans (but exclude home equity
loans, which are classified as consumer loans).

         Commercial Loans. The Bank makes loans for commercial purposes in
various lines of businesses. Included in this category are loans to purchase
equipment, finance accounts receivable or inventory or for working capital
purposes.

         Consumer Loans. The Bank makes a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment and
term loans, home equity loans and lines of credit, and revolving lines of credit
such as credit cards.

         Loan Approval and Review. The Bank's loan approval policies provide for
various levels of officer lending authority. When the amount of aggregate loans
to a single borrower exceeds that individual officer's lending authority, the
loan request is considered by an officer with a higher lending limit. Any loan
in excess of this lending limit is approved by the directors' loan committee.
The Bank does not make any loans to any director or executive officer of the
Bank unless the loan is approved by the board of directors of the Bank and is
made on terms not more favorable to such person than would be available to a
person not affiliated with the Bank.

         Lending Limits. The Bank's lending activities are subject to a variety
of lending limits imposed by federal law. While differing limits apply in
certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank is
subject to a loan-to-one-borrower limit. These limits increase or decrease as
the Bank's capital increases or decreases. Unless the Bank sells participations
in its loans to other financial institutions, the Bank is not able to meet all
of the lending needs of loan customers requiring aggregate extensions of credit
above these limits.

OTHER BANKING SERVICES

         Other bank services which are in place or planned include cash
management services, safe deposit boxes, travelers checks, direct deposit of
payroll and social security checks, and automatic drafts for various accounts.
The Bank is associated with a shared network of automated teller machines that
may be used by Bank customers throughout South Carolina and other regions. In
the future, the Bank intends to offer annuities, mutual funds, and other
financial services. The Bank also offers MasterCard and VISA credit card
services through a correspondent bank as an agent for the Bank.

                           SUPERVISION AND REGULATION

         The Company and the Bank are subject to state and federal banking laws
and regulations which impose specific requirements or restrictions on and
provide for general regulatory oversight with respect to virtually all aspects
of operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws or regulations may have a material effect on the business and prospects of
the Company. Beginning with the enactment of FIRREA in 1989 and following with
FDICIA in 1991, numerous additional regulatory requirements have been placed on
the banking industry in the past several years, and additional changes have been
proposed. The operations of the Company may be affected by legislative changes
and the policies of various regulatory authorities. The Company is unable to
predict the nature or the extent of the effect on its business and earnings that
fiscal or monetary policies, economic control, or new federal or state
legislation may have in the future.


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         The Company. Because it owns the outstanding capital stock of the Bank,
the Company is a bank holding company within the meaning of the federal Bank
Holding Company Act of 1956 (the "BHCA") and The South Carolina Bank Holding
Company Act (the "South Carolina Act"). The activities of the Company are also
governed by the Glass-Steagall Act of 1933 (the "Glass-Steagall Act").

         The BHCA. Under the BHCA, the Company is subject to periodic
examination by the Federal Reserve and is required to file periodic reports of
its operations and such additional information as the Federal Reserve may
require. The Company's and the Bank's activities are limited to banking,
managing, or controlling banks; furnishing services to or performing services
for its subsidiaries; and engaging in other activities that the Federal Reserve
determines to be so closely related to banking, managing, or controlling banks
as to be a proper incident thereto.

         Investments, Control, and Activities. With certain limited exceptions,
the BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank,
(ii) acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5% of the
voting shares of such bank (unless it already owns or controls the majority of
such shares), or (iii) merging or consolidating with another bank holding
company.

         In addition, and subject to certain exceptions, the BHCA and the Change
in Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of disapproval)
prior to any person or company acquiring "control" of a bank holding company,
such as the Company. Control is conclusively presumed to exist if an individual
or company acquires 25% or more of any class of voting securities of the bank
holding company. Control is rebuttably presumed to exist if a person acquires
10% or more but less than 25% of any class of voting securities and either the
Company has registered securities under Section 12 of the Securities Exchange
Act of 1934 (the "Exchange Act") (which the Company has done) or no other person
owns a greater percentage of that class of voting securities immediately after
the transaction. The regulations provide a procedure for challenge of the
rebuttable control presumption.

         Under the BHCA, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of more than 5% of the
voting shares of any company engaged in nonbanking activities unless the Federal
Reserve Board, by order or regulation, has found those activities to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank
holding company include making or servicing loans and certain types of leases,
engaging in certain insurance and discount brokerage activities, performing
certain data processing services, acting in certain circumstances as a fiduciary
or investment or financial adviser, owning savings associations, and making
investments in certain corporations or projects designed primarily to promote
community welfare.

         The Federal Reserve Board imposes certain capital requirements on the
Company under the BHCA, including a minimum leverage ratio and a minimum ratio
of "qualifying" capital to risk-weighted assets. These requirements are
described below under "-- Capital Regulations." Subject to its capital
requirements and certain other restrictions, the Company is able to borrow money
to make a capital contribution to the Bank, and such loans may be repaid from
dividends paid from the Bank to the Company (although the ability of the Bank to
pay dividends is subject to regulatory restrictions as described below in "The
Bank--Dividends"). The Company is also able to raise capital for contribution to
the Bank by issuing securities without having to receive regulatory approval,
subject to compliance with federal and state securities laws.

         Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
Board policy, the Company is expected to act as a source of financial strength
to the Bank and to commit resources to support the Bank in circumstances in
which the Company might not otherwise do so. Under the BHCA, the Federal Reserve
Board may require a bank holding company to terminate any activity or relinquish
control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon
the Federal Reserve Board's determination that such activity or control
constitutes a serious risk to the financial soundness or stability of any
subsidiary depository institution of the bank 

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holding company. Further, federal bank regulatory authorities have additional
discretion to require a bank holding company to divest itself of any bank or
nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.

         Glass-Steagall Act. The Company is also restricted in its activities by
the provisions of the Glass-Steagall Act, which prohibits the Company from
owning subsidiaries that are engaged principally in the issue, flotation,
underwriting, public sale, or distribution of securities. The interpretation,
scope, and application of the provisions of the Glass-Steagall Act currently are
being considered and reviewed by regulators and legislators, and the
interpretation and application of those provisions have been challenged in the
federal courts.

         South Carolina Act. As a bank holding company registered under the
South Carolina Act, the Company is subject to regulation by the South Carolina
State Board of Financial Institutions (the "South Carolina Board").
Consequently, the Company must receive the approval of the South Carolina Board
prior to engaging in the acquisition of banking or nonbanking institutions or
assets. The Company must also file with the South Carolina Board periodic
reports with respect to its financial condition and operations, management, and
intercompany relationships between the Company and its subsidiaries.

         The Bank. The Bank operates as a national banking association
incorporated under the laws of the United States and subject to examination by
the OCC. Deposits in the Bank are insured by the FDIC up to a maximum amount
(generally $100,000 per depositor, subject to aggregation rules). The OCC and
the FDIC regulate or monitor virtually all areas of the Bank's operations,
including security devices and procedures, adequacy of capitalization and loss
reserves, loans, investments, borrowings, deposits, mergers, issuances of
securities, payment of dividends, interest rates payable on deposits, interest
rates or fees chargeable on loans, establishment of branches, corporate
reorganizations, maintenance of books and records, and adequacy of staff
training to carry on safe lending and deposit gathering practices. The OCC
requires the Bank to maintain certain capital ratios and imposes limitations on
the Bank's aggregate investment in real estate, bank premises, and furniture and
fixtures. The Bank is required by the OCC to prepare quarterly reports on the
Bank's financial condition and to conduct an annual audit of its financial
affairs in compliance with minimum standards and procedures prescribed by the
OCC.

         Under FDICIA, all insured institutions must undergo regular on site
examinations by their appropriate banking agency. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other appropriate agencies a method
for insured depository institutions to provide supplemental disclosure of the
estimated fair market value of assets and liabilities, to the extent feasible
and practicable, in any balance sheet, financial statement, report of condition
or any other report of any insured depository institution. FDICIA also requires
the federal banking regulatory agencies to prescribe, by regulation, standards
for all insured depository institutions and depository institution holding
companies relating, among other things, to: (i) internal controls, information
systems, and audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; and (v) asset quality.

         National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the OCC or the Federal Reserve Board, respectively, to
be troubled institutions must give the OCC or the Federal Reserve Board,
respectively, thirty days prior notice of the appointment of any senior
executive officer or director. Within the thirty day period, the OCC or the
Federal Reserve Board, as the case may be, may approve or disapprove any such
appointment.

         Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund ("BIF") and Savings Association Insurance Fund
("SAIF") are maintained for commercial banks and thrifts, respectively, with
insurance premiums from the industry used to offset losses from insurance
payouts when banks and thrifts fail. In 1993, the FDIC adopted a 

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rule which establishes a risk-based deposit insurance premium system for all
insured depository institutions. Under this system, until mid-1995 depository
institutions paid to BIF or SAIF from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semi-annual basis. Once the BIF reached its
legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually to $.00 per $100, with a minimum semiannual
assessment of $1,000. However, in 1996 Congress enacted the Deposit Insurance
Funds Act of 1996, which eliminated this minimum assessment. It also separated
the Financial Corporation (FICO) assessment to service the interest on its bond
obligations. The amount assessed on individual institutions, including the Bank,
by FICO is in addition to the amount paid for deposit insurance according to the
risk-related assessment rate schedule. Increases in deposit insurance premiums
or changes in risk classification will increase the Bank's cost of funds.

         Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. The aggregate of
all covered transactions is limited in amount, as to any one affiliate, to 10%
of the bank's capital and surplus and, as to all affiliates combined, to 20% of
the bank's capital and surplus. Furthermore, within the foregoing limitations as
to amount, each covered transaction must meet specified collateral requirements.
Compliance is also required with certain provisions designed to avoid the taking
of low quality assets.

         The Bank is also subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibit an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The Bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.

         Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods (in the case of an annual dividend). The approval
of the OCC is required if the total of all dividends declared by a national bank
in any calendar year exceeds the total of its net profits for that year combined
with its retained net profits for the preceding two years, less any required
transfers to surplus.

         Branching. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current South Carolina law, the Bank may open
branch offices throughout South Carolina with the prior approval of the OCC. In
addition, with prior regulatory approval, the Bank is able to acquire existing
banking operations in South Carolina. Furthermore, federal legislation has
recently been passed which permits interstate branching. The new law permits
out-of-state acquisitions by bank holding companies (subject to veto by new
state law), interstate branching by banks if allowed by state law, interstate
merging by banks, and de novo branching by national banks if allowed by state
law. See "Recent Legislative Developments."

         Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, the OCC, or the Office
of Thrift Supervision shall evaluate the record of the financial institutions in
meeting the credit needs of their local communities, including low and moderate
income neighborhoods, consistent with the safe and sound operation of those
institutions. These factors are also considered in evaluating mergers,
acquisitions, and applications to open a branch or facility.


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         Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligation to help
meet the housing needs of the community it serves; the Equal Credit Opportunity
Act, prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit; the Fair Credit Reporting Act of 1978, governing
the use and provision of information to credit reporting agencies; the Fair Debt
Collection Act, governing the manner in which consumer debts may be collected by
collection agencies; and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws. The
deposit operations of the Bank also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, and the Electronic Funds Transfer Act and
Regulation E issued by the Federal Reserve Board to implement that act, which
governs automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of automated teller
machines and other electronic banking services.

         Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. Neither the
Company nor the Bank has received any notice indicating that either entity is
subject to higher capital requirements. The current guidelines require all bank
holding companies and federally-regulated banks to maintain a minimum risk-based
total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital.
Tier 1 capital includes common shareholders' equity, qualifying perpetual
preferred stock, and minority interests in equity accounts of consolidated
subsidiaries, but excludes goodwill and most other intangibles and excludes the
allowance for loan and lease losses. Tier 2 capital includes the excess of any
preferred stock not included in Tier 1 capital, mandatory convertible
securities, hybrid capital instruments, subordinated debt and intermediate
term-preferred stock, and general reserves for loan and lease losses up to 1.25%
of risk-weighted assets.

         Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.

         The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.

         FDICIA established a new capital-based regulatory scheme designed to
promote early intervention for troubled banks which requires the FDIC to choose
the least expensive resolution of bank failures. The new capital-based
regulatory framework contains five categories of compliance with regulatory
capital requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and 



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"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. As of December
31, 1998, the Company and the Bank were qualified as "well capitalized." See
"Management's Discussion and Analysis or Plan of Operation -- Capital."

         Under the FDICIA regulations, the applicable agency can treat an
institution as if it were in the next lower category if the agency determines
(after notice and an opportunity for hearing) that the institution is in an
unsafe or unsound condition or is engaging in an unsafe or unsound practice. The
degree of regulatory scrutiny of a financial institution increases, and the
permissible activities of the institution decreases, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates, and other activities; (iv) improve their management; (v)
eliminate management fees; or (vi) divest themselves of all or a part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.

         These capital guidelines can affect the Company in several ways. If the
Company continues to grow at a rapid pace, a premature "squeeze" on capital
could occur making a capital infusion necessary. The requirements could impact
the Company's ability to pay dividends. The Company's present capital levels are
more than adequate; however, rapid growth, poor loan portfolio performance or
poor earnings performance or a combination of these factors could change the
Company's capital position in a relatively short period of time.

         FDICIA requires the federal banking regulators to revise the risk-based
capital standards to provide for explicit consideration of interest-rate risk,
concentration of credit risk, and the risks of untraditional activities. It is
uncertain what effect these regulations, when implemented, would have on the
Company.

         Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.

         Enforcement Powers. FIRREA expanded and increased civil and criminal
penalties available for use by the federal regulatory agencies against
depository institutions and certain "institution-affiliated parties" (primarily
including management, employees, and agents of a financial institution, and
independent contractors such as attorneys and accountants and others who
participate in the conduct of the financial institution's affairs). These
practices can include the failure of an institution to timely file required
reports or the filing of false or misleading information or the submission of
inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such
violations. Criminal penalties for some financial institution crimes have been
increased to twenty years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, FIRREA expanded the appropriate
banking agencies' power to issue cease-and-desist orders that may, among other
things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.

         Recent Legislative Developments. In the 1994 legislative session, South
Carolina amended its bank holding act to allow nationwide interstate banking
beginning in 1996. The Interstate Banking Act, passed by Congress in 1994,
allows unrestricted interstate bank mergers, unrestricted interstate acquisition
of banks by bank holding companies, and interstate de novo branching by banks if
allowed by state law. From time to time, various bills are introduced in the
United States Congress with respect to the regulation of financial institutions.


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Certain of these proposals, if adopted, could significantly change the
regulation of banks and the financial services industry. The Company cannot
predict whether any of these proposals will be adopted or, if adopted, how these
proposals would affect the Company.

         Effect of Governmental Monetary Policies. The earnings of the Company
are affected by domestic economic conditions and the monetary and fiscal
policies of the United States government and its agencies. The Federal Reserve
Board's monetary policies have had, and are likely to continue to have, an
important impact on the operating results of commercial banks through its power
to implement national monetary policy in order, among other things, to curb
inflation or combat a recession. The monetary policies of the Federal Reserve
Board have major effects upon the levels of bank loans, investments and deposits
through its open market operations in United States government securities and
through its regulation of the discount rate on borrowings of member banks and
the reserve requirements against member bank deposits. It is not possible to
predict the nature or impact of future changes in monetary and fiscal policies.

LOCATION AND SERVICE AREA

         The Bank engages in a general commercial and retail banking business,
emphasizing the needs of small- to medium-sized businesses, professional
concerns, and individuals, primarily in Myrtle Beach, South Carolina and the
surrounding area, including Horry County. The Bank has an office located at the
corner of Oak Street and Sixteenth Avenue North in the city of Myrtle Beach. See
"Item 2. Description of Property" below.

         Horry County is located on the Atlantic coast of the state of South
Carolina. Myrtle Beach, South Carolina is located within Horry County. The
Myrtle Beach area, also known as the Grand Strand, stretches from the North
Carolina state line at Little River to Georgetown, South Carolina. According to
the 1998 Myrtle Beach Area Statistical Abstract, Myrtle Beach had an estimated
population in 1996 of 28,456, while Horry County had an estimated population of
163,856. By 2010, Horry County's projected population will be 225,800. The
principal component of the economy of the Myrtle Beach area is vacation, sport,
and entertainment tourism. The Grand Strand hosts an estimated 13 million
visitors annually. The vacation segment, which has a four-month season, attracts
vacationers from along the East Coast. Area hotels, motels, condominiums, and
cottages provide more than 55,000 rooms. The Myrtle Beach area also has nine
privately-owned campgrounds and two publicly-owned state parks consisting of
more than 7,000 sites. Convention business also has a sizeable economic impact
on the Myrtle Beach area. The sports segment, which has an approximate ten-month
season, attracts golfers, tennis players, and anglers. The Grand Strand boasts
100 golf courses, with approximately 4.3 million rounds of golf played in 1997.
The entertainment segment is a year-round source of funds. The Grand Strand has
more than ten live entertainment theaters, including the Palace Theater and the
Alabama Theater, as well as entertainment centers as varied as Ripley's Aquarium
and the Pavilion Amusement Park.

COMPETITION

         The banking business is highly competitive. The Bank competes as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, and money market mutual funds operating in the
Myrtle Beach area and elsewhere. As of March 1999, there were twelve commercial
banks and three savings banks operating in Horry County. A number of these
competitors are well established in the Myrtle Beach area. Most of them have
substantially greater resources and lending limits than the Bank and offer
certain services, such as extensive and established branch networks and trust
services, that the Bank does not provide. As a result of these competitive
factors, the Bank may have to pay higher rates of interest to attract deposits.

         The Company believes that the community bank focus of the Bank, with
its emphasis on service to small businesses, individuals, and professional
concerns, gives it an advantage in this market.


                                       9
<PAGE>   10



EMPLOYEES

         As of March 1, 1999, the Company had sixteen full-time employees and
two part-time employees. The Company does not have any employees other than its
officers, none of whom receive any remuneration for their services to the
Company.

ITEM 2.    DESCRIPTION OF PROPERTY

         The principal place of business of both the Company and the Bank and
the main office of the Bank is located at the corner of Oak Street and Sixteenth
Avenue North in Myrtle Beach, South Carolina. The Bank's main office is a
located on 0.8-acre plot of land, which was purchased for $218,000. The Company
constructed a permanent banking facility of 5,000 square feet on the site at a
cost of approximately $1,000,000, which was paid out of the proceeds of the
Company's initial public offering. Furniture, fixtures, and equipment for the
main office cost approximately $534,000. The Company believes that the
facilities adequately serve the Bank's needs. There is one automated teller
machine located at the Bank's main office.


ITEM 3.    LEGAL PROCEEDINGS.

         From time to time the Bank is involved in various legal proceedings
which management considers to be incidental to the normal conduct of the Bank's
business. The Bank became involved in one such case in early 1998 relating to a
suspected kiting operation involving two customers' accounts. As the Company has
previously reported, it believed its total estimated loss exposure in this case
was $625,000. As a part of the recovery from one of these customers, the bank
took a deed in lieu of foreclosure on a single family residence as well as other
incidental collateral. The estimated fair value of the property, net of selling
costs, at December 31, 1998 is $288,074. In February 1998, another financial
institution which, along with the Bank, had been defrauded in the kiting
operation, commenced litigation against the Bank. In March 1999, the Bank
settled its lawsuit with the other financial institution, as well as a related
action it had brought against its data processor.

         During 1998, $100,000 of the amounts previously thought to be
recoverable were charged to the allowance for possible loan losses. During 1998
and 1997, $50,000 and $62,000, respectively, were charged to operations to
establish reserves for professional fees related to recovery activities. During
1998, $47,000 was paid in professional fees related to this matter.

         The Bank continues to employ various recovery and loss minimization
strategies relating to the kiting operations, including strategies to recover
from the customers who perpetrated the kite. Management does not believe any
possible future losses due to the fraud will have a material impact on the
results of operations of the Company.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.


ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's articles of incorporation authorize it to issue up to
10,000,000 shares of Common Stock, of which 735,868 shares, for a total of
$7,358,680, were sold in the initial public offering and are outstanding as of
March 12, 1999. As of March 12, 1999, the Company had 976 shareholders of
record. There is no established trading market in the Common Stock, and one is
not expected to develop in the near future.



                                       10
<PAGE>   11

         All outstanding shares of Common Stock of the Company are entitled to
share equally in dividends from funds legally available therefor, when, as and
if declared by the Board of Directors. The Company does not plan to declare any
dividends in the immediate future. See "Item 1. Description of Business --
Dividends."


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         In response to this Item, the information contained on pages 5 through
15 of the Company's Annual Report to Shareholders for the year ended December
31, 1998 is incorporated herein by reference.

ITEM 7.  FINANCIAL STATEMENTS

         In response to this Item, the information contained on pages 18 through
36 of the Company's Annual Report to Shareholders for the year ended December
31, 1998 is incorporated herein by reference.

ITEM     8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On October 1, 1997, the Company dismissed the firm of Francis & Company
CPA, as the auditors of the Company effective as of that date. The decision to
change accountants was approved by the board of directors of the Company.

         The reports of Francis & Company on the Company's financial statements
for the past two fiscal years did not contain an adverse opinion or a disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.

         In connection with the audits of the Company's financial statements for
the fiscal year ended December 31, 1996 and in the subsequent interim period,
there were no disagreements with Francis & Company on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures which, if not resolved to the satisfaction of Francis & Company,
would have caused Francis & Company to make reference to the matter in their
report. During the fiscal year ended December 31, 1996 and in the subsequent
interim period, there were no "reportable events" to describe as specified in
Item 304(e)(1)(v) of Regulation S-B.

         A copy of the letter dated November 6, 1997 from Francis & Co. stating
that such firm agrees with the above statements is filed as Exhibit 16.1 to the
Current Report on Form 8-K filed by the Company on November 13, 1997.

         On October 1, 1997, the Company engaged Elliott, Davis & Company, LLP
as its independent auditors for the fiscal year ending December 31, 1997, to
audit the Company's financial statements. During the Company's most recent
fiscal year and the subsequent interim period preceding the engagement of
Elliott, Davis & Company, the Company did not consult Elliott, Davis & Company
on any matter requiring disclosure under Item 304(a)(3) of Regulation S-B.

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         In response to this Item, the information contained on page 9 of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
April 21, 1999 is incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION

         In response to this Item, the information contained on pages 6 through
7 of the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on April 21, 1999 is incorporated herein by reference.


                                       11
<PAGE>   12

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         In response to this Item, the information contained on pages 7 through
8 of the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on April 21, 1999 is incorporated herein by reference.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In response to this Item, the information contained on page 9 of the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held on
April 21, 1999 is incorporated herein by reference.



                                       12
<PAGE>   13



ITEM 13.   EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)      The following documents are filed as part of this report:

1.1               Selling Agent Agreement, dated October 16, 1995, by and
                  between Capital Investment Group, Inc. and the Company
                  (incorporated by reference to Exhibit 1.1 to the Company's
                  Registration Statement No. 33-95562 on Form S-1).

3.1.              Articles of Incorporation (incorporated by reference to
                  Exhibit 3.1 to the Company's Registration Statement No.
                  33-95562 on Form S-1).

3.2.              Bylaws (incorporated by reference to Exhibit 3.2 to the
                  Company's Registration Statement No. 33-95562 on Form S-1).

4.1.              Provisions in the Company's Articles of Incorporation and
                  Bylaws defining the rights of holders of the Common Stock
                  (incorporated by reference to Exhibit 4.1 to the Company's
                  Registration Statement No. 33-95562 on Form S-1).

4.2.              Form of Certificate of Common Stock (incorporated by reference
                  to Exhibit 4.1 to the Company's Registration Statement No.
                  33-95562 on Form S-1).

10.1.             Contract of Sale, dated April 27, 1995, by and between Nadim
                  Baroody, Mary Baroody, Jean P. Saad, and Miray Saad, as
                  sellers, and Orvis Bartlett Buie, as purchaser (incorporated
                  by reference to Exhibit 10.1 to the Company's Registration
                  Statement No. 33-95562 on Form S-1).

10.2.             Line of Credit Note, dated April 24, 1995, by Sea Group, Ltd.
                  to The Bankers Bank (incorporated by reference to Exhibit 10.2
                  to the Company's Registration Statement No. 33-95562 on Form
                  S-1)

10.3.             Employment Agreement, dated August 23, 1995, by and between
                  the Company and William Gary Horn (incorporated by reference
                  to Exhibit 10.3 to the Company's Registration Statement No.
                  33-95562 on Form S-1).*

10.4.             Form of Amended and Restated Escrow Agreement, dated November
                  1995, by and among The Bankers Bank, Capital Investment Group,
                  Inc., and the Company (incorporated by reference to Exhibit
                  10.4 to the Company's Registration Statement No. 33-95562 on
                  Form S-1).

10.5.             Amended and Restated Escrow Agreement, dated December 1, 1995,
                  by and among The Bankers Bank, Capital Investment Group, Inc.,
                  and the Company (incorporated by reference to Exhibit 10.5 of
                  the Company's Form 10-KSB for the fiscal year ended December
                  31, 1995).

10.6.             Amendment to Employment Agreement, dated January 9, 1996, by
                  and between the Company and William Gary Horn (incorporated by
                  reference to Exhibit 10.6 of the Company's Form 10-KSB for the
                  fiscal year ended December 31, 1995).*

10.7.             Stock Option Plan dated as of April 30, 1997 (incorporated by
                  reference to Exhibit 10.7 of the Company's Form 10-KSB for the
                  fiscal year ended December 31, 1996).

13                Annual Report to Shareholders for the year ended December 31, 
                  1998

                                       13
<PAGE>   14


16                Letter of Francis & Company, dated November 6, 1997 to the
                  Securities and Exchange Commission (incorporated by reference
                  to Exhibit 16 of the Company's Current Report on Form 8-K
                  filed on November 13, 1997)

21.1.             Subsidiaries of the Company. (incorporated by reference to
                  Exhibit 21.1 of the Company's Form 10-QSB for the quarter
                  ended March 30, 1996).

27.1.             Financial Data Schedule. (for SEC use only).


-------------------------
*        Denotes executive compensation contract or arrangement.

(b)      Reports on Form 8-K

         There were no reports filed on Form 8-K.



                                       14
<PAGE>   15

                                   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: March 17, 1999                  By: /s/ William Gary Horn       
     -------------------------------     -------------------------------------
                                         William Gary Horn
                                         President

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William Gary Horn, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report on Form 10-KSB, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>


Signature                                                Title                                   Date
---------                                                -----                                   ----
<S>                                         <C>                                             <C> 

---------------------------------
Michael Bert Anderson                                   Director                            

/s/ Orvis Bartlett Buie
---------------------------------
Orvis Bartlett Buie                                     Director                            March 17, 1999

/s/ Raymond E. Cleary
---------------------------------
Raymond E. Cleary III                       Chairman of the Board, and Chief                March 17, 1999
                                                     Executive Officer

/s/ Vernie E. Dove
---------------------------------
Vernie E. Dove                                          Director                            March 17, 1999

/s/ Jack Green, Jr.
---------------------------------
Jack Green, Jr.                                         Director                            March 17, 1999

/s/ Michael D. Harrington
---------------------------------
Michael D. Harrington                                   Director                            March 17, 1999

/s/ William Gary Horn
---------------------------------
William Gary Horn                                      President                            March 17, 1999
</TABLE>

                                       15
<PAGE>   16
<TABLE>

<S>                                                     <C>                                 <C>

---------------------------------
Joe N. Jarrett, Jr.                                     Director                                    

/s/ Richard E. Lester
---------------------------------
Richard E. Lester                                       Director                            March 17, 1999


---------------------------------
Diane W. Sammons                                        Director                               

/s/ Rick H. Seagroves
---------------------------------
Rick H. Seagroves                                       Director                            March 17, 1999

/s/ Don J. Smith
---------------------------------
Don J. Smith                                            Director                            March 17, 1999


---------------------------------
Samuel Robert Spann, Jr.                                Director                            

/s/ B. Larkin Spivey, Jr.
---------------------------------
B. Larkin Spivey, Jr.                                   Director                            March 17, 1999

/s/ James C. Yahnis
---------------------------------
James C. Yahnis                                         Director                            March 17, 1999

</TABLE>



                                       16
<PAGE>   17




                                INDEX TO EXHIBITS
Exhibit
Number                     Description

1.1.     Selling Agent Agreement, dated October 16, 1995, by and between Capital
         Investment Group, Inc. and the Company (incorporated by reference to
         Exhibit 1.1 to the Company's Registration Statement No. 33-95562 on
         Form S-1).

3.1.     Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
         the Company's Registration Statement No. 33-95562 on Form S-1).

3.2.     Bylaws (incorporated by reference to Exhibit 3.2 to the Company's
         Registration Statement No. 33-95562 on Form S-1).

4.1.     Provisions in the Company's Articles of Incorporation and Bylaws
         defining the rights of holders of the Common Stock (incorporated by
         reference to Exhibit 4.1 to the Company's Registration Statement No.
         33-95562 on Form S-1).

4.2.     Form of Certificate of Common Stock (incorporated by reference to
         Exhibit 4.1 to the Company's Registration Statement No. 33-95562 on
         Form S-1).

10.1.    Contract of Sale, dated April 27, 1995, by and between Nadim Baroody,
         Mary Baroody, Jean P. Saad, and Miray Saad, as sellers, and Orvis
         Bartlett Buie, as purchaser (incorporated by reference to Exhibit 10.1
         to the Company's Registration Statement No. 33-95562 on Form S-1).

10.2.    Line of Credit Note, dated April 24, 1995, by Sea Group, Ltd. to The
         Bankers Bank (incorporated by reference to Exhibit 10.2 to the
         Company's Registration Statement No. 33-95562 on Form S-1).

10.3.    Employment Agreement, dated August 23, 1995, by and between the Company
         and William Gary Horn (incorporated by reference to Exhibit 10.3 to the
         Company's Registration Statement No. 33-95562 on Form S-1).*

10.4.    Form of Amended and Restated Escrow Agreement, dated November 1995, by
         and among The Bankers Bank, Capital Investment Group, Inc., and the
         Company (incorporated by reference to Exhibit 10.4 to the Company's
         Registration Statement No. 33-95562 on Form S-1).

10.5.    Amended and Restated Escrow Agreement, dated December 1, 1995, by and
         among The Bankers Bank, Capital Investment Group, Inc., and the Company
         (incorporated by reference to Exhibit 10.5 of the Company's Form 10-KSB
         for the fiscal year ended December 31, 1995).

10.6.    Amendment to Employment Agreement, dated January 9, 1996, by and
         between the Company and William Gary Horn (incorporated by reference to
         Exhibit 10.6 of the Company's Form 10-KSB for the fiscal year ended
         December 31, 1995).*

10.7.    Stock Option Plan dated as of April 30, 1997 (incorporated by reference
         to Exhibit 10.7 of the Company's Form 10-KSB for the fiscal year ended
         December 31, 1996).

13       Annual Report to Shareholders for the year ended December 31, 1998

                                       17
<PAGE>   18

16       Letter of Francis & Company, dated November 6, 1997 to the Securities
         and Exchange Commission (incorporated by reference to Exhibit 16 of the
         Company's Current Report on Form 8-K filed on November 13, 1997)

21.1.    Subsidiaries of the Company. (incorporated by reference to Exhibit 21.1
         of the Company's Form 10-QSB for the quarter ended March 30, 1996).

27.1.    Financial Data Schedule. (for SEC use only).

-------------
*        Denotes executive compensation contract or arrangement.


                                       18