Exhibit 13

             2002 Annual Report for Beach First National Bancshares





<PAGE>
Cover:  Beach First National Bancshares, Inc. 2002 Annual Report

<PAGE>





Inside front cover:  Photo of Board of Directors; Photos of Main Office Staff


<PAGE>

Beach First National Bancshares, Inc. logo












Beach First  National  Bancshares,  Inc.  is the parent of Beach First  National
Bank,  headquartered  in Myrtle Beach,  South  Carolina.  Beach First opened for
business in September  1996 and opened  offices in Surfside  Beach in June 2001,
North Myrtle Beach in November  2002,  and Hilton Head Island in February  2003.
Beach First provides a full range of community  banking  services to individuals
and small to medium size businesses.


<PAGE>

Corporate Office
1550 Oak Street
Myrtle Beach, SC 29577
843.626.2265
843.916.7818 (fax)

Inside the Report
2    To Our Shareholders and Friends
4    Building Customer Relationships
8    Management's Discussion & Analysis
20   Report of Management
21   Report of Independent Accountants
22   Consolidated Balance Sheets
23   Consolidated Statements of Income
24   Consolidated Statements of Changes in
     Shareholders' Equity and Comprehensive  Income
25   Consolidated Statements of Cash Flows
26   Notes
39   Corporate Information
40   Directors and Officers

Selected Financial Highlights

                                         2002           2001            %Change
                                         ----           ----            -------
Earnings
     Net Income                      $  707,271        459,294           54.0%
     Net Income per share - basic          0.54           0.46           17.4%
     Net Income per share - diluted        0.53           0.46           15.2%
     Book Value per share                 10.48           9.97            5.1%

Earnings Breakdown
     Total Interet Income            $    6,385          5,729           11.5%
     Total Interest Expense               2,095          2,705           22.6%
     Net Interest Income                  4,290          3,024           41.9%
     Total Noninterest Income               732            381           92.1%
     Total Noninterest Expense            3,356          2,404           39.6

Year End Balances (in thousands)
     Total Assets                    $  118,409         80,785           46.6%
     Loans, net of unearned income       93,300         63,204           47.6
     Deposits                            99,866         67,133           48.8%
     Stockholders' Equity                13,928         13,149            5.9%




[Net Income Graph]                                    [Total Assets Graph]

[Total Deposits Graph]                                [Total Loans Graph]



Beach First National Bancshares, Inc., p. 1


To Our Shareholders and Friends

In 2002,  Beach First National Bank  solidified its position as a true community
bank where service is locally  managed,  absolutely  dependable,  and completely
attentive.

This core banking philosophy is at the heart of everything we do at Beach First.
It has resonated with  customers who continue to respond with great  enthusiasm.
Their  interest  has helped us achieve  strong  financial  performance  while we
expand to new  markets  and  develop  the  infrastructure  needed to support our
growing bank. We were able to achieve these positive  results during a time when
growth in our tourism-driven economy was flat.

Solid Financial Performance

Net income  rose to  $707,271  in 2002,  an  increase  of 54.0% over the figures
reported one year ago. In September,  the bank reached a  significant  milestone
when it crossed the $100  million mark in assets.  By year-end,  assets stood at
$118.4 million,  an increase of 46.5% over the previous year. Other areas of the
balance sheet also reflected double digit growth in 2002. Total loans, bolstered
by a strong  first  quarter  in which  the bank saw its best loan  growth  ever,
increased  47.6% to $93.3 million.  Bank deposits  climbed to $99.4 million,  an
increase of 48.1% over figures reported for last year.

Software for Relationship Banking

Late in 2001, it became apparent that bank's core processing software, which had
been in place since our opening and upgraded  once  already,  was at its maximum
capacity.  To  sustain  our future  growth,  we would  need a new,  more  robust
software package.  After careful review of several systems,  the bank chose Jack
Henry and Associates (JHA), a long-time leader in service to community banks, to
provide a software solution.  JHA's 20/20 system has been in place since October
2002 and we are well pleased with its efficiency and ease of use in all areas of
the bank - from accounting to customer service to operations. It has streamlined
the new account opening  process and allows customer  service and loan personnel
to view the customer's total relationship at the click of a mouse.

(artwork of mouse)

Telephone and Internet Banking

In addition to its proficiency as a processing system for the entire bank, 20/20
also provides the bank with opportunities for new or enhanced products.  When we
implemented  20/20,  we replaced  the  Telebanc  system with a new Bank by Phone
service  that is easier to use and  provides  more  functionality.  With Bank by
Phone,  customers  can  perform  many  banking  functions  for their Beach First
deposit and loan accounts, all from a touchtone phone.

The next  step  beyond  Telephone  Banking  is  Internet  Banking,  which is now
available to customers.  Called  NetTeller,  this system allows  customers to do
their banking from their  personal  computers.  We will also offer Internet Cash
Management services to our business customers this year. Offering these products
makes the bank more appealing to computer savvy customers who use technology but
appreciate the local,  personal service that Beach First will always provide. We
have made a  substantial  investment  in the  technology  needed  to expand  our
customer base and enhance existing customer relationships.

Mortgage Loan Services


We have been able to allocate  additional  resources to boost our mortgage  loan
activity.  We have a full-time mortgage loan originator to assist customers with
every  loan  need,  including  traditional  fixed rate  loans,  adjustable  rate
mortgages,  jumbo  loans,  construction  loans,  condo loans,  refinancing,  and
mortgages  for second homes and  investment  properties.  Mortgage  loans are an
important  part of the  financial  services  package we offer,  helping to build
customer relationships from the time of home purchase.

Expansion to North Myrtle Beach and Beyond

Our new North Myrtle Beach office opened in November and in just a few months of
operations, is exceeding our performance  expectations.  Its location within the
Gator Hole Plaza  provides us with good  visibility  in a busy retail  corridor.
With the opening of this office,  we have achieved a special goal - there is now
a Beach First location within easy driving distance for everyone along the Grand
Strand.

Beach First National Bancshares, Inc., p. 2

<PAGE>

(photo of North Myrtle Beach office)

We ended  the year by  purchasing  a 2.4 acre  parcel  of land at the  southwest
corner of Robert Grissom Parkway and 38th Avenue North in Myrtle Beach. Adjacent
to the  Plantation  Point  Plaza,  this site will be the  location of a new main
office,   housing  a  Beach  First  full  service   branch  and   executive  and
administrative   offices.   The  completion  of  Grissom  Parkway  and  the  new
interchange  at Carolina  Forest make this site a prime location for our banking
headquarters.  Its central  location is convenient  to businesses  and residents
alike and it gives us a prominent address in a rapidly growing part of the Grand
Strand.  Bank  operations  will be  centralized  at the new building,  while the
current Oak Street  location  will  continue to operate as a branch  office.  We
expect to break ground later this year and occupy the new site sometime in 2004.

Outside the Grand Strand

As large banks realign their branch  networks after  completing  mergers,  there
will be ample  opportunity  for  community  banks to expand beyond their current
markets.  Because local management and local decision-making have always been at
the heart of our banking philosophy, we are comfortable in offering our services
outside  the Grand  Strand,  bringing  our  style of  community  banking  to new
markets. Our first such expansion has taken place on Hilton Head Island where we
opened a branch in mid-February 2003. The Hilton  Head/Bluffton market is one of
the  fastest  growing  areas  in the  state,  and  we are  excited  to  have  an
opportunity to be there. We have an experienced, local management team and board
of directors leading the way in this new market.

In Our Communities

Support of our  communities  will always be a priority at Beach First,  and 2002
was no exception.  Our 2003 Children's Calendar was published to rave reviews in
November and featured artwork by students from Myrtle Beach, North Myrtle Beach,
and Lakewood Elementary Schools. Our newest event, the Family Holiday Sandcastle
Contest,  made its debut in  December to the  delight of the many  families  who
participated.  We also  continue  to support a large  number of  charitable  and
community organizations and endeavors.  Our employees helped raise funds for the
Grand Strand Humane Society,  donated presents to provide CareTeam and Red Cross
families  with a  happy  holiday,  supported  the  United  Way,  and  also  gave
generously  of their time as  members  and board  members  of various  community
groups.

(photo of children with calendar)

The Future

Our  progress  would not be possible  without  the support of a strong  board of
directors.  They are deeply  involved in our  planning  and remain  committed to
helping the bank achieve its goals. Our employees

continue to work hard,  showing the dedication and determination that results in
quality  service.   These  efforts,   combined  with  support  from  our  valued
shareholders,  will help us build a truly  great bank with a bright  future.  As
always,  we  appreciate  your  support  and will  continue to work hard for your
investment.

(signature)

Walter E. Standish, III
President and Chief Executive Officer


Beach First National Bancshares, Inc., p. 3

<PAGE>


Building Customer Relationships
American Athletic Club

The American  Athletic Club helps more than 5000 clients stay  physically fit at
its locations on Highway 544 near Surfside Beach and 38th Avenue North in Myrtle
Beach. But who helps the club with its fiscal fitness?

Partners Tim Connor and Heyward Gulledge maintain it is their  relationship with
account officer Katie Huntley that keeps the club in tip-top shape.

Tim started the club, then known as American Health and Racquet,  in 1982 out of
a location on Kings Highway in Surfside Beach.  Heyward joined the staff in 1986
and  became a partner in 1988.  Together,  they  built the  club's  Highway  544
facility from the ground up.

That's where Katie Huntley came in. She did the  financing for the  construction
of the new  location in 1988 and then  helped Tim and Heyward  weather the storm
when  Hurricane  Hugo hit a year later,  while the club was under  construction.
When a 1994  fire  threatened  to close  the  club's  doors,  Katie  was  there,
providing support and an unsurpassed level of service.

Tim said, "It took people like Katie,  sticking with us when things were bad, to
get us where we are today.  She doesn't say `no.' She finds  solutions.  So when
she started at Beach First in 1996, we followed her to the new bank. When it was
time for us to work on our new location at 38th Avenue North, we knew to turn to
her.

Both  partners  concur that Katie does much more than  financing.  She is keenly
interested in the workings of the business and will offer suggestions.  It's the
kind of banking relationship that Beach First is known for -- a true partnership
much like the one that  develops  between the client and the fitness  trainer at
the club.

Heyward  added,  "We  provide  our clients  with a high level of  attention  and
personalized  service.  That  level  of  service  is  needed  because  it can be
intimidating for a person to start a health and fitness  program.  We knock down
that wall of fear with a smile.  In a way,  approaching a bank for a loan can be
equally as intimidating, but Katie and Beach First make it easy."

(photo of Heyward Gulledge, Katie Huntley, and Tim Connor)



Beach First National Bancshares, Inc., p. 4

<PAGE>

Classic Building Specialties, Inc

Take the general  manager of a former  building supply center who has the talent
and drive to own a business,  find the perfect  space,  and then combine it with
the service of Beach First National Bank, and you'll come up with Jerry Anderson
and Classic Building Specialties, Inc.

After spending most of his career with Pelican  Building  Supply,  Jerry and his
wife  founded  the  Carolina  Gourmet in Pawleys  Island.  But he knew there was
another business in his future,  and in 1992,  Classic Building  Specialties was
born.  The company  supplies  quality  doors and windows to upscale homes in the
coastal Carolinas from its locations in Myrtle Beach and Wilmington.

Classic   Building   Specialties   purchases  doors  and  windows  from  leading
manufacturers,  does the finish work on the items, and then assembles, delivers,
and services them. On an order of vinyl  windows,  the finish work would involve
adding the wood trim to each frame. The warehouse has held orders for as many as
23 homes at one time, using a custom storage system that Jerry designed.

The Myrtle Beach location  quickly outgrew its first home on Highway 501 and the
search for a new site,  along with the  necessary  financing,  was on.  That led
Jerry to Jerome Smoak, who had recently come on board at Beach First.

"There was a lot of  competition  for the loan for our new site," Jerry Anderson
recalls.  "But Jerome  Smoak and Beach First made the best offer and combined it
with the best possible service. It was an unbeatable combination.  I appreciated
how they made the process simple and easy.  That's when I moved our relationship
to Beach First."

"You know,  one of our biggest  challenges  is facing the pricing the big chains
offer.  But,  there's  one way we will  always be better and that is through our
service.  Our staff  will  always be here to answer  the  questions,  to fix any
problems  the  customer  may have.  And it's a live  person on the phone,  not a
recording or a voice mail."

"That's been the philosophy at Beach First,"  Anderson  said.  "They are glad to
see me when I walk in their door.  They  understand  the way my business  works.
There are real  advantages to banking with a small bank.  It's very  comfortable
and  personal -- much the same way I treat my own  customers.  That's what makes
Beach First such a good match for Classic Building Supplies."

(photo of Jerry Anderson and Jerome Smoak)




Beach First National Bancshares, Inc., p. 5


<PAGE>



Identity Apparel, Inc

Banking  at Beach  First,  along with a flair for  merchandising  and a head for
business,  runs in the  family  for Ronny  West.  Ronny and wife  Christian  own
Identity  Apparel,  Inc., an  embroidery  and silk  screening  business in North
Myrtle Beach. In addition to the myriad of hats, golf shirts, t-shirts and other
clothing  items  being  produced,  the  group  also  markets a wide  variety  of
promotional products.

The couple  bought the company,  once a component of Apparel  Brokers,  from his
family in 1999,  expanded it, and  business  has been  booming  ever since.  The
senior Wests, also Beach First customers, own ABSCO Storage.

Identity  Apparel uses  digitizing  software to create the  embroidery  that can
appear on virtually  any type of clothing.  This  specialized  software aids the
embroidery  process by telling the machine which types of stitches to use, their
placement,  and the colors to include. "This software, which takes a high degree
of skill to use, is becoming  absolutely  essential for embroidery  work," Ronny
said.  "Currently,  we're  in a small  minority  of  embroiderers  who  have the
software, so we will also digitize artwork for other firms that want this done."
Both Ronny and Christian,  along with fellow employee Toni Griffin,  are trained
in the software.

Identity  Apparel also employs a graphic designer who can create logos and other
artwork  for small  businesses  that may not have these  capabilities  in-house,
thereby  providing one stop shopping for their customers.  The company also goes
to great  lengths to develop a bond with their  customers,  including  those who
transact  their  business  via the  Internet.  "Service is how we  differentiate
ourselves from our  competition,"  Ronny stated.  "We are there for the customer
through  the  entire  process,  from the  creative  end to the  delivery  of the
finished product, much like Beach First is there for us.
"Ronny  continued,  "If we've ever needed  help,  the bank has stepped up. Katie
[account  officer Katie  Huntley] has taken the time to understand our business,
its needs, and its seasonality.  A good example has been this past winter,  when
we needed a new piece of drying  equipment.  We talked to Katie about it and she
immediately  understood  that  the new  equipment  would  improve  our  earnings
capability because it's more efficient.  She also understood our cash flow needs
during the  off-season.  It's this  understanding,  this level of rapport,  that
distinguishes  Beach  First  from the  competition  and makes  them our  banking
partner. We simply wouldn't be here today without them."

(photo of Katie Huntley and Ronny West)



Beach First National Bancshares, Inc., p. 6


<PAGE>

Garret and Marlene Denbraven

Their  relationship  had its  beginnings  in  grammar  school  where  they  were
classmates.  It later grew into a marriage and a family with two fine  daughters
who now work in  education.  Career  moves  took the  family  from New Jersey to
Asheville,  North Carolina, and finally to Myrtle Beach, where they've spent the
last 29 years.  Throughout the years,  Garret and Marlene  Denbraven have seen a
lot of change along the Grand Strand, right down to the banks they've used.

Garret first worked for Kearfott Singer and later for AVX Corporation,  where he
retired as a division vice president in 1991.  Marlene managed the household and
the family  finances,  and to this day,  Garret marvels at how well she does it.
With an excellent  money  manager in the family,  you can be sure they have high
standards when it comes to selecting a banking partner.

The  Denbravens  feel that Beach  First  achieves  those high  standards.  Their
relationship  with the bank began in 1996 in the bank's  temporary  quarters  at
Myrtle  Offices on Oak Street.  At that time,  customer  service  representative
Joyce  Mew  introduced  the  couple  to  Beach  First  and  its  services.   The
relationship  has continued now that the bank has three branches along the Grand
Strand.

"It's this level of service that is so important to  customers,"  Marlene added.
"You want to bank at a place where they are glad to see you. An  acknowledgement
when  you  come  in  the  door  with a  friendly  hello  can  go a  long  way in
establishing  a  relationship.  We want to be able to sit down with a banker who
respects us and will listen to our needs.

"Beach  First  has  always  been  competitive  in terms of CD and  money  market
interest  rates which is important  to us,  because it provides a fair return on
our  investment.  When you  combine  good  interest  rates with a great level of
service,  that builds a relationship between the bank and the customer," Marlene
said.

Garret added,  "We've seen banks come and go over the years. It seems to me that
the  survivors  are the ones who can use  technology to know the customer and to
meet the  customer  needs.  We've been pleased that Beach First knows us and our
needs and is willing to work with us to meet those needs."

(photo of Marlene and Garret Denbraven with Zella Starbuck)


Beach First National Bancshares, Inc., p. 7


<PAGE>

Management's Discussion and Analysis
Overview

We commenced operations on September 23, 1996, and completed our sixth full year
of operations on December 31, 2002. From the outset,  we have focused on serving
the banking needs of small  businesses and  individuals,  and we have emphasized
our local management and ownership.

Walt Standish,  our president and chief executive  officer,  completed his third
full year as president at December 31, 2002. Under Mr. Standish's leadership, we
are continuing to grow in our service  markets.  Our total assets have increased
to $118.4  million at December  31, 2002, a 46.6%  increase  since  December 31,
2001,  and our net income was $707,271 for the year ended  December 31, 2002, an
increase of $247,977,  or 54%, over the same period in 2001. We accomplished our
first  quarterly  profit  in  the  second  quarter  of  1999,  and in  2001  our
performance resulted in the first cumulative year of profitability.

The following  table sets forth selected  measures of our financial  performance
for the periods indicated:

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                     -------------------------------------------------------------------------
                                            2002              2001              2000              1999
                                            ----              ----              ----              ----
<S>                                  <C>                 <C>                <C>                <C>
    Total Revenues (1)........       $   5,021,421       $   3,405,568      $   2,477,321      $  1,837,082
    Net Income................             707,271             459,294            230,723            52,921
    Total Assets..............         118,408,825          80,784,815         63,770,016        46,155,395
    Total Loans...............          93,300,352          63,203,643         45,622,155        32,537,992
    Total Deposits............          99,425,897          67,132,968         56,726,511        36,836,020
    Retained Earnings (Deficit)            709,390               2,119           (457,175)         (687,898)

<FN>
       (1) Total revenues equal net interest income plus total noninterest
           income.
</FN>
</TABLE>


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.

Certain  accounting  policies involve  significant  judgments and assumptions by
management  which have a material impact on the carrying value of certain assets
and liabilities.  We consider such accounting policies to be critical accounting
policies.  The  judgments  and  assumptions  we  use  are  based  on  historical
experience  and other  factors,  which are believed 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.   These
differences  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 its
consolidated financial statements.  Refer to the section entitled "Provision and
Allowance for Loan Losses" for a detailed  description of our estimation process
and methodology related to the allowance for loan losses.

The following  discussion  contains our analysis of our financial  condition and
results of operations beginning with the year ended December 31, 2000.

Analysis of the Fiscal Years Ended December 31, 2002, and 2001, and 2000

Earnings Review

Overview.  For the year ended December 31, 2002, our net income was $707,271, or
$.54 basic net income per common share,  as compared to $459,294,  or $.46 basic
net income per common share, for the year ended December 31, 2001, and $230,723,
or $0.31  basic net income per common  share,  for the year ended  December  31,
2000.  Our net  income  increased  in  2002,  2001,  and 2000  primarily  due to
increases in net interest income and  noninterest  income that resulted from the
significant growth in our assets and deposits over these periods.

We had total assets of $118.4 million at December 31, 2002, an increase of 46.6%
from $80.8 million at December 31, 2001. Our total  deposits  increased to $99.9
million at December 31, 2002,  up 48.1% from $67.1 million at December 31, 2001.
Return on average  assets and  return on  average  stockholders'  equity are key
measures  of  earnings  performance.  Our return on average  assets for 2002 was
0.75%  compared  to 0.62% in




Beach First National Bancshares, Inc., p. 8


<PAGE>

2001 and 0.41% in 2000;  and our  return  on  average  equity  was 5.24% in 2002
versus 3.97% in 2001 and 3.45% in 2000.  The  improvement  in net income in 2002
reflects  our growth,  with average  earning  assets  increasing  26.4% to $88.0
million during 2002 from $69.6 million during the same period of 2001.

Net Interest Income

General.  Our primary source of revenue is net interest income, which represents
the  difference  between  the income on  interest-earning  assets and expense on
interest-bearing liabilities. Our net interest income increased $1.3 million, or
41.8%,  to $4.3 million in 2002 from $3.0 million in 2001.  Net interest  income
increased  $.8 million in 2001 from $2.2  million in 2000.  The  increase in net
interest  income was due primarily to the growth of our bank, as reflected in an
increase in our average  earning  assets.  Average  earning assets  increased to
$88.0 million  during 2002, a 26.4%  increase from $69.6 million in 2001,  and a
32.0% increase from $52.7 million in 2000.

[graph of Net Interest Income]

Net interest spread, the difference between the rate we earn on interest-earning
assets and the rate we pay on  interest-bearing  liabilities,  was 4.12% for the
year ended December 31, 2002,  compared to 3.03% for the year ended December 31,
2001 and 2.96% for the year ended  December 31, 2000.  Our net interest  margin,
which is net interest  income divided by average  interest-earning  assets,  was
4.88% for the year ended  December 31, 2002,  4.34% for the year ended  December
31, 2001,  and 4.12% for the year ended  December 31, 2000. The increase in 2002
and 2001 resulted  primarily from the declining  interest rate  environment that
occurred during these periods.

Average Balances, Income and Expenses and Rates. The following tables set forth,
for the periods indicated,  information related to our average balance sheet and
average yields on assets and average rates paid on liabilities. We derived these
yields or rates by  dividing  income or  expense by the  average  balance of the
corresponding assets or liabilities.  We derived average balances from the daily
balances throughout the periods indicated.

<TABLE>
<CAPTION>
                                                    Average Balances, Income and Expenses, and Rates

                                     For the year ended                   For the year ended                For the year ended
                                     December 31, 2002                    December 31, 2001                 December 31, 2000
                            ---------------------------------    -------------------------------   ---------------------------------

                             Average     Income/      Yield/      Average     Income/    Yield/      Average      Income/    Yield/
                             Balance     Expense       Rate       Balance     Expense     Rate       Balance      Expense     Rate
                             -------     -------       ----       -------     -------     ----       -------      -------     ----
<S>                       <C>            <C>           <C>     <C>            <C>          <C>     <C>            <C>          <C>
      Federal funds
      sold and short
      term investments.   $  4,519,786   $    73,206   1.62%   $  6,538,716   $   242,601  3.71%   $  4,963,476   $   334,086  6.73%

      Investment
      securities.......      7,603,198       413,289   5.44%      7,008,278       446,585  6.37%      8,738,925       577,076  6.60%
      Loans............     75,837,003     5,898,801   7.78%     56,097,384     5,040,259  8.98%     39,031,826     3,713,902  9.52%
                            ----------     ---------   ----      ----------     ---------  ----      ----------     ---------  ----
        Total earning
      assets...........   $ 87,959,987   $ 6,385,296   7.26%   $ 69,644,378   $ 5,729,445  8.23%   $ 52,734,227   $ 4,625,064  8.77%
                            ==========     =========   ====      ==========     =========  ====      ==========     =========  ====

      Interest-bearing
      deposits
       IBCA............   $  3,903,291   $    19,982   0.51%   $  2,960,275   $    58,315  1.97%      1,273,091        37,008  2.35%
       MMA.............     21,519,407       490,095   2.28%      9,930,303       443,670  4.47%      6,353,302       347,246  5.47%
       Savings.........      3,211,338        38,414   1.20%      3,127,306        95,716  3.06%      3,841,637       183,514  4.78%
       CD's <$100,000..     17,036,416       741,659   4.35%     20,837,943     1,236,173  5.93%     16,953,510     1,052,712  6.21%
       CD's >$100,000..     15,581,654       539,547   3.46%     11,602,589       645,489  5.56%      9,594,329       593,197  6.18%
       IRA.............      3,652,567       194,056   5.31%      3,338,666       212,488  6.36%      2,962,456       183,101  6.18%
                            ----------     ---------   ----      ----------     ---------  ----      ----------     ---------  ----
        Total interest-
         bearing
      deposits.........   $ 64,904,673   $ 2,023,754   3.12%   $ 51,797,082   $ 2,691,850  5.20%   $ 41,278,325   $ 2,396,778  5.81%
                            ==========     =========   ====      ==========     =========  ====      ==========     =========  ====

      Other borrowings.      1,948,663        71,746   3.68%        217,926        13,140  6.03%        893,142        53,406  5.98%
                            ----------     ---------   ----      ----------     ---------  ----      ----------     ---------  ----
        Total
      interest-
        bearing
      liabilities......   $ 68,853,336   $ 2,095,499   3.13%   $ 52,015,008   $ 2,704,990  5.20%   $ 42,171,467   $ 2,450,184  5.81%
                            ==========     =========   ====      ==========     =========  ====      ==========     =========  ====

      Net interest                                     4.12%                               3.03%                               2.96%
      spread...........
      Net interest
      income/margin....                  $ 4,289,797   4.88%                  $ 3,035,836  4.34%                  $ 2,183,839  4.12%
                                           =========   ====                     =========  ====                     =========  ====
</TABLE>






Beach First National Bancshares, Inc., p. 9


<PAGE>




Analysis of Changes in Net Interest  Income.  The following tables set forth the
impact of the varying levels of earning assets and interest-bearing  liabilities
and the  applicable  rates have had on changes  in net  interest  income for the
periods  presented.  The change in net interest  income is primarily  due to the
increases in volume of both loans and deposits and changes in average rates.
<TABLE>
<CAPTION>
                                      Analysis of Changes in Net Interest Income
                                    For the year ended December 31,               For the year ended December 31,
                                            2002 versus 2001                             2001 versus 2000
                              --------------------------------------------- --------------------------------------------
                                  Volume         Rate         Net change        Volume          Rate       Net change
                                  ------         -----        ----------        ------          ----       ----------
<S>                           <C>            <C>            <C>             <C>             <C>          <C>
Federal funds sold and short
term investments............  $    (32,770)  $    (136,695) $  (169,465)    $     58,445    $ (149,930)  $    (91,485)

Investment securities.......        32,338         (65,634)     (33,296)        (110,281)      (20,210)      (130,491)
Loans.......................     1,535,399        (676,857)      858,542       1,533,313      (206,956)     1,326,357
                               -----------   -------------    ----------     -----------      --------     ----------
     Total earning assets...     1,535,038        (879,186)      655,852       1,481,476      (377,095)     1,104,381

Interest-bearing deposits...       408,700      (1,076,796)     (668,096)        546,651      (251,579)       295,072
Other borrowings............        63,722          (5,116)       58,606         (40,713)          447        (40,266)
                               -----------     -----------    ----------     -----------     ---------     ----------
     Total interest-bearing
            liabilities.....       472,422      (1,081,913)      609,491         505,938      (251,132)       248,806
                               -----------     -----------    ----------     -----------     ---------     ----------

Net interest income.........  $  1,062,615   $     202,727  $  1,265,342    $    975,538    $ (125,963)  $    849,575
                               ===========     ===========    ==========     ===========     =========     ==========
</TABLE>


Interest Rate Sensitivity.  A significant  portion of our assets and liabilities
are monetary in nature,  and consequently  they are very sensitive to changes in
interest rates. This interest rate risk is our primary market risk exposure, and
it can have a significant  effect on our net interest  income and cash flows. We
review our exposure to market risk on a regular basis, and we manage the pricing
and maturity of our assets and  liabilities  to diminish the  potential  adverse
impact that changes in interest rates could have on our net interest income.

One  monitoring  technique we employ is the  measurement  of our  interest  rate
sensitivity   "gap,"   which  is  the   difference   between   the   amount   of
interest-earning  assets and  interest-bearing  liabilities  that  mature or may
reprice  within a given period of time. A gap is  considered  positive  when the
amount of  interest-rate  sensitive  assets exceeds the amount of  interest-rate
sensitive  liabilities,  and  it is  considered  negative  when  the  amount  of
interest-rate   sensitive   liabilities  exceeds  the  amount  of  interest-rate
sensitive  assets.  We generally would benefit from  increasing  market interest
rates when we have an asset-sensitive,  or a positive,  interest rate gap and we
would  generally  benefit from  decreasing  market  interest  rates when we have
liability-sensitive,  or a negative, interest rate gap. When measured on a "gap"
basis, we are liability-sensitive  over the cumulative one-year time frame as of
December 31, 2001 and December 31, 2002. However,  gap analysis is not a precise
indicator of our interest  sensitivity  position.  The analysis  presents only a
static view of the timing of  maturities  and repricing  opportunities,  without
taking  into  consideration  that  changes in  interest  rates do not affect all
assets and liabilities equally. For example, rates paid on a substantial portion
of core deposits may change  contractually within a relatively short time frame,
but we  believe  those  rates are  significantly  less  interest-sensitive  than
market-based rates such as those paid on non-core deposits.

Net interest  income is also affected by other  significant  factors,  including
changes in the volume and mix of  interest-earning  assets and  interest-bearing
liabilities. We perform asset/liability modeling to assess the impact of varying
interest  rates and the impact that balance sheet mix  assumptions  will have on
net interest income. We attempt to manage interest rate sensitivity by repricing
assets or liabilities, selling securities available-for-sale, replacing an asset
or liability at maturity,  or adjusting  the interest rate during the life of an
asset or liability.  Managing the amount of assets and liabilities  that reprice
in the same time interval helps us to hedge risks and minimize the impact on net
interest  income of rising or  falling  interest  rates.  We  evaluate  interest
sensitivity  risk and then formulate  guidelines  regarding asset generation and
repricing,  funding sources and pricing,  and off-balance  sheet  commitments in
order to decrease interest rate sensitivity risk.

The  following  tables  summarize  the  amounts of  interest-earning  assets and
interest-bearing  liabilities outstanding at December 31, 2002 and 2001 that are
expected to mature, prepay, or reprice in each of the future time periods shown.
Except as stated in the following  tables, we determined the amount of assets or
liabilities that mature or reprice during a particular period in accordance with
the  contractual  terms of the asset or liability.  We included  adjustable rate
loans in the period in which  interest rates are next scheduled to adjust rather
than in the period in which they are due,  and we  included  fixed rate loans in
the  periods  in which we  anticipate  they  will be repaid  based on  scheduled
maturities.  We  included  our  savings  accounts



Beach First National Bancshares, Inc., p. 10


<PAGE>

and interest-bearing demand accounts (interest bearing checking and money market
deposit accounts),  which are generally subject to immediate withdrawal,  in the
"Within three months"  category,  although our historical  experience has proven
these deposits to be more stable over the course of a year.
<TABLE>
<CAPTION>
                                             Interest Sensitivity Analysis
                                             -----------------------------
                                                 December 31, 2002

                                      Within Three    After three but      After one but
                                        Months      Within twelve Months  Within five years  After five years  Total
                                        ------      --------------------  -----------------  ----------------  -----
<S>                                  <C>              <C>                 <C>              <C>                <C>
Assets
Earning assets:
   Federal funds sold and short
   term investments...........       $ 5,429,214      $          -        $         -      $         -        $  5,429,214
   Investment securities......           663,729           574,210          1,829,904        4,849,139           7,916,982
   Total loans................        35,934,675        10,247,046         42,416,923        4,701,708          93,300,352
                                      ----------        ----------         ----------       ----------          ----------
        Total earning assets..       $42,027,618      $ 10,821,256        $44,246,827      $ 9,550,847        $106,646,548
                                     ===========      ============        ===========      ===========        ============
Liabilities
Interest-bearing liabilities
   MONEY MARKET AND INTEREST
   CHECKING                          $26,917,322      $          -        $         -      $         -        $ 26,917,322
   Regular savings deposits...         2,935,199                 -                  -                -           2,935,199
   Time deposits  < $100,000..         7,431,280        19,028,050          3,351,586                -          29,810,916
                  > $100,000..         5,905,680        13,333,412          1,647,216                -          20,886,308
   Other borrowings...........                 -                 -          4,000,000                -           4,000,000
                                      ----------        ----------         ----------      -----------          ----------
   Total interest-bearing
   liabilities................       $43,189,481      $ 32,361,462        $ 8,998,802      $         -        $ 84,549,745
                                      ==========        ==========         ==========      ===========          ==========

Period gap....................       $(1,161,863)     $(21,540,206)       $35,248,025       $9,550,847        $ 22,096,803
Cumulative gap................       $(1,161,863)     $(22,702,069)       $12,545,956      $22,096,803        $ 22,096,803
Ratio of cumulative gap to total
earning assets...............              (1.09)%          (21.29)%            11.77%           20.72%
</TABLE>


<TABLE>
<CAPTION>
                                                 December 31, 2002

                                      Within Three    After three but      After one but
                                         Months     Within twelve Months  Within five years  After five years    Total
                                         ------     --------------------  -----------------  ----------------    -----
<S>                                  <C>              <C>                 <C>                <C>               <C>
Assets
Earning assets:
   Federal funds sold and short
   term investments...........       $ 5,679,291      $          -        $         -        $         -       $ 5,679,291
   Investment securities......           733,624           194,838          1,041,620          3,711,898         5,681,980
   Total loans................        16,832,994         7,258,001         35,632,847          3,479,801        63,203,643
                                      ----------        ----------         ----------        -----------        ----------
      Total earning assets....       $23,245,909      $  7,452,839        $36,674,467        $ 7,191,699       $74,564,914
                                      ==========       ===========         ==========         ==========        ==========

Liabilities
   Interest-bearing liabilities
   MONEY MARKET AND INTEREST
   CHECKING                          $17,873,801      $          -        $         -        $         -       $17,873,801
   Regular savings deposits...           695,138                 -                  -                  -           695,138
   Prime savings deposits.....         2,129,313                 -                  -                  -         2,129,313
   Time deposits  < $100,000..         5,764,109         9,636,801          5,060,099            245,956        20,706,965
                  > $100,000..         3,308,314         7,854,207          2,220,602            375,694        13,758,817
   Other borrowings...........                 -                 -                  -                  -                 -
                                      ----------        ----------         ----------        -----------        ----------
   Total interest-bearing
   liabilities................       $29,770,675      $ 17,491,008        $ 7,280,701        $   621,646       $55,164,034
                                      ==========       ===========         ==========         ==========        ==========

 Period gap...................       $(6,524,766)     $(10,038,169)       $29,393,766        $ 6,570,049       $19,400,880
 Cumulative gap...............       $(6,524,766)     $(16,562,935)       $12,830,831        $19,400,880
 Ratio of cumulative gap to total
 earning assets...............             (8.75)%          (22.21)%            17.21%             26.02%
</TABLE>



Provision and Allowance for Loan Losses

General.  We have  established  an allowance for loan losses through a provision
for loan losses charged to expense.  The allowance represents an amount which we
believe will be adequate to absorb  probable  losses on existing  loans that may
become uncollectible.  Our judgment in determining the adequacy of the allowance
is based on evaluations of the collectibility of loans, including  consideration
of factors such as the balance of impaired loans, the quality,  mix, and size of
our overall loan portfolio,  economic  conditions that may affect the borrower's
ability to pay, the


Beach First National Bancshares, Inc., p. 11


<PAGE>

amount and quality of collateral  securing the loans,  our historical  loan loss
experience,  and a review of specific problem loans. We adjust the amount of the
allowance  periodically  based on changing  circumstances.  We charge recognized
losses to the allowance for loan losses,  and we add any  subsequent  recoveries
back to the  allowance.  We consider a loan to be  impaired  when it is probable
that we will be unable to collect all  principal  and  interest  payments due in
accordance  with the  terms  of the  loan  agreement.  We  measure  individually
identified impaired loans based on the present value of expected payments, using
the  contractual  loan rate as the  discount  rate.  Alternatively,  we may base
measurement on observable market prices, or, for loans that are solely dependent
on the  collateral  for  repayment,  the fair  value of the  collateral.  If the
recorded  investment in the impaired loan exceeds the measure of fair value,  we
establish a valuation allowance as a component of the allowance for loan losses.
We record changes to the valuation allowance as a component of the provision for
loan losses.

Our policy has been to review the Allowance for Loan and Losses  ("ALL") using a
reserve factor for each type of loan since there have been few delinquencies and
little charge-off activity since we commenced operations.  The objective of this
review is to apply percentages to the nonclassified  loans based on the relative
inherent risk for that loan type. Classified loans are reviewed individually for
specific allowance requirements.

Reserve  factors  for  nonclassified  loan  types  (e.g.,  commercial  loans and
consumer  loans)  are based on peer  group  data,  information  from  regulatory
agencies,  and on the experience of our lenders. The reserve factors will change
depending  on trends in national  and local  economic  conditions,  the depth of
experience  of our  lenders,  delinquency  trends  for our  bank  and  for  peer
institutions, and other factors.

Our general strategy is to maintain a minimum  coverage of a certain  percentage
of total loans until we have sufficient historical data and trends available for
migration  analysis  (five  historical  years of  charge  off  data).  Migration
analysis is a more  statistically  sound method of analyzing the allowance based
on prior periods of loss within market area and product  types.  Our current ALL
percentage is 1.37% of total loans.

In  addition,  regulatory  agencies,  as an integral  part of their  examination
process, periodically review our allowance for loan losses, and they may require
us to record  additions to the  allowance  based on their review of  information
available to them at the time of their examinations.

At December 31, 2002, our allowance for possible loan losses was $1,275,778,  or
1.37% of total  outstanding  loans,  compared to an allowance for possible loans
losses of $851,222,  or 1.35% of  outstanding  loans at December  31, 2001,  and
$569,245,  or 1.25% at December  31,  2000.  Our  provision  for loan losses was
$539,000 in 2002  compared to $467,000 in 2001 and $251,107 in 2000.  Management
believes  that the  allowance  for loan losses is adequate at this time to cover
any potential losses in the portfolio.  However, management's judgment about the
adequacy of the  allowance  is based upon a number of  assumptions  about future
events  which it  believes to be  reasonable  but which may or may not be valid.
Thus,  there can be no assurance  that  charge-offs  in future  periods will not
exceed  the  allowance  for loan  losses  or that  additional  increases  in the
allowance for loan losses will not be required.

[graph of Loan Loss Reserve to Total Loans]

In  2002,  2001,  and  2000  we  charged-off  $115,808,  $189,572  and  $91,000,
respectively. The 2002 charge-offs included approximately $104,000 in commercial
loans and $12,000 in consumer loans. The 2001 charge-offs  included  $112,000 of
commercial real estate loans,  $14,000 in commercial loans,  $15,600 of consumer
real estate loans and $42,700 in consumer  loans.  The 2000 charge offs included
$77,000 in  commercial  real estate  loans and  $14,000 in consumer  real estate
loans.

We  discontinue  accrual of  interest  on a loan when we conclude it is doubtful
that we will be able to  collect  interest  from the  borrower.  We  reach  this
conclusion  by taking into  account  factors  such as the  borrower's  financial
condition,  economic  and business  conditions,  and the results of our previous
collection  efforts.  Generally,  we will place a delinquent  loan in nonaccrual
status when the loan  becomes 90 days or more past due.  When we place a loan in
nonaccrual  status,  we reverse all interest  which has been accrued on the loan
but remains  unpaid and we deduct this  interest from earnings as a reduction of
reported interest income.  We do not accrue any additional  interest on the loan
balance  until we conclude  the  collection  of both  principal  and

Beach First National Bancshares, Inc., p. 12


<PAGE>

interest is reasonably  certain.  At December 31, 2002,  there were two consumer
loans totaling $1,418 accruing interest which were 90 days or more past due, and
we did not have any restructured loans.

We had one nonaccruing  loan totaling $46,387 at December 31, 2002. This loan is
80% guaranteed by the Small Business Administration.  The non-guaranteed portion
was charged  off in 2002.  We had two  nonaccruing  loans  totaling  $107,377 at
December 31,  2001.  One loan in the amount of $88,000 is secured by real estate
currently  in  foreclosure  and the other  loan in the  amount of  $20,000  is a
consumer loan. We had two  nonaccruing  loans totaling  $104,815 at December 31,
2000.  These loans were both SBA  guaranteed and both  guaranteed  portions have
been received.  Interest income that would have been received for the year ended
December 31, 2002 had  nonaccruing  loans been current in accordance  with their
original terms amounted to $1,251.

We do not include  loans that are current as to  principal  and  interest in our
nonperforming assets categories.  However, we will still classify a current loan
as a potential  problem loan if we develop  serious  doubts about the borrower's
future  performance under the terms of the loan contract.  We consider the level
of potential problem loans in our determination of the adequacy of the allowance
for loan losses.  At December 31, 2002, 2001 and 2000, we did not have any loans
we considered to be potential  problem  loans.  At December 31, 2002, we had two
loans  totaling  $85,756  that we have  classified  substandard  and have made a
specific allocation in the allowance for loan and lease losses.  Management does
not anticipate any losses as a result of this classification.

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 years
ended December 31, 2002, 2001, and 2000.
<TABLE>
<CAPTION>
                            Allowance for Loan Losses
                             (Dollars in Thousands)
                                                                   December 31,
                                        -----------------------------------------------------------------
                                                   2002                 2001                2000
<S>                                              <C>                    <C>               <C>
         Average loans outstanding......         $   75,837             $   56,097        $    39,032
                                                                                             ========
         Loans outstanding at period end         $   93,300             $   63,204        $    45,622
                                                     ======                 ======           ========
         Total nonperforming loans......                 86                    107                105
                                                    =======                =======           ========

         Beginning balance of allowance.         $      851             $      569        $       409
         Loans charged off:.............                116                    190                 91
               Real Estate..............                                       112                  -
               Commercial...............                104                     46                 77
               Consumer.................                 12                     32                 14
                                                    -------                -------           --------
         Total loans charged off:.......                116                    190                 91
         Recoveries:
               Real Estate..............                  1                      5                  -
               Commercial...............                  -                      -                  -
               Consumer.................                  -                      -                  -
                                                    -------                -------           --------
               Total recoveries:........                  1                      5                  -
                                                    -------                -------           --------
         Net loans charged off..........                115                    185                 91

         Provision for loan losses......                539                    467                251
                                                    -------                -------           --------
         Balance at period end..........         $    1,276             $      851        $       569
                                                    =======                =======           ========

         Net charge-offs to average                    0.15%                  0.33%              0.23%
           loans........................
         Allowance as a percent of                     1.37%                  1.35%              1.25%
           total loans..................
         Nonperforming loans as a
           percentage of total loans....               0.09%                  0.17%              0.23%
         Nonperforming loans as a
         percentage of allowance........               6.74%                 12.61%             18.41%
   Ratio of net charge-offs to average
     gross loans outstanding during
     the period.........................               0.15%                  0.33%              0.23%
</TABLE>




Beach First National Bancshares, Inc., p. 13


<PAGE>



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.

<TABLE>
<CAPTION>
                                                  Allocation of the Allowance for Loan Losses
                                                               As of December 31,
                                ---------------------------------------------------------------------------------
                                               2002                         2001                       2000
<S>                             <C>                  <C>      <C>                <C>     <C>               <C>
     Residential
          Real estate........   $       918,560      72.0%    $    530,482       62.3%   $    339,042      59.6%
          Construction.......            81,650       6.4%          50,137        5.9%         44,970       7.9%
     Commercial..............           167,127      13.1%         185,226       21.8%        108,783      19.1%
     Consumer................           108,441       8.5%          85,377       10.0%         76,450      13.4%
                                        -------       ----          ------       -----      -- ------      ----
     Total allowance for
          loan losses........   $     1,275,778     100.0%    $    851,222      100.0%   $    569,245     100.0%
                                      =========     ======         =======      ======        =======     ======
</TABLE>


Noninterest Income and Expense

Noninterest Income.  Noninterest income increased to $731,624 for the year ended
December 31, 2002, up 92.0% from $381,112 for the year ended  December 31, 2001.
Noninterest  income  increased  26.0% from  $302,441  in 2000.  Service  fees on
deposit accounts,  the largest component of noninterest income,  increased 42.1%
to  $420,148  in 2002  from  $295,624  in 2001.  Service  fee  income  increased
$295,624,  or 11.9%, in 2001 from $264,154 in 2000. We had a gain on the sale of
a small  business  administration  loan in the amount of $96,866.  Other  income
increased  149.9% to $213,613 in 2002 from $85,488 in 2001, and increased 123.3%
from $38,287 in 2000.  Service  fees on deposit  accounts  increased  due to the
growth in the number of deposit  accounts,  the  addition of the VISA Check Card
product  and  increased  fee-related  activities  of  customers.   Other  income
increased  due  to the  bank's  purchase  of  bank  owned  life  insurance  that
contributed  $80,772  of the  total.  The  net  gain on the  sale of  investment
securities was $997 in 2002.

Noninterest Expense. Total noninterest expense increased to $3.4 million for the
period  ended  December  31, 2002 from $2.4 million for the same period of 2001,
and from $1.9  million for the year ended  December  31,  2000.  The increase in
noninterest  expense reflects an increase in most expense categories as a result
of our growth to $118.4  million  in total  assets at the end of 2002 from $80.8
million at the end of 2001,  up from $63.8  million for the year ended  December
31, 2000.  Salary and wages expense  totaled  $1,468,357 in 2002,  $1,107,125 in
2001, and $835,698 in 2000. Employee benefits were $275,694 in 2002, $190,076 in
2001, and $142,479 in 2000. We had 41 full-time  equivalent employees at the end
of 2002,  an  increase of 11 from the end of 2001 and an increase of 23 from the
end of 2000.  The staffing  increases  are  primarily  due to the opening of new
branch offices in Surfside  Beach,  South Carolina  during the second quarter of
2001,  North Myrtle Beach,  South Carolina during the fourth quarter of 2002 and
the Hilton Head Island,  South  Carolina  office staff that was hired during the
fourth quarter of 2002.

[graphs of Noninterest Income and Noninterest Expense]



Beach First National Bancshares, Inc., p. 14


<PAGE>

Professional  fees were $140,429 for the year ended December 31, 2002,  compared
to $88,589  for 2001 and  $141,699  for 2000.  The  increase  costs for 2002 are
primarily  related to legal and  accounting  services.  The  decrease in 2001 is
primarily due to reduced legal costs. The 2000 figures included collection costs
of $47,500.  Occupancy costs for the year ended December 31, 2002 were $239,774,
compared to $121,114 in 2001 and $53,485 in 2000. These annual increases are the
result of branch expansion that occurred during these periods.

Depreciation and amortization increased to $320,590 from $233,449 in 2001 due to
the  expansion of branch  offices in Surfside  Beach,  South  Carolina and North
Myrtle  Beach,  South  Carolina,  and was $175,523 in 2000.  We  experienced  an
increase in other operating  expenses to $483,988 in 2002, from $344,052 in 2001
and from $284,901 in 2000,  principally  as a result of an increase in operating
expenses related to the new branch office in Surfside Beach,  South Carolina and
North Myrtle Beach,  South Carolina,  along with other expenses  associated with
the expansion of loans and deposits.

Income Taxes.  Total income tax expense included in the Consolidated  Statements
of Income was  $419,220  in 2002,  $75,517  in 2001 and  $145,126  in 2000.  Our
effective tax rates were 37%, 14% and 39%, respectively.  Our effective tax rate
decreased in 2001  primarily  due to the  valuation of a loss carry forward that
resulted in a tax valuation allowance in the amount of $112,279.

Financial Condition
Loans.  Loans are our largest  component of earning assets and typically provide
higher  yields than our other types of earning  assets.  At December  31,  2002,
loans represented 86.2% of average earning assets, representing an increase over
the 80.5% that they  represented  at the end of 2001. At December 31, 2002,  net
loans (gross loans less the allowance for loan losses) totaled $92.0 million, an
increase of $29.7 million, or 47.6%, from December 31, 2001. Average gross loans
increased  35.2%  from  $56.1  million  with a yield of 8.98% in 2001,  to $75.9
million with a yield of 7.78% in 2002.  Average gross loans increased from $39.0
million  with a yield of 9.52% in 2000.  The  decrease in yield on loans  during
these periods is due to the declining interest rate environment. Associated with
the higher  loan yields are the  inherent  credit and  liquidity  risks which we
attempt to control and  counterbalance.  The  interest  rates we charge 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.

Mortgage  loans  constitute  the  principal  component  of our  loan  portfolio.
Mortgage loans represented 64.2% and 62.3% of our portfolio at year end 2002 and
2001, 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. Most of our real estate loans are secured
by  residential  or  commercial  property.  We follow  the  common  practice  of
financial  institutions  in our area of  obtaining  a security  interest in real
estate whenever possible,  in addition to any other available  collateral.  This
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 our  loan-to-value  ratio to 80%. We attempt to
maintain  a  relatively  diversified  loan  portfolio  to help  reduce  the risk
inherent in concentrations of collateral.

The following  table shows the  composition of our loan portfolio by category at
December 31, 2002, and 2001.
<TABLE>
<CAPTION>

                                             Composition of Loan Portfolio

                                        December 31, 2002              December 31, 2001

                                         Amount     Percent            Amount      Percent
                                         ------                        ------
                                                    of Total                       of Total
                                                    --------                       --------
<S>                               <C>                   <C>     <C>                    <C>
Commercial....................    $    24,546,654       26.3%   $     13,736,659       21.7%
Real estate - construction....          3,486,356        3.7%          3,716,189        5.9%
Real estate - mortgage........         57,569,021       61.7%         39,344,768       62.3%
Consumer......................          7,698,321        8.3%          6,406,027       10.1%
                                     ------------   --------       -------------   --------
Loans, total..................         93,300,352      100.0%         63,203,643      100.0%
                                                    ========                       ========
Allowance for possible
Losses........................          (1,275,778)                     (851,222)
                                     -------------                 -------------
Loans, net....................    $    92,024,574               $     62,352,421
                                     ============                  =============
</TABLE>





Beach First National Bancshares, Inc., p. 15


<PAGE>


The following tables set forth the maturity  distribution,  classified according
to sensitivity to changes in interest rates, for selected components of our loan
portfolio as of December 31, 2002 and 2001.  The  information in these tables is
based on the  contractual  maturities of the individual  loans,  including loans
which may be subject to renewal at their contractual maturity.  Renewal of these
loans is subject to review and credit approval, as well as modification of terms
upon their  maturity.  Actual  repayments  of loans may differ  from  maturities
reflected above because borrowers may have the right to prepay  obligations with
or without prepayment penalties.
<TABLE>
<CAPTION>
                        Loan Maturity Schedule and Sensitivity to Changes in Interest Rates


December 31, 2002
                                                              After one but
                                         One year or less    within five years   After five years        Total
                                         ----------------    -----------------   ----------------        -----
<S>                                     <C>                 <C>                   <C>                 <C>
Commercial............................  $      12,948,995   $       8,406,734     $       802,459     $   22,158,189
Real estate...........................         15,550,251          37,693,347           6,680,005         59,923,603
Construction..........................          3,221,784             264,572                  --          3,486,356
Consumer..............................          2,791,817           4,576,476             363,912          7,732,204
                                             ------------      --------------        ------------       ------------
     Total............................  $      34,512,847   $      50,941,129     $    7,846,376      $   93,300,352
                                             ============      ==============       ============        ============

Fixed Interest Rate...................  $      19,273,952   $      41,116,398     $    2,107,083      $   62,497,433
Variable Interest Rate................         15,224,492           9,824,731          5,739,293          30,788,516
                                             ------------      --------------                           ------------
     Total............................  $      34,512,847   $      50,941,129     $    7,846,376      $   93,300,352
                                             ============      ==============       ============        ============
</TABLE>

<TABLE>
<CAPTION>
December 31, 2001
                                                              After one but
                                         One year or less    within five years   After five years        Total
                                         ----------------    -----------------   ----------------        -----
<S>                                     <C>                 <C>                   <C>                 <C>
Commercial............................  $       7,118,509   $       5,976,529     $       583,423     $   13,678,461
Real estate...........................          9,890,730          25,968,561           3,531,763         39,391,054
Construction..........................          1,920,735           1,799,826                  --          3,720,561
Consumer..............................          2,373,192           3,781,305             259,070          6,413,567
                                             ------------      --------------                           ------------
     Total............................  $      21,303,166   $      37,526,221   $    4,374,256        $   63,203,643
                                             ============      ==============        =========          ============

Fixed Interest Rate...................  $      12,336,863   $      35,674,768   $    3,483,898        $   51,495,529
Variable Interest Rate................          8,966,303           1,851,453          890,358            11,708,114
                                             ------------      --------------     ------------          ------------
     Total............................  $      21,303,166   $      37,526,221   $    4,374,256        $   63,203,643
                                             ============      ==============     ============          ============
</TABLE>


Investment Securities.  Investment securities at December 31, 2002, and December
31, 2001, averaged $7.6 million, representing 8.6% of average earning assets and
$7.0 million,  representing 10.0% of average earning assets, respectively.  This
slight decline is due to good loan demand during 2002. At December 31, 2002, our
total  portfolio  had a book value of $7.4  million,  and a market value of $7.6
million,  for an  unrealized  net gain of $170,775.  This compares to our market
value at December  31, 2001 of $5.7  million,  and at December  31, 2000 of $7.9
million.

At December 31, 2002, short term investments  totaled $5.4 million.  At December
31, 2001, we had short-term  investments of $5.7 million.  At December 31, 2000,
we had  short-term  investments  of $7.1  million.  These  funds  are  generally
invested in an earning capacity with maturities of six months or less in federal
funds or in U.S. Government Agency and mortgage backed securities.

Contractual  maturities and yields on our investment  securities  (all available
for sale) at December 31, 2002,  2001,  and 2000 are set forth on the  following
tables.  Expected  maturities  may differ from  contractual  maturities  because
issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.




Beach First National Bancshares, Inc., p. 16


<PAGE>


<TABLE>
<CAPTION>
             Investment Securities Maturity Distribution and Yields
                                December 31, 2002

                                                           After one year but        After five years but
                                 Less than one year       Less than five years       Less than ten years      Greater than ten years
                                 ------------------       --------------------       -------------------      ----------------------
                                  Amount       Yield        Amount        Yield       Amount        Yield       Amount        Yield
                                  ------       -----        ------        -----       ------        -----       ------        -----

<S>                              <C>            <C>        <C>              <C>       <C>             <C>      <C>             <C>
U S Govt Agencies....            $    299,760   2.02%     $   1,262,705    4.18%     $    716,688    4.73%    $          -        -

Mortgage-backed......                       -     -             500,000    3.50%                -       -        4,408,429     6.06%

Other.................                      -     -                   -       -                 -       -          364,700     5.63%
                                 ------------   ---       -------------    ----      ------------    ----     ------------     ----

     Total                       $    299,760  2.02%      $   1,762,705    3.84%     $    716,688    4.73%    $  4,770,129     5.85%
                                 ============  ====       =============    ====      ============    ====     ============     ====
</TABLE>



<TABLE>
<CAPTION>
          Investment Securities Maturity Distribution and Yields
                            December 31, 2001

                              After five but
                              within ten years         After ten years
                              ----------------         ---------------
                              Amount      Yield       Amount      Yield
                              ------      -----       ------      -----
<S>                         <C>           <C>      <C>            <C>
U.S. Govt Agencies........  $  199,446    7.95%    $         -       -%
Mortgage-backed...........           -       -%      5,420,511    6.35%
Other.....................     196,600    6.13%        286,900       -%
                             ---------    ----     -----------    ----
     Total................  $  396,046    7.00%    $ 5,420,511    6.35%
                            ==========    ====     ===========    ====
</TABLE>


<TABLE>
<CAPTION>
         Investment Securities Maturity Distribution and Yields
                           December 31, 2000

                             After five but
                             Within ten years        After ten years
                             ----------------        ---------------
                              Amount      Yield       Amount      Yield
                              ------      -----       ------      -----
<S>                        <C>            <C>      <C>            <C>
U.S. Govt Agencies........ $   662,903    7.30%    $         -       -%
Mortgage-backed...........           -       -%      7,299,032    6.29%
Other.....................           -       -%        286,900    6.75%
                             ---------    ----     -----------    ----
     Total................ $   662,903    7.30%   $ 7,585,932     6.43%
                            ==========    ====     ===========    ====
</TABLE>



Funding Sources

Deposits and Other  Interest-Bearing  Liabilities.  Average total  deposits were
$78.3  million  in  2002,   up  27.5%  from  $61.4  million  in  2001.   Average
interest-bearing  deposits  were  $64.9  million  in 2002,  up 25.3%  from $51.8
million  in 2001.  These  increases  were  primarily  a result of the  continued
expansion of the company.

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 $78.9 million at December 31, 2002, an
increase of 48.0%  compared to $53.3  million at December 31, 2001.  We expect a
stable base of deposits to continue to be our primary  source of funding to meet
both our short-term and long-term liquidity needs.

Beach First National Bancshares, Inc., p. 17


<PAGE>

Core deposits as a percentage  of total  deposits  were  approximately  79.0% at
December 31, 2002, and 79.4% at December 31, 2001. Our loan-to-deposit ratio was
92.5% at December  31, 2002,  versus  92.9% at December  31,  2001.  The average
loan-to-deposit ratio was 94.1% during 2002, 85.4% during 2001, and 80.9% during
2000.

The following tables set forth our deposits by category as of December 31, 2002,
and 2001.

<TABLE>
<CAPTION>
                                                Deposits
                                                December 31, 2002               December 31, 2001
                                                            Percent of                  Percent of
                                               Amount        Deposits       Amount       Deposits
                                               ------        --------       ------       --------
<S>                                         <C>                 <C>      <C>                <C>
Demand deposit accounts...............      $ 19,316,292        19.0%    $ 11,968,934       17.9%
Interest bearing checking accounts....         4,120,079         4.1%       3,911,552        5.8%
Money market accounts.................        22,797,243        22.9%      13,962,249       20.9%
Savings accounts......................         2,935,199         2.9%       2,824,451        4.2%
Time deposits less than $100,000......        29,810,915        30.0%      20,706,965       30.8%
Time deposits of $100,000 or over.....        20,886,309        21.1%      13,758,817       20.4%
                                              ----------        -----      ----------       -----
     Total deposits...................      $ 99,866,037       100.0%   $  67,132,968      100.0%
                                             ===========       ======     ===========      ======
</TABLE>


As of December 31, 2002,  time deposits  less than $100,000 that matured  within
three  months were  $7,431,279  and within 3-12  months were  $19,028,050.  Time
deposits  less than  $100,000  that had a maturity  greater  than 12 months were
$3,351,586, with no maturities greater than five years. As of December 31, 2001,
time  deposits  greater  than  $100,000  that  matured  within three months were
$6,017,908, those within 3-12 months were $4,718,983. Time deposits greater than
$100,000 that had a maturity  greater than 12 months were  $1,806,855  and after
five years were $108,212.

Due to the seasonal nature of our market areas,  deposit growth is strong during
the summer  months and loan  demand  usually  reaches its peak during the winter
months.  Thus, we historically have a more favorable  liquidity  position during
the summer  months.  To meet loan demand and  liquidity  needs during the winter
months, we typically invest significant amounts of our deposit growth during the
summer months in temporary investments and short-term securities maturing in the
winter  months.  Additionally,  the company has access to other funding  sources
including federal funds purchased from correspondent  banks and a line of credit
with the Federal Home Loan Bank (FHLB).

Borrowings.  During 2002,  we had average  short-term  borrowings  of $1,948,663
compared to  $217,926 in average  short term  borrowings  for 2001.  The primary
reason for the increase in  borrowings  was the strong loan growth and to extend
our liabilities due to the declining interest rate environment during 2002.

Capital

We are subject to various  regulatory capital  requirements  administered by our
federal  bank  regulators.  As long as we have less than $150  million  in total
assets, our capital levels are measured for regulatory purposes only at the bank
level, not at the holding company level. Under these capital guidelines, we must
maintain a minimum total risk-based  capital ratio of 8%, with at least 4% being
Tier  1  capital.  In our  case,  our  Tier 1  capital  consists  of our  common
shareholders'  equity,   although  Tier  1  capital  could  also  include  other
components,  such as qualifying perpetual preferred stock and minority interests
in equity accounts of consolidated subsidiaries. In addition, we must maintain a
minimum  Tier 1 leverage  ratio (Tier 1 capital to total  average  assets) of at
least 4%. To be considered "well-capitalized," we must maintain total risk-based
capital of at least 10%, Tier 1 capital of at least 6%, and a leverage  ratio of
at least 5%.

[graph of Capital]



Beach First National Bancshares, Inc., p. 18


<PAGE>

Our total shareholders' equity at December 31, 2002, was $13.9 million, compared
with  $13.1  million  at  December  31,  2001.  We were  considered  to be "well
capitalized" at the bank level for regulatory  purposes at December 31, 2002, as
our Tier 1 capital  ratio was  11.3%,  our total  risk-based  capital  ratio was
12.5%, and our Tier 1 leverage ratio was 9.9%.

Liquidity Management

Our primary  sources of liquidity  are  deposits,  scheduled  repayments  on our
loans, and interest on and maturities of our investments.  All of our securities
have  been  classified  as  available  for  sale.  Occasionally,  we might  sell
investment  securities  in  connection  with  the  management  of  our  interest
sensitivity gap or to manage cash availability. 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 $6.3  million.  We also are  eligible  to  receive
advances from the Federal Home Loan Bank of Atlanta, subject to its approval. In
July 2001, we were approved to participate in the Federal Home Loan Bank Blanket
Lien Program where the Bank can borrow up to 75% of outstanding loan balances on
1 to 4 family residences.  We estimate borrowing availability under this line to
be  approximately  $7.5  million.  We believe that our  liquidity and ability to
manage  assets will be sufficient  to meet our cash  requirements  over the near
term.

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 December 31,
2002, we had issued commitments to extend credit of $9.6 million through various
types of  commercial  lending  arrangements,  of which $2.8 million was at fixed
rates  and $6.8 was at  variable  rates.  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.

The  commitments  expire  over the  next  thirty  six  months.  Past  experience
indicates  that many of these  commitments  to extend credit will expire unused.
However,  as described in  "Liquidity  and Asset and Liability  Management",  we
believe that we have adequate  sources of liquidity to fund commitments that may
be drawn upon by borrowers.

In addition to commitments to extend  credit,  we also issue standby  letters of
credit which are assurances to a third party that they will not suffer a loss if
our  customer  fails to meet its  contractual  obligation  to the  third  party.
Standby  letters of credit  totaled  $3.8  million at December  31,  2002.  Past
experience  indicates  that many of these standby  letters of credit will expire
unused.  However,  through our various sources of liquidity,  we believe that we
will have the  necessary  resources  to meet these  obligations  should the need
arise.

Except as  disclosed in this report,  we are not involved in  off-balance  sheet
contractual relationships, unconsolidated related entities that have off-balance
sheet arrangements or transactions that could result in liquidity needs or other
commitments or significantly impact earnings.

Impact of Inflation

Unlike  most  industrial  companies,  the assets and  liabilities  of  financial
institutions  such as our  company  and bank are  primarily  monetary in nature.
Therefore, interest rates have a more significant impact on our performance than
do the  effects of changes  in the  general  rate of  inflation  and  changes in
prices.  In  addition,  interest  rates do not  necessarily  move  with 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.



Beach First National Bancshares, Inc., p. 19


<PAGE>

Report of Management

The consolidated financial statements of Beach First National Bancshares,  Inc.,
and other financial  information included in this Annual Report were prepared by
management  responsible  for the  integrity of the  information  presented.  The
statements have been prepared in conformity with generally  accepted  accounting
principles  appropriate in the  circumstances and include amounts that are based
on management's best estimates and judgment.

The Company  maintains  accounting  and control  systems  which are  believed to
provide   reasonable   assurance  that  assets  are  safeguarded  from  loss  or
unauthorized  use and produce  records  adequate  for  preparation  of financial
information. Management recognizes the limits inherent in any system of internal
control  as the  cost of  controls  should  not  exceed  the  benefits  derived.
Management believes the system provides an appropriate balance.

In order to monitor compliance with its system of controls,  the Company employs
the Independent Auditors of Tourville,  Simpson, and Caskey to perform quarterly
internal  audits of controls and  compliance  with systems and  controls.  Audit
reports are issued to  management  and  presented to the Audit  Committee of the
Board of Directors.  The independent accountants receive copies of these reports
and the reports are available for review by regulatory authorities.

The  Audit  Committee  of  the  Board  of  Directors  meets  as  necessary  with
management,  the independent auditors, and the independent accountants to review
audit  scopes,   audit  reports,   and  fee   arrangements  of  the  independent
accountants,  in order to evaluate  management's  performance  of its  financial
reporting  responsibility.  Both the independent  auditors and accountants  have
access to the Audit Committee without any management present in the discussions.
Independent  accountants  are recommended by the Audit Committee to the Board of
Directors for selection and ratification by the stockholders.

Elliott Davis, L.L.C., as independent  certified public accountants,  is engaged
to provide an objective,  independent review as to management's discharge of its
responsibilities  relating to the  fairness of  reported  operating  results and
financial condition.  They have an understanding of the Company's accounting and
financial  controls and conduct such tests and related  procedures  as they deem
appropriate to arrive at an opinion of the fairness of the financial statements.
Their opinion is included as a part of the Company's 2002 Annual Report.

Our  management  is committed  to, and has always  maintained  and  enforced,  a
philosophy  of high  ethical  standards  in the  conduct  of its  business.  The
policies covering conflicts of interest,  community affairs, and other subjects,
are uniformly applicable to all officers and employees of our Company.

Beach First National Bancshares, Inc.
Myrtle Beach, South Carolina
March 7, 2003




Beach First National Bancshares, Inc., p. 20


<PAGE>



Report of Independent Accountants

To the Board of Directors
Beach First National Bancshares, Inc.
Myrtle Beach, South Carolina


We have  audited the  accompanying  consolidated  balance  sheets of Beach First
National Bancshares,  Inc. (the"Company") and Subsidiary as of December 31, 2002
and  2001  and  the  related  consolidated  statements  of  income,  changes  in
shareholders'  equity  and  comprehensive  income and cash flows for each of the
years in the three year period  ended  December  31,  2002.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of Beach
First National Bancshares, Inc. and Subsidiary at December 31, 2002 and 2001 and
the  results  of their  operations  and cash  flows for each of the years in the
three year period  ended  December  31,  2002,  in  conformity  with  accounting
principles generally accepted in the United States of America.


(Elliott Davis signature)

Greenville, South Carolina
January 23, 2003



Beach First National Bancshares, Inc., p. 21


<PAGE>


Beach First National Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                    ----------------------------------------
                                                                                           2002                 2001
                                                                                    ------------------    ------------------
                                                          ASSETS

<S>                                                                                 <C>                   <C>
Cash and due from banks                                                             $      4,457,614      $      3,387,066
Federal funds sold and short term investments                                              5,429,214             5,679,291
Investment securities                                                                      7,552,282             5,681,980
Loans, net                                                                                92,024,574            62,352,421
Federal Reserve Bank stock                                                                   164,700               164,700
Federal Home Loan Bank stock                                                                 200,000               144,100
Property and equipment, net                                                                4,577,770             2,568,475
Other assets                                                                               4,002,671               806,782
                                                                                    -----------------    ------------------
        Total assets                                                                $    118,408,825     $      80,784,815
                                                                                    =================    ==================

                                           LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Deposits
     Non-interesting bearing                                                        $     19,316,292     $      11,968,934
     Interest bearing                                                                     80,549,745            55,164,034
                                                                                    -----------------    ------------------
        Total deposits                                                                    99,866,037            67,132,968
Advances from Federal Home Loan Bank                                                       4,000,000                     -
Other liabilities                                                                            614,420               503,017
                                                                                    -----------------    ------------------
        Total liabilities                                                                104,480,457            67,635,985

COMMITMENTS AND CONTINGENCIES - Notes 10 and 13

SHAREHOLDERS' EQUITY
     Common stock, $1 par value, 10,000,000 shares authorized,
        1,318,368 shares issued and outstanding                                            1,318,368             1,318,368
     Paid-in capital                                                                      11,787,899            11,787,899
     Retained earnings                                                                       709,390                 2,119
     Accumulated other comprehensive income                                                  112,711                40,444
                                                                                    -----------------    ------------------
        Total shareholders' equity                                                        13,928,368            13,148,830
                                                                                    -----------------    ------------------
        Total liabilities and shareholders' equity                                  $    118,408,825      $      80,784,815
                                                                                    =================    ==================
</TABLE>

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




Beach First National Bancshares, Inc., p. 22


<PAGE>


Beach First National Bancshares, Inc. and Subsidiary
Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                                            For the years ended December 31,
                                                                ----------------------------------------------------------
                                                                      2002                2001                 2000
                                                                -----------------   ------------------   -----------------
<S>                                                             <C>                 <C>                  <C>
INTEREST INCOME
     Loans and fees on loans                                    $     5,898,801     $    5,040,259       $    3,713,902
     Investment securities                                              413,289            446,585              577,076
     Federal funds sold and short term investments                       73,206            242,601              334,086
                                                                -----------------   ------------------   -----------------
         Total interest income                                        6,385,296          5,729,445            4,625,064

INTEREST EXPENSE
     Deposits and borrowings                                          2,095,499          2,704,990            2,450,184
                                                                -----------------   ------------------   -----------------
         Net interest income                                          4,289,797          3,024,455            2,174,880

PROVISION FOR POSSIBLE LOAN LOSSES                                      539,000            467,000              251,107
                                                                -----------------   ------------------   -----------------
         Net interest income after provision for possible
            loan losses                                               3,750,797          2,557,455            1,923,773
                                                                -----------------   ------------------   -----------------

NONINTEREST INCOME
     Service fees on deposit accounts                                   420,128            295,624              264,154
     Gain on sale of loan                                                96,886                  -                    -
     Gain on sale of investment securities                                  997                  -                    -
     Other income                                                       213,613             85,488               38,287
                                                                -----------------   ------------------   -----------------
         Total noninterest income                                       731,624            381,112              302,441
                                                                -----------------   ------------------   -----------------

NONINTEREST EXPENSES
     Salaries and wages                                               1,468,357          1,107,125              835,698
     Employee benefits                                                  275,694            190,076              142,479
     Supplies and printing                                               94,624             81,324               51,222
     Advertising and public relations                                   117,077             81,605               34,598
     Professional fees                                                  140,429             88,589              141,699
     Depreciation and amortization                                      320,590            233,449              175,523
     Occupancy                                                          239,774            121,114               53,485
     Data processing fees                                               215,397            156,422               96,560
     Other operating expenses                                           483,988            344,052              319,101
                                                              -----------------   ------------------   -----------------
         Total noninterest expenses                                   3,355,930          2,403,756            1,850,365
                                                                -----------------   ------------------   -----------------

         Income before income taxes                                   1,126,491            534,811              375,849

INCOME TAX EXPENSE                                                      419,220             75,517              145,126
                                                                -----------------   ------------------   -----------------
         Net income                                             $       707,271     $      459,294       $      230,723
                                                                =================   ==================   =================
BASIC NET INCOME PER
     COMMON SHARE                                               $          0.54     $         0.46       $         0.31
                                                                =================   ==================   =================
DILUTED NET INCOME PER
     COMMON SHARE                                               $          0.53     $         0.46       $         0.28
                                                                =================   ==================   =================
WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING

        Basic                                                         1,318,368            990,302              736,118

        Diluted                                                       1,324,979          1,000,369              822,407
</TABLE>

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


Beach First National Bancshares, Inc., p. 23

<PAGE>

Beach First National Bancshares, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income
<TABLE>
<CAPTION>
                                                                                                     Accumulated
                                                                                        Retained        other              Total
                                                    Common stock          Paid-in       earnings    comprehensive      shareholders'
                                                Shares       Amount       capital      (deficit)    income (loss)         equity
                                                ------       ------       -------      ---------    -------------         ------
<S>                                              <C>         <C>          <C>         <C>           <C>                <C>
BALANCE, DECEMBER 31, 1999                        735,868     $735,868     $6,476,481  $ (687,898)   $ (211,138)        $ 6,313,313
                                                                                                                        -----------
   Net income                                           -            -              -      230,723            -             230,723
   Other comprehensive income, net of
      taxes:
      Unrealized gain on investment
         securities                                     -            -              -            -      163,721             163,721
      Plus reclassification adjustments
         for losses included in net income              -            -              -            -        5,913               5,913
                                                                                                                        -----------
   Comprehensive income                                 -            -              -            -            -             400,357
   Exercise of stock options                        1,500        1,500         13,500            -            -              15,000
                                              -----------   ----------    -----------   ----------   ----------         -----------

BALANCE, DECEMBER 31, 2000                        737,368      737,368      6,489,981    (457,175)      (41,504)          6,728,670
                                                                                                                        -----------

   Net income                                           -            -              -     459,294             -             459,294
   Other comprehensive income, net of
      taxes:
      Unrealized gain on investment
         securities                                     -            -              -            -       77,042              77,042
      Plus reclassification adjustments
         for losses included in net income              -            -              -            -        4,906               4,906
                                                                                                                        -----------
   Comprehensive income                                 -            -              -            -            -             541,242
   Issuance of common stock, less
      offering expenses of $258,824               581,000      581,000      5,297,918            -            -           5,878,918
                                              -----------   ----------    -----------   ----------   ----------         -----------

BALANCE, DECEMBER 31, 2001                      1,318,368    1,318,368     11,787,899        2,119       40,444          13,148,830
                                                                                                                        -----------

   Net income                                           -            -              -      707,271            -             707,271
   Other comprehensive income, net of
      taxes:
      Unrealized gain on investment
         securities                                     -            -              -            -       72,267              72,267
                                                                                                                        -----------
   Comprehensive income                                 -            -              -            -            -             779,538
                                              -----------   ----------    -----------   ----------   ----------         -----------

BALANCE, DECEMBER 31, 2002                      1,318,368   $1,318,368    $11,787,899     $709,390   $  112,711         $13,928,368
                                              ===========   ==========    ===========   ==========   ==========         -----------

</TABLE>

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



Beach First National Bancshares, Inc., p. 24


<PAGE>



Beach First National Bancshares, Inc. and Subsidiary
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
                                                                                  For the years ended December 31,
                                                                        ------------------------------------------------------
                                                                              2002               2001              2000
                                                                        -----------------  -----------------  ----------------
<S>                                                                     <C>                <C>                <C>
OPERATING INCOME
     Net income                                                         $       707,271    $       459,294    $      230,723
     Adjustments to reconcile net income to net
         cash provided by operating activities:
         Depreciation and amortization                                          320,590            233,449           175,523
         Deferred income taxes
         Provision for loan losses
         Writedown on real estate acquired in settlement of loans
         Loss on sale of investment securities
         Decrease (increase) in other assets
         Increase in other liabilities
         Deferred income taxes                                                 186,161            (189,449)          129,286
         Provision for loan losses                                             539,000             467,000           251,107
         Writedown on real estate acquired in settlement of loans                    -                   -            11,426
         Gain on sale of investment securities                                    (976)                  -                 -
         Decrease (increase) in other assets                                  (538,937)             36,026          (176,699)
         Increase in other liabilities                                         551,543             188,183           128,771
                                                                        -----------------   ----------------  ----------------
             Net cash provided by operating activities                       1,764,652           1,194,503           750,137
                                                                        -----------------   ----------------  ----------------

INVESTING ACTIVITIES
     Proceeds from sale of investment securities                             4,322,844           2,350,034         1,557,160
     Purchase of investment securities                                      (6,119,903)                  -          (209,313)
     Purchase of FHLB stock                                                    (55,900)            (21,900)                -
     Decrease (increase) in Federal funds sold and short term
           investments                                                         250,077           1,405,878        (6,984,786)
     Increase in loans, net                                                (30,211,153)        (17,921,511)      (13,174,903)
     Proceeds from sale of real estate acquired in
           settlement of loans                                                       -             155,000                 -
     Purchase of premises and equipment                                     (2,250,808)         (1,253,302)          271,024)
     Proceeds from disposal of premises and equipment                                -                   -            24,085
     Purchase of life insurance contracts                                   (2,922,190)                  -                 -
                                                                        ----------------   -----------------  ----------------
             Net cash used by investing activities                         (36,987,033)        (15,285,801)      (19,058,781)
                                                                        ----------------   -----------------  ----------------

FINANCING ACTIVITIES
     Advances from Federal Home Loan Bank                                    4,000,000                   -                 -
     Repayments of advances from Federal Home Loan Bank                              -                   -        (1,900,000)
     Decrease in Federal funds purchased                                             -                   -          (920,000)
     Net increase in deposits                                               32,292,929          10,406,457        19,890,490
     Exercise of stock options                                                       -                   -            15,000
     Issuance of common stock                                                        -           5,878,918                 -
                                                                        ----------------   -----------------  ----------------
             Net cash provided by financing activities                      36,292,929          16,285,375        17,085,490
                                                                        ----------------   -----------------  ----------------
            Net increase (decrease) in cash                                  1,070,548           2,194,077        (1,223,154)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
                                                                             3,387,066           1,192,989         2,416,143
                                                                        ----------------   -----------------  ----------------

CASH AND EQUIVALENTS AT END OF YEAR                                     $    4,457,614     $     3,387,066     $  31,192,989
                                                                        ================   =================  ================

CASH PAID FOR
     Interest                                                           $   2,095,499      $     2,718,206    $    2,378,832
                                                                        ================   =================  ================

     Income taxes                                                       $      419,220     $        16,640    $        1,910
                                                                        ================   =================  ================

SCHEDULE OF NONCASH INVESTING ACTIVITY
             Real estate acquired in settlement of loans                $            -     $       155,000    $            -
                                                                        ================   =================  ================
</TABLE>

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


Beach First National Bancshares, Inc., p. 25


<PAGE>

Notes

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
------------------------------------------------------------------

Beach First National  Bancshares,  Inc. (the  "Company") is organized  under the
laws of the State of South  Carolina  for the  purpose  of  operating  as a bank
holding  company for Beach First  National Bank (the "Bank").  The Bank provides
full  commercial  banking  services to customers and is subject to regulation by
the Office of the  Comptroller  of the  Currency  (OCC) and the Federal  Deposit
Insurance  Corporation.  The  Company is subject to  regulation  by the  Federal
Reserve Board.

Basis of presentation
The consolidated  financial  statements  include the accounts of the Company and
the Bank.  All  significant  intercompany  accounts and  transactions  have been
eliminated  in  consolidation.  The  accounting  and  reporting  policies of the
Company conform to accounting principles generally accepted in the United States
of America and to general  practices in the banking  industry.  The Company uses
the accrual basis of accounting.

Estimates
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities as of the date
of the consolidated  financial  statements and the reported amount of income and
expenses  during the reporting  periods.  Actual results could differ from those
estimates.

Concentrations of credit risk
The Company,  through its subsidiary,  makes loans to individuals and businesses
in and around Horry County for various  personal and  commercial  purposes.  The
Company has a diversified  loan  portfolio and the  borrowers'  ability to repay
their loans is not dependent upon any specific economic sector.

Cash and cash equivalents
For  purposes of the  statement  of cash flows,  cash and cash  equivalents  are
defined as those  amounts  included in the balance  sheet  caption "Cash and due
from banks". Cash and cash equivalents have an original maturity of three months
or less.

Investment securities
The Company  accounts for investment  securities in accordance with Statement of
Financial   Accounting   Standards  (SFAS)  No.  115,  "Accounting  for  Certain
Investments in Debt and Equity Securities".  The statement requires  investments
in equity and debt securities to be classified into three categories:

1. Available for sale:  These are securities  which are not classified as either
held to maturity or as trading securities. These securities are reported at fair
market value.  Unrealized gains and losses are reported, net of income taxes, as
separate  components of shareholders'  equity  (accumulated other  comprehensive
income).

2. Held to maturity:  These are investment  securities which the Company has the
ability and intent to hold until maturity.  These securities are stated at cost,
adjusted for  amortization  of premiums  and the  accretion  of  discounts.  The
Company currently has no held to maturity securities.

3. Trading:  These are securities  which are bought and held principally for the
purpose of selling in the near future.  Trading  securities are reported at fair
market  value,  and related  unrealized  gains and losses are  recognized in the
statement of income. The Company has no trading securities.

Other investments
The Bank, as a member institution,  is required to own certain stock investments
in the Federal Home Loan Bank of Atlanta and the Federal Reserve Bank. The stock
is generally  pledged against any borrowings from these  institutions.  No ready
market  exists  for the  stock  and it has not  quoted  market  value.  However,
redemption of these stocks has historically been at par value.


Loans, interest and fee income on loans
Loans are  stated  at the  principal  balance  outstanding.  Unearned  discount,
unamortized  loan fees and the  allowance  for possible loan losses are deducted
from total loans in the balance sheet.  Interest  income is recognized  over the
term of the loan  based on the  principal  amount  outstanding.  Points  on real
estate loans are taken into income to the extent they  represent the direct cost
of  initiating  a loan.  The amount in excess of direct  costs is  deferred  and
amortized over the expected life of the loan.

Loans are  generally  placed on  non-accrual  status when  principal or interest
becomes ninety days past due, or when payment in full is not anticipated. When a
loan is placed on  non-accrual  status,  interest  accrued  but not  received is
generally  reversed against interest income. If collectibility is in doubt, cash
receipts on non-accrual loans are not recorded as interest income,  but are used
to reduce principal.


Beach First National Bancshares, Inc., p. 26


<PAGE>


Allowance for possible loan losses
The provision for possible loan losses  charged to operating  expenses  reflects
the amount deemed  appropriate by management to establish an adequate  allowance
to meet the present and  foreseeable  risk  characteristics  of the current loan
portfolio.  Management's judgment is based on periodic and regular evaluation of
individual  loans,  the overall risk  characteristics  of the various  portfolio
segments,  past experience  with losses and prevailing and anticipated  economic
conditions.  Loans which are determined to be uncollectible  are charged against
the allowance.  Provisions  for loan losses and  recoveries on loans  previously
charged  off are  added to the  allowance.  Management  considers  the  year-end
allowance  appropriate  and  adequate  to  cover  possible  losses  in the  loan
portfolio;  however, management's judgment is based upon a number of assumptions
about future events,  which are believed to be reasonable,  but which may or may
not prove valid.  Thus,  there can be no assurance  that  charge-offs  in future
periods  will not  exceed  the  allowance  for loan  losses  or that  additional
increases in the allowance for loan losses will not be required.

The  Company  accounts  for  impaired  loans in  accordance  with SFAS No.  114,
"Accounting by Creditors for Impairment of a Loan".  This standard requires that
all lenders  value  loans at the loan's  fair value if it is  probable  that the
lender will be unable to collect all amounts due  according  to the terms of the
loan  agreement.  Fair value may be  determined  based upon the present value of
expected cash flows,  market price of the loan,  if  available,  or value of the
underlying collateral.  Expected cash flows are required to be discounted at the
loan's  effective  interest  rate.  SFAS No. 114 was  amended by SFAS No. 118 to
allow a lender to use existing  methods for  recognizing  interest  income on an
impaired  loan and by  requiring  additional  disclosures  about how a  creditor
recognizes interest income on an impaired loan.

Under SFAS No. 114, as amended by SFAS No. 118, when the ultimate collectibility
of an impaired  loan's  principal  is in doubt,  wholly or  partially,  all cash
receipts are applied to principal.  Once the reported principal balance has been
reduced to zero,  future cash  receipts are applied to interest  income,  to the
extent that any interest has been  foregone.  Further cash receipts are recorded
as  recoveries of any amounts  previously  charged off. When this doubt does not
exist,  cash  receipts  are  applied  under  the  contractual  terms of the loan
agreement first to interest income then to principle.

A loan is also considered  impaired if its terms are modified in a troubled debt
restructuring.  For these accruing  impaired loans,  cash receipts are typically
applied to principal and interest receivable in accordance with the terms of the
restructured loan agreement.  Interest income is recognized on these loans using
the accrual method of accounting.  As of December 31, 2002 and 2001, the Company
had no impaired loans.

Real estate acquired in settlement of loans
Real estate acquired through  foreclosure is initially  recorded at the lower of
cost or  estimated  fair value.  Subsequent  to the date of  acquisition,  it is
carried at the lower of cost or fair value, adjusted for net selling costs. Fair
values of real estate owned are reviewed  regularly and  writedowns are recorded
when it is determined  that the carrying  value of real estate  exceeds the fair
value less  estimated  costs to sell.  Costs  relating  to the  development  and
improvement  of such property are  capitalized,  whereas those costs relating to
holding the property are charged to expense.

Property and equipment
Furniture  and equipment are stated at cost,  net of  accumulated  depreciation.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful  lives of the  related  assets.  Maintenance  and  repairs are charged to
operations,  while major improvements are capitalized.  Upon retirement, sale or
other   disposition  of  property  and  equipment,   the  cost  and  accumulated
depreciation  are eliminated from the accounts,  and gain or loss is included in
net income.

Income taxes

The consolidated  financial  statements have been prepared on the accrual basis.
When income and  expenses are  recognized  in  different  periods for  financial
reporting purposes and for purposes of computing income taxes currently payable,
deferred taxes are provided on such temporary differences.  The Company accounts
for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes".
Under SFAS No. 109,  deferred tax assets and  liabilities are recognized for the
expected  future tax  consequences  of events that have been  recognized  in the
consolidated  financial  statements  or tax  return.  Deferred  tax  assets  and
liabilities  are  measured  using the  enacted  tax rates  expected  to apply to
taxable income in the years in which those temporary differences are expected to
be realized or settled.

Advertising and public relations expense
Advertising,  promotional  and other  business  development  costs are generally
expensed as incurred. External costs incurred in producing media advertising are
expensed the first time the advertising takes place.  External costs relating to
direct mailing costs are expensed in the period in which the direct mailings are
sent.

Net income per common share
SFAS No. 128,  "Earnings per Share"  requires that the Company present basic and
diluted net income per common  share.  The assumed  conversion  of stock options
creates the  difference  between  basic and diluted net income per common share.
Net Income per common share is calculated by dividing net income by the weighted
average number of common shares outstanding for each period presented.



Beach First National Bancshares, Inc., p. 27


<PAGE>

The weighted  average number of common shares  outstanding  for basic net income
per common share was  1,318,368 in 2002,  990,302 in 2001,  and 736,118 in 2000.
The weighted average number of common shares  outstanding for diluted net income
per common share was 1,324,979 in 2002, 1,000,369 in 2001, and 822,407 in 2000.

Stock Based Compensation
The  Company  has a  stock-based  employee  compensation  plan  which is further
described in Note 15. The Company  accounts  for the plan under the  recognition
and measurement  principles of Accounting  Principles  Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees", and related Interpretations.  No
stock-based employee  compensation cost is reflected in net income, as all stock
options  granted  under these  plans had an  exercise  price equal to the market
value of the underlying  common stock on the date of grant.  The following table
illustrates  the effect on net income and net income per common  share as if the
Company  had  applied  the  fair  value  recognition   provisions  of  Financial
Accounting  Standards  Board ("FASB") SFAS No. 123,  "Accounting for Stock-Based
Compensation", to stock-based employee compensation.

<TABLE>
                                                                   For the years ended December 31,
                                                               2002              2001             2000

<S>                                                              <C>               <C>              <C>
Net income, as reported                                    $    707,271      $    459,294     $    230,723
Deduct:  Total stock-based employee
      compensation expense determined
      under fair value based method
      for all awards,  net of related tax effects                12,785            25,838           36,755

Pro forma net income                                       $    694,486      $    433,456     $    193,968

Net income per common share
      Basic - as reported                                  $        .54      $        .46     $        .31
      Basic - pro forma                                    $        .53      $        .44     $        .26

      Diluted - as reported                                $        .53      $        .46     $        .28
      Diluted - pro forma                                  $        .52      $        .43     $        .24
</TABLE>


Reclassifications
Certain  previously  reported  amounts have been  reclassified to conform to the
current year presentation. Such changes had no effect on previously reported net
income or shareholders' equity.

Recently issued accounting standards

In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations".  This statement  requires companies to record the fair value of an
asset  retirement  obligation  as a liability in the period in which it incurs a
legal obligation  associated with the retirement of tangible  long-lived  assets
that result from the acquisition, construction, development and/or normal use of
assets. A corresponding  asset (which is depreciated over the life of the asset)
must also be  recorded.  The  provisions  of SFAS No.  143 were  adopted  by the
Company on January 1, 2003, with no impact on financial  position and results of
operations.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived Assets", which supersedes prior pronouncements associated
with  impairment or disposal of  long-lived  assets.  The statement  establishes
methodologies for assessing impairment of long-lived assets, including assets to
be disposed of by sale or by other means.  The adoption of this  standard had no
impact on the financial position of the Company.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections".
This  statement   rescinds  SFAS  No.  4,  "Reporting   Gains  and  Losses  from
Extinguishments  of Debt",  and SFAS No.  64,  "Extinguishments  of Debt Made to
Satisfy  Sinking-Fund  Requirements".  This statement also rescinds SFAS No. 44,
"Accounting  for  Intangible  Assets of Motor  Carriers" and amends SFAS No. 13,
"Accounting  for  Leases".  This new  statement  requires  gains and losses from
extinguishment  debt to be classified as an extraordinary item only if they meet
the   criteria   of  APB   Opinion   No.   30,   "Reporting   the   Results   of
Operations-Reporting  the  Effects of  Disposal  of a Segment of  Business,  and
Extraordinary,  Unusual and  Infrequently  Occurring  Events and  Transactions",
which  will  distinguish  transactions  that are part of an  entity's  recurring
operations  from those that are unusual or  infrequent or that meet the criteria
for

Beach First National Bancshares, Inc., p. 28


<PAGE>

classification as an extraordinary  item. The adoption of the provisions of SFAS
No.  145 had no  impact  on the  Company's  financial  position  or  results  of
operations.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities",  which  addresses  financial  accounting and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force (EITF) Issue No. 94-3,  "Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including Certain Costs Incurred in a  Restructuring)".  This Statement applies
to costs associated with specific exit activities and requires a liability for a
cost associated with an exit or disposal  activity to be recognized and measured
initially at its fair value in the period in which the liability is incurred.  A
liability for a cost  associated  with an exit or disposal  activity is incurred
when the  definition of a liability is met. The provisions of this statement are
effective for exitor  disposal  activities that are initiated after December 31,
2002. The provisions of this statement were adopted by the Company on January 1,
2003, with no impact on financial position or results of operations.

In October 2002, the FASB issued SFAS No. 147, "Accounting for Certain Financial
Institutions  - an  amendment  of  FASB  Statements  No.  72 and  144  and  FASB
Interpretation  No.  9",  which  brings  all  business  combinations   involving
financial institutions,  except mutual financial institutions, into the scope of
SFAS  No.  141,  "Business  Combinations".  This  statement  requires  that  all
acquisitions of financial  institutions  that meet the definition of a business,
including  acquisitions  of  part  of a  financial  institution  that  meet  the
definition of a business,  must be accounted for in accordance with SFAS No. 141
and the related intangibles  accounted for in accordance with SFAS No. 142. SFAS
No. 147 removes such acquisitions from the scope of SFAS No. 72, "Accounting for
Certain  Acquisitions  of  Banking  or Thrift  Institutions".  SFAS No. 147 also
amends  SFAS No.  144 to include in its scope  long-term  customer  relationship
intangibles of financial institutions.  SFAS No. 147 was effective upon issuance
and had no impact on the Company's financial statements.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure - an amendment  of FASB  Statement  No.
123". This Statement amends 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.  In addition, this statement amends the disclosure requirements of
SFAS No.  123 to  require  prominent  disclosures  in both  annual  and  interim
financial  statements  about the method of accounting for  stock-based  employee
compensation and the effect of the method used on reported results.  The Company
adopted this standard effective December 31, 2002, and has included the required
disclosures in the footnotes to the financials.  The Company has not elected the
fair value  treatment  of  stock-based  compensation  and the  adoption  of this
standard had no impact on its financial position.

Other  accounting  standards  that have been  issued or  proposed by the FASB or
other standards-setting  bodies that do not require adoption until a future date
are not  expected  to  have a  material  impact  on the  consolidated  financial
statements upon adoption.

NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS
------------------------------------------------

The Bank is required to maintain average reserve balances, computed by applying
prescribed percentages to its various types of deposits, either at the bank or
on deposit with the Federal Reserve Bank. At December 31, 2002 and 2001, these
required reserves were met by vault cash.

NOTE 3 - INVESTMENT SECURITIES
------------------------------

The amortized costs and fair value of available for sale investment securities
are as follows:
<TABLE>
<CAPTION>
                                                                      December 31, 2002
                                        ------------------------------------------------------------------------------
                                             Amortized                   Gross unrealized                   Fair
                                                                 ---------------------------------
                                                cost                 gains             losses              value
                                        ---------------------    ---------------    --------------     ---------------
<S>                                     <C>                      <C>                <C>                <C>
Federal agencies                        $          2,736,193     $      45,959      $           -      $    2,782,152
Mortgage-backed                                    4,645,314           126,147              1,331           4,770,130
                                        ---------------------    ---------------    --------------     ---------------
                                        ---------------------    ---------------    --------------     ---------------
         Total securities               $          7,381,507     $     172,106      $       1,331      $    7,552,282
                                        =====================    ===============    ==============     ===============
</TABLE>


<TABLE>
<CAPTION>
                                                                      December 31, 2001
                                        ------------------------------------------------------------------------------
<S>                                     <C>                      <C>                <C>                <C>
Federal agencies                        $            199,445     $      11,867      $           -      $      211,312
Mortgage-backed                                    5,420,512            69,166             19,010           5,470,668
                                        ---------------------    ---------------    --------------     ---------------
         Total securities               $          5,619,957     $      81,033      $      19,010      $    5,681,980
                                        =====================    ===============    ==============     ===============
</TABLE>



Beach First National Bancshares, Inc., p. 29


<PAGE>

The  amortized  costs and fair values of  investment  securities at December 31,
2002,  by  contractual  maturity,  are shown in the  following  chart.  Expected
maturities may differ from contractual maturities because borrowers may have the
right  to  call  or  prepay  obligations  with or  without  call  or  prepayment
penalties.

                                                Amortized cost      Fair value
                                               ----------------   -------------
Due in one year or less                         $    299,849       $   299,760
Due after one year through five years              1,719,924         1,762,705
Due after five through ten years                     716,419           719,688
Due after ten years                                4,645,315         4,770,129
                                               ---------------    -------------
         Total investment securities            $  7,381,507       $ 7,552,282
                                               ===============    =============



The fair value of securities  pledged as  collateral  for public funds and other
purposes  as of December  31, 2002 and 2001,  were  $7,237,244  and  $4,967,103,
respectively.

NOTE 4 - LOANS
--------------
The composition of net loans by major loan category is presented below:


                                                       December 31,
                                           -------------------------------------
                                                 2002                  2001
                                           ------------------   ----------------

Commercial                                 $    24,546,655       $   13,453,083
Real estate - construction                       3,486,356            2,368,358
Real estate - mortgage                          52,934,586           39,046,158
Consumer                                        12,456,031            8,407,773
                                           ----------------     ----------------

                                                93,423,628           63,275,372
                                           ----------------     ----------------
Less:
   Allowance for possible loan losses            1,275,778              851,222
   Deferred loan fees                              123,276               71,729
                                           ----------------     ----------------
                                                 1,399,054              922,951
                                           ----------------     ----------------

Loans, net                                 $    92,024,574      $    62,352,421
                                           ================     ================

At  December  31, 2002 and 2001,  nonaccrual  loans were  $46,388 and  $107,377,
respectively.  Foregone  interest income on nonaccrual  loans in 2002, 2001, and
2000 was an insignificant amount.

NOTE 5 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
-------------------------------------------

The  allowance  for  possible  loan losses is  available  to absorb  future loan
charge-offs.  The  allowance  is increased  by  provisions  charged to operating
expenses  and by  recoveries  of loans which were  previously  written-off.  The
allowance is decreased by the aggregate loan balances, if any, which were deemed
uncollectible during the year.

Activity within the allowance for possible loan losses account follows:

<TABLE>
<CAPTION>
                                                                       For the years ended December 31,
                                                               --------------------------------------------------
                                                                    2002              2001              2000
                                                               ---------------    --------------    -------------
<S>                                                            <C>                 <C>              <C>
Balance, beginning of year                                     $     851,222       $    69,245      $     408,878
Recoveries of loans previously charged against the allowance           1,364             4,549                  -
Provision for possible loan losses                                   539,000           467,000            251,107
Loans charged against the allowance                                 (115,808)         (189,572)           (90,740)
                                                               ---------------     -------------    --------------

Balance, end of year                                           $   1,275,778       $   851,222        $   569,245
                                                               ===============     =============    ==============
</TABLE>

Beach First National Bancshares, Inc., p. 30


<PAGE>

NOTE 6 - PROPERTY AND EQUIPMENT
-------------------------------

Property and equipment are stated at cost less accumulated depreciation.
Components of property and equipment included in the consolidated balance sheets
are as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                 --------------------------------------------
                                                                        2002                    2001
                                                                 --------------------    --------------------
<S>                                                              <C>                     <C>
Land                                                             $        1,449,555      $          218,608
Buildings and improvements                                                2,423,553               1,862,789
Furniture and equipment                                                   1,184,517               1,072,357
Software                                                                    386,578                 272,610
Construction in progress                                                     86,294                     771
                                                                 --------------------    --------------------
                                                                          5,530,497               3,427,135
Accumulated depreciation                                                   (952,727)               (858,660)
                                                                 --------------------    --------------------
         Total property and equipment                            $        4,577,770      $        2,568,475
                                                                 ====================    ====================
</TABLE>

Depreciation  expense for the years ended  December  31, 2002,  2001,  and 2000,
amounted to $320,590,  $231,274,  and $146,918,  respectively.  Depreciation  is
charged  to  operations  over the  estimated  useful  lives of the  assets.  The
estimated  useful  lives and methods of  depreciation  for the  principal  items
follow:


           Type of Asset          Life in Years            Depreciation Method
           -------------          -------------            -------------------

Software                              3                       Straight-line
Furniture and equipment               5 to 7                  Straight-line
Buildings and improvements            5 to 40                 Straight-line


NOTE 7 - DEPOSITS
-----------------

The following is a detail of the deposit accounts:

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                         ---------------------------------------
                                                                               2002                  2001
                                                                         -----------------     -----------------
<S>                                                                             <C>                   <C>
Non-interest bearing                                                     $     19,316,292      $     11,968,934
Interest bearing:
         Interest bearing checking accounts                                     4,120,079             3,911,552
         Money market accounts                                                 22,797,243            13,962,249
         Savings                                                                2,935,199             2,824,451
         Time, less than $100,000                                              29,810,915            20,706,965
         Time, $100,000 and over                                               20,886,309            13,758,817
                                                                         -----------------     -----------------
Total deposits                                                           $     99,866,037      $     67,132,968
                                                                         =================     =================
</TABLE>


Interest  expense on time  deposits  greater than $100,000 was $603,427 in 2002,
$689,842 in 2001, and $647,924 in 2000.

At December 31, 2002, the scheduled maturities of certificates of deposit are as
follows:


2003                                           $       45,698,420
2004 through 2006                                       4,814,518
2007                                                      184,286
                                               ---------------------
                                               ---------------------

                                               $       50,697,224
                                               =====================

At December  31,  2002,  12.56% of total  deposits  was from two  customers.  At
December 31, 2001, there were no similar deposit concentrations.

Beach First National Bancshares, Inc., p. 31


<PAGE>

NOTE 8 - ADVANCES FROM FEDERAL HOME LOAN BANK
---------------------------------------------

The Bank had advances  outstanding  of $4,000,000  and zero at December 31, 2002
and 2001,  respectively.  At December 31, 2002,  the advance  bears  interest at
3.69% per annum and matures in July 2005. At December 31, 2002,  the advance was
collateralized by one to four family residential  mortgage loans and FHLB stock.
Additional  borrowings  are  available  by pledging  additional  collateral  and
purchasing additional stock in the FHLB.

NOTE 9 - UNUSED LINES OF CREDIT
-------------------------------

At December 31,  2002,  the Bank had  $7,000,000  of lines of credit to purchase
federal funds from unrelated banks. These lines of credit are available on a one
to seven  day basis  for  general  corporate  purposes  of the Bank.  All of the
lenders have reserved the right to withdraw these lines at their option.

At  December  31,  2002,  the Bank  had the  ability  to  borrow  an  additional
$7,840,883  or 10  percent  of  total  assets  less  advances  outstanding.  The
borrowings are available by pledging collateral and purchasing  additional stock
in the FHLB.

NOTE 10 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

The Company is party to  litigation  and claims  arising in the normal course of
business. As of December 31, 2002, there is no litigation pending.

The Company has entered into  contractual  commitments  for the  remodeling of a
leased  building  for a new branch  location.  The total cost is estimated to be
approximately $175,000 of which $86,294 is included in property and equipment as
construction  in progress at December 31, 2002.  The remodeling was completed in
the first quarter of 2003 and the new branch began operations.

Refer to Note 13 concerning financial instruments with off balance sheet risk.

NOTE 11 - INCOME TAXES
----------------------

The following  summary of the provision for income taxes  includes tax deferrals
which arise from temporary  differences  in the  recognition of certain items of
revenue and expense for tax and financial reporting purposes for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                 2002               2001               2000
                                                            ---------------    ---------------    ---------------
<S>                                                         <C>                <C>                <C>
Income taxes currently payable
         Federal                                            $    516,110       $  255,728         $         -
         State                                                    31,762           12,100              15,840
                                                            ---------------    ---------------    ---------------
                                                                 547,872         267,828               15,840
                                                            ---------------    ---------------    ---------------
Tax consequences of differences
         Allowance for loan losses                              (133,965)         (84,002)                  -
         Depreciation                                              5,313            3,970               4,470
         Net operating loss                                            -                -             124,816
         Valuation allowance adjustment                                -         (112,279)                  -
                                                            ---------------    ---------------    ---------------
                                                              (  128,652)        (192,311)            129,286
                                                            ---------------    ---------------    ---------------
                  Provision                                 $    419,220       $   75,517         $   145,126
                                                            ===============    ===============    ===============
</TABLE>



Beach First National Bancshares, Inc., p. 32

<PAGE>

The income tax effect of cumulative temporary differences at December 31, are as
follows:

<TABLE>
<CAPTION>
                                                                           Deferred tax asset (liability)
                                                                     --------------------------------------------
                                                                            2002                    2001
                                                                     --------------------    --------------------
<S>                                                                  <C>                     <C>
Allowance for loan losses                                            $        416,443        $        282,477
Unrealized (gain) loss on investment securities                               (58,063)                (21,580)
Depreciation                                                                  (38,433)                (33,120)
                                                                     --------------------    --------------------
                  Net deferred tax asset                             $        319,947        $        227,777
                                                                     ====================    ====================
</TABLE>


The net deferred tax asset is reported in other assets in the balance  sheets at
December  31, 2002 and 2001.  The  recognition  of a net  deferred  tax asset is
dependent upon a "more likely than not"  expectation  of the  realization of the
deferred  tax asset,  based  upon the  analysis  of the  available  evidence.  A
valuation allowance is required to sufficiently reduce the deferred tax asset to
the amount that is expected to be realized through future realization of profits
on a "more  likely  than not"  basis.  The  analysis  of  available  evidence is
performed on an ongoing  basis  utilizing the "more likely than not" criteria to
determine  the  amount,  if any,  of the  deferred  tax  asset  to be  realized.
Adjustments  to the valuation  allowance are made  accordingly.  There can be no
assurance  that the Company will recognize  additional  portions of the deferred
tax asset in future periods or that additional  valuation  allowances may not be
recorded in the future periods.

The  provision  for  income  taxes is  reconciled  to the  amount of income  tax
computed at the federal  statutory  rate on income  before  income taxes for the
years ended December 31, as follows:

<TABLE>
<CAPTION>
                                             2002                      2001                          2000
                                   -------------------------  ------------------------    ----------------------------
                                      Amount          %          Amount          %            Amount           %
                                   --------------  ---------  -------------   --------    ---------------  -----------
<S>                                <C>                <C>     <C>                <C>      <C>                 <C>
Tax expense at statutory rate      $   383,007        34%     $   181,835        34%      $   127,790         34%
Increase (decrease) in taxes
   Resulting from:
   State bank tax (net of
    federal benefit)                    20,963         2            7,990         1            10,455          3
   Valuation allowance                       -         -         (112,279)      (21)                -          -
   Other                                15,250         1           (2,029)        -             6,881          2
                                   --------------  ---------  -------------   --------    ---------------  -----------
   Tax provision                   $   419,220        37%     $    75,517        14%      $   145,126         39%
                                   ==============  =========  =============   ========    ===============  ===========
</TABLE>

NOTE 12 - RELATED PARTY TRANSACTIONS
------------------------------------

Certain  directors,  executive  officers  and  companies  with  which  they  are
affiliated,  are customers of and have banking transactions with the Bank in the
ordinary  course of business.  These loans were made on  substantially  the same
terms, including interest rates and collateral,  as those prevailing at the time
for comparable arms-length transactions.

A summary of loan transactions with directors,  including their affiliates,  and
executive officers follows:
<TABLE>
<CAPTION>
                                                  For the years ended December 31,
                                        ------------------------------------------------------
                                             2002                2001               2000
                                        ---------------    -----------------   ---------------
<S>                                     <C>                <C>                 <C>
Balance, beginning of year              $   5,769,980      $      ,835,728     $   ,936,854
New loans                                   1,148,028           3,129,598        2,757,853
Less loan payments                             529,543          2,195,346        1,858,979
                                        ---------------    -----------------   ---------------
Balance, end of year                    $   6,388,465      $    5,769,980      $ 4,835,728
                                        ===============    =================   ===============
</TABLE>


Deposits by directors,  including their  affiliates and executive  officers,  at
December  31,  2002  and  2001,   approximated   $10,407,910   and   $7,175,000,
respectively.


Beach First National Bancshares, Inc., p. 33


<PAGE>

NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK
-----------------------------------------------------------

In the  ordinary  course of  business,  and to meet the  financing  needs of its
customers,  the  Company is a party to various  financial  instruments  with off
balance sheet risk. These financial  instruments,  which include  commitments to
extend  credit  and  standby  letters of credit,  involve,  to varying  degrees,
elements of credit and interest rate risk in excess of the amounts recognized in
the balance sheets. The contract amount of those instruments reflects the extent
of involvement the Company has in particular classes of financial instruments.

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the financial  instrument  for  commitments  to extend credit and
standby  letters of credit is  represented by the  contractual  amounts of those
instruments.

The Company uses the same credit policies in making  commitments and conditional
obligations as it does for on balance sheet instruments.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any material  condition  established  in the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require the payment of a fee. At December 31, 2002, unfunded commitments
to extend credit were  $9,561,315,  of which  $2,810,173  was at fixed rates and
$6,751,142 was at variable rates. The Company  evaluates each customer's  credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company  upon  extension  of credit,  is based on  management's
credit  evaluation of the borrower.  Collateral  varies but may include accounts
receivable, inventory, property, plant and equipment, commercial and residential
real estate.

At  December  31,  2002,  there was a  $3,768,551  commitment  under a letter of
credit. The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending  loan  facilities  to  customers.  Collateral
varies but may include accounts  receivable,  inventory,  equipment,  marketable
securities  and property.  Because most of the letters of credit are expected to
expire without being drawn upon, they do not necessarily  represent  future cash
requirements.

NOTE 14 - EMPLOYEE BENEFIT PLAN
-------------------------------

The Company  sponsors the Beach First  National  Bank Profit  Sharing and 401(k)
Plan for the benefit of all eligible  employees.  The Company contributes to the
Plan annually upon approval by the Board of Directors. Contributions made to the
Plan in 2002,  2001,  and 2000,  amounted  to  $51,416,  $33,125,  and  $18,416,
respectively.


Supplemental  benefits  have been  approved  by the Board of  Directors  for the
directors and certain  executive  officers of Beach First National  Bank.  These
benefits  are not  qualified  under the  Internal  Revenue Code and they are not
funded.  However,  certain funding is provided informally and indirectly by life
insurance policies.  The cash surrender value of the life insurance policies are
recorded in the accompanying  balances sheets at $2,922,190 and zero at December
31, 2002 and 2001,  respectively.  The Company recorded expense related to these
benefits of $22,860 in 2002.  There were no expenses  recorded  related to these
benefits in 2001 and 2000.

NOTE 15 - STOCK OPTION PLANS
----------------------------

The  Company  sponsors a stock  option  plan for the  benefit of the  directors,
officers  and  employees.  The  Board may grant up to  110,000  incentive  stock
options at an option  price per share not less than the fair market value on the
date of grant.  The  directors  were  granted  1,500  options  each that  vested
immediately.   All  other  options   granted  to  officers  and  employees  vest
immediately or up to five years and expire 10 years from the grant date.

The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting for Stock-Based Compensation". Accordingly, no compensation cost has
been recognized for the stock option plan. Had compensation cost been determined
based on the fair  value at the grant  date for the above  stock  option  awards
consistent  with the provisions of SFAS No. 123, the Company's net income (loss)
and net  income  (loss)  per common  share  would have  changed to the pro forma
amounts indicated below:

The fair value of the option  grant is  estimated on the date of grant using the
Black-Scholes  option  pricing  model.  For  December  31,  2002,  the risk free
interest  rate used was 3.9%,  the  expected  option life was 10 years,  and the
assumed  dividend rate was zero.  For December 31, 2002 and 2001,  the risk free
interest rate used was 4.5 percent,  the expected  option life was 6 to 10 years
and the assumed dividend rate was zero.


Beach First National Bancshares, Inc., p. 34


<PAGE>

A summary of the status of the plan as of December 31, 2002,  2001, and 2000 and
changes during the years ending on those dates is presented below:
<TABLE>
<CAPTION>
                                            2002                           2001                         2000
                              -----------------------------    -----------------------------  ------------------------------
                                                 Weighted                       Weighted                     Weighted
                                                  average                        average                     average
                                  Shares      exercise price       Shares    exercise price     Shares    exercise price
                                  ------      --------------       ------    --------------     ------    --------------
<S>                                 <C>         <C>                 <C>        <C>                <C>       <C>
Outstanding at
beginning of year                   92,862      $    10.33          88,862     $    10.24         104,978   $    10.08
Granted                             31,000           10.70           7,000          11.50           5,000        12.50
Exercised                                -               -               -              -          (1,500)       10.00
Forfeited or expired               (38,877)          10.00          (3,000)         10.50         (19,616)       10.00
                              ------------                     -----------                    -----------
Outstanding at end
   of year                          84,985           10.61          92,862          10.33          88,862        10.24
                              ============                     ===========                    ===========

Options exercisable at
   year-end                         53,448           10.41          81,688          10.13          77,091        10.05
                              ============                     ===========                    ===========
Shares available for
   grant                            23,515                          15,638                         19,638
                              ============                     ===========                    ===========
</TABLE>


NOTE 16 - DIVIDENDS
-------------------

There are no current  plans to initiate  payment of cash  dividends,  and future
dividend  policy will depend on the Bank's and the Company's  earnings,  capital
requirements,  financial  condition and other factors considered relevant by the
Company's  Board of  Directors.  The Bank is  restricted  in its  ability to pay
dividends under the national banking laws and regulations of the OCC. Generally,
these  restrictions  require the Bank to pay dividends  derived  solely from net
profits.  Moreover,  OCC prior approval is required if dividends declared in any
calendar  year  exceed the Bank's  net  profit for that year  combined  with its
retained net profits for the preceding two years.

NOTE 17 - REGULATORY MATTERS
----------------------------

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possible  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's financial statements.

Under  capital  adequacy  guidelines  and the  regulatory  framework  for prompt
corrective  action,  the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain off balance
sheet items as calculated  under  regulatory  accounting  practices.  The Bank's
capital amounts and classification are also subject to qualitative  judgments by
the regulators about components, risk weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of total  and Tier 1  capital  to  risk-weighted  assets,  and of Tier 1
capital to average assets.  Management  believes,  as of December 31, 2002, that
the Bank meets all capital adequacy requirements to which it is subject.

As of  December  31,  2002,  the most recent  notification  of the Office of the
Comptroller of the Currency  categorized the Bank as well capitalized  under the
regulatory  framework for prompt corrective  action.  There are no conditions or
events  since that  notification  that  management  believes  have  changed  the
institution's category.


Beach First National Bancshares, Inc., p. 35


<PAGE>

The Bank's actual capital amounts and ratios and minimum  regulatory amounts and
ratios are presented as follows:
<TABLE>
<CAPTION>
                                                                                             To be well capitalized
                                                                    For capital           under prompt corrective
                                                                 adequacy purposes             action provisions
                                                              ------------------------    -----------------------------
                                          Actual                      Minimum                       Minimum
                                 --------------------------   ------------------------   ------------------------------
                                 Amount            Ratio        Amount         Ratio        Amount            Ratio
                                 ------------    ----------   ------------    --------   --------------    ------------
<S>                                <C>              <C>         <C>             <C>       <C>                  <C>
As of December 31, 2002                                       (amounts in $000)
Total Capital (to risk
weighted assets)                   $ 12,234         12.5%       $   7,827       8.0%      $     9,784          10.0%
Tier 1 Capital (to risk
weighted assets)                     11,010         11.3            3,914       4.0             5,870           6.0
Tier 1 Capital (to average
assets)                              11,010          9.9            4,459       4.0             5,574           5.0

As of December 31, 2001
Total Capital (to risk
weighted assets)                   $ 11,156         17.1%       $   5,211       8.0%      $     6,513          10.0%
Tier 1 Capital (to risk
weighted assets)                     10,305         15.8            2,605       4.0             3,908           6.0
Tier 1 Capital (to average
assets)                              10,305         12.7            3,251       4.0             4,064           5.0

</TABLE>


NOTE 18 -FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------------

SFAS No. 107,  "Disclosures about Fair Value of Financial  Instruments" requires
disclosure of fair value  information,  whether or not recognized in the balance
sheets,  when it is practical to estimate the fair value. SFAS No. 107 defines a
financial  instrument as cash, evidence of an ownership interest in an entity or
contractual  obligations  which require the exchange of cash or other  financial
instruments.

Certain  items  are  specifically  excluded  from the  disclosure  requirements,
including  the Company's  common stock,  premises and equipment and other assets
and liabilities.

Fair value approximates  carrying value for the following financial  instruments
due to the short-term nature of the instrument: cash and due from banks, federal
funds  sold  and  short  term   investments,   demand  deposit   accounts,   and
interest-bearing accounts with no fixed maturity date.

Securities are valued using quoted market  prices.  Fair value for the Company's
off-balance sheet financial instruments is based on the discounted present value
of the estimated future cash flows.

Fair  value  for  fixed  rate  loans  maturing  after  one  year is based on the
discounted present value of the estimated future cash flows. Discount rates used
in these computations  approximate the rates currently offered for similar loans
of comparable terms and credit quality.

Fair value for  certificate  of deposit  accounts are valued by  discounting  at
rates currently available on similar account types.

Fair value for advances from the FHLB are based on  discounted  cash flows using
the Company's current incremental borrowing rate.

The Company has used management's best estimate of fair value based on the above
assumptions.  Thus, the fair values presented may not be the amounts which could
be realized in an immediate sale or settlement of the  instrument.  In addition,
any income taxes or other  expenses which would be incurred in an actual sale or
settlement are not taken into consideration in the fair value presented.


Beach First National Bancshares, Inc., p. 36


<PAGE>

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                     -------------------------------------------------------------------
                                                                  2002                               2001
                                                     --------------------------------   --------------------------------
                                                        Carrying          Fair            Carrying            Fair
                                                         amount           value            amount             value
                                                     ---------------  ---------------   ---------------  ---------------
<S>                                                      <C>          <C>               <C>                <C>
 Financial Assets:
    Cash and due from banks                              $4,457,614   $    4,457,614    $    3,387,066     $  3,387,066
    Federal funds sold and short term
      investments                                         5,429,214        5,429,214         5,679,291        5,679,291
    Investment securities                                 7,552,282        7,552,282         5,681,980        5,681,980
    Loans, net                                           92,024,574       91,929,119        62,352,421       62,558,325
    Federal Reserve Bank stock                              164,700          164,700           164,700          164,700
    Federal Home Bank Loan Bank stock                       200,000          200,000           144,100          144,100

 Financial Liabilities:
    Deposits                                             99,866,037      100,581,009        67,132,968       68,416,910
    Advances from Federal Home Loan Bank                  4,000,000        4,000,000                 -                -

 Financial Instruments with Off-Balance Sheet  Risks:
     Commitments to extend credit                         9,561,315        9,561,315          4,498,405       4,498,405
     Standby letters of credit                            3,768,551        3,768,551          1,490,978       1,490,978
</TABLE>


NOTE 19 - PARENT COMPANY FINANCIAL INFORMATION
----------------------------------------------

Following is condensed financial information of Beach First National Bancshares,
Inc. (parent company only):
<TABLE>
<CAPTION>
                                             Condensed Balance Sheets

                                                                         ---------------------------------------
                                                                                        December 31,
                                                                         ---------------------------------------
                                                                              2002                    2001
                                                                         ----------------       -----------------
<S>                                                                      <C>                    <C>
Assets
Cash                                                                     $     1,062,550        $     2,293,490
Due from Bank subsidiary                                                         440,140                195,697
Investment in Bank subsidiary                                                 11,123,265             10,340,271
Securities available for sale                                                    101,403                353,036
Land                                                                           1,230,947                      -
Other assets                                                                      11,240                  3,808
                                                                         ----------------       -----------------
         Total assets                                                    $    13,969,545        $    13,186,302
                                                                         ================       =================
Liabilities and Shareholders' Equity
Accounts payable                                                         $        41,177        $        37,472
Shareholders' equity                                                          13,928,368             13,148,830
                                                                         ----------------       -----------------
         Total liabilities and shareholders' equity                      $    13,969,545        $    13,186,302
                                                                         ================       =================

</TABLE>
Beach First National Bancshares, Inc., p. 37

<PAGE>


<TABLE>
<CAPTION>
                                         Condensed Statements of Income

                                                                      For the years ended December 31,
                                                            -----------------------------------------------------
                                                                 2002              2001               2000
                                                            ---------------    --------------    ----------------
<S>                                                                                   <C>               <C>
                                                            $       59,055     $     52,576      $     40,848
                                                            ---------------    --------------    ----------------
Expenses
Amortization                                                             -            2,175             2,900
Other expenses                                                      57,605           37,163            31,384
                                                            ---------------    --------------    ----------------
         Total expenses                                             57,605           39,338            34,284
                                                            ---------------    --------------    ----------------
Income before equity in undistributed
  net income of Bank subsidiary                                      1,450           13,238             6,564
Equity in undistributed net income of Bank
  Subsidiary                                                       705,821          446,056           224,159
                                                            ---------------    --------------    ----------------
         Net income                                         $      707,271     $    459,294      $    230,723
                                                            ===============    ==============    ================
</TABLE>


<TABLE>
<CAPTION>
                                         Condensed Statements of Cash Flows

                                                                ------------------------------------------------------
                                                                          For the years ended December 31,
                                                                ------------------------------------------------------
                                                                     2002               2001               2000
                                                                ---------------     -------------    -----------------
<S>                                                             <C>                 <C>               <C>
Operating activities
  Net income                                                    $    707,271        $    459,294      $    230,723
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
   Equity in undistributed net income of
    the bank subsidiary                                             (705,821)           (446,056)         (224,159)
  Amortization                                                             -               2,175             2,900
  Decrease (increase) in due from Bank                              (244,443)            122,210          (213,147)
  (Increase) decrease in other assets                                 18,369              19,783           (12,795)
  Increase (decrease) in accounts payable                              3,705              (4,677)           24,653
                                                                ---------------     ---------------   ---------------
    Net cash provided by (used for) operating activities            (220,919)            152,729          (191,825)
                                                                ---------------     ---------------   ---------------
Investing activities
  Additional investment in bank                                            -          (4,000,000)                -
  Proceeds from sale of securities available for sale                220,926             252,499 1         129,915
  Purchase of land                                                (1,230,947)                  -                 -
                                                                ---------------     ---------------   ---------------
    Net cash provided (used for) investing activities             (1,010,021)         (3,747,501)          129,915
                                                                ---------------     ---------------   ---------------
Financing activities
Proceeds from issuance of stock                                            -           5,878,918                 -
Proceeds from exercise of stock options                                    -                   -            15,000
                                                                ---------------     ---------------   ---------------
    Net cash provided by financing activities                              -           5,878,918            15,000
                                                                ---------------     ---------------   ---------------
    Net increase (decrease) in cash and cash
         equivalents                                              (1,230,940)          2,284,146           (46,910)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                       2,293,490               9,344            56,254
                                                                ---------------     ---------------   ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR                          $  1,062,550        $  2,293,490      $      9,344
                                                                ===============     ===============   ===============
</TABLE>




Beach First National Bancshares, Inc., p. 38


<PAGE>


Corporate Information

Annual Meeting of Shareholders

The Annual Meeting of Shareholders of Beach First National Bancshares, Inc. will
be held at the Myrtle Beach Convention  Center,  2101 Oak Street,  Myrtle Beach,
South  Carolina on Wednesday,  April 23. The meeting will take place in Ballroom
C, beginning at 2 p.m.

Stock Information

The  Company's  stock  trades  under the symbol  "BFNB" on the  Over-the-Counter
Bulletin  Board.  As of March 7,  2003,  the  Company  had  approximately  1,485
stockholders and 1,318,368 shares of common stock  outstanding.  For information
contact:

Hill Thompson                  201-434-8100
Monroe Securities              800-766-5560
Scott & Stringfellow           800-476-3662
Trident Securities             404-249-7700
Webush Morgan Securities       212-693-2003

The table below reflects the high and low bid stock prices published by the OTC
Bulletin Board for each quarter:

                                    High Bid     Low Bid
           Year end 2002:
                First Quarter       10.40        10.10
                Second Quarter      11.12        10.90
                Third Quarter       12.15        11.75
                Fourth Quarter      12.45        12.05


           Year end 2001:
                First Quarter       *            *
                Second Quarter      *            *
                Third Quarter       11.50        11.50
                Fourth Quarter      10.20        10.10


*Stock began trading on the OTC Bulletin Board on July 19, 2001.


Form 10-KSB

Copies of the  Company's  Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002, as filed with the Securities and Exchange Commission, will be
furnished at no charge to shareholders upon written request to Richard N. Burch,
Senior Vice  President and Chief  Financial  Officer,  at the  Corporate  Office
address.

Forward Looking Statement

This report may contain certain "forward-looking  statements" within the meaning
of  Section  27A of the  Securities  Exchange  Act of 1934,  as  amended,  which
represent Beach First National  Bancshares,  Inc. (the Company)  expectations or
beliefs  concerning  future events.  Such  forward-looking  statements are about
matters that are  inherently  subject to risks and  uncertainties.  Factors that
could  influence  the matters  discussed in certain  forward-looking  statements
include the timing and amount of revenues that may be recognized by the Company,
continuation of current revenue and expense trends  (including  trends affecting
charge-offs and provisions for loan losses), unforeseen changes in the Company's
markets,  legal and  regulatory  changes,  and  general  changes in the  economy
(particularly  in the markets  served by the Company).  Because of the risks and
uncertainties inherent in forward looking statements,  readers are cautioned not
to place  undue  reliance  on them,  whether  included  in this  report  or made
elsewhere  from time to time by the Company or on its  behalf.  Except as may be
required by applicable law or regulation,  the Company  assumes no obligation to
update any forward looking statements.

Offices
Corporate Office
1550 Oak Street
Myrtle Beach, SC 29577
843.626.2265
843.916.7818 (fax)

Surfside Beach Office
3064 Dick Pond Road
Surfside Beach, SC  29588
843.294.6000
843.294.6001 (fax)

North Myrtle Beach Office
710 Highway 17 North
North Myrtle Beach, SC  29582
843.663.2265
843.663.2250 (fax)

Hilton Head Island Office
430 William Hilton Parkway
Pineland Station Office Building
Hilton Head Island, SC 29926
843.342.8866
843.342.8867 (fax)

Website:  www.beachfirst.com

(Beach First National Bank logo)
(Equal Housing Lender logo)
(Member FDIC logo)


Beach First National Bancshares, Inc., p. 39


<PAGE>

Directors

Michael Bert Anderson
Managing Owner
Patricia Resorts

Bart Buie
Certified Public Accountant
Bartlett Buie, CPA, P.A.

Raymond E. Cleary, III, DDS
Chairman of the Board
Beach First National Bancshares, Inc.
Dentist
Glenn's Bay Dentists at Surfside

Michael D. Harrington
General Contractor
Harrington Construction Company, Inc.

Joe N. Jarrett, Jr., M.D
Orthopaedic Surgeon
Strand Orthopaedic

Richard E. Lester
Attorney
Van Osdell, Lester, Howe,& Jordan, PA

Leigh Ammons Meese
Attorney
Sea Mist Resort and Family Kingdom  Amusement Park

Rick H. Seagroves
Owner
Inland Foods Corporation
Southeast Restaurants Corporation

Don J. Smith
President
Coldwell Banker Chicora

Samuel R. Spann, Jr.
President
Spann Roofing and Sheet Metal, Inc.

B. Larkin Spivey, Jr.
Owner
Spivey Company, LLC

Walter E. Standish, III
President and Chief Executive Officer
Beach First National Bank

James C. Yahnis
Beverage Wholesaler
Chris Yahnis Coastal Consultants

Officers

Executive Officers

Walter E. Standish, III
President
Chief Executive Officer

M. Katharine Huntley (Katie
Executive Vice President
Senior Credit Officer

Richard N. Burch
Senior Vice President
Chief Financial Officer

Julien E. Springs
Senior Vice President
Business Development Officer
Officers

Barbara H. Abrams
Vice President
Consumer Lending, Myrtle Beach

Linda S. Dickinson
Vice President
Loan Operations

Stephanie K. Loudner
Assistant Vice President
Consumer Lending, Hilton Head Island

Ann R. Marion
Assistant Vice President
Consumer Lending, Surfside Beach

Barbara W. Marshall
Vice President
Marketing

Marcus G. McDowell
Vice President
Commercial Lending, North Myrtle Beach

Jerome Smoak
Vice President
Commercial Lending, Surfside Beach

Tiffany P. Suggs
Vice President
Operations

Paul R. Walter
Vice President
Regional Executive, Hilton Head Island

(Family Friendly logo)

South Carolina Family Friendly Workplace Award Winner

Equal Opportunity Employer Statement

It is the policy of Beach First  National  Bancshares,  Inc. and its  subsidiary
bank, Beach First National Bank, to extend equal  employment  opportunity to all
qualified employees and applicants for employment without regard to race, color,
sex, age, physical or mental disability,  national origin,  status as a disabled
veteran or Vietnam veteran,  citizenship, or any other characteristics protected
by  applicable  law,  in all phases of  employment.  This  includes,  but is not
limited to recruitment,  hiring, placement,  upgrading and promotion,  transfer,
layoff, recall, termination, selection for bank-sponsored training, rates of pay
and  other  forms  of  compensation,   benefits,  use  of  all  facilities,  and
participation in bank-sponsored activities. All of these privileges,  terms, and
conditions or employment  will be  administered  as to further the principles of
equal opportunity.

Beach First National Bancshares, Inc., p. 40


<PAGE>

Inside back cover:  Photos of Branch Staffs.  Photo of Operations and
Administrative Staff


Beach First National Bancshares, Inc., p. 41


<PAGE>

Back cover:  Beach First National Bancshares, Inc. logo


Beach First National Bancshares, Inc., p. 42