# UNITED STATESSECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

# Form 10-KSB

| | (Mark One)
| | ----------

|X | Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------

| | For the fiscal year ended December 31, 2005
| | -------------------------------------------

| | or
| | --

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

Commission file no.
000-22503

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

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

|1550 Oak Street                          |  |           
|---------------------------------------- |  | ----------
|Myrtle Beach, South Carolina             |  | 29577     
|(Address of Principal Executive Offices) |  | (Zip Code)

(843) 626-2265Issuers Telephone Number, Including Area Code

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

| |  | 
| |  | 
| |  | 
| |  | 

Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act

Check whether the issuer (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      No

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).                         
              
Yes      No

The issuers revenue for the
year ended December 31, 2005 was $ 12,665,596.

The aggregate market value of the voting
stock held by non-affiliates (shareholders holding less than 5% of an outstanding class of
stock, excluding directors and executive officers), as of March 3, 2006, was approximately
$61,458,949. This calculation was based on the closing price of our common stock on March
3, 2006 of $23.99.

The number of shares outstanding of
the issuers common stock was 3,174,458 at March 3, 2006.

DOCUMENTS INCORPORATED
BY REFERENCE The Companys Annual Report to Shareholders for the year ended December 31, 2005 is incorporated by reference in this
Form 10-KSB in Part II, Items 6 and 7. The Companys Proxy Statement for the Annual
Meeting of Shareholders to be held on April 19, 2006 is incorporated by reference in this
Form 10-KSB in Part III, Items 9 through 12 and 14.

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

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# Part IItem 1.  Business

This
Report contains statements which constitute forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These statements are based on many assumptions and estimates and are not guarantees of
future performance. Our actual results may differ materially from those projected in any
forward-looking statements, as they will depend on many factors about which we are unsure,
including many factors which are beyond our control. The words may,
would, could, will, expect,
anticipate, believe, intend, plan, and
estimate, as well as similar expressions, are meant to identify such
forward-looking statements. Potential risks and uncertainties include, but are not limited
to those described below under Risk Factors.

# General Overview

We
conduct a general commercial and retail banking business, emphasizing the needs of
individual and small- to medium-sized businesses. We operate our banking business through
our bank, Beach First National Bank. Our main office is located at the corner of Oak
Street and Sixteenth Avenue in Myrtle Beach, South Carolina. In June 2001, we opened our
first branch office, which is located at the northwest corner of the intersection of S.C.
Highway 544 and U.S. Highway 17 in Surfside Beach, South Carolina. In November 2002, we
opened our second branch office located in the Gator Hole Shopping Center in North Myrtle
Beach, South Carolina, in February 2003, we opened our third office on Hilton Head Island,
South Carolina, in July 2004, we opened our fourth office in the Litchfield/Pawleys Island
area in the Willbrook Shopping Center and in January 2005, we opened our sixth office on
the south end of Hilton Head Island in the Village at Wexford Shopping Center. We
primarily serve the Grand Strand area of Myrtle Beach, South Carolina and Hilton Head
Island, South Carolina. We have plans to expand our operations to serve the other coastal
areas of South Carolina. We maintain an internet web site at
http://www.beachfirst.com.

# Risk Factors

# Our recent operating
results may not be indicative of our future operating results.

We
may not be able to sustain our historical rate of growth and may not even be able to grow
our business at all. Because of our relatively small size and short operating history, it
will be difficult for us to generate similar earnings growth as we continue to expand, and
consequently our historical results of operations will not necessarily be indicative of
our future operations. Various factors, such as economic conditions, regulatory and
legislative considerations, and competition, may also impede our ability to expand our
market presence. If we experience a significant decrease in our historical rate of growth,
our results of operations and financial condition may be adversely affected because a high
percentage of our operating costs are fixed expenses.

# Our decisions regarding
credit risk and reserves for loan losses may materially and adversely affect our business.

Making
loans and other extensions of credit is an essential element of our business. Although we
seek to mitigate risks inherent in lending by adhering to specific underwriting practices,
our loans and other extensions of credit may not be repaid. The risk of nonpayment is
affected by a number of factors, including:

| |  | the duration of the credit;
| | - | ---------------------------

| |  | credit risks of a particular customer;
| | - | --------------------------------------

| |  | changes in economic and industry conditions; and
| | - | ------------------------------------------------

| |  | in the case of a collateralized loan, risks resulting from uncertainties about the future
value of the collateral.
| | - | ------------------------------------------------------------------------------------------------------------------

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We
attempt to maintain an appropriate allowance for loan losses to provide for potential
losses in our loan portfolio. We periodically determine the amount of the allowance based
on consideration of several factors, including:

| |  | an ongoing review of the quality, mix, and size of our overall loan portfolio;
| | - | ------------------------------------------------------------------------------

| |  | our historical loan loss experience;
| | - | ------------------------------------

| |  | evaluation of economic conditions;
| | - | ----------------------------------

| |  | regular reviews of loan delinquencies and loan portfolio quality; and
| | - | ---------------------------------------------------------------------

| |  | the amount and quality of collateral, including guarantees, securing the loans.
| | - | -------------------------------------------------------------------------------

There
is no precise method of predicting credit losses; therefore, we face the risk that
charge-offs in future periods will exceed our allowance for loan losses and that
additional increases in the allowance for loan losses will be required. Additions to the
allowance for loan losses would result in a decrease of our net income, and possibly our
capital.

# Lack of seasoning of our
loan portfolio may increase the risk of credit defaults in the future.

Due
to the rapid growth of our bank over the past several years and our short operating
history, a large portion of the loans in our loan portfolio and of our lending
relationships are of relatively recent origin. In general, loans do not begin to show
signs of credit deterioration or default until they have been outstanding for some period
of time, a process we refer to as seasoning. As a result, a portfolio of older
loans will usually behave more predictably than a newer portfolio. Because our loan
portfolio is relatively new, the current level of delinquencies and defaults may not be
representative of the level that will prevail when the portfolio becomes more seasoned,
which may be higher than current levels. If delinquencies and defaults increase, we may be
required to increase our provision for loan losses, which would adversely affect our
results of operations and financial condition.

# An economic downturn,
especially one affecting the Horry and Beaufort County areas, could reduce our customerbase,
our level of deposits, and demand for financial products such as loans.

Our
success significantly depends upon the growth in population, income levels, deposits, and
housing starts in our markets, especially in Horry and Beaufort Counties and to a lesser
extent Georgetown County. If the communities in which we operate do not grow or if
prevailing economic conditions locally or nationally are unfavorable, our business may not
succeed. An economic downturn would likely contribute to the deterioration of the quality
of our loan portfolio and reduce our level of deposits, which in turn would hurt our
business. Interest received on loans represented approximately 82.6% of our interest
income for the year ended December 31, 2005. If an economic downturn occurs in the economy
as a whole, or especially in the Horry and Beaufort County areas, borrowers may be less
likely to repay their loans as scheduled. Moreover, the value of real estate or other
collateral that may secure our loans could be adversely affected. Unlike many larger
institutions, we are not able to spread the risks of unfavorable local economic conditions
across a large number of diversified economies. An economic downturn could, therefore,
result in losses that materially and adversely affect our business.

# Changes in prevailing
interest rates may reduce our profitability.

Our
results of operations depend in large part upon the level of our net interest income,
which is the difference between interest income from interest-earning assets, such as
loans and mortgage-backed securities, and interest expense on interest-bearing
liabilities, such as deposits and other borrowings. Depending on the terms and maturities
of our assets and liabilities, a significant change in interest rates could have a
material adverse effect on our profitability. Many factors cause changes in interest
rates, including governmental monetary policies and domestic and international economic
and political conditions. While we intend to manage the effects of changes in interest
rates by adjusting the terms, maturities, and pricing of our assets and liabilities, our
efforts may not be effective and our financial condition and results of operations could
suffer. After operating in a historically low interest rate environment, the Federal
Reserve began raising short-term interest rates in the

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second quarter of 2004. We anticipate
that we will benefit from a rising interest rate environment. However, no assurance can be
given that the Federal Reserve will actually continue to raise interest rates or that the
results we anticipate will actually occur.

# We are subject to
extensive regulation that could limit or restrict our activities.

We
operate in a highly regulated industry and are subject to examination, supervision, and
comprehensive regulation by various regulatory agencies. Our compliance with these
regulations is costly and restricts certain of our activities, including payment of
dividends, mergers and acquisitions, investments, loans and interest rates charged,
interest rates paid on deposits, and locations of offices. We are also subject to
capitalization guidelines established by our regulators, which require us to maintain
adequate capital to support our growth.

The
laws and regulations applicable to the banking industry could change at any time, and we
cannot predict the effects of these changes on our business and profitability. Because
government regulation greatly affects the business and financial results of all commercial
banks and bank holding companies, our cost of compliance could adversely affect our
ability to operate profitably.

The
Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the
Securities and Exchange Commission that are now applicable to us, have increased the
scope, complexity, and cost of corporate governance, reporting, and disclosure practices.
We have experienced, and we expect to continue to experience, greater compliance costs,
including costs related to internal controls, as a result of the Sarbanes-Oxley Act.

# Our continued pace of
growth may require us to raise additional capital in the future, but that capital may notbe
available when it is needed.

We
are required by regulatory authorities to maintain adequate levels of capital to support
our operations. To support our continued growth, we may need to raise additional capital.
Our ability to raise additional capital, if needed, will depend in part on conditions in
the capital markets at that time, which are outside our control. Accordingly, we cannot
assure you of our ability to raise additional capital, if needed, on terms acceptable to
us. If we cannot raise additional capital when needed, our ability to further expand our
operations through internal growth and acquisitions could be materially impaired. In
addition, if we decide to raise additional equity capital, your interest could be diluted.

# We
face strong competition for clients, which could prevent us from obtaining clients and
may cause us to payhigher interest rates to attract clients.

The
banking business is highly competitive, and we experience competition in our market from
many other financial institutions. We compete with commercial banks, credit unions,
savings and loan associations, mortgage banking firms, consumer finance companies,
securities brokerage firms, insurance companies, money market funds, and other mutual
funds, as well as other super-regional, national, and international financial institutions
that operate offices in our primary market areas and elsewhere. We compete with these
institutions

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both in attracting deposits and in
making loans. In addition, we have to attract our client base from other existing
financial institutions and from new residents. Many of our competitors are
well-established, larger financial institutions. These institutions offer some services,
such as extensive and established branch networks, that we do not provide. There is a risk
that we will not be able to compete successfully with other financial institutions in our
market, and that we may have to pay higher interest rates to attract deposits, resulting
in reduced profitability. In addition, competitors that are not depository institutions
are generally not subject to the extensive regulations that apply to us.

# We will face risks with
respect to future expansion and acquisitions or mergers.

We
may seek to acquire other financial institutions or parts of those institutions. We may
also expand into new markets or lines of business or offer new products or services. These
activities would involve a number of risks, including:

| |  | the potential inaccuracy of the estimates and judgments used to evaluate credit, operations, management,
and market risks with respect to a target institution;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the time and costs of evaluating new markets, hiring or retaining experienced local
management, and opening new offices and the time lags between these activities and the
generation of sufficient assets and deposits to support the costs of the expansion;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the incurrence and possible impairment of goodwill associated with an acquisition and
possible adverse effects on our results of operations; and the risk of loss of key employees and customers.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Marketing Focus

Most
of the banks in the Grand Strand and on Hilton Head Island are now local branches of
regional, super-regional, and large national banks. Although size gives the larger banks
certain advantages in competing for business from large corporations, including higher
lending limits and the ability to offer services in other areas of South Carolina and the
Southeast, we believe that there has been a void in the community banking market in the
Myrtle Beach and Hilton Head Island areas which we can successfully fill by adding
additional branches. As a result, we generally do not attempt to compete for the banking
relationships of large corporations, but concentrate our efforts on individuals and small-
to medium-sized businesses.

# Operating and Growth
Strategy

Our
goals are to be the leading community bank along the Grand Strand and on Hilton Head
Island. We intend to achieve these goals by locating new branches in growing communities
in our market areas, increasing asset size through internal growth, providing personalized
service with a community focus, hiring and retaining high caliber and motivated employees,
maintaining high asset quality, and offering our customers a variety of competitive
products and services. These goals are intended to build long-term shareholder value.

# Deposit Products

Our
principal source of funding is core deposits, of which approximately 92.4% were obtained
from within our core markets as of December 31, 2005. We offer a full range of deposit
services, including checking accounts, commercial accounts, savings accounts, and other
time deposits of various types, ranging from daily money market accounts to long-term
certificates of deposit. We regularly review our deposit rates to ensure that we remain
competitive in our markets. Due to the seasonal nature of our market areas, deposit growth
is generally strongest 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 offer special rates on deposits.

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# Other Financial Services

We
offer NetTeller Internet banking with bill payment and cash management services. With
NetTeller and PowerPay, customers can perform a variety of banking functions from their
home or office computer. These services allow our customers to view images of checks,
deposits (including the items that make up the deposit), and past statements, and also to
transfer funds between Beach First accounts, download information to money management
software packages, and pay bills. To help business customers streamline their day-to-day
operations and leave more time to focus on their core lines of business, we also offer
online cash management services, including business internet banking, ACH or electronic
transactions, wire origination, sweep accounts, CD ROM statements, and consolidated
analysis. Our goal with technology-oriented products such as NetTeller, cash management,
and website is to supplement our high level of service by offering our customers a virtual
key to the bank.

We
also offer other bank services including safe deposit boxes, direct deposit, and Visa
Check Cards. We earn fees for most of these services, including debit and credit card
transactions, sales of checks, and wire transfers. We also receive ATM transactions fees
from certain transactions performed by both our depositors and others. We are associated
with the STAR, Cirrus, and Plus ATM networks, which are available to our customers
throughout the country.

# Lending Activities

General.       
          We emphasize a range of lending services, including real estate, commercial and
          consumer loans including home equity lines of credit, to individuals and small-
          to mid-size businesses that are located, or conduct a substantial portion of
          their business, in the Grand Strand and Hilton Head Island markets. At December
          31, 2005, we had total loans of $311.7 million, representing 84.2% of our
          average earning assets. When we opened our bank, we introduced a strong credit
          culture based on traditional credit measures and our intimate knowledge of our
          markets through veteran bankers. We currently engage an outside firm to evaluate
          our loan portfolio on an annual basis for credit quality and a second outside
          firm for compliance issues. As of December 31, 2005, there were no loans 90 day
          or more past due still accruing interest, and we had no restructured loans.
          Because loans typically provide higher interest yields than other types of
          interest-earning assets, we invest a substantial percentage of our earning
          assets in our loan portfolio.

We
have focused our lending activities primarily on small business owners, the professional
market, including doctors and dentists, operating companies and commercial real estate
developers. By focusing on this customer base and by serving each customer with a
consistent relationship team of bankers, we have generated a loan portfolio with an
average size loan of approximately $144,990 as of December 31, 2005. At the same time, we
strive to maintain a diversified loan portfolio and limit the amount of our loans to any
single customer. As of December 31, 2005, our 10 largest customer loan relationships
represented approximately $71.1 million, or 21.7% of the loan portfolio.

Real
Estate Mortgage Loans.Loans secured by real estate mortgages are the principal
component of our loan portfolio. We obtain a security interest in real estate whenever
possible, in additional to any other available collateral, in order to increase the
likelihood of the ultimate repayment of the loan. At December 31, 2005, we had loans
secured by first or second mortgages on real estate that made up approximately $237.0
million or 75.8% of our loan portfolio.

These
loans will generally fall into one of three categories: commercial real estate loans,
residential real estate loans and home equity loans. Most of our real estate loans are
secured by residential or commercial property. Real estate loans are subject to the same
general risks as other loans and are particularly sensitive to fluctuations in the value
of real estate. Fluctuations in the value of real estate, as well as other factors arising
after a loan has been made, could negatively affect a borrowers cash flow,
creditworthiness, and ability to repay the loan.

| |  | Commercial Real Estate Loans.At December 31, 2005, our individual commercial real
estate loans ranged in size from $10,000 to $5.0 million, as we have participated in
credits in excess of our legal lending limit to correspondent banks. The average
commercial real estate loan size was
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | approximately
$330,075. These loans generally have terms of five years or less, although payments may be
structured on a longer amortization basis. We evaluate each borrower on an individual
basis and attempt to determine the business risks and credit profile of each borrower. We
attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans
on owner-occupied properties where the loan-to-value ratio, established by independent
appraisals, does not exceed 80%. We prepare a credit analysis in addition to a cash flow
analysis to support the loan. In order to ensure secondary sources of payment and
liquidity to support a loan request, we typically review all of the personal financial
statements of the principal owners and require their personal guarantees. At December 31,
2005, commercial real estate loans (other than construction loans) amounted to $199.4
million, or approximately 64.0% of our loan portfolio. This includes various types of
business purpose loans secured by commercial real estate.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Residential Real Estate Loans.We do not generally originate traditional long term
residential mortgages for our portfolio, but we do issue traditional first and second
mortgage residential real estate loans and home equity lines of credit. At December 31,
2005, our individual residential real estate loans ranged in size from $8,100 to $1.0
million, with an average loan size of approximately $144,616. Generally, we limit the
loan-to-value ratio on our residential real estate loans to 80%. We offer fixed and
adjustable rate residential real estate loans with amortizations up to 20 years. We offer
fixed rate and variable rate loans through a third party for terms greater than 20 years,
rather than originating and retaining these loans ourselves. At December 31, 2005,
residential real estate loans (other than construction loans) amounted to $20.7 million or
6.6% of our loan portfolio.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Home Equity Loans. Our underwriting criteria for, and the risks associated with,
home equity loans and lines of credit are generally the same as those for first mortgage
loans. Home equity lines of credit typically have terms of fifteen years or less. We
generally limit the extension of credit to 90% of the available equity of each property,
although we may extend up to 100% of the available equity. At December 31, 2005, our
individual home equity lines of credit amounted to $16.4 million or 5.3% of our loan
portfolio. At December 31, 2005, loans ranged in size from $10,000 to $800,000, with an
average balance of approximately $60,084.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Real
Estate Construction and Land Development Loans. We offer adjustable and fixed rate
residential and commercial construction loans to builders and developers and to consumers
who wish to build their own homes. At December 31, 2005, our construction and development
real estate loans ranged in size from approximately $30,000 to $9.7 million, with an
average loan size of approximately $576,062.The duration of our construction and
development loans generally is limited to 12 months, although payments may be structured
on a longer amortization basis. Construction and development loans generally carry a
higher degree of risk than long-term financing of existing properties because repayment
depends on the ultimate completions of the project or home and usually on the sale of the
property or permanent financing. Specific risks include:

| |  | cost overruns;
| | - | --------------

| |  | mismanaged construction;
| | - | ------------------------

| |  | inferior or improper construction techniques;
| | - | ---------------------------------------------

| |  | economic changes or downturns during construction;
| | - | --------------------------------------------------

| |  | rising interest rates which may prevent sale of the property; and
| | - | -----------------------------------------------------------------

| |  | failure to sell completed projects in a timely manner.
| | - | ------------------------------------------------------

We
attempt to reduce the risk associated with construction and development loans by obtaining
personal guarantees and by keeping the loan-to-value ratio of the completed project at or
below 80%. At December 31, 2005, total construction and development loans amounted to
$25.8 million, or 8.3% of our total loan portfolio.

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Commercial
Business Loans.We make loans for commercial purposes in various lines of businesses,
including retail, service industry, and professional service area. At December 31, 2005,
our individual commercial business loans ranged in size from approximately $2,000 to $4.0
million, with an average loan size of approximately $61,713. Commercial loans are
generally considered to have greater risk than first or second mortgages on real estate
because commercial loans may be unsecured or, if they are secured, the value of the
collateral may be difficult to assess and more likely to decrease than real estate. At
December 31, 2005, commercial business loans amounted to $42.2 million, or 13.5% of our
total loan portfolio.

We
are eligible to offer small business loans utilizing government enhancements such as the
Small Business Administrations (SBA) 7 (a) program and SBAs 504
programs. These loans typically are partially guaranteed by the government, which helps to
reduce their risk. Government guarantees of SBA loans do not exceed, and are generally
less than, 75% of the loan.

Consumer
Loans.We make a variety of loans to individuals for personal and household purposes,
including secured and unsecured installment loans and revolving lines of credit. Consumer
loans are underwritten based on the borrowers income, current debt level, past
credit history, and the availability and value of collateral. Consumer rates are both
fixed and variable, with negotiable terms. At December 31, 2005, our individual consumer
loans ranged in size from $2,000 to $154,000, with an average loan size of approximately
$14,671. Our installment loans typically amortize over periods up to 60 months. We will
offer consumer loans with a single maturity date when a specific source of repayment is
available. We typically require monthly payments of interest and a portion of the
principal on our revolving loan products. Consumer loans are generally considered to have
greater risk than first or second mortgages on real estate because they may be unsecured,
or if they are secured, the value of the collateral may be difficult to assess and more
likely to decrease in value than real estate. At December 31, 2005, consumer loans
amounted to $7.5 million or 2.4% of our loan portfolio

Credit
Administration and Loan Review.We emphasize a strong credit culture based on
traditional credit measures and our knowledge of our markets through experienced
relationship managers. We maintain a continuous internal loan review system and engage an
independent consultant on an annual basis to review loan files on a test basis to confirm
our loan grading. Each loan officer is responsible for every loan he or she makes,
regardless of whether other individuals or committees joined in the approval. This
responsibility continues until the loan is repaid or until the loan is officially assigned
to another officer. The compensation of our lending officers is dependent in part on the
asset quality of their loan portfolios.

Underwriting
Procedures, Collateral, and Risk.We use our established credit policies and
procedures when underwriting each type of loan. Although there are minor variances in the
characteristics and criteria for each loan type, which variances may require additional
underwriting procedures, we generally evaluate borrowers using the following defined
criteria:

| |  | Character  we determine that the borrower has sound character and integrity by
examining the borrowers history.
| | - | -----------------------------------------------------------------------------------------------------------------

| |  | Capital  we evaluate the borrowers overall financial strength, as well as the
equity investment in the asset being financed.
| | - | ------------------------------------------------------------------------------------------------------------------------------

| |  | Collateral  we determine that the collateral is adequate from the standpoint of
quality, marketability, value and income potential.
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| |  | Capacity  we evaluate the borrowers ability to service the debt.
| | - | ------------------------------------------------------------------

| |  | Conditions  we underwrite the credit in light of the effects of external factors,
such as economic conditions and industry trends.
| | - | -----------------------------------------------------------------------------------------------------------------------------------

It
is our practice to obtain collateral for most loans to help mitigate the risk associated
with lending. We generally limit our loan-to-value ratio to 80%. We obtain a security
interest in real estate for loans secured by real estate, including construction and
development loans, and other commercial loans. For commercial loans, we obtain security
interests in equipment and other company assets. For consumer loans used to purchase
vehicles, we obtain appropriate title documentation. For secured loans that are not
associated with real estate, or for which the mortgaged real estate does not provide an
acceptable loan-to-value ratio, we obtain other available collateral such as stocks and
bonds.

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Each
type of loan carries a credit risk, simply defined as the potential that the borrower will
not be willing or able to repay the debt. While real estate loans have various risks
common to all types of loans, certain types of real estate loans have specific risk
characteristics that vary according to the collateral type securing the loan and the terms
and repayment sources for the loan. Real estate loans are all sensitive to fluctuations in
the value of the real estate securing the loan. In addition, commercial real estate loans
have risk that the primary source of repayment will be insufficient to service the debt.
Construction and development real estate loans generally carry a higher degree of risk
than long term financing of existing properties. These projects are usually dependent on
the completion of the project on schedule and within cost estimates and on the timely sale
of the property. Inferior or improper construction techniques, changes in economic
conditions during the construction and marketing period, and rising interest rates which
may slow the sale of the property are all risks unique to this type of loan. Residential
mortgage loans, in contrast to commercial real estate loans, generally have longer terms
and may have fixed or adjustable interest rates. Commercial loans primarily have risk that
the primary source of repayment will be insufficient to service the debt. Often this
occurs as the result of changes in local economic conditions or in the industry in which
the borrower operates which impact cash flow or collateral value. Consumer loans, other
than home equity loan products, are generally considered to have more risk than loans to
individuals secured by first or second mortgages on real estate due to dependence on the
borrowers employment status as the sole source of repayment. By following defined
underwriting criteria as noted above, we seek to reduce these risks. Additionally, we help
to reduce the risk that the underlying collateral may not be sufficient to pay the
outstanding balance by using appraisals or taking other steps to determine that the value
of the collateral is adequate, and lending amounts based upon lower loan-to-value ratios.
We control risks by reducing concentration of our loan portfolio in any one type of loan.
A concentration of credit report based upon SIC codes and other factors are reviewed on a
quarterly basis by the board of directors.

Loan
Approval.Certain credit risks are inherent in making loans. These include prepayment
risks, risks resulting from uncertainties in the future value of collateral, risks
resulting from changes in economic and industry conditions, and risks inherent in dealing
with individual borrowers. We attempt to mitigate these risks by adhering to internal
credit policies and procedures. These policies and procedures include officer and customer
lending limits, a multi-layered approval process for larger loans, documentation
examination, and follow-up procedures for any exceptions to credit policies. Our loan
approval policies provide for various levels of officer lending authority. When the amount
of aggregate loans to a single borrower exceeds an individual officers lending
authority, the loan request will be reviewed by the internal management loan committee
comprised of Mr. Standish, Ms. Huntley, and Mr. Springs. Individual loan authorities range
from $25,000 to $750,000. Any two concurring members of our management loan committee can
approve loans up to $1.5 million. If a loan exceeds $1.5 million, then the board of
directors loan committee comprised of Mr. Standish and six other directors may
approve the loan up to 15% of our capital and surplus or legal lending limit. We do not
make any loans to any of our directors or executive officers unless the loan is approved
by the loan committee and reviewed by the board of directors of the bank and is made on
terms not more favorable to such person than would be available to a person not affiliated
with us. We take steps to protect against losses due to hurricanes and weather phenomena
by requiring customers to carry appropriate insurance.

Lending
Limits.Our lending activities are subject to a variety of lending limits imposed by
federal law. In general, the bank is subject to a legal limit on loans to a single
borrower equal to 15% of the banks capital and unimpaired surplus. This limit will
increase or decrease as the banks capital increases or decreases. Based upon the
capitalization of the bank at December 31, 2005, our legal lending limit was approximately
$6.6 million. We are able to sell participations in our larger loans to other financial
institutions, which allow us to manage the risk involved in these loans and to meet the
lending needs of our customers requiring extensions of credit in excess of this limit.

# Competition

The
Myrtle Beach and Hilton Head Island markets are highly competitive markets which all of
the largest banks in the state, as well as super regional banks, are represented. The
competition among the various financial

9

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institutions is based upon a variety
of factors, including interest rates offered on deposit accounts, interest rates charged
on loans, credit and service charges, the quality of services rendered, the convenience of
banking facilities and, in the case of loans to large commercial borrowers, relative
lending limits. In addition to banks and savings associations, we compete with other
financial institutions including securities firms, insurance companies, credit unions,
leasing companies and finance companies. Size gives larger banks certain advantages in
competing for business from large corporations. These advantages include higher lending
limits and the ability to offers services in other areas of South Carolina. As a result,
we do not generally attempt to compete for the banking relationships of large
corporations, but concentrate our efforts on small- to medium-sized businesses and
individuals. We believe we have competed effectively in this market by offering quality
and personal service.

# Employees

At
December 31, 2005, we employed a total of 62 full-time and 8 part-time employees. The
company believes that the relations with its employees are good.

# SUPERVISION AND
REGULATION

We
are subject to extensive state and federal banking laws and regulations which impose
specific requirements or restrictions on, and provide for general regulatory oversight of,
virtually all aspects of our operations. These laws and regulations are generally intended
to protect depositors, not shareholders. The following summary is qualified by reference
to the statutory and regulatory provisions discussed. Changes in applicable laws or
regulations may have a material effect on our business and prospects. Our operations may
be affected by legislative changes and the policies of various regulatory authorities. We
cannot predict the effect that fiscal or monetary policies, economic control, or new
federal or state legislation may have on our business and earnings in the future.

The
following discussion is not intended to be a complete list of all the activities regulated
by the banking laws or of the impact of such laws and regulations on our operations. It is
intended only to briefly summarize some material provisions.

# Recent Legislation

# USA Patriot Act of 2001

In
October 2001, the USA Patriot Act of 2001 was enacted in response to the terrorist attacks
in New York, Pennsylvania and Washington D.C. which occurred on September 11, 2001. The
Patriot Act is intended to strengthen U.S. law enforcements and the intelligence
communities abilities to work cohesively to combat terrorism on a variety of fronts.
The potential impact of the Patriot Act on financial institutions of all kinds is
significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and
financial transparency laws and imposes various regulations, including standards for
verifying client identification at account opening, and rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying parties
that may be involved in terrorism or money laundering.

# Check 21

On
October 28, 2003, President Bush signed into law the Check Clearing for the 21st Century
Act, also known as Check 21. The new law, which is not effective until October 28, 2004,
gives substitute checks, such as a digital image of a check and copies made
from that image, the same legal standing as the original paper check. Some of the major
provisions include:

| |  | Allows check truncation without making it mandatory;
| | - | ----------------------------------------------------

| |  | Demands that every financial institution communicate to accountholders in writing a
description of its substitute check processing program and their rights under the law;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Legalizes substitutions for and replacements of paper checks without agreement from
consumers;
| | - | ----------------------------------------------------------------------------------------------

| |  | Keeps in place the previously mandated electronic collection and return of
checks between financial institutions only when individual agreements are in place;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Cautions that when accountholders request verification, financial institutions must
produce the original check (or a copy that accurately represents the original) and
demonstrate that the account debit was accurate and valid; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Requires recrediting of funds to an individuals account on the next business day
after a consumer proves the financial institution has erred.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

This
new legislation will likely have a dramatic impact on bank capital spending as many
financial institutes assess whether technological or operational changes are
necessary to stay competitive and take advantage of the new opportunities presented by
Check 21.

# Beach First National
Bancshares, Inc.

Because
our holding company, Beach First National Bancshares, Inc., owns the outstanding capital
stock of our bank, our holding company is a bank holding company under the federal Bank
Holding Company Act of 1956 and the South Carolina Banking and Branching Efficiency Act.

The
Bank Holding Company Act. Under the Bank Holding Company Act (BHCA), our holding
company is subject to periodic examination by the Federal Reserve and required to file
periodic reports of its operations and any additional information that the Federal Reserve
may require. Our activities at the holding company level are limited to:

| |  | banking and managing or controlling banks;
| | - | ------------------------------------------

| |  | furnishing services to or performing services for our subsidiaries; and
| | - | -----------------------------------------------------------------------

| |  | engaging in other activities that the Federal Reserve determines to be so closely related
to banking and managing or controlling banks as to be a proper incident thereto.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investments,
Control, and Activities. With certain limited exceptions, the BHCA requires every bank
holding company to obtain the prior approval of the Federal Reserve before:

| |  | acquiring substantially all the assets of any bank;
| | - | ---------------------------------------------------

| |  | acquiring direct or indirect ownership or control of any voting shares of any bank if
after the acquisition it would own or control more than 5% of the voting shares of such
bank (unless it already owns or controls the majority of such shares); or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | merging or consolidating with another bank holding company.
| | - | -----------------------------------------------------------

In
addition, and subject to certain exceptions, the BHCA and the Change in Bank Control Act
require Federal Reserve approval prior to any person or company acquiring
control of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting securities of a
bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or
more, but less than 25%, of any class of voting securities and either the company has
registered securities under Section 12 of the Securities Exchange Act of 1934 or no other
person owns a greater percentage of that class of voting securities immediately after the
transaction. Our common stock is registered under the Securities Exchange Act of 1934. The
regulations provide a procedure for challenge of the rebuttable control presumption.

Under
the Bank Holding Company Act, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of more than 5% of the voting shares of any
company engaged in, nonbanking activities unless the Federal Reserve Board has found those
activities to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank holding company
include:

11

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| |  | making or servicing loans and certain types of leases;
| | - | ------------------------------------------------------

| |  | engaging in certain insurance and discount brokerage activities;
| | - | ----------------------------------------------------------------

| |  | performing certain data processing services;
| | - | --------------------------------------------

| |  | acting in certain circumstances as a fiduciary or investment or financial adviser;
| | - | ----------------------------------------------------------------------------------

| |  | owning savings associations; and
| | - | --------------------------------

| |  | making investments in certain corporations or projects designed primarily to promote
community welfare.
| | - | -------------------------------------------------------------------------------------------------------

The
Federal Reserve Board imposes certain capital requirements on our holding company under
the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of
qualifying capital to risk-weighted assets. These requirements are described
below under Capital Regulations. Subject to capital requirements and certain
other restrictions, our holding company is able to borrow money to make a capital
contribution to our bank, and these loans may be repaid from dividends paid from our bank
to our company. Our ability to pay dividends is subject to regulatory restrictions as
described below in Beach First National Bank  Dividends. Our holding
company is also able to raise capital for contribution to our bank by issuing securities
without having to receive regulatory approval, subject to compliance with federal and
state securities laws.

Source
of Strength; Cross-Guarantee. In accordance with Federal Reserve Board policy, our
holding company is expected to act as a source of financial strength to our bank and to
commit resources to support our bank in circumstances in which our holding company might
not otherwise do so. Under the Bank Holding Company Act, the Federal Reserve Board may
require a bank holding company to terminate any activity or relinquish control of a
nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal Reserve
Boards determination that such activity or control constitutes a serious risk to the
financial soundness or stability of any subsidiary depository institution of the
banks holding company. Further, federal bank regulatory authorities have additional
discretion to require a bank holding company to divest itself of any bank or nonbank
subsidiary if the agency determines that divestiture may aid the depository
institutions financial condition.

The
Company is subject to the obligations and restrictions described above. However,
management currently does not expect that any of these provisions will have any material
impact on our operations.

The
Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act, previously known as the Financial
Services Modernization Act of 1999, was signed into law on November 12, 1999. Among other
things, the Act repeals the restrictions on banks affiliating with securities firms
contained in sections 20 and 32 of the Glass-Steagall Act. The Act also permits bank
holding companies that become financial holding companies to engage in a statutorily
provided list of financial activities, including insurance and securities underwriting and
agency activities, merchant banking, and insurance company portfolio investment
activities. The Act also authorizes activities that are complementary to
financial activities.

The
Act is intended, in part, to grant to community banks certain powers as a matter of right
that larger institutions have accumulated on an ad hoc basis. Nevertheless, the Act may
have the result of increasing the amount of competition that we face from larger
institutions and other types of companies. In fact, it is not possible to predict the full
effect that the Act will have on us.

South
Carolina State Regulation. As a South Carolina bank holding company under the South
Carolina Banking and Branching Efficiency Act, we are subject to limitations on sale or
merger and to regulation by the South Carolina Board of Financial Institutions. Prior to
acquiring the capital stock of a national bank, we are not required to obtain the approval
of the Board, but we must notify them at least 15 days prior to doing so. We must receive
the Boards approval prior to engaging in the acquisition of a South Carolina state
chartered bank or another South Carolina bank holding company.

12

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Beach
First National Bank. Our bank, Beach First National Bank, operates as a national
banking association incorporated under the laws of the United States and subject to
examination by the Office of the Comptroller of the Currency. Deposits in the bank are
insured by the FDIC up to a maximum amount, which is generally $100,000 per depositor
subject to aggregation rules.

The
Office of the Comptroller of the Currency and the FDIC regulate or monitor virtually all
areas of our banks operations, including:

| |  | security devices and procedures;
| | - | --------------------------------

| |  | adequacy of capitalization and loss reserves;
| | - | ---------------------------------------------

| |  | loans;
| | - | ------

| |  | investments;
| | - | ------------

| |  | borrowings;
| | - | -----------

| |  | deposits;
| | - | ---------

| |  | mergers;
| | - | --------

| |  | issuances of securities;
| | - | ------------------------

| |  | payment of dividends;
| | - | ---------------------

| |  | interest rates payable on deposits;
| | - | -----------------------------------

| |  | interest rates or fees chargeable on loans;
| | - | -------------------------------------------

| |  | establishment of branches;
| | - | --------------------------

| |  | corporate reorganizations;
| | - | --------------------------

| |  | maintenance of books and records; and
| | - | -------------------------------------

| |  | adequacy of staff training to carry on safe lending and deposit gathering practices.
| | - | ------------------------------------------------------------------------------------

The
Office of the Comptroller of the Currency requires banks to maintain specified capital
ratios and imposes limitations on banks aggregate investment in real estate, bank
premises, and furniture and fixtures. The Office of the Comptroller of the Currency also
requires banks to prepare quarterly reports on their financial condition and to conduct
annual audits of their financial affairs in compliance with its minimum standards and
procedures.

Under
the FDIC Improvement Act, all insured institutions must undergo regular on-site
examinations by their appropriate banking agency. The cost of examinations of insured
depository institutions and any affiliates may be assessed by the appropriate agency
against each institution or affiliate as it deems necessary or appropriate. Insured
institutions are required to submit annual reports to the FDIC, their federal regulatory
agency, and their state supervisor when applicable. The FDIC Improvement Act directs the
FDIC to develop a method for insured depository institutions to provide supplemental
disclosure of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of condition
or any other report of any insured depository institution. The FDIC Improvement Act also
requires the federal banking regulatory agencies to prescribe, by regulation, standards
for all insured depository institutions and depository institution holding companies
relating, among other things, to the following:

| |  | internal controls;
| | - | ------------------

| |  | information systems and audit systems;
| | - | --------------------------------------

| |  | loan documentation;
| | - | -------------------

| |  | credit underwriting;
| | - | --------------------

| |  | interest rate risk exposure; and
| | - | --------------------------------

| |  | asset quality.
| | - | --------------

13

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National
banks and their holding companies which have been chartered or registered or have
undergone a change in control within the past two years or which have been deemed by the
Office of the Comptroller of the Currency or the Federal Reserve Board to be troubled
institutions must give the Office of the Comptroller of the Currency or the Federal
Reserve Board 30 days prior notice of the appointment of any senior executive
officer or director. Within the 30 day period, the Office of the Comptroller of the
Currency or the Federal Reserve Board, as the case may be, may approve or disapprove any
such appointment.

Deposit
Insurance. The FDIC has adopted a risk-based assessment system for determining an
insured depository institutions insurance assessment rate. The system takes into
account the risks attributable to different categories and concentrations of assets and
liabilities. An institution is placed into one of three capital categories: (1) well
capitalized; (2) adequately capitalized; or (3) undercapitalized. The FDIC also assigns an
institution to one of three supervisory subgroups, based on the FDICs determination
of the institutions financial condition and the risk posed to the deposit insurance
funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institutions capital group and supervisory subgroup. In addition, the FDIC imposes
assessments to help pay off the $780 million in annual interest payments on the $8.1
billion Financing Corporation bonds issued in the late 1980s as part of the government
rescue of the thrift industry. The FDIC assessment rate on our bank deposits currently is
zero, but may change in the future. The FDIC may increase or decrease the assessment rate
schedule on a semiannual basis. An increase in the BIF assessment rate could have a
material adverse effect on our earnings, depending on the amount of the increase.

The
FDIC may terminate its insurance of deposits if it finds that the institution has engaged
in unsafe and unsound practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation, rule, order, or condition
imposed by the FDIC.

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

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

The
Federal Reserve Board issued Regulation W, which codifies prior regulations under Sections
23A and 23B of the Federal Reserve Act and interpretative guidance with respect to
affiliate transactions. Regulation W incorporates the exemption from the affiliate
transaction rules but expands the exemption to cover the purchase of any type of loan or
extension of credit from an affiliate. In addition, under Regulation W:

| |  | a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;
| | - | -----------------------------------------------------------------------------------

| |  | covered transactions and other specified transactions between a bank or its subsidiaries
and an affiliate must be on terms and conditions that are consistent with safe and sound
banking practices; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | with some exceptions, each loan or extension of credit by a bank to an affiliate must be
secured by collateral with a market value ranging from 100% to 130%, depending on the type
of collateral, of the amount of the loan or extension of credit.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Regulation
W generally excludes all non-bank and non-savings association subsidiaries of banks from
treatment as affiliates, except to the extent that the Federal Reserve Board decides to
treat these subsidiaries as affiliates. The regulation also limits the amount of loans
that could be purchased by a bank from an affiliate to not more than 100% of the
banks capital and surplus.

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

Branching.
          National banks are required by the National Bank Act to adhere to branch office
          banking laws applicable to state banks in the states in which they are located.
          Under current South Carolina law, the bank may open branch offices throughout
          South Carolina with the prior approval of the Office of the Comptroller of the
          Currency. In addition, with prior regulatory approval, the bank will be able to
          acquire existing banking operations in South Carolina. Furthermore, federal
          legislation permits interstate branching, including out-of-state acquisitions by
          bank holding companies, interstate branching by banks if allowed by state law,
          and interstate merging by banks. South Carolina law, with limited exceptions,
          currently permits branching across state lines through interstate mergers, but
          not de-novo branching.

Community
Reinvestment Act. The Community Reinvestment Act requires that, in connection with
examinations of financial institutions within their respective jurisdictions, the Federal
Reserve, the FDIC, or the Office of the Comptroller of the Currency shall evaluate the
record of each financial institution in meeting the credit needs of its local community,
including low and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or facility. Failure
to adequately meet these criteria could impose additional requirements and limitations on
our bank. Under the Gramm-Leach-Bliley Act, banks with aggregate assets of not more than
$250 million will be subject to a Community Reinvestment Act examination only once every
60 months if the bank receives an outstanding rating, once every 48 months if it receives
a satisfactory rating, and as needed if the rating is less than satisfactory.
Additionally, under the Gramm-Leach-Bliley Act, banks are required to publicly disclose
the terms of various Community Reinvestment Act-related agreements.

All
institutions receive one of four ratings based on their performance: Outstanding,
Satisfactory, Needs Improvement or Substantial Noncompliance. An institution that receives
a rating of Substantial Noncompliance would be subject to enforcement action. Beach First
National Bank is strongly committed to providing credit needs to individuals in the
communities that we serve. Beach First National Bank received a satisfactory
rating in the most recent evaluation.

The
Gramm-Leach-Bliley Act. Under the Gramm-Leach-Bliley Act, subject to certain
conditions imposed by their respective banking regulators, national and state-chartered
banks are permitted to form financial subsidiaries that may conduct financial
or incidental activities, thereby permitting bank subsidiaries to engage in certain
activities that previously were impermissible. The Gramm-Leach-Bliley Act imposes several
safeguards and restrictions on financial subsidiaries, including that the parent
banks equity investment in the financial subsidiary be deducted from the banks
assets and tangible equity for purposes of calculating the banks capital adequacy.
In addition, the Gramm-Leach-Bliley Act imposes new restrictions on transactions between a
bank and its financial subsidiaries similar to restrictions applicable to transactions
between banks and nonbank affiliates.

15

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The
Gramm-Leach-Bliley Act also contains provisions regarding consumer privacy. These
provisions require financial institutions to disclose their policy for collecting and
protecting confidential information. Customers generally may prevent financial
institutions from sharing personal financial information with nonaffiliated third parties
except for third parties that market an institutions own products and services.
Additionally, financial institutions generally may not disclose consumer account numbers
to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other
marketing to the consumer.

Other
Regulations. Interest and other charges collected or contracted for by the bank are
subject to state usury laws and federal laws concerning interest rates. The banks
loan operations are also subject to federal laws applicable to credit transactions, such
as:

| |  | the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer
borrowers;
| | - | ----------------------------------------------------------------------------------------------

| |  | the Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the community it serves;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other
prohibited factors in extending credit;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit
reporting agencies;
| | - | -------------------------------------------------------------------------------------------------------------------

| |  | the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by
collection agencies; and
| | - | -----------------------------------------------------------------------------------------------------------------------

| |  | the rules and regulations of the various federal agencies charged with the responsibility
of implementing such federal laws.
| | - | ----------------------------------------------------------------------------------------------------------------------------

The deposit operations of the bank
also are subject to:

| |  | the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of
consumer financial records and prescribes procedures for complying with administrative
subpoenas of financial records; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to
implement that act, which governs automatic deposits to and withdrawals from deposit
accounts and customers rights and liabilities arising from the use of automated
teller machines and other electronic banking services.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capital
Regulations. The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among banks and bank
holding companies and account for off-balance sheet items. The guidelines are minimums,
and the federal regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios in excess of the minimums. We have not received any notice
indicating that either our holding company or our bank is subject to higher capital
requirements. The current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total capital ratio equal to
8%, of which at least 4% must be Tier 1 capital. Tier 1 capital includes common
shareholders equity, qualifying perpetual preferred stock, and minority interests in
equity accounts of consolidated subsidiaries, but excludes goodwill and most other
intangibles and excludes the allowance for loan and lease losses. Tier 2 capital includes
the excess of any preferred stock not included in Tier 1 capital, mandatory convertible
securities, hybrid capital instruments, subordinated debt and intermediate term-preferred
stock, and general reserves for loan and lease losses up to 1.25% of risk-weighted assets.

16

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

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

The
FDIC Improvement Act established a new capital-based regulatory scheme designed to promote
early intervention for troubled banks which requires the FDIC to choose the least
expensive resolution of bank failures. The new capital-based regulatory framework contains
five categories of compliance with regulatory capital requirements, including well
capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.
To qualify as a well capitalized institution, a bank must have a leverage
ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total
risk-based capital ratio of no less than 10%, and the bank must not be under any order or
directive from the appropriate regulatory agency to meet and maintain a specific capital
level. Currently, we qualify as well capitalized.

Under
the FDIC Improvement Act regulations, the applicable agency can treat an institution as if
it were in the next lower category if the agency determines (after notice and an
opportunity for hearing) that the institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of a
financial institution increases, and the permissible activity of the institution
decreases, as it moves downward through the capital categories. Institutions that fall
into one of the three undercapitalized categories may be required to do some or all of the
following:

| |  | submit a capital restoration plan;
| | - | ----------------------------------

| |  | raise additional capital;
| | - | -------------------------

| |  | restrict their growth, deposit interest rates, and other activities;
| | - | --------------------------------------------------------------------

| |  | improve their management;
| | - | -------------------------

| |  | eliminate management fees; or
| | - | -----------------------------

| |  | divest themselves of all or a part of their operations.
| | - | -------------------------------------------------------

These
capital guidelines can affect us in several ways. If we grow at a rapid pace, our capital
may be depleted too quickly, and a capital infusion from our holding company may be
necessary which could impact our ability to pay dividends. Our capital levels currently
are adequate; however, rapid growth, poor loan portfolio performance, poor earnings
performance, or a combination of these factors could change our capital position in a
relatively short period of time. If we fail to meet these capital requirements, our bank
would be required to develop and file a plan with the Office of the Comptroller of the
Currency describing the means and a schedule for achieving the minimum capital
requirements. In addition, our bank would generally not receive regulatory approval of any
application that requires the consideration of capital adequacy, such as a branch or
merger application, unless our bank could demonstrate a reasonable plan to meet the
capital requirement within a reasonable period of time. A bank that is not well
capitalized is also subject to certain limitations relating to so-called
brokered deposits. Bank holding companies controlling financial institutions
can be called upon to boost the institutions capital and to partially guarantee the
institutions performance under their capital restoration plans.

17

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Enforcement
Powers. The Financial Institutions Reform, Recovery and Enforcement Act expanded and
increased civil and criminal penalties available for use by the federal regulatory
agencies against depository institutions and certain institution-affiliated
parties. Institution-affiliated parties primarily include management, employees, and
agents of a financial institution, as well as independent contractors and consultants such
as attorneys and accountants and others who participate in the conduct of the financial
institutions affairs. These practices can include the failure of an institution to
timely file required reports or the filing of false or misleading information or the
submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for
such violations. Criminal penalties for some financial institution crimes have been
increased to 20 years. In addition, regulators are provided with greater flexibility to
commence enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance. Furthermore,
banking agencies power to issue cease-and-desist orders were expanded. Such orders
may, among other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnification or guarantees
against loss. A financial institution may also be ordered to restrict its growth, dispose
of certain assets, rescind agreements or contracts, or take other actions as determined by
the ordering agency to be appropriate.

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

Proposed
Legislation and Regulatory Action.New regulations and statutes are regularly proposed
that contain wide-ranging proposals for altering the structures, regulations, and
competitive relationships of the nations financial institutions. We cannot predict
whether or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.

18

---

# Item 2.   Description of
Property

We
currently operate from a six branch network along the South Carolina coast. Our branch
offices are located in Beaufort, Horry, and Georgetown Counties.

|               |  | 
|-------------- |  | 
|Type of Office |  | 
|               |  | 
|Main office    |  | 
|               |  | 
|Branch         |  | 
|               |  | 
|               |  | 
|Branch         |  | 
|               |  | 
|               |  | 
|Branch         |  | 
|               |  | 
|               |  | 
|Branch         |  | 
|               |  | 
|               |  | 
|Branch         |  | 
|               |  | 

---

(1)    We own the building but lease the land.

On
February 8, 2006, we entered into a Commercial Purchase Agreement with Ford Shelley, Jr.
(Buyer) related to the sale of our main office located at 1550 Oak Street,
Myrtle Beach, South Carolina for $1.5 million.

Closing,
which is scheduled for March 2006, is expressly contingent upon the parties entering into
a lease agreement wherein we will lease back the property from Buyer. Our new
headquarters, being built in partnership with Nelson Mullins Riley & Scarborough, LLP,
is expected to open in summer 2006 at the corner of 38th Avenue North and
Grissom Parkway. Once completed, we will move our main office to this location and Nelson
Mullins Riley & Scarborough will relocate its Myrtle Beach legal office to the
building. We purchased the land for approximately $1.8 million, and we intend to
contribute the land to an entity of which we will own two-thirds and Nelson Mullins Riley
& Scarborough will own one-third. We will finance the construction project through a
third-party lender with each of the owners being responsible for their respective
interests in the project. We estimate that the total land and construction project will
cost $7.0 million, exclusive of tenant improvements. We will lease two-thirds of the
building (approximately 30,000 square feet) from the entity that owns the building.
Because we will initially only occupy approximately 11,000 square feet of space, we intend
to lease the other 19,000 square feet of our portion to outside tenants. Nelson Mullins
Riley & Scarborough will lease the remaining one-third of the building from the entity
that owns it.

We
believe that all of our properties are adequately covered by insurance.

# Item 3.   Legal
Proceedings.

There
are no material legal proceedings.

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

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

19

---

# Part II 
Item 5.   Market for Common Equity and Related Stockholder Matters.

Our
common stock was approved for listing on The NASDAQ National Market in June 2005 under the
symbol BFNB. Prior to such listing, our common stock was quoted on the OTC
Bulletin Board under the symbol BFNB.OB. As of March 3, 2006, we had
approximately 1,383 shareholders of record. Unless otherwise noted, the following table
shows the high and low sales prices published by NASDAQ for each quarter within the last
two fiscal years.

| |  | High | Low             
| |  | ---- | ----------------
| |  |      | Year end 2005:  
| |  |      | First Quarter * 
| |  |      | Second Quarter* 
| |  |      | Third Quarter   
| |  |      | Fourth Quarter  
| |  |      |                 
| |  |      | Year end 2004:  
| |  |      | First Quarter * 
| |  |      | Second Quarter *
| |  |      | Third Quarter * 
| |  |      | Fourth Quarter *

_____________________________________* For the periods indicated, the
table shows the reported high and low bid information (adjusted for stock splits) on the
OTC Bulletin Board. The prices are quotations, which reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual transactions.

To
date, we have not paid cash dividends on our common stock. We currently intend to retain
earnings to support operations and finance expansion and therefore do not anticipate
paying cash dividends in the foreseeable future. All of our outstanding shares of common
stock are entitled to share equally in dividends from funds legally available when, and
if, declared by the board of directors. The company declared a 3 for 2 stock split in June
2004 and has not paid any cash dividends.

# Item 6.   Managements Discussion and Analysis of Financial Condition and Results of Operations

In
response to this Item, the information contained on pages 8 through 21 of the
Companys Annual Report to Shareholders for the year ended December 31, 2005 is
incorporated herein by reference.

# Item 7.   Financial
Statements

In
response to this Item, the information contained on pages 23 through 46 of the
companys Annual Report to Shareholders for the year ended December 31, 2005 is
incorporated herein by reference.

# Item 8.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

20

---

# Item 8A.   Controls and
Procedures

As
of the end of the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our current
disclosure controls and procedures are effective as of December 31, 2005.

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

# Part III

# Item 9.   Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act

In
response to this Item, additional information is contained on page 13 of the
companys Proxy Statement for the Annual Meeting of Shareholders to be held on April
19, 2006 is incorporated herein by reference.

We
have adopted a Code of Ethics that applies to our board of directors, principal executive
officer, principal financial officer, senior financial officers, and other executive
officers in accordance with the Sarbanes-Oxley Corporate Responsibility Act of 2002. The
Code of Ethics is available without charge to shareholders upon request. Shareholders
should contact our chief financial officer, Richard N. Burch, at our main office to obtain
a copy.

# Item 10.  Executive
Compensation

In
response to this Item, the information contained on pages 6 through 8 of the
companys Proxy Statement for the Annual Meeting of Shareholders to be held on April
19, 2006 is incorporated herein by reference.

# Item 11.  Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

In
response to this Item, the information contained on pages 6 through 9 of the
companys Proxy Statement for the Annual Meeting of Shareholders to be held on April
19, 2006 is incorporated herein by reference.

# Item 12.  Certain
Relationships and Related Transactions

In
response to this Item, the information contained on page 13 of the companys Proxy
Statement for the Annual Meeting of Shareholders to be held on April 19, 2006 is
incorporated herein by reference.

# Item 13.  Exhibits

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

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

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

21

---

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

|10.1 | Employment Agreement of Walter E. Standish, III with the Company dated March 4, 2000
(incorporated by reference to Exhibit 10.9 of the Companys Form 10-KSB for the year
ended December 31, 2005).*
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Description of the Director Deferred Compensation Plan (incorporated to Exhibit 10.1 to
the Companys Form 10-QSB filed with the SEC on November 14, 2002).*
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Description of the Executive Deferred Compensation Plan (incorporated to Exhibit 10.2 to
the Companys Form 10-QSB filed with the SEC on November 14, 2002).*
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Description of the Split Dollar Life Insurance Plan (incorporated to Exhibit 10.3 to the
Companys Form 10-QSB filed with the SEC on November 14, 2002).*
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Employment Agreement of Walter E. Standish, III with the Company dated February 24, 2004
(incorporated to Exhibit 10.5 to the Companys Form 10-KSB filed with the SEC on
March 19, 2004).*
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Beach First National Bancshares, Inc. 1997 Stock Option Plan and Form of Option Agreement
(incorporated by reference to Exhibit 10.7 of the Companys Form 10-KSB for the
fiscal year ended December 31, 1996).*
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Commercial Purchase Agreement between Ford Shelley, Jr. and the Company dated February 8, 2006.
|---- | -----------------------------------------------------------------------------------------------

|10.8 | Amendment to Employment Agreement of Walter E. Standish, III with the Company dated December 29, 2005.*
|---- | -------------------------------------------------------------------------------------------------------

|13 | Annual Report to Shareholders for the year ended December 31, 2005.
|-- | -------------------------------------------------------------------

|21.1 | Subsidiaries of the Company
|---- | ---------------------------

|23 | Consent of Independent Registered Public Accounting Firm.
|-- | ---------------------------------------------------------

|24 | Power of Attorney (contained on the signature page hereof).
|-- | -----------------------------------------------------------

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

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

|32 | Section 1350 Certifications.
|-- | ----------------------------

__________________________* Indicates Management contract or
compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report
on Form 10-KSB.

# Item 14.   Principal
Accountant Fees and Services

In
response to this Item, the information contained on page 12 of the companys Proxy
Statement for the Annual Meeting of Shareholders to be held on April 19, 2006 is
incorporated herein by reference.

22

---

# SIGNATURES

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

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

|Date:  March 20, 2006 |  | By:  /s/ Walter E. Standish, III
        Walter E. Standish, III        
President and Chief Executive Officer
|--------------------- |  | --------------------------------------------------------------------------------------------------------------

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

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

|Signature | Title | Date
|--------- | ----- | ----

| |  | 
| |  | 

|/s/ Michael Bert Anderson
Michael Bert Anderson | Director | March 20, 2006
|----------------------------------------------- | -------- | --------------

|/s/ Orvis Bartlett Buie
Orvis Bartlett Buie | Director | March 20, 2006
|------------------------------------------- | -------- | --------------

|/s/ Raymond E. Cleary, III
Raymond E. Cleary, III | Chairman and Director | March 20, 2006
|------------------------------------------------- | --------------------- | --------------

|/s/ E.Thomas Fulmer
E.Thomas Fulmer | Director | March 20, 2006
|----------------------------------- | -------- | --------------

|/s/ Michael D. Harrington
Michael D. Harrington | Director | March 20, 2006
|----------------------------------------------- | -------- | --------------

|/s/ Joe N. Jarrett, Jr.
Joe N. Jarrett, Jr. | Director | March 20, 2006
|------------------------------------------- | -------- | --------------

|/s/ Richard E. Lester
Richard E. Lester | Director | March 20, 2006
|--------------------------------------- | -------- | --------------

23

---

|Signature | Title | Date
|--------- | ----- | ----

|/s/ Leigh Ammons Meese
Leigh Ammons Meese | Director | March 20, 2006
|----------------------------------------- | -------- | --------------

|/s/ Rick H. Seagroves
Rick H. Seagroves | Director | March 20, 2006
|--------------------------------------- | -------- | --------------

|/s/ Don J. Smith
Don J. Smith | Director | March 20, 2006
|----------------------------- | -------- | --------------

|/s/ Samuel Robert Spann
Samuel Robert Spann | Director | March 20, 2006
|------------------------------------------- | -------- | --------------

|/s/ B. Larkin Spivey, Jr.
B. Larkin Spivey, Jr. | Director | March 20, 2006
|----------------------------------------------- | -------- | --------------

|/s/ Walter E. Standish, III
Walter E. Standish, III | President, CEO and Director | March 20, 2006
|--------------------------------------------------- | --------------------------- | --------------

|/s/ James C. Yahnis
James C. Yahnis | Director | March 20, 2006
|----------------------------------- | -------- | --------------

|/s/ Richard N. Burch
Richard N. Burch | Chief Financial Officer andPrincipal
Accounting Officer | March 20, 2006
|------------------------------------- | ------------------------------------------------------- | --------------

24

---

# Exhibit List:

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

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

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

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

|10.1 | Employment Agreement of Walter E. Standish, III with the Company dated March 4, 2000
(incorporated by reference to Exhibit 10.9 of the Companys Form 10-KSB for the year
ended December 31, 2005).*
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Description of the Director Deferred Compensation Plan (incorporated to Exhibit 10.1 to
the Companys Form 10-QSB filed with the SEC on November 14, 2002).*
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Description of the Executive Deferred Compensation Plan (incorporated to Exhibit 10.2 to
the Companys Form 10-QSB filed with the SEC on November 14, 2002).*
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Description of the Split Dollar Life Insurance Plan (incorporated to Exhibit 10.3 to the
Companys Form 10-QSB filed with the SEC on November 14, 2002).*
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Employment Agreement of Walter E. Standish, III with the Company dated February 24, 2004
(incorporated to Exhibit 10.5 to the Companys Form 10-KSB filed with the SEC on
March 19, 2004).*
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Beach First National Bancshares, Inc. 1997 Stock Option Plan and Form of Option Agreement
(incorporated by reference to Exhibit 10.7 of the Companys Form 10-KSB for the
fiscal year ended December 31, 1996).*
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Commercial Purchase Agreement between Ford Shelley, Jr. and the Company dated February 8, 2006.
|---- | -----------------------------------------------------------------------------------------------

|10.8 | Amendment to Employment Agreement of Walter E. Standish, III with the Company dated December 29, 2005.*
|---- | -------------------------------------------------------------------------------------------------------

|13 | Annual Report to Shareholders for the year ended December 31, 2005.
|-- | -------------------------------------------------------------------

|21.1 | Subsidiaries of the Company
|---- | ---------------------------

|23 | Consent of Independent Registered Public Accounting Firm.
|-- | ---------------------------------------------------------

|24 | Power of Attorney (contained on the signature page hereof).
|-- | -----------------------------------------------------------

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

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

|32 | Section 1350 Certifications.
|-- | ----------------------------

__________________________* Indicates Management contract or
compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report
on Form 10-KSB.

25