<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 June 30, 2000

         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

Check  whether  the issuer:  (1) has filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
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  X    No
              ----      ------

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 1,906,533 shares, $0.01 par value, common stock as of July 13, 2000.




<PAGE> 2



                        UNION FINANCIAL BANCSHARES, INC.


                                      INDEX

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

            Item 1.  Consolidated Financial Statements (unaudited)

            Consolidated Balance Sheets as of June 30, 2000
             and September 30, 1999                                           3

            Consolidated Statements of Income for the three and nine months
             ended June 30, 2000 and 1999                                     4

            Consolidated Statements of Cash Flows for the nine
             months ended June 30, 2000 and 1999                              5

            Consolidated Statements of Shareholders' Equity for the
            nine months ended June 30, 2000 and 1999                          6

            Notes to Consolidated Financial Statements                      7-9

            Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations                10-13


PART II.    OTHER INFORMATION                                                14
            -----------------


            Signatures                                                       15




<PAGE> 3
<TABLE>
<CAPTION>

UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATING BALANCE SHEETS
June 30, 2000 (unaudited) and September 30, 1999

                                                                                         June 30,             September 30,
ASSETS                                                                                     2000                   1999
                                                                                    -------------------    --------------------
                                                                                                (DOLLARS IN THOUSANDS)

<S>                                                                                <C>                    <C>
Cash                                                                               $             2,773    $              3,149
Short term interest-bearing deposits                                                             5,080                   2,421
                                                                                    -------------------    --------------------
Total cash and cash equivalents                                                                  7,853                   5,570
                                                                                    -------------------    --------------------
Investment and mortgage-backed securities:
  Held to maturity                                                                              38,241                   5,586
  Available for sale                                                                            28,924                  27,335
                                                                                    -------------------    --------------------
Total investment and mortgage-backed securities                                                 67,165                  32,921
Loans , net
  Held for sale                                                                                  1,172                     216
  Held for investment                                                                          167,639                 149,185
                                                                                    -------------------    --------------------
Total loans receivable, net                                                                    168,811                 149,401
Office properties and equipment, net                                                             6,108                   4,524
Federal Home Loan Bank Stock, at cost                                                            2,138                   2,050
Accrued interest receivable                                                                      1,728                   1,574
Mortgage servicing rights                                                                        3,552                   3,842
Goodwill intangible                                                                              4,202                   1,818
Other assets                                                                                     2,907                   3,594
                                                                                    -------------------    --------------------
TOTAL ASSETS                                                                       $           264,464    $            205,294
                                                                                    ===================    ====================
LIABILITIES

Deposit accounts                                                                   $           193,373    $            142,624
Advances from the Federal Home Loan Bank and other borrowings                                   47,864                  46,503
Accrued interest on deposits                                                                       286                     226
Advances from borrowers for taxes and insurance                                                    435                     548
Other liabilities                                                                                1,887                     655
                                                                                    -------------------    --------------------
TOTAL LIABILITIES                                                                              243,845                 190,556
                                                                                    -------------------    --------------------
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 - 1,906,533 shares at 6/30/00 and 1,357,214 at 9/30/99                    20                      14
Additional paid-in capital                                                                      11,298                   5,484
Accumulated other comprehensive income                                                          (2,434)                 (1,779)
Retained earnings, substantially restricted                                                     11,735                  11,019
                                                                                    -------------------    --------------------
TOTAL SHAREHOLDERS' EQUITY                                                                      20,619                  14,738
                                                                                    -------------------    --------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                         $           264,464    $            205,294
                                                                                    ===================    ====================
See notes to consolidated financial statements.
</TABLE>

                                                            3



<PAGE> 4
<TABLE>
<CAPTION>

UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Months Ended June 30, 2000 (unaudited) and 1999 (unaudited)

                                                            Three Months Ended                           Nine Months Ended
                                                   June 30,               June 30,                June 30,               June 30,
                                                     2000                   1999                    2000                   1999
                                              -------------------    --------------------    -------------------    ----------------
                                                         (DOLLARS IN THOUSANDS)                      (DOLLARS IN THOUSANDS)
<S>                                           <C>                    <C>                     <C>                    <C>
Interest Income:
  Loans                                       $            3,699     $             2,742     $           10,944     $         8,311
  Deposits and federal funds sold                             19                      17                     58                  67
  Mortgage-backed securities                                 431                     385                    968               1,132
  Interest and dividends on
   investment securities                                     379                     279                  1,131                 713
                                              -------------------    --------------------    -------------------    ----------------
Total Interest Income                                      4,528                   3,423                 13,101              10,223
                                              -------------------    --------------------    -------------------    ----------------
Interest Expense:
  Deposit accounts                                         2,241                   1,419                  6,056               4,288
  Advances from the FHLB and other borrowings                662                     409                  1,954               1,376
                                              -------------------    --------------------    -------------------    ----------------
Total Interest Expense                                     2,903                   1,828                  8,010               5,664
                                              -------------------    --------------------    -------------------    ----------------

Net Interest Income                                        1,625                   1,595                  5,091               4,559
  Provision for loan losses                                  150                      25                    200                  70
                                              -------------------    --------------------    -------------------    ----------------
Net Interest Income After
   Provision for Loan Losses                               1,475                   1,570                  4,891               4,489
                                              -------------------    --------------------    -------------------    ----------------
Non Interest Income:
  Fees for financial services                                322                     287                    938                 635
  Loan servicing fees (costs)                                167                     (60)                   204                (135)
  Net gains (losses) on sale of investments                    0                       0                      0                   7
  Net gains (losses) on sale of loans                        160                     119                    292                 493
                                              -------------------    --------------------    -------------------    ----------------
Total Non Interest Income                                    649                     346                  1,434               1,000
                                              -------------------    --------------------    -------------------    ----------------

Non Interest Expense:
  Compensation and employee benefits                         709                     592                  2,195               1,774
  Occupancy and equipment                                    362                     292                  1,061                 828
  Deposit insurance premiums                                  13                      17                     42                  59
  Professional services                                       60                      68                    238                 206
  Real estate operations                                      13                       1                     28                   3
  Goodwill amortization                                      111                      81                    320                 196
  Other                                                      181                     172                    586                 519
                                              -------------------    --------------------    -------------------    ----------------
Total Non Interest Expense                                 1,449                   1,223                  4,470               3,585
                                              -------------------    --------------------    -------------------    ----------------

Income Before Income Taxes                                   675                     693                  1,855               1,904
Income tax expense                                           215                     251                    632                 689
                                              -------------------    --------------------    -------------------    ----------------
Net Income                                    $              460     $               442     $            1,223     $         1,215
                                              ===================    ====================    ===================    ================

Basic Net Income Per Common Share             $             0.24     $              0.33     $             0.67     $          0.90
                                              ===================    ====================    ===================    ================

Diluted Net Income Per Common Shar            $             0.24     $              0.31     $             0.66     $          0.86
                                              ===================    ====================    ===================    ================
Weighted Average Number of
  Common Shares Outstanding

Basic                                                  1,904,947               1,351,762              1,837,644           1,347,920

Diluted                                                1,904,947               1,423,053              1,848,053           1,419,216

See notes to consolidated financial statements.
</TABLE>
                                                                       4


<PAGE> 5
<TABLE>
<CAPTION>

UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended June 30, 2000 (unaudited) and 1999 (unaudited)
                                                                                              Nine Months Ended
                                                                                       June 30,                June 30,
                                                                                         2000                    1999
                                                                                  --------------------    -------------------
                                                                                                (IN THOUSANDS)
<S>                                                                                            <C>                    <C>
OPERATING ACTIVITIES:

Net income                                                                                     $1,222                 $1,215
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Provision for loan losses                                                                       200                     70
  Amortization of intangibles                                                                     242                    195
  Depreciation expense                                                                            332                    249
  Recognition of deferred income, net of costs                                                   (199)                   (81)
  Deferral of fee income, net of costs                                                            443                    231
  Loans originated for sale                                                                    38,583                (90,166)
  Sale of loans                                                                               (38,583)                90,166
  Gain on sale of loans                                                                           292                    493
  Changes in operating assets and liabilities:
   (Increase) decrease in accrued interest receivable                                            (154)                  (421)
   (Increase) decrease  in other assets                                                           687                 (1,160)
   Increase (decrease) in other liabilities                                                     1,119                   (506)
   Increase (decrease) in accrued interest payable                                                 60                    (91)
                                                                                  --------------------    -------------------
Net cash provided by (used by) operating activities                                             4,244                    194
                                                                                  --------------------    -------------------
INVESTING ACTIVITIES:

Purchase of investment and mortgage-backed securities:
   Held to maturity                                                                           (30,365)                     0
   Available for sale                                                                          (4,094)               (21,539)
Investments acquired in merger                                                                 (2,602)                     0
Proceeds from sale of investment and mortgage-
    backed securities                                                                               0                  2,090
Proceeds from maturity of investment and mortgage-
    backed securities:
   Available for sale                                                                             100                  4,657
Principal repayments on mortgage-backed securities:
   Held to maturity                                                                               577                    165
   Available for sale                                                                           1,486                  4,456
Loans acquired in merger                                                                      (41,144)                     0
Net (increase) decrease in loans                                                               20,998                 (2,917)
Net (increase) decrease in  mortgage servicing rights                                             290                   (387)
Purchase of FHLB stock                                                                            (88)                    (6)
Redemption of FHLB stock                                                                            0                      0
Purchase of office properties and equipment                                                    (1,916)                  (577)
                                                                                  --------------------    -------------------
Net cash provided by (used by) investing activities                                          ($56,758)              ($14,058)
                                                                                  --------------------    -------------------
FINANCING ACTIVITIES:

Proceeds from the dividend reinvestment plan                                                      158                     68
Dividends paid in cash ($0..10 per share -2000
and $0.093 per share - 1999)                                                                     (506)                  (300)
Proceeds from the exercise of stock options                                                        13                      2
Increase in goodwill intangible                                                                (2,626)                  (854)
Proceeds from term borrowings                                                                   1,361                  1,384
Capital acquired in merger                                                                      5,648                      0
Deposits acquired in acquisition                                                               35,688                 12,622
Increase (Decrease) in deposit accounts                                                        15,061                  2,037
                                                                                  --------------------    -------------------
Net cash (used by) provided by financing activities                                            54,797                 14,959
                                                                                  --------------------    -------------------
NET  DECREASE \ INCREASE IN CASH
   AND CASH EQUIVALENTS                                                                         2,283                  1,095

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                                                       5,570                  3,593
                                                                                  --------------------    -------------------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                                                            $7,853                 $4,688
                                                                                  ====================    ===================
SUPPLEMENTAL DISCLOSURES:

Cash paid for:
  Income taxes                                                                                     $0                   $953
  Interest                                                                                      8,010                  5,755

Non-cash transactions:
  Loans foreclosed                                                                               $125                   $220

See notes to consolidated financial statements.
</TABLE>

                                                           5
<PAGE> 6
<TABLE>
<CAPTION>

                                                      UNION FINANCIAL BANCSHARES, INC.
                                              CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                           NINE MONTHS ENDED JUNE 30, 2000 AND 1999 (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, 1998                      1,278,250        $13      $4,471         $10,668          $148         $15,300

Net income                                                                                    1,215                         1,215

Other comprehensive income
Unrealized losses on securities:
   Unrealized holding losses arising during
     period                                                                                                (1,355)         (1,355)
                                                                                                           -------         -------
Comprehensive loss                                                                                                           (140)

Options exercised                                      2,000                      2                                             2
Dividend reinvestment plan contributions               8,652          0          68                                            68
Five percent stock dividend                           64,090
Cash dividend ($.279 per share)                                                                (300)                         (300)

                                                   ---------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1999                           1,352,992         13       4,541          11,583        (1,207)         14,930
                                                   =================================================================================
BALANCE AT SEPTEMBER 30, 1999                      1,357,214         14       5,484          11,019        (1,779)         14,738

Net income                                                                                    1,222                         1,222

Other comprehensive income
Unrealized losses on securities:
  Unrealized holding losses arising during
    period                                                                                                   (655)           (655)
                                                                                                             -----           -----
Comprehensive income                                                                                                          567
Options exercised                                      2,200                     13                                            13
Dividend reinvestment plan contributions              20,936          1         158                                           159
Acquisition of SC Community Bancshares               526,183          5       5,643                                         5,648
Cash dividend ($.30 per share)                                                                 (506)                         (506)

                                                   ---------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2000                           1,906,533        $20     $11,298         $11,735       ($2,434)        $20,619
                                                   =================================================================================
</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 nine months  ended June 30,  2000 are not  necessarily
      indicative  of the  results  which may be expected  for the entire  fiscal
      year.  The  consolidated  balance  sheet as of September 30, 1999 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.

      SFAS  No.  133,   Accounting  for  Derivative   Instruments   and  Hedging
                        --------------------------------------------------------
      Activities-This  statement establishes  accounting and reporting standards
      ----------
      for derivative instruments and for hedging activities. It requires that an
      entity  recognize all  derivatives  as either assets or liabilities in the
      balance sheet and measure those  instruments at fair value. The accounting
      for changes in the fair value of a derivative  depends on the intended use
      of the derivative.  The statement is effective for the Corporation for the
      fiscal   year   beginning   October   1,  1999  and  may  not  be  applied
      retroactively.

      SFAS No. 134, Accounting for Mortgage-Backed Securities Retained after the
                    ------------------------------------------------------------
      Securitization  of  Mortgage  Loans  Held for Sale by a  Mortgage  Banking
      --------------------------------------------------------------------------
      Enterprise.   The  new  statement  establishes  accounting  and  reporting
      ----------
      standards  for certain  activities  of mortgage  banking  activities.  The
      statement is effective for the first quarter beginning  December 15, 1998.
      This  statement  had  no  effect  on  the  financial   statements  of  the
      Corporation.

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

      Effective January 31, 1999, the Corporation  declared a 5% stock dividend.
      The weighted  average  number of shares and all other share data have been
      restated for all periods presented to reflect this dividend.

      Income per share amounts for the three and nine months ended June 30, 2000
      and 1999 were

                                      7

<PAGE> 8



      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  $13,985,000  and $12,963,000 of debt securities at June 30,
      2000 and  September  30, 1999,  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.

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 June 30, 2000 related to these items is summarized below:

      Loan Commitments:                                      Contract Amount
      ----------------                                       ---------------
            Unadvanced portions of loans                        $ 11,101,000
            Total loan commitments                              $ 11,101,000
                                                                ------------

      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 June 30, 2000 consist of fixed and adjustable
      rate loans of  approximately  $11,101,000  at rates ranging from 7% to 9%.
      Commitments to originate loans generally expire within 30 to 60 days.

      Commitments  to fund credit lines  (principally  variable  rate,  consumer
      lines secured by real


                                        8

<PAGE> 9



      estate and overdraft protection) totaled approximately $23,312,000 at June
      30,  2000.  Of  these  lines,   the  outstanding   loan  balances  totaled
      approximately $12,211,000. The Bank also has commitments to fund warehouse
      lines of credit for various mortgage banking companies  totaling $750,000,
      which had an outstanding balance at June 30, 2000 of approximately $ 0. At
      June 30, 2000, the Bank had loan  commitments to sell  $4,711,000 in fixed
      rate  residential  loans  which had not been closed to Freddie Mac for the
      months of July-September, 2000.

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 526,290
      shares  and  paid a total  of  $3,582,081  to the  shareholders  of  South
      Carolina  Community  Bancshares,  Inc. 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  $1.7  million in goodwill  was  created  with the
      transaction and will be amortized straight-line over 15 years.

6.    Proposed sale of loan servicing rights
      --------------------------------------

      The  Corporation  has signed a letter of intent with Chevy Chase Bank, FSB
      of Laurel,  Maryland,  to sell the rights to  service  approximately  $222
      million of mortgage loans serviced by Provident Community Bank. Completion
      of the sale is  projected  for the fourth  quarter of the  current  fiscal
      year. The Corporation is currently  evaluating the future direction of the
      Mortgage Division.




                                        9

<PAGE> 10



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

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

      Total  assets  of the  Corporation  increased  $59,170,000  or  28.82%  to
      $264,464,000  at June 30, 2000 from  $205,294,000  at  September  30, 1999
      primarily  as a result  of the  acquisition  of South  Carolina  Community
      Bancshares,  which as  completed on November  12,  1999.  Investments  and
      mortgage-backed  securities increased approximately $34,244,000 or 104.02%
      during the nine months ended June 30, 2000. Loans increased $19,410,000 or
      12.99% to  $168,811,000  for the nine  months  ended  June 30,  2000.  The
      increase  in  loans   included   approximately   $41.1  million  from  the
      acquisition  of South Carolina  Community  Bancshares of which 91.40% were
      residential mortgage loans. The Corporation also securitized approximately
      $32.3 million of loans during the fiscal year. At June 30, 2000,  mortgage
      servicing rights decreased $290,000 or 7.55% to $3,552,000 from $3,842,000
      at September 30, 1999.The  reduction in mortgage  servicing rights was due
      to a sale of servicing of approximately  $30 million that was completed in
      October,  1999.  Deposits increased  $50,749,000 or 35.58% to $193,373,000
      for the nine months  ended June 30,  2000.  Approximately  $35,900,000  or
      84.3% of the deposit increase was a result of the South Carolina Community
      Bancshares  acquisition.  The  remaining  growth  was a result of  various
      deposit promotion programs with continued emphasis on core deposits.

      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 repayments, borrowings and interest payments.

      The OTS  imposes  a  minimum  level  of  liquidity  on the  Bank  which is
      currently 4% of with- drawable  deposits plus short-term  borrowings.  The
      liquidity  levelmeasuredBank  as for regulatory  purposes was 24.75% as of
      June 30, 2000. As in the past,  management  expects that the Bank can meet
      its obligations to fund  outstanding loan  commitments  while  maintaining
      liquidity in excess of regulatory requirements.

      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 June 30, 2000,  the Bank's  capital  position,  as calculated  under
      regulatory guidelines,

                                       10

<PAGE> 11



      exceeds these minimum requirements as follows (dollars in thousands):


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

      Tangible capital                               $3,955    $18,575   $14,620
      Tangible capital to adjusted total assets       1.50%      7.04%     5.54%

      Core capital                                  $10,547    $18,575    $8,028
      Core capital to adjusted total assets           4.00%       7.0%     3.04%

      Risk based capital                            $11,759    $19,974    $8,215
      Risk based capital to risk weighted assets      8.00%     13.59%     5.59%

      The reported capital requirements are based on information reported in the
      OTS June 30, 2000 quarterly thrift financial report.

      RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND 1999
      ----------------------------------------------------------------------

      General
      -------

      Net income  increased  $8,000 or .66% to  $1,223,000  for the nine  months
      ended June 30, 2000 as compared to the same period in 1999.  Non  interest
      income  increased  $434,000  or  43.40%  and  net  interest  income  after
      provision for loan losses increased  $402,000 or 8.96%. This was offset by
      an $885,000 or 24.79% increase in non-interest  expense.  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  $2,878,000 or 28.15% for the nine months ended
      June 30, 2000 as compared to the same period in 1999.  Interest  income on
      loans  increased  31.68% or $2,633,000 to $10,944,000  for the nine months
      ended June 30, 2000 from $8,311,000 for the nine months ended June 30,1999
      due  primarily to growth of the  portfolio  and the  acquisition  of South
      Carolina  Community  Bancshares.  Interest and dividends on investment and
      mortgage-backed  securities  increased  $254,000  or  13.70%  for the nine
      months ended June 30, 1999 to $2,099,000 from  $1,845,000  during the same
      period in 1999. The increase was due primarily to an increase in the level
      of purchases in investment and mortgage-backed  securities made during the
      first  three  quarters  of the  fiscal  year  along  with the  investments
      acquired from South Carolina Community Bancshares.

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

      Interest expense increased  $2,346,000 or 41.42% for the nine months ended
      June 30,  2000 as  compared  to the nine  months  ended June 30,  1999 due
      primarily to the growth in deposits


                                       11

<PAGE> 12



      that were  acquired from South  Carolina  Community  Bancshares.  Interest
      expense on deposit accounts  increased  $1,768,000 or 41.23% to $6,056,000
      for the nine months  ended June 30, 2000 from  $4,288,000  during the same
      period in 1999.  Interest  expense on  borrowings  increased  $578,000  or
      42.01% for the nine  months  ended June 30,  2000 as  compared to the nine
      months  ended  June 30,  1999 due  primarily  to rising  rates  during the
      period.

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

      During the nine months  ended June 30,  2000,  provisions  for loan losses
      were  $200,000 as compared to $70,000 for the same period in the  previous
      year.  The increase in loan loss  provisions  are due to the growth in the
      loan portfolio as a result of the acquisition of South Carolina  Community
      Bancshares.  In addition,  the loan loss  provisions  were  increased as a
      result of higher  bankruptcy  filings  during the current fiscal year that
      have increased the level of non-performing assets. Management believes the
      Bank's loan loss  allowance  is adequate to absorb  estimated  future loan
      losses.   The  Bank's  loan  loss   allowances   at  June  30,  2000  were
      approximately .83% of the Bank's outstanding loan portfolio,  net of loans
      held for sale compared to .60% for the same period in the previous year.

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

                                          JUNE 30, 2000     SEPTEMBER 30, 1999
                                          -------------     ------------------

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

      Real Estate:
       Residential                            $1,245               $  42
      Commercial                                 240                  --
       Construction                               --                  --
      Non-mortgage                               221                 141
                                                 ---               -----
      Total                                   $1,706               $ 183
                                              ======               =====

      Percentage of loans receivable, net       1.01%               0.12%
                                                ====                =====

      Allowance for loan losses               $1,400               $ 836
                                              ======               =====

      Real estate acquired through
       foreclosure and repossessed
       assets, net of allowances                $366               $ 241
                                                ====               =====

      All non-accruing loans and allowance for loan losses for the period ending
      June 30, 2000

                                       12

<PAGE> 13



      reflect loans and balances  assumed with the acquisition of South Carolina
      Community Bancshares.

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

      Total non interest income  increased  $434,000 or 43.40% to $1,434,000 for
      the nine months ended June 30, 2000 from $1,000,000 for the same period in
      the  previous  year.  The  increase  in  non-interest  income  was  due to
      increased  fees from financial  services which  increased from $635,000 at
      June 30, 1999 to $938,000 at June 30, 2000.  In addition,  loan  servicing
      fee income for the nine months ended June 30, 2000 was  $204,000  compared
      to loan  service fee income of  ($135,000)  for the nine months ended June
      30,  1999.  The  increase  in the loan  servicing  income was due to lower
      premium amortization  expense as a result of lower loan prepayments.  Gain
      on sale of loans  decreased  $201,000 or 40.77% to  $292,000  for the nine
      months  ended  June 30,  2000  from  $493,000  for the same  period in the
      previous year. The reduction was due to lower volumes of loans sold.

      For the nine  months  ended  June 30,  2000,  total non  interest  expense
      increased  $885,000 or 24.69% to $4,470,000  from  $3,585,000 for the same
      period in 1999.  All expenses  were affected by the  acquisition  of South
      Carolina   Community   Bancshares.   Compensation  and  employee  benefits
      increased $421,000 or 23.73% to $2,195,000 for the nine month period ended
      June 30, 2000 from $1,774,000 for the same period in 1999 due primarily to
      the  additional  staff  assumed in the  merger.  Occupancy  and  equipment
      expense  increased  $233,000 or 28.14% to  $1,061,000  for the nine months
      ended  June 30,  2000  from  $828,000  for the same  period in 1999 due to
      higher  data  processing  costs along with  higher  depreciation  expense.
      Professional services expenses increased $32,000 or 15.53% to $238,000 for
      the nine month  period  ended  June 30,  2000 from  $206,000  for the same
      period in 1999. Goodwill amortization  increased from $196,000 at June 30,
      1999 to $320,000 at June 30, 2000.  The increase was due to the additional
      amortization  expense required for the merger. Other operating expense for
      the nine months  ended June 30, 2000  increased  $67,000 to $586,000  from
      $519,000  for the same  period  in 1999  due to  increases  in  forms  and
      printing costs.

      Year 2000
      ---------

      The  Corporation's  formal Year 2000 plan  provided  the  framework  for a
      successful year end changeover.  All systems and procedures were tested on
      January 1 to ensure  compliance  with the  established  plan. To date, all
      equipment has worked  properly and no service  providers or customers have
      notified  the  Corporation  of any  problems  that  would  have a material
      adverse effect on the Corporation.



                                       13

<PAGE> 14



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 will not result in a material
                  loss to the Corporation.

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

                  None

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

                  None

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

                  Exhibits
                  --------

                  27    Financial Data Schedule

                  Reports on Form 8-K
                  -------------------

                  None




                                       14

<PAGE> 15





                                   SIGNATURES
                                   ----------

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


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



Date: August 4, 2000                 By:  /s/ Dwight V. Neese
      ------------------------------     --------------------------------------
                                           Dwight V. Neese, CEO


Date: August 4, 2000                 By:  /s/ Richard H. Flake
      ------------------------------     --------------------------------------
                                           Richard H. Flake, CFO





                                       15