<PAGE> 1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             -----------------------

                                   FORM 10-QSB

(Mark One)

  X     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
-----   ACT OF 1934
        For the quarterly period ended March 31, 2001
                                       --------------

        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
-----   SECURITIES EXCHANGE ACT OF 1934
        For the transition period from                  to
                                       ---------------      -------------------


                          COMMISSION FILE NUMBER 1-5735


                        UNION FINANCIAL BANCSHARES, INC.
                        --------------------------------


Delaware                                                 57-1001177
--------------------------------------------------------------------------------
(Jurisdiction of Incorporation)             (I.R.S. Employer Identification No.)

203 West Main Street, Union, South Carolina                           29379
-------------------------------------------                     ----------------
(Address of Principal Executive Offices)                            (Zip Code)

Registrant's telephone number, including area code (864)429-1864

State the number of shares outstanding of each of the issuer's classes of common
stock,  as of the  latest  practicable  date:  The  Corporation  had  issued and
outstanding  1,917,895  shares,  $0.01 par value,  common  stock as of April 30,
2001.





<PAGE> 2



                        UNION FINANCIAL BANCSHARES, INC.


                                      INDEX

PART I.           FINANCIAL INFORMATION                                  PAGE
                  ---------------------                                  ----

            Item 1.  Consolidated Financial Statements (unaudited)

            Consolidated Balance Sheets as of March 31, 2001
             and September 30, 2000                                         3

            Consolidated Statements of Income for the three and six months
             ended March 31, 2001 and 2000                                  4

            Consolidated Statements of Cash Flows for the six
             months ended March 31, 2001 and 2000                           5

            Consolidated Statements of Shareholders' Equity for the
            six months ended March 31, 2001 and 2000                        6

            Notes to Consolidated Financial Statements                      7

            Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations                 10


PART II.    OTHER INFORMATION                                              15
            -----------------


            Signatures                                                     17





<PAGE> 3
<TABLE>
<CAPTION>


UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2001 (unaudited) and September 30, 2000

                                                                                               MARCH 31,       SEPTEMBER 30,
ASSETS                                                                                           2001              2000
                                                                                              -----------       ------------
                                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                                                           <C>               <C>
Cash                                                                                          $   1,881         $   2,068
Short term interest-bearing deposits                                                             11,311             2,545
                                                                                              ---------         ---------
Total cash and cash equivalents                                                                  13,192             4,613
                                                                                              ---------         ---------
Investment and mortgage-backed securities:
  Held to maturity                                                                               12,730            37,652
  Available for sale                                                                             51,513            29,240
                                                                                              ---------         ---------
Total investment and mortgage-backed securities                                                  64,243            66,892
Loans, net
  Held for sale                                                                                   5,210             1,801
  Held for investment                                                                           160,693           166,006
                                                                                              ---------         ---------
Total loans receivable, net                                                                     165,903           167,807
Office properties and equipment, net                                                              6,960             6,485
Federal Home Loan Bank Stock, at cost                                                             2,625             2,625
Accrued interest receivable                                                                       1,680             1,629
Mortgage servicing rights                                                                           828               452
Goodwill intangible                                                                               6,628             7,042
Other assets                                                                                      2,444             1,519
                                                                                              ---------         ---------
TOTAL ASSETS                                                                                  $ 264,503         $ 259,064
                                                                                              =========         =========
LIABILITIES

Deposit accounts                                                                              $ 192,940         $ 187,974
Advances from the Federal Home Loan Bank and other borrowings                                    46,368            47,687
Accrued interest on deposits                                                                        392               329
Advances from borrowers for taxes and insurance                                                     238               473
Other liabilities                                                                                 1,638               677
                                                                                              ---------         ---------
TOTAL LIABILITIES                                                                               241,576           237,140
                                                                                              ---------         ---------
SHAREHOLDERS' EQUITY

Serial preferred stock, no par value,
  authorized - 500,000 shares, issued
  and outstanding - None                                                                              0                 0
Common stock - $0.01 par value,
  authorized - 2,500,000 shares,
   issued and outstanding - 1,917,895 shares at 3/31/01 and 1,911,005 at 9/30/00                     20                20
Additional paid-in capital                                                                       11,260            11,314
Accumulated other comprehensive income                                                           (1,346)           (2,050)
Retained earnings, substantially restricted                                                      12,993            12,640
                                                                                              ---------         ---------
TOTAL SHAREHOLDERS' EQUITY                                                                       22,927            21,924
                                                                                              ---------         ---------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                    $ 264,503         $ 259,064
                                                                                              =========         =========
See notes to consolidated financial statements.
</TABLE>


                                                              3


<PAGE> 4
<TABLE>
<CAPTION>

UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended March 31, 2001 (unaudited) and 2000 (unaudited)

                                                                       THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                                    MARCH 31,         MARCH 31,          MARCH 31,        MARCH 31,
                                                                      2001              2000               2001             2000
                                                                  ------------      ------------       ------------     ------------
                                                                      (DOLLARS IN THOUSANDS)               (DOLLARS IN THOUSANDS)
<S>                                                               <C>                <C>               <C>               <C>
INTEREST INCOME:
  Loans                                                           $     3,629        $     3,773       $     7,457       $     7,222
  Deposits and federal funds sold                                          78                 19               159                39
  Mortgage-backed securities                                              651                266             1,341               538
  Interest and dividends on
   investment securities                                                  338                384               681               751
                                                                  -----------        -----------       -----------       -----------
TOTAL INTEREST INCOME                                                   4,696              4,442             9,638             8,550
                                                                  -----------        -----------       -----------       -----------
INTEREST EXPENSE:
  Deposit accounts                                                      2,293              2,145             4,546             3,815
  Advances from the FHLB and other borrowings                             667                587             1,526             1,292
                                                                  -----------        -----------       -----------       -----------
TOTAL INTEREST EXPENSE                                                  2,960              2,732             6,072             5,107
                                                                  -----------        -----------       -----------       -----------
NET INTEREST INCOME                                                     1,736              1,710             3,566             3,443
  Provision for loan losses                                                11                  0                35                50
                                                                  -----------        -----------       -----------       -----------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                                            1,725              1,710             3,531             3,393
                                                                  -----------        -----------       -----------       -----------
NON INTEREST INCOME:
  Fees for financial services                                             188                300               449               616
  Loan servicing fees (costs)                                             (10)                23                16                38
  Net gains on sale of investments                                          0                  0                 3                 0
  Net gains on sale of loans                                               84                 22               193               131
                                                                  -----------        -----------       -----------       -----------
TOTAL NON INTEREST INCOME                                                 262                345               661               785
                                                                  -----------        -----------       -----------       -----------
NON INTEREST EXPENSE:
  Compensation and employee benefits                                      728                792             1,465             1,486
  Occupancy and equipment                                                 278                367               611               698
  Deposit insurance premiums                                                9                  8                16                29
  Professional services                                                    85                 94               178               179
  Real estate operations                                                    0                 10                16                15
  Goodwill amortization                                                   162                 96               327               185
  Other                                                                   219                218               440               406
                                                                  -----------        -----------       -----------       -----------
TOTAL NON INTEREST EXPENSE                                              1,481              1,585             3,053             2,998
                                                                  -----------        -----------       -----------       -----------
INCOME BEFORE INCOME TAXES                                                506                470             1,139             1,180
Income tax expense                                                        178                164               404               417
                                                                  -----------        -----------       -----------       -----------
NET INCOME                                                        $       328        $       306       $       735       $       763
                                                                  ===========        ===========       ===========       ===========
BASIC NET INCOME PER COMMON SHARE                                 $      0.17        $      0.16       $      0.38       $      0.42
                                                                  ===========        ===========       ===========       ===========
DILUTED NET INCOME PER COMMON SHARE                               $      0.17        $      0.16       $      0.37       $      0.41
                                                                  ===========        ===========       ===========       ===========
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING

BASIC                                                               1,916,765          1,899,516         1,915,044         1,804,177

DILUTED                                                             1,965,848          1,943,791         1,962,650         1,851,545

See notes to consolidated financial statements.
</TABLE>

                                                                   4

<PAGE> 5
<TABLE>
<CAPTION>


UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 31, 2001 (unaudited) and 2000 (unaudited)

                                                                                 SIX MONTHS ENDED
                                                                         MARCH 31,              MARCH 31,
                                                                           2001                    2000
                                                                   --------------------    -------------------
                                                                                   (IN THOUSANDS)
<S>                                                                      <C>                   <C>
OPERATING ACTIVITIES:
Net income                                                                  $735                   $763
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Provision for loan losses                                                   35                     50
  Amortization of intangibles                                                414                    185
  Depreciation expense                                                       392                    216
  Recognition of deferred income, net of costs                               (52)                   (27)
  Deferral of fee income, net of costs                                        64                    224
  Loans originated for sale                                               17,068                 17,977
  Sale of loans                                                          (17,068)               (17,977)
  Gain on sale of loans                                                      190                    131
  Changes in operating assets and liabilities:
   (Increase) decrease in accrued interest receivable                        (51)                  (496)
   (Increase) decrease  in other assets                                     (925)                   472
   Increase (decrease) in other liabilities                                  726                    672
   Increase (decrease) in accrued interest payable                            63                    129
                                                             --------------------    -------------------
Net cash provided by operating activities                                  1,591                  2,319
                                                             --------------------    -------------------
INVESTING ACTIVITIES:

Purchase of investment and mortgage-backed securities:
   Held to maturity                                                            0                 (4,886)
   Available for sale                                                     (1,133)                (2,901)
Proceeds from sale of investment and mortgage-
    backed securities                                                      1,735                      0
Proceeds from maturity of investment and mortgage-
    backed securities:
   Available for sale                                                        950                      0
Principal repayments on mortgage-backed securities:
   Held to maturity                                                          321                    386
   Available for sale                                                        776                    975
Acquisition of SCCB                                                            0                 (2,410)
Net (increase) decrease in loans                                           2,258                 (2,633)
Net (increase) decrease in  mortgage servicing rights                       (376)                   666
Purchase of FHLB stock                                                         0                    (45)
Redemption of FHLB stock                                                       0                      0
Purchase of office properties and equipment                                 (867)                (1,206)
                                                             --------------------    -------------------
Net cash provided by (used by) investing activities                       $3,664               ($12,054)
                                                             --------------------    -------------------
FINANCING ACTIVITIES:

Proceeds from the dividend reinvestment plan                                   0                    123
Dividends paid in cash ($0.20 per share -2001
and $0.20 per share - 2000)                                                 (323)                  (317)
Proceeds from the exercise of stock options                                    0                     13
Increase in goodwill intangible                                                0                 (2,682)
Proceeds from term borrowings                                             (1,319)                (5,835)
Increase (Decrease) in deposit accounts                                    4,966                 19,382
                                                             --------------------    -------------------
Net cash provided by financing activities                                  3,324                 10,684
                                                             --------------------    -------------------

NET INCREASE IN CASH
   AND CASH EQUIVALENTS                                                    8,579                    949

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                                  4,613                  5,570
                                                             --------------------    -------------------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                                      $13,192                 $6,519
                                                             ====================    ===================
SUPPLEMENTAL DISCLOSURES:

Cash paid for:
  Income taxes                                                              $718                     $0
  Interest                                                                 6,009                  4,977

Non-cash transactions:
  Loans foreclosed                                                            71                    200

See notes to consolidated financial statements.
</TABLE>

                                                5

<PAGE> 6
<TABLE>
<CAPTION>

                                                UNION FINANCIAL BANCSHARES, INC.
                                         CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                      SIX MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)

                                                                              RETAINED       ACCUMULATED
                                                               ADDITIONAL     EARNINGS          OTHER          TOTAL
                                              COMMON STOCK      PAID-IN     SUBSTANTIALLY   COMPREHENSIVE   SHAREHOLDERS'
                                             SHARES    AMOUNT   CAPITAL       RESTRICTED        INCOME         EQUITY
                                             ------    ------   -------       ----------        ------         ------
                                                                   (In Thousands, Except Share Data)
<S>                                         <C>          <C>    <C>             <C>            <C>            <C>
BALANCE AT SEPTEMBER 30, 1999               1,357,214     14      5,484          11,019         (1,779)        14,738

Net income                                                                          763                           763

Other comprehensive income
 Unrealized losses on securities:
  Unrealized holding losses arising during
   period                                                                                         (572)          (572)
                                                                                                  ----           ----
Comprehensive income                                                                                              191

Options exercised                               2,200                13                                            13

Dividend reinvestment plan contributions       16,124      1        123                                           124

Acquisition of SC Community Bancshares        526,183      5      5,643                                         5,648

Cash dividend ($.20 per share)                                                     (317)                         (317)
                                         ------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000                   1,901,721    $20    $11,263         $11,465        ($2,351)       $20,397
                                         ====================================================================================
BALANCE AT SEPTEMBER 30, 2000               1,911,005     20     11,314          12,640         (2,050)        21,924

Net income                                                                          735                           735

 Other comprehensive income
  Unrealized gains on securities:
   Equity reclassification
    Unrealized holding gains arising during
     period                                                                                        113            113
Comprehensive income                                                                               591            591
                                                                                                   ---            ---
Equity reclassification                                            (113)                                         (113)

Dividend reinvestment plan contributions        6,890                59                                            59

Cash dividend ($.20 per share)                                                     (382)                         (382)
                                         ------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2001                   1,917,895    $20    $11,260         $12,993        ($1,346)       $22,927
                                         ====================================================================================

</TABLE>

                                                          6

<PAGE> 7



                        UNION FINANCIAL BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.    Presentation of Consolidated Financial Statements
      -------------------------------------------------

      The  accompanying  unaudited  consolidated  financial  statements of Union
      Financial Bancshares, Inc. (the "Corporation") were prepared in accordance
      with  instructions  for Form  10-QSB  and,  therefore,  do not include all
      disclosures   necessary  for  a  complete   presentation  of  consolidated
      financial condition,  results of operations,  and cash flows in conformity
      with generally accepted accounting  principles.  However,  all adjustments
      which  are,  in  the  opinion  of  management,   necessary  for  the  fair
      presentation of the interim  consolidated  financial  statements have been
      included.  All such adjustments are of a normal and recurring nature.  The
      consolidated  financial  statements include the Corporation's wholly owned
      subsidiary,   Provident  Community  Bank  (the  "Bank").  The  results  of
      operations  for the six months  ended March 31,  2001 are not  necessarily
      indicative  of the  results  which may be expected  for the entire  fiscal
      year.  The  consolidated  balance  sheet as of September 30, 2000 has been
      derived from the Company's audited financial  statements  presented in the
      annual  report  to  shareholders.  Certain  amounts  in the  prior  year's
      financial  statements have been  reclassified to conform with current year
      classifications.

      Additional  proposed  guidance  addresses  the  accounting  treatment  for
      goodwill  generated  in  a  purchase  business  combination   transaction.
      Proposed  guidance  by the FASB  requires  goodwill  to be carried at fair
      value and will no longer be amortized on a straight line basis. Management
      does  not  know  the  impact  of  the   proposed   pronouncement   on  the
      Corporation's financial condition.

2.    Income Per Share
      ----------------

      Income per share amounts for the three and six months ended March 31, 2001
      and 2000 were  computed  based on the  weighted  average  number of common
      shares outstanding  adjusted for the dilutive effect of outstanding common
      stock options during the periods.

3.    Assets Pledged
      --------------

      Approximately  $27,387,000 and $12,535,000 of debt securities at March 31,
      2001 and  September  30, 2000,  respectively,  were pledged by the Bank as
      collateral  to secure  deposits  of the State of South  Carolina,  Laurens
      County and certain other  liabilities.  The Bank pledges as collateral for
      Federal Home Loan Bank  advances  the Bank's  Federal Home Loan Bank stock
      and has entered into a blanket collateral  agreement with the Federal Home
      Loan  Bank  whereby  the  Bank  maintains,  free  of  other  encumbrances,
      qualifying mortgages (as defined) with unpaid principal balances equal to,
      when  discounted at 75% of the unpaid  principal  balances,  100% of total
      advances.


                                       7

<PAGE> 8



4.    Contingencies and Loan Commitments
      ----------------------------------

      The Bank is a party to financial instruments with  off-balance-sheet  risk
      in the  normal  course  of  business  to meet the  financing  needs of its
      customers.  These instruments  expose the Bank to credit risk in excess of
      the amount recognized on the balance sheet.

      The Bank's exposure to credit loss in the event of  nonperformance  by the
      other party to the financial  instrument for  commitments to extend credit
      is represented by the contractual  amount of those  instruments.  The Bank
      uses the same  credit  policies  in  making  commitments  and  conditional
      obligations  as it does for  on-balance-sheet  instruments.  Total  credit
      exposure at March 31, 2001 related to these items is summarized below:

      Loan Commitments:                                      Contract Amount
      ----------------                                       ---------------
            Approved loan commitments                         $   805,000
            Unadvanced portions of loans                        9,739,000
                                                             ------------
            Total loan commitments                            $10,544,000
                                                             ------------

      Loan  commitments to extend credit are agreements to lend to a customer as
      long  as  there  is no  violation  of  any  condition  established  in the
      contract.  Loan commitments generally have fixed expiration dates or other
      termination  clauses and may require  payment of a fee. The Bank evaluates
      each customer's  creditworthiness  on a case-by-case  basis. The amount of
      collateral  obtained  upon  extension  of credit is based on  management's
      credit  evaluation  of the counter  party.  Collateral  held is  primarily
      residential property. Interest rates on loan commitments are a combination
      of fixed and variable.

      Commitments  outstanding at March 31, 2001 consist of fixed and adjustable
      rate loans of  approximately  $10,544,000  at rates  ranging  from 6.5% to
      7.5%.  Commitments  to originate  loans  generally  expire within 30 to 60
      days.

      Commitments  to fund credit lines  (principally  variable  rate,  consumer
      lines   secured  by  real  estate  and   overdraft   protection)   totaled
      approximately   $22,623,000  at  March  31,  2001.  Of  these  lines,  the
      outstanding loan balances totaled approximately $12,884,000. The Bank also
      has  commitments  to fund warehouse  lines of credit for various  mortgage
      banking companies totaling $3,200,000, which had an outstanding balance at
      March 31, 2001 of  approximately  $1,011,000.  At March 31, 2001, the Bank
      had loan commitments to sell  $12,262,000 in fixed rate residential  loans
      which had not been  closed to Freddie  Mac for the  months of  April-June,
      2001.

5.    Acquisition of South Carolina Community Bancshares, Inc.
      --------------------------------------------------------

      On November 12, 1999, the  Corporation  completed the acquisition of South
      Carolina  Community  Bancshares,  Inc.  and its wholly  owned  subsidiary,
      Community Federal Savings Bank. The Corporation  issued a total of 526,183
      shares and paid a total of $3,582,081 to the



                                        8

<PAGE>  9



      shareholders of South Carolina Community Bancshares, Inc. Each shareholder
      received  $5.25 in cash and 0.817 shares of Union  Financial  common stock
      valued at $10.68 per share that was based upon the average market price of
      Union  Financial  common stock during the 25 trading day period that ended
      on the trading day that  immediately  preceded  the third day prior to the
      merger's  closing.  The  transaction  was accounted for under the purchase
      method of accounting.  The two offices of Community  Federal  Savings Bank
      became offices of Provident  Community Bank. At September 30, 1999,  South
      Carolina  Community  Bancshares,  Inc. had total assets of $46.6  million,
      loans of $40.2 million and deposits of $35.9 million.  Approximately  $4.7
      million in goodwill was created with the transaction and will be amortized
      straight-line over 15 years.













                                        9

<PAGE> 10



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

      Forward Looking Statements
      --------------------------

      Management's discussion and analysis of financial condition and results of
      operations   and  other   portions   of  this   report   contain   certain
      "forward-looking  statements"  concerning  the  future  operations  of the
      Corporation  and the Bank.  Management  desires to take  advantage  of the
      "safe harbor" provisions of the Private  Securities  Litigation Reform Act
      of 1995  and is  including  this  statement  for the  express  purpose  of
      availing  the  Corporation  of the  protections  of such safe  harbor with
      respect  to all  "forward-looking  statements"  contained  in  our  Annual
      Report. We have used "forward-looking statements" to describe future plans
      and strategies.  Management's  ability to predict results or the effect of
      future plans or strategies is  inherently  uncertain.  Factors which could
      affect actual results include  interest rate trends,  the general economic
      climate in the Corporation's and the Bank's market area and the country as
      a whole,  the ability of the Corporation and the Bank to control costs and
      expenses,  the  ability  of the  Corporation  to  efficiently  incorporate
      acquisitions into its operations,  competitive products and pricing,  loan
      delinquency  rates,  and  changes in federal and state  regulation.  These
      factors   should  be  considered  in   evaluating   the   "forward-looking
      statements", and undue reliance should not be placed on such statements.

      Financial Condition
      -------------------

      Total  assets  of  the  Corporation   increased  $5,439,000  or  2.10%  to
      $264,503,000 at March 31, 2001 from $259,064,000 at September 30, 2000 due
      primarily  to higher  short term  investments.  The increase in short term
      investments   was  due  to  higher  fed  funds  sold  at  quarter  end  in
      anticipation  of security  purchases  that were in process of  settlement.
      Investments  and  mortgage-backed   securities   decreased   approximately
      $2,649,000  or 3.96% during the six months ended March 31, 2001 due to the
      sale of a fixed rate mortgage  backed security in order to reduce interest
      rate risk  exposure.  During  the  quarter  ended  December  31,  2000 the
      Corporation  reclassified  approximately  $24,000,000  in mortgage  backed
      securities  from held to  maturity  to  available  for sale as part of the
      adoption of FASB 133,  Accounting for Derivative  Instruments  and Hedging
                             ---------------------------------------------------
      Activities.  The purpose of this  transfer  was to allow for the  possible
      ----------
      sale of the fixed rate  securities  in order to reduce  interest rate risk
      exposure. Loans decreased $1,904,000 or 1.13% to $165,903,000 at March 31,
      2001. The decrease in loans was due to higher  principal  reductions along
      with reductions in residential  mortgage loan production.  The Corporation
      continues  to  focus on  consumer  and  commercial  lending  with  reduced
      emphasis on  wholesale  residential  mortgage  loans.  Deposits  increased
      $4,966,000 or 2.64% to  $192,940,000  at March 31, 2001.  The increase was
      due  primarily to a $4,000,000  deposit  received  from the State of South
      Carolina  through  the  state  institutional  bid  program.  The funds are
      normally  priced less than current deposit rates and are held for a period
      of six months.  Borrowings decreased $1,319,000 or 2.77% to $46,368,000 at
      March 31, 2001 from $47,687,000. Shareholders' equity increased



                                       10

<PAGE> 11



      $1,003,000 or 4.57% to $22,927,000 from $21,924,000 due to net income year
      to date and unrealized gains in securities  available for sale,  offset by
      the payment of a $0.20 per share quarterly dividend.

      Liquidity
      ---------

      Liquidity  is the ability to meet demand for loan  disbursements,  deposit
      withdrawals,  repayment of debt, payment of interest on deposits and other
      operating expenses. The primary sources of liquidity are savings deposits,
      loan sales and repayments, borrowings, maturity of securities and interest
      payments.

      Recent legislation has repealed the Office of Thrift  Supervision  minimum
      liquidity ratio requirement.  The Office of Thrift Supervision regulations
      now require the Bank to maintain  sufficient  liquidity to ensure its safe
      and sound operation.  As in the past, management expects that the Bank can
      meet  its  obligations  to  fund  outstanding   loan   commitments   while
      maintaining liquidity to ensure the Bank's safe and sound operation.

      Capital Resources
      -----------------

      The capital  requirement  of the Bank  consists of three  components:  (1)
      tangible  capital,  (2) core capital and (3) risk based capital.  Tangible
      capital must equal or exceed 1.5% of adjusted  total assets.  Core capital
      must be a minimum of 4% of adjusted  total  assets and risk based  capital
      must be a minimum of 8% of risk weighted assets.

      As of March 31, 2001, the Bank's  capital  position,  as calculated  under
      regulatory  guidelines,  exceeds  these  minimum  requirements  as follows
      (dollars in thousands):

                                                   REQUIREMENT   ACTUAL   EXCESS
--------------------------------------------------------------------------------

      Tangible capital                                 $3,889   $17,629  $13,740
      Tangible capital to adjusted total assets         1.50%     6.80%    5.30%

      Core capital                                    $10,372   $17,629  $ 7,257
      Core capital to adjusted total assets             4.00%    6.80%     2.80%

      Risk based capital                              $11,386   $18,908   $7,522
      Risk based capital to risk weighted assets        8.00%    13.29%    5.29%

      The reported capital requirements are based on information reported in the
      OTS March 31, 2001 quarterly thrift financial report.





                                        11

<PAGE> 12



      RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2000
      ----------------------------------------------------------------------

      General
      -------

      Net income decreased $28,000 or 3.67% to $735,000 for the six months ended
      March 31, 2001 as compared  to the same  period in 2000 due  primarily  to
      reductions  in non interest  income as a result of lower  production  from
      Provident  Financial  Services,  the wholly owned  subsidiary of Provident
      Community  Bank.  All  current  year  comparative  references  reflect the
      acquisition of South Carolina  Community  Bancshares  from the acquisition
      date, November 12, 1999.

      Interest Income
      ---------------

      Interest  income  increased  $1,088,000 or 12.73% for the six months ended
      March 31, 2001 as compared to the same period in 2000.  Interest income on
      loans  increased  3.25% or $235,000 to $7,457,000 for the six months ended
      March 31, 2001 from  $7,222,000  for the six months  ended March 31, 2000,
      due primarily to higher earning assets from the growth of the consumer and
      commercial  loan  portfolios.  Interest and  dividends on  investment  and
      mortgage-backed securities increased $733,000 or 56.87% for the six months
      ended March 31, 2001 to $2,022,000 from $1,289,000  during the same period
      in 2000.  The  increase  was due  primarily to an increase in the level of
      purchases in  mortgage-backed  securities  made during the last quarter of
      the previous fiscal year.

      Interest Expense
      ----------------

      Interest  expense  increased  $965,000 or 18.90% for the six months  ended
      March 31,  2001 as  compared  to the six months  ended  March 31, 2000 due
      primarily  to  higher  deposit  rates  as a  result  of  high  short  term
      certificate  of  deposit  rates not  decreasing  in line with loan  rates.
      Interest  expense  on deposit  accounts  increased  $731,000  or 19.16% to
      $4,546,000 for the six months ended March 31, 2001 from $3,815,000  during
      the same period in 2000. Interest expense on borrowings increased $234,000
      or 18.11% for the six months  ended  March 31, 2001 as compared to the six
      months  ended  March 31,  2000 due  primarily  to rising  rates and higher
      borrowing levels during the period.

      Provision for Loan Loss
      -----------------------

      During the six months  ended March 31,  2001,  provisions  for loan losses
      were  $35,000 as compared  to $50,000 for the same period in the  previous
      year. The reduction in the provision reflects the implementation of a risk
      weighted loan loss reserve  methodology  that provides better insight into
      the  reserve  calculation.   Management  believes  the  Bank's  loan  loss
      allowance is adequate to absorb estimated  future loan losses.  The Bank's
      loan loss  allowances  at March 31,  2001 were  approximately  .78% of the
      Bank's outstanding loan portfolio,  net of loans held for sale compared to
      .75% for the same period in the previous year.



                                        12

<PAGE> 13



      The  following  table sets forth  information  with  respect to the Bank's
      non-performing assets at the dates indicated (dollars in thousands):


                                          MARCH 31, 2001    SEPTEMBER 30, 2000
                                          --------------    ------------------

      Non-accruing loans which are
      contractually past due 90 days
       or more:

      Real Estate:
       Residential                             $  545            $  763
      Commercial                                1,149               247
      Construction                                 --               --
                                                   44               106
                                                -----              ----
      Total                                    $1,738            $1,116
                                               ======            ======

      Percentage of loans receivable, net       1.05%             0.66%
                                                =====             =====

      Allowance for loan losses                $1,282            $1,360
                                               ======            ======

      Real estate acquired through
       foreclosure and repossessed
       assets, net of allowances                 $113             $ 460
                                                 ====             =====

      Non accrual loans  increased  $622,000 to $1,738,000 for the period ending
      March 31, 2001 from $1,116,000 at September 30, 2000. The increase was due
      to the  classification  of one commercial  loan with a current  balance of
      $833,000.  The loan was 90 days  past  due at March  31,  2001 and is well
      collateralized with commercial real estate as security.  The overall level
      of non performing loans is projected to decline over the near term.

      The provision for loan loss  calculation  includes a segmentation  of loan
      categories  subdivided by  residential  mortgage,  commercial and consumer
      loans. Each category is rated for all loans including  performing  groups.
      The weights  assigned to each performing  group is developed from previous
      loan loss  experience  and as the loss  experience  changes,  the category
      weight  is  adjusted  accordingly.  In  addition,  as the loan  categories
      increase and decrease in balance,  the provision for loan loss calculation
      will adjust accordingly.


                                        13

<PAGE> 14



      Non Interest  Income and Expense
      --------------------------------

      Total non interest income decreased $124,000 or 15.80% to $661,000 for the
      six months  ended March 31, 2001 from  $785,000 for the same period in the
      previous year. Fees from financial  services  decreased $167,000 or 27.11%
      to $449,000 for the six months ended March 31, 2001 from  $616,000 for the
      same period in the previous  year.  The  decrease  was due  primarily to a
      reduction in production from Provident Financial Services, a wholly- owned
      subsidiary of Provident  Community  Bank as a result of changing  economic
      conditions for brokerage relationships.  Loan servicing fee income for the
      six months  ended March 31, 2001 was $16,000  compared to loan service fee
      income of $38,000 for the six months ended March 31, 2000. The decrease in
      loan  servicing  fee  income  was due to the  sale of  approximately  $250
      million in loan servicing rights that was completed on September 30, 2000.
      Gain on sale of loans increased  $62,000 or 47.33% to $193,000 for the six
      months  ended  March 31,  2001 from  $131,000  for the same  period in the
      previous year.  Although  residential  loan sales increased  approximately
      4.05% over the previous year, the Corporations continued focus on consumer
      and commercial lending will result in a reduction in future loan sales and
      therefore lower gains from this line of business.

      For the six  months  ended  March 31,  2001,  total non  interest  expense
      increased  $55,000 or 1.83% to  $3,053,000  from  $2,998,000  for the same
      period  in 2000.  The  projected  expense  reductions  anticipated  in the
      acquisition of South Carolina Community  Bancshares which was finalized on
      November 12, 1999 were  realized and  contributed  to the minimal  expense
      increase  over the  previous  year.  Compensation  and  employee  benefits
      decreased  $21,000 or 1.41% to  $1,465,000  for the six month period ended
      March 31, 2001 from  $1,486,000  for the same period in 2000 due primarily
      to  staff  reductions  resulting  from  the  acquisition.   Occupancy  and
      equipment  expense  decreased  $87,000 or 12.46% to  $611,000  for the six
      months ended March 31, 2001 from  $698,000 for the same period in 2000 due
      to  lower  data  processing  expense  as a  result  of a prior  year  data
      processing  conversion.  Goodwill amortization  increased from $185,000 at
      March 31, 2000 to $327,000 at March 31, 2001.  The increase was due to the
      additional  amortization  expense required for the merger. Other operating
      expense  for the six months  ended  March 31,  2001  increased  $34,000 to
      $440,000  from  $406,000  for the same period in 2000 due to  increases in
      telephone, printing and other general and administrative costs.












                                       14

<PAGE> 15



PART II  - OTHER INFORMATION

ITEM 1.     Legal Proceedings
            -----------------

                  The  Corporation  is  involved  in  various  claims  and legal
                  actions  arising in the normal course of business.  Management
                  believes  that  these   proceedings   are  immaterial  to  the
                  Corporation's financial condition and results of operations.

ITEM 2.     Changes in Securities
            ---------------------

                  Not applicable.

ITEM 3.     Defaults upon Senior Securities
            -------------------------------

                  Not applicable.

ITEM 4.     Submission of Matters to a Vote of Security Holders
            ---------------------------------------------------

            The Annual Meeting of the  Stockholders  of the Corporation was held
            on  January  17,  2001.  The  results  of the  vote  on the  matters
            presented at the meeting is as follows:

            1>    The following individuals were elected as directors,  each for
                  a three-year term:

                                      Votes For         Votes Withheld
                                      ---------         --------------

                  Mason G. Alexander  1,234,119               99,857
                  James W. Edwards    1,247,870               86,106

            2>    The appointment of Elliott,  Davis & Company, LLP, as auditors
                  for the Corporation  for the fiscal year ending  September 30,
                  2001 was ratified by the shareholders by the following vote:

                  For  1,262,167     Against  65,810     Abstain  5,999
                       ---------              -------             -----

            3>    The adoption of the 2001 Stock Option Plan:

                  For  808,250       Against  148,587    Abstain  18,521
                       -------                --------            ------

                  Broker Non-Votes                   358,618
                                                     -------




                                       15


<PAGE> 16



ITEM 5.     Other Information
            -----------------

                  None

ITEM 6.     Exhibits and Reports on Form 8-K
            --------------------------------


            (a)   Exhibits

                  10.1 Union Financial Bancshares, Inc. 2001 Stock Option Plan.*

            (b)   Reports on Form 8-K
                  -------------------

                  None

            ---------------------

            * Incorporated  by reference into this document from the appendix to
            the Proxy statement for its 2001 Annual Meeting,  dated December 22,
            2000.












                                       16

<PAGE> 17






                                  SIGNATURES
                                  ----------

In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                        UNION FINANCIAL BANCSHARES, INC.
                        --------------------------------
                                  (REGISTRANT)



Date: May 7, 2001                   By: /s/ Dwight V. Neese
      --------------------------        --------------------------------------
                                        Dwight V. Neese, CEO


Date: May 7, 2001                   By: /s/ Richard H. Flake
      --------------------------        --------------------------------------
                                        Richard H. Flake, CFO









                                       17