<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, 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 1,921,298 shares, $0.01 par value, common stock as of July 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 June 30, 2001
             and September 30, 2000                                            3

            Consolidated Statements of Income for the three and nine months
             ended June 30, 2001 and 2000                                      4

            Consolidated Statements of Cash Flows for the nine
             months ended June 30, 2001 and 2000                               5

            Consolidated Statements of Shareholders' Equity for the
            nine months ended June 30, 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
            -----------------

            Item 1. Legal Proceedings                                         15

            Item 2. Changes in Securities                                     15

            Item 3. Defaults Upon Senior Securities                           15

            Item 4. Submission of Matters to a Vote of Security Holders       15

            Item 5. Other Information                                         15

            Item 6. Exhibits and Reports on Form 8-K                          15

            Signatures                                                        16





<page> 3
<table>
<caption>


ITEM 1.    FINANCIAL STATEMENTS
UNION FINANCIAL BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 (UNAUDITED) AND SEPTEMBER 30, 2000

                                                                              JUNE 30,            SEPTEMBER 30,
ASSETS                                                                          2001                 2000
                                                                            -------------        -------------
                                                                                  (DOLLARS IN THOUSANDS)

                                                                       <c>                  <c>
Cash                                                                      $        2,337       $        2,068
Short term interest-bearing deposits                                              10,190                2,545
                                                                           -------------        -------------
Total cash and cash equivalents                                                   12,527                4,613
                                                                           -------------        -------------
Investment and mortgage-backed securities:
  Held to maturity                                                                11,825               37,652
  Available for sale                                                              56,213               29,240
                                                                           -------------        -------------
Total investment and mortgage-backed securities                                   68,038               66,892
Loans , net
  Held for sale                                                                        0                1,801
  Held for investment                                                            158,140              166,006
                                                                           -------------        -------------
Total loans receivable, net                                                      158,140              167,807
Office properties and equipment, net                                               7,174                6,485
Federal Home Loan Bank Stock, at cost                                              2,625                2,625
Accrued interest receivable                                                        1,609                1,629
Mortgage servicing rights                                                            988                  452
Goodwill intangible                                                                6,464                7,042
Other assets                                                                       2,271                1,519
                                                                           -------------        -------------
TOTAL ASSETS                                                              $      259,836       $      259,064
                                                                           =============        =============
LIABILITIES

Deposit accounts                                                          $      195,479       $      187,974
Advances from the Federal Home Loan Bank and other borrowings                     39,127               47,687
Accrued interest on deposits                                                         379                  329
Advances from borrowers for taxes and insurance                                      274                  473
Other liabilities                                                                  1,338                  677
                                                                           -------------        -------------
TOTAL LIABILITIES                                                                236,597              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 - 1,921,298
   shares at 6/30/01 and 1,911,005 at 9/30/00                                        20                   20
Additional paid-in capital                                                       11,290               11,314
Accumulated other comprehensive income                                           (1,176)              (2,050)
Retained earnings, substantially restricted                                      13,105               12,640
                                                                           ------------         ------------
TOTAL SHAREHOLDERS' EQUITY                                                       23,239               21,924
                                                                           ------------         ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $     259,836        $     259,064
                                                                           ============         ============

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, 2001 (UNAUDITED) AND 2000 (UNAUDITED)


                                              Three Months Ended              Nine Months Ended
                                          June 30,        June 30,        June 30,         June 30,
                                            2001            2000            2001             2000
                                        -------------   -------------   -------------    -------------
                                            (DOLLARS IN THOUSANDS)         (DOLLARS IN THOUSANDS)

                                   <c>             <c>             <c>              <c>
Interest Income:
  Loans                               $        3,616  $        3,699  $       11,073   $       10,944
  Deposits and federal funds sold                 65              19             224               58
  Mortgage-backed securities                     728             431           2,069              968
  Interest and dividends on
   investment securities                         328             379           1,008            1,131
                                        -------------   -------------   -------------    -------------
Total Interest Income                          4,737           4,528          14,374           13,101
                                        -------------   -------------   -------------    -------------

Interest Expense:
  Deposit accounts                             2,192           2,241           6,675            6,056
  Advances from the FHLB and other borrowings    653             662           2,241            1,954
                                        -------------   -------------   -------------    -------------
Total Interest Expense                         2,845           2,903           8,916            8,010
                                        -------------   -------------   -------------    -------------

Net Interest Income                            1,892           1,625           5,458            5,091
  Provision for loan losses                       10             150              45              200
                                        -------------   -------------   -------------    -------------
Net Interest Income After
   Provision for Loan Losses                   1,882           1,475           5,413            4,891
                                        -------------   -------------   -------------    -------------

Non Interest Income:
  Fees for financial services                    233             322             683              938
  Loan servicing fees (costs)                    (44)            167             (28)             204
  Net gains (losses) on sale of investments        0               0               3                0
  Net gains (losses) on sale of loans             17             160             210              292
                                        -------------   -------------   -------------    -------------
Total Non Interest Income                        206             649             868            1,434
                                        -------------   -------------   -------------    -------------

Non Interest Expense:
  Compensation and employee benefits             743             709           2,208            2,195
  Occupancy and equipment                        349             362             960            1,061
  Deposit insurance premiums                       8              13              24               42
  Professional services                          105              60             283              238
  Real estate operations                          (2)             13              14               28
  Goodwill amortization                          162             111             489              320
  Other                                          255             181             695              586
                                        -------------   -------------   -------------    -------------
Total Non Interest Expense                     1,620           1,449           4,673            4,470
                                        -------------   -------------   -------------    -------------

Income Before Income Taxes                       468             675           1,608            1,855
Income tax expense                               165             215             569              632
                                        -------------   -------------   -------------    -------------
Net Income                            $          303  $          460  $        1,039   $        1,223
                                        =============   =============   =============    =============

Basic Net Income Per Common Share     $         0.16  $         0.24  $         0.54   $         0.67
                                        =============   =============   =============    =============

Diluted Net Income Per Common Share   $         0.15  $         0.24  $         0.53   $         0.65
                                        =============   =============   =============    =============

Weighted Average Number of
  Common Shares Outstanding

Basic                                      1,920,176       1,904,947       1,916,759        1,837,644

Diluted                                    1,977,210       1,904,947       1,967,502        1,869,281

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, 2001 (UNAUDITED) AND 2000 (UNAUDITED)

                                                               NINE MONTHS ENDED
                                                            JUNE 30,        JUNE 30,
                                                              2001            2000
                                                          -------------   -------------
                                                                 (IN THOUSANDS)

                                                            <c>             <c>
OPERATING ACTIVITIES:

Net income                                                      $1,039          $1,222
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Provision for loan losses                                         45             200
  Amortization of intangibles                                      578             242
  Depreciation expense                                             593             332
  Recognition of deferred income, net of costs                     (58)           (199)
  Deferral of fee income, net of costs                              70             443
  Loans originated for sale                                     27,825          38,583
  Sale of loans                                                (27,825)        (38,583)
  Gain on sale of loans                                            210             292
  Changes in operating assets and liabilities:
   (Increase) decrease in accrued interest receivable               20            (154)
   (Increase) decrease  in other assets                           (752)            687
   Increase (decrease) in other liabilities                        462           1,119
   Increase (decrease) in accrued interest payable                  50              60
                                                          -------------   -------------
Net cash provided by (used by) operating activities              2,257           4,244
                                                          -------------   -------------
INVESTING ACTIVITIES:

Purchase of investment and mortgage-backed securities:
   Held to maturity                                                  0         (30,365)
   Available for sale                                           (8,923)         (4,094)
Proceeds from sale of investment and mortgage-
    backed securities                                            4,353               0
Proceeds from maturity of investment and mortgage-
    backed securities:
   Available for sale                                            1,650             100
Principal repayments on mortgage-backed securities:
   Held to maturity                                                296             577
   Available for sale                                            1,478           1,486
Acquisition of SCCB                                                  0          (2,410)
Net (increase) decrease in loans                                10,161          20,998
Net (increase) decrease in  mortgage servicing rights             (536)            290
Purchase of FHLB stock                                               0             (88)
Redemption of FHLB stock                                             0               0
Purchase of office properties and equipment                     (1,282)         (1,916)
                                                          -------------   -------------
Net cash provided by (used by) investing activities             $7,197        ($15,422)
                                                          -------------   -------------
FINANCING ACTIVITIES:

Proceeds from the dividend reinvestment plan                        89             158
Dividends paid in cash ($0.30 per share -2001
and $0.30  per share - 2000)                                      (574)           (506)
Proceeds from the exercise of stock options                          0              13
Increase in goodwill intangible                                      0          (2,626)
Proceeds from term borrowings                                   (8,560)          1,361
Increase (Decrease) in deposit accounts                          7,505          15,061
                                                          -------------   -------------
Net cash (used by) provided by financing activities             (1,540)         13,461
                                                          -------------   -------------
NET  DECREASE\INCREASE IN CASH
   AND CASH EQUIVALENTS                                          7,914           2,283

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                        4,613           5,570
                                                          -------------   -------------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                            $12,527          $7,853
                                                          =============   =============
SUPPLEMENTAL DISCLOSURES:

Cash paid for:
  Income taxes                                                    $437              $0
  Interest                                                       8,866           8,010

Non-cash transactions:
  Loans foreclosed                                                 $71            $125

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, 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)

                                                  <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                                                                                    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
                                                   ===============================================================================

BALANCE AT SEPTEMBER 30, 2000                        1,911,005         20     11,314         12,640         (2,050)       21,924

Net income                                                                                    1,039                        1,039

  Other comprehensive income
    Unrealized gains on securities:
       Equity reclassification                                                                                 113           113
       Unrealized holding gains arising during
        period                                                                                                 761           761
                                                                                                               ---           ---
  Comprehensive income                                                                                                     1,913

Equity reclassification                                                          113                                        (113)

Dividend  reinvestment plan contributions               10,293                    89                                          89

Cash dividend ($.30 per share)                                                                  574                         (574)

                                                   -------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2001                             1,921,298        $20    $11,290        $13,105        ($1,176)      $23,239
                                                   ===============================================================================
</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,  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.

      RECENTLY ISSUED ACCOUNTING STANDARDS

      In July 2001,  the SEC issued Staff  Accounting  Bulletin  (SAB) No. 102 -
      Selected Loan Loss Allowance  Methodology and Documentation  Issues.  This
      -------------------------------------------------------------------
      staff  accounting  bulletin  clearly  defines  the  required  development,
      documentation, and application of a systematic methodology for determining
      allowances for loan and lease losses in accordance with generally accepted
      accounting principles.  The Company believes that it is in compliance with
      SAB 102.

      In June 2001, the Financial  Accounting Standards Board (FASB) issued SFAS
      No.  141- Business  Combinations.   This FASB  addresses  accounting   and
                ----------------------
      reporting for all business combinations and defines the purchase method as
      the only acceptable  method.  This statement is effective for all business
      combinations initiated after June 30, 2001.

      In June 2001, the FASB issued SFAS No. 142 - Goodwill and Other Intangible
                                                   -----------------------------
      Assets.  This SFAS  addresses  how  goodwill and other  intangible  assets
      ------
      should be accounted for at their acquisition (except for those acquired in
      a business  combination) and after they have been initially  recognized in
      the financial statements.  The statement is effective for all fiscal years
      beginning  after  December  15,  2001.  The  Company is in the  process of
      determining  the  effect of this  SFAS on the  financial  position  of the
      Company.


                                        7

<page> 8



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

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

      Income per share amounts for the three and nine months ended June 30, 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  $26,733,000  and $12,535,000 of debt securities at June 30,
      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.

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, 2001 related to these items is summarized below:

      Loan Commitments:                                      Contract Amount
      ----------------                                       ---------------
            Approved loan commitments                         $   530,000
            Unadvanced portions of loans                       11,107,000
                                                              -----------
            Total loan commitments                            $11,637,000
                                                              -----------

      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



                                        8

<page> 9


      commitments are a combination of fixed and variable.

      Commitments  outstanding  at June 30, 2001 consist of fixed and adjustable
      rate loans of  approximately  $11,637,000  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   $23,978,000  at  June  30,  2001.  Of  these  lines,   the
      outstanding loan balances totaled approximately $12,871,000. 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
      June 30, 2001 of approximately $651,000.



                                       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  Form  10-Q  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  10-Q 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 effect 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,  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 $772,000 or .30% to $259,836,000
      at June 30, 2001 from  $259,064,000  at  September  30,  2000.  Short term
      investments  increased  $7,914,000 or 171.56% due to higher  federal funds
      sold at quarter end in  anticipation  of security  purchases  that were in
      process  of  settlement.   Investments  and   mortgage-backed   securities
      increased approximately  $1,146,000,  or 1.71%, from September 30, 2000 to
      June 30,  2001 due to the sale of  fixed-rate  mortgage-backed  securities
      offset  by  additional   purchases  of  adjustable  rate  mortgage  backed
      securities  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 sale of the fixed rate  securities  in order
      to reduce  interest rate risk exposure.  Loans  decreased  $9,667,000,  or
      5.76%,  to $158,140,000 at June 30, 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 $7,505,000 or 3.99% to $195,479,000 at June 30,
      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 $8,560,000, or 17.95%, to
      $39,127,000  at June  30,  2001  from  $47,687,000.  Shareholders'  equity
      increased  $1,315,000 or 6.00% to $23,239,000  from $21,924,000 due to net
      income

                                       10

<page> 11



      year to date and an increase in unrealized  gains in securities  available
      for sale, offset by the payment of a $0.30 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 June 30, 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                             $  3,819     $17,824  $14,005
      Tangible capital to adjusted total assets       1.50%       7.00%    5.50%

      Core capital                                  $10,185     $17,824  $ 7,639
      Core capital to adjusted total                  4.00%       7.00%    3.00%

      Risk based capital                            $11,345     $19,027  $ 7,682
      Risk based capital to risk weighted assets      8.00%      13.42%    5.42%

      The reported capital requirements are based on information reported in the
      OTS June 30, 2001 quarterly thrift financial report.






                                       11

<page> 12



      RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2001 AND 2000
      ----------------------------------------------------------------------

      General
      -------

      Net income  decreased  $184,000,  or 15.04%,  to  $1,039,000  for the nine
      months  ended  June 30,  2001 as  compared  to the same  period in 2000 as
      reductions in non interest income were partially  offset by an increase in
      net   interest  income.  Non-interest  income  decreased  due  to  reduced
      mortgage  loan service fees and lower gain on sale of mortgage  loans as a
      result of the sale of the Bank's  mortgage loan  servicing  portfolio that
      was completed during the fourth quarter of fiscal 2000.

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

      Interest income increased $1,273,000,  or 9.72%, for the nine months ended
      June 30, 2001 as compared to the same period in 2000.  Interest  income on
      loans  increased  slightly by 1.18%,  or $129,000,  to $11,073,000 for the
      nine months ended June 30, 2001 from $10,944,000 for the nine months ended
      June 30, 2000.  Interest and dividends on investment  and  mortgage-backed
      securities  increased $978,000,  or 46.59%, for the nine months ended June
      30, 2001 to $3,077,000 from $2,099,000 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 $906,000,  or 11.31%, for the nine months ended
      June 30,  2001 as  compared  to the nine  months  ended June 30,  2000 due
      primarily  to  higher  deposit  rates  as a  result  of  high  short  term
      certificate  of  deposit  rates.  Interest  expense  on  deposit  accounts
      increased  $619,000,  or 10.22%,  to $6,675,000  for the nine months ended
      June 30,  2001 from  $6,056,000  during the same  period in 2000.  Deposit
      rates  have  trended  downward  from  the  previous  quarter  end  and are
      projected  to continue  downward  through  the fiscal  year end.  Interest
      expense on borrowings  increased $287,000,  or 14.69%, for the nine months
      ended June 30, 2001 as compared to the nine months ended June 30, 2000 due
      primarily to rising rates and higher borrowing levels during the period.

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

      During the nine months  ended June 30,  2001,  provisions  for loan losses
      were  $45,000 as compared to $200,000  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 June 30,  2001 were  approximately  .74% of the
      Bank's  outstanding loan portfolio compared to .82% for the same period in
      the previous year.

                                       12

<page> 13



      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.

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

                                            JUNE 30, 2001     SEPTEMBER 30, 2000
                                            -------------     ------------------
      Non-accruing loans which are
      contractually past due 90 days
       or more:

      Real Estate:
       Residential                            $  623              $  763
      Commercial                                 311                 247
      Consumer                                    44                 106
                                               -----                ----
      Total                                   $  953              $1,116
                                              ======              ======

      Percentage of loans receivable, net       0.60%               0.66%
                                               ======              =====

      Percentage of allowance for loan losses   0.79%               0.82%
                                               ======              =====

      Allowance for loan losses               $1,204              $1,360
                                              ======              ======

      Real estate acquired through
       foreclosure and repossessed
       assets, net of allowances              $   88              $  460
                                              ======              =======

      Non accrual  loans  decreased  $163,000 to $953,000 for the period  ending
      June 30, 2001 from $1,116,000 at September 30, 2000.The commercial balance
      consist of five loans  supported by good  collateral  and all  residential
      loans have low loan to value ratios.

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

      Total non interest income decreased $566,000 or 39.47% to $868,000 for the
      nine months ended June 30, 2001 from $1,434,000 for the same period in the
      previous year. Fees from financial  services  decreased $255,000 or 27.19%
      to $683,000 for the nine months ended June 30, 2001 from  $938,000 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



                                       13

<page> 14



      subsidiary of Provident  Community Bank, as a result of changing  economic
      and market conditions.  Loan servicing fee costs for the nine months ended
      June 30,  2001 were  ($28,000)  compared  to loan  service  fee  income of
      $204,000  for the nine months  ended June 30,  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  decreased  $82,000,  or 28.08%,  to  $210,000  for the nine
      months  ended  June 30,  2001  from  $292,000  for the same  period in the
      previous  year.  The  Corporation's  significant  reduction  of  wholesale
      residential  lending  along  with  the  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 nine  months  ended  June 30,  2001,  total non  interest  expense
      increased  $203,000,  or 4.54%, to $4,673,000 from $4,470,000 for the same
      period in 2000.  Approximately 83.25% or $169,000 of the total increase of
      $203,000 was  additional  goodwill  amortization  from the  acquisition of
      South Carolina  Community  Bancshares.  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  increased  $13,000 or .59% to $2,208,000  for the nine
      month  period ended June 30, 2001 from  $2,195,000  for the same period in
      2000 due  primarily to staff  reductions  resulting  from the  acquisition
      offset by salary  increases  for existing  staff.  Occupancy and equipment
      expense  decreased  $101,000,  or 9.52%,  to $960,000  for the nine months
      ended June 30,  2001 from  $1,061,000  for the same  period in 2000 due to
      lower data processing  expense as a result of a prior year data processing
      conversion.  Other  operating  expense for the nine months  ended June 30,
      2001  increased  $109,000 to $695,000 from $586,000 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
            ---------------------------------------------------

                  None

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

                  None

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

                  Reports on Form 8-K

                  None







                                       15


<page> 16







                                   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: 7-31-01                        By: /s/ Dwight V. Neese
      ------------------------------     --------------------------------------
                                         Dwight V. Neese, CEO


Date: 7-31-01                        By: /s/ Richard H. Flake
      ------------------------------     --------------------------------------
                                         Richard H. Flake, CFO







                                       16