FORM 10-Q



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549



                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


   For the quarter ended September 30, 1999      Commission file number 0-13759
                         ------------------                             -------



                          ANCHOR FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)



          South Carolina                                     57-0778015
 (State or other jurisdiction of                         (I.R.S. Employer
  incorporation or organization)                         Identification number)



  2002 Oak St., Myrtle Beach, S. C.                             29577
(Address of principal executive offices)                     (Zip Code)



Registrant's telephone number, including area code  (843) 448-1411


         Indicate by check mark whether the registrant (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 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


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.


           Class                               Outstanding at November 5, 1999
  ----------------------------                 --------------------------------
  (Common stock, no par value)                            8,089,882


<PAGE>

                      ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES



                                       INDEX



                                                                  PAGE NO.


Part I - Financial Information
------------------------------

Item 1 - Financial Statements (Unaudited)

          Consolidated Balance Sheet - September 30, 1999
          and December 31, 1998                                       1

          Consolidated Statement of Income - Three months and
          Nine months ended September 30, 1999 and 1998               2

          Consolidated Statement of Changes in Stockholders' Equity
          and Comprehensive Income - Nine months ended
          September 30, 1999 and 1998                                 3

          Consolidated Statement of Cash Flows -
          Nine months ended September 30, 1999 and 1998               4

          Notes to Consolidated Financial Statements                  5-8

Item 2 - Management's Discussion and Analysis of
         Financial Condition and Results of Operations                9-17

Item 3 - Quantitative and Qualitative Disclosures about Market Risk   17


Part II - Other Information
---------------------------

Item 1 - Legal Proceedings                                            18
Item 2 - Changes in Securities                                        18
Item 3 - Defaults Upon Senior Securities                              18
Item 4 - Submission of Matters to a Vote of Security-Holders          18
Item 5 - Other Information                                            18
Item 6 - Exhibits and Reports on Form 8-K                             18

<PAGE>

Anchor Financial Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>



                                                                                September 30,        December 31,

-----------------------------------------------------------------------------------------------------------------
                                                                                    1999                 1998
-----------------------------------------------------------------------------------------------------------------

ASSETS
  <S>                                                                  <C>                      <C>
  Cash and due from banks                                              $       43,843,427       $     49,347,029
  Interest-bearing balances due from banks                                        179,980              8,082,081
  Federal funds sold                                                                    0              5,650,000
  Investment securities:
    Held-to-maturity, at amortized cost (fair value of $12,291,707
      in 1999 and $30,317,309 in 1998)                                         13,353,395             29,481,031
    Available-for-sale, at fair value                                         262,900,876            238,808,061
-----------------------------------------------------------------------------------------------------------------
  Total investment securities                                                 276,254,271            268,289,092
-----------------------------------------------------------------------------------------------------------------

  Total Loans                                                                 862,152,996            810,890,670
    Less - allowance for loan losses                                          (10,295,579)            (9,546,139)
-----------------------------------------------------------------------------------------------------------------
  Net loans                                                                   851,857,417            801,344,531
-----------------------------------------------------------------------------------------------------------------

  Premises and equipment                                                       26,584,140             27,562,951
  Other assets                                                                 25,058,228             23,399,144
-----------------------------------------------------------------------------------------------------------------

Total assets                                                           $    1,223,777,463       $  1,183,674,828
=================================================================================================================


LIABILITIES AND STOCKHOLDERS' EQUITY
  Liabilities:
    Deposits:
      Demand deposits                                                  $      176,256,739       $    169,219,775
      NOW and money market accounts                                           452,574,419            407,438,748
      Time deposits $100,000 and over                                          72,010,934             89,537,292
      Other time and savings deposits                                         253,290,165            302,144,079
-----------------------------------------------------------------------------------------------------------------
    Total deposits                                                            954,132,257            968,339,894
    Federal funds purchased and securities
      sold under agreements to repurchase                                      68,895,760             62,424,543
    Other short-term borrowings                                                 1,864,531              1,396,927
    Long-term debt                                                             88,687,080             42,187,000
    Subordinated notes                                                         11,000,000             11,000,000
    Other liabilities                                                          10,739,045              9,324,769
-----------------------------------------------------------------------------------------------------------------
  Total liabilities                                                         1,135,318,673          1,094,673,133
-----------------------------------------------------------------------------------------------------------------

  Stockholders' Equity:
    Common stock, no par value; 50,000,000 shares
      authorized; shares issued and outstanding - 8,065,280
      in 1999 and 8,085,793 in 1998                                            53,450,418             54,653,232
    Retained earnings                                                          39,995,263             34,025,512
    Accumulated other comprehensive income (loss)                              (3,941,891)             1,417,951
    Unearned ESOP shares                                                       (1,045,000)            (1,095,000)
-----------------------------------------------------------------------------------------------------------------
  Total stockholders' equity                                                   88,458,790             89,001,695
-----------------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity                             $    1,223,777,463       $  1,183,674,828
=================================================================================================================
</TABLE>

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


                                       1
<PAGE>

Anchor Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>


                                                 Nine months ended September 30,       Three months ended September 30,
                                                -----------------------------------   -------------------------------------

                                                      1999               1998              1999                 1998
                                                -----------------------------------   -------------------------------------
INTEREST INCOME:
  <S>                                          <C>                 <C>              <C>                 <C>
  Interest and fees on loans                   $     55,852,355    $    56,524,857  $      19,119,974   $       18,962,868
  Interest on investment securities:
    Taxable                                          11,322,299         11,015,356          3,893,554            4,102,985
    Non-taxable                                         913,623            771,731            283,560              300,917
  Other interest income                                 221,126          1,488,683             55,757              508,900
                                                -----------------------------------   -------------------------------------
                Total interest income                68,309,403         69,800,627         23,352,845           23,875,670
                                                -----------------------------------   -------------------------------------

INTEREST EXPENSE:
  Interest on deposits                               23,346,869         27,694,982          7,923,228            9,438,683
  Interest on short-term borrowings                   1,947,269          1,588,876            670,057              560,178
  Interest on long-term borrowings                    2,545,609          2,299,307          1,041,970              706,472
  Interest on subordinated notes                        717,660            696,906            254,794              234,041
                                                -----------------------------------   -------------------------------------
                Total interest expense               28,557,407         32,280,071          9,890,049           10,939,374
                                                -----------------------------------   -------------------------------------

Net interest income                                  39,751,996         37,520,556         13,462,796           12,936,296
Provision for loan losses                             1,227,250          2,686,644            375,750            1,513,644
                                                -----------------------------------   -------------------------------------

Net interest income after provision for loan
losses                                               38,524,746         34,833,912         13,087,046           11,422,652
                                                -----------------------------------   -------------------------------------

NONINTEREST INCOME:
  Service charges on deposit accounts                 3,256,728          3,375,737          1,064,160            1,142,530
  Commissions and fees                                2,294,645          1,904,452            785,591              752,622
  Trust income                                        1,595,891          1,244,860            576,613              413,500
  Gains on sales of mortgage loans                      968,550          1,144,980            243,839              410,789
  Gains on sales of securities                           83,436            183,678              9,404               77,277
  Other operating income                                722,548            678,923            253,322              130,725
                                                -----------------------------------   -------------------------------------
                Total noninterest income              8,921,798          8,532,630          2,932,929            2,927,443
                                                -----------------------------------   -------------------------------------

NONINTEREST EXPENSE:
  Salaries and employee benefits                     16,958,796         17,280,183          5,465,774            6,612,939
  Net occupancy expense                               2,259,459          2,120,126            764,202              565,316
  Equipment expense                                   2,009,705          2,138,404            660,713              993,880
  Other operating expense                            10,032,715         10,253,964          3,118,960            4,664,324
                                                -----------------------------------   -------------------------------------
                Total noninterest expense            31,260,675         31,792,677         10,009,649           12,836,459
                                                -----------------------------------   -------------------------------------

Income before income taxes                           16,185,869         11,573,865          6,010,326            1,513,636
Provision for income taxes                            5,853,287          4,524,406          2,078,300            1,040,077
                                                -----------------------------------   -------------------------------------

Net income                                     $     10,332,582    $     7,049,459  $       3,932,026   $          473,559
                                                ===================================   =====================================

Net income per share - basic                   $           1.29    $          0.89  $            0.49   $             0.06
                                                ===================================   =====================================

Net income per share - diluted                 $           1.25    $          0.85  $            0.48   $             0.06
                                                ===================================   =====================================

Weighted average common shares outstanding -
basic                                                 8,012,583          7,952,105          8,000,480            7,963,715
                                                ===================================   =====================================

Weighted average common shares outstanding -
diluted                                               8,289,293          8,275,792          8,273,768            8,328,509
                                                ===================================   =====================================
</TABLE>

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


                                       2
<PAGE>

Anchor Financial Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
and Comprehensive Income
Nine Months ended September 30, 1999 and September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>


-----------------------------------------------------------------------------------------------------------------
                                                                         Accumulated
                                                                            other       Unearned       Total
                                          Common Stock       Retained   comprehensive    ESOP     stockholders'
                                      Shares      Amount     earnings      income       shares       equity
                                      ---------------------------------------------------------------------------
<S>                                   <C>        <C>         <C>             <C>        <C>          <C>
Balance at December 31, 1997          7,983,379  $53,655,224 $26,638,500     $918,405   ($526,625)   $80,685,504

Comprehensive Income
  Net income                                                   7,049,459                               7,049,459
  Other comprehensive income, net of tax
    Unrealized gains on investment securities                               1,058,043                  1,058,043
                                                                                                   --------------
Total Comprehensive Income                                                                             8,107,502
                                                                                                   --------------
Common stock issued pursuant to:
  Dividend Reinvestment Plan              7,483      295,067                                             295,067
  Stock Option Plan                      39,258      294,705                                             294,705
Fractional shares paid in                  (427)                 (15,718)                                (15,718)
acquisitions
Change in unearned ESOP shares                       277,722      20,947                   106,625       405,294
Cash dividends ($0.36 per share)                              (1,399,760)                             (1,399,760)
Cash dividends from:
  Acquired entities                                             (570,130)                               (570,130)
                                     ============================================================================
Balance at September 30, 1998         8,029,693  $54,522,718 $31,723,298   $1,976,448    ($420,000)  $87,802,464
                                     ============================================================================




Balance at December 31, 1998          8,085,793  $54,653,232 $34,025,512   $1,417,951  ($1,095,000)  $89,001,695

Comprehensive Income
  Net income                                                  10,332,582                              10,332,582
  Other comprehensive income, net of tax
    Unrealized loss on investment securities                               (5,359,842)                (5,359,842)
                                                                                                   --------------
Total Comprehensive Income                                                                             4,972,740
                                                                                                   --------------
Common stock issued pursuant to:
  Stock Option Plan                      42,829      315,453                                             315,453
Tax benefit from exercised stock options              30,250                                              30,250
Dissenters from Bailey Merger           (63,322)  (1,726,469)                                         (1,726,469)
Fractional shares paid in                   (20)                    (564)                                   (564)
acquisition merger
Change in unearned ESOP shares                       177,952      28,407                    50,000       256,359
Cash dividends ($0.42 per share)                              (4,298,388)                             (4,298,388)
Cash dividends from:
  Acquired entities                                              (92,286)                                (92,286)
                                     ============================================================================
Balance at September 30, 1999         8,065,280  $53,450,418 $39,995,263  ($3,941,891)  ($1,045,000) $88,458,790
                                     ============================================================================
</TABLE>

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


                                       3
<PAGE>

Anchor Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>



----------------------------------------------------------------------------------------------------------------------------
                                                                                       Nine Months ended September 30,
----------------------------------------------------------------------------------------------------------------------------
                                                                                            1999                 1998
----------------------------------------------------------------------------------------------------------------------------

Cash flows from operating activities:
  <S>                                                                                <C>                 <C>
  Net income                                                                         $     10,332,582    $        7,049,459
  Adjustments to reconcile net income to net cash provided by operating activities:
    Accretion and amortization of investment securities                                       131,750              (371,853)
    Depreciation and amortization                                                           2,362,086             2,295,853
    Provision for loan losses                                                               1,227,250             2,686,644
   (Gains)losses on sales of investment securities, net                                       (83,436)              183,678
    Gains on sales of mortgage loans                                                         (968,550)           (2,224,217)
    Gains on sales of premises and equipment                                                     (548)                8,814
    Change in interest receivable                                                             730,327               469,283
    Change in other assets                                                                    540,350             3,455,470
    Change in deferred taxes                                                               (3,362,240)              336,792
    Change in interest payable                                                               (755,867)             (338,780)
    Change in other liabilities                                                             3,737,880             1,579,530
    Origination of mortgage loans held for sale                                           (63,539,875)          (81,457,148)
    Proceeds from sales of mortgage loans held for sale                                    65,383,915            83,681,365
    Net change in unearned ESOP shares                                                        256,359               405,294
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                                  15,991,983            17,760,184
----------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Purchase of investment securities held-to-maturity                                                0            (3,860,000)
  Proceeds from maturities of investment securities held-to-maturity                       16,126,440            11,153,464
  Purchase of investment securities available-for-sale                                    (98,824,832)         (135,512,433)
  Proceeds from sales of investment securities available-for-sale                          52,133,585            43,828,780
  Proceeds from maturities of investment securities available-for-sale                     14,495,064            55,996,790
  Net change in loans                                                                     (52,615,626)          (40,278,211)
  Capital expenditures                                                                       (950,248)           (2,134,000)
----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities                                                    (69,635,617)          (70,805,610)
----------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Net change in deposits                                                                  (14,207,637)           58,436,639
  Net change in federal funds purchased and securities sold under
    agreements to repurchase                                                                6,471,217            (3,769,305)
  Net change in other short-term borrowings                                                   467,604            (2,982,488)
  Net change in long-term debt                                                             46,500,080             1,007,344
  Proceeds from issuance of stock in accordance with:
    Stock Option Plan                                                                         315,453               294,705
    Dividend Reinvestment Plan                                                                      0               295,067
  Cash dividends paid                                                                      (3,262,003)           (1,969,890)
  Other, net                                                                               (1,696,783)              (15,718)
----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                                  34,587,931            51,296,354
----------------------------------------------------------------------------------------------------------------------------

Net change in cash and cash equivalents                                                   (19,055,703)           (1,749,072)
Cash and cash equivalents at January 1                                                     63,079,110            61,140,628
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at September 30                                            $     44,023,407    $       59,391,556
============================================================================================================================

</TABLE>

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


                                       4
<PAGE>

                  ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1:         BASIS OF PRESENTATION

                The   accompanying   consolidated   financial   statements   are
                unaudited;  however,  such information  reflects all adjustments
                (consisting  solely of normal recurring  adjustments) which are,
                in the opinion of management,  necessary for a fair statement of
                the financial position and operating results of Anchor Financial
                Corporation  (the  "Corporation")  and its  subsidiaries for the
                periods  presented.  A summary of the Corporation's  significant
                accounting  policies is set forth in Note 1 to the  Consolidated
                Financial  Statements in the Corporation's Annual Report on Form
                10-K for 1998.

                The results of  operations  for the three and nine month periods
                ended September 30, 1999 are not  necessarily  indicative of the
                results to be expected for the full year.


NOTE 2:         ACQUISITIONS

                On  August  31,  1998,  the  Corporation  merged  with  ComSouth
                Bankshares  Inc. and M&M  Financial  Corporation.  The surviving
                entity was Anchor Financial  Corporation.  The transactions were
                accounted  for  as  poolings  of  interests.   The  consolidated
                financial  statements  have been  restated  to present  combined
                financial  information  of the  Corporation as if the merger had
                been in effect for all periods presented.

                On April 9, 1999, the Corporation  merged with Bailey  Financial
                Corporation  ("Bailey  Financial").  The  surviving  entity  was
                Anchor Financial Corporation.  The transaction was accounted for
                as a pooling of interests  and provided for a tax-free  exchange
                of 16.32  shares  of  Anchor  Financial  common  stock  for each
                outstanding   share  of  Bailey   Financial  common  stock.  The
                consolidated  financial statements have been restated to present
                combined  financial  information  of the  Corporation  as if the
                merger had been in effect for all periods presented.


                                       5

<PAGE>

                  ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 3:         RESERVE FOR LOAN LOSSES

                Activity in the reserve for loan losses for the nine months
                ended September 30, 1999 and 1998 is summarized as follows:
                <TABLE>
                <CAPTION>
                                                                                1999              1998
                                                                       -------------------------------------
                <S>                                                            <C>               <C>
                Balance, beginning of year                                     $9,546,139        $8,366,714
                Provision charged to operations                                 1,227,250         2,686,644
                Recoveries of charged off loans                                   441,301           677,622
                Loans charged off                                                (919,111)       (2,237,624)
                                                                       -------------------------------------
                Balance, end of period                                        $10,295,579        $9,493,356
                                                                       =====================================
                </TABLE>


NOTE 4:        NONPERFORMING ASSETS

               The following is a summary of  nonperforming  assets at September
               30,1999 and  December  31,  1998.  The income  effect of interest
               foregone on these assets is not material. The Corporation did not
               have any loans with reduced  interest  rates  because of troubled
               debt restructuring,  foreign loans, or loans for highly leveraged
               transactions.  Management  is not aware of any  situation,  other
               than those included in the summary below, where known information
               about a borrower would require  disclosure as a potential problem
               loan.
               <TABLE>
               <CAPTION>
                                                                           9/30/99           12/31/98
                                                                      -------------------------------------
               <S>                                                            <C>               <C>
               Nonaccrual loans                                               $2,982,765        $2,987,753
               Loans past due ninety days or more                                 55,434            34,000
               Other real estate owned                                           511,508           212,912
                                                                      =====================================
               Total nonperforming assets                                     $3,549,707        $3,234,665
                                                                      =====================================
               </TABLE>

               Impaired  loans  are  loans  for  which it is  probable  that all
               amounts,  including principal and interest, will not be collected
               in accordance with the  contractual  terms of the loan agreement.
               At September  30,  1999,  impaired  loans had a related  specific
               allowance  for loan  losses  totaling  $1,024,113.  There were no
               material  commitments to lend additional funds to customers whose
               loans were classified as impaired at September 30, 1999.


                                       6

<PAGE>

                  ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



NOTE 5:        LONG-TERM DEBT AND SUBORDINATED NOTES

               The principal  maturity of long-term debt and subordinated  notes
               for the next five  years  subsequent  to  September  30,  1999 is
               summarized below:
               <TABLE>
               <CAPTION>

                   <S>                                                                       <C>
                   2000                                                                      $ 1,987,080
                   2001                                                                        1,000,000
                   2002                                                                       10,700,000
                   2003                                                                       16,000,000
                   2004                                                                        5,000,000
                   2005 and thereafter                                                        65,000,000
                   --------------------------------------------------------------------------------------
                   Total                                                                     $99,687,080
                   --------------------------------------------------------------------------------------
                </TABLE>

                Subordinated   Notes,   which   qualify  for  inclusion  in  the
                determination  of total  capital  under the Risk  Based  Capital
                Guidelines, totaled $11,000,000 at September 30, 1999.


NOTE 6:        EARNINGS PER SHARE DATA

               Earnings  per share - basic is computed by dividing net income by
               the weighted average number of shares  outstanding.  Earnings per
               share -  diluted  is  computed  by  dividing  net  income  by the
               weighted average number of common shares outstanding and dilutive
               common  share   equivalents  using  the  treasury  stock  method.
               Dilutive common share equivalents  include common shares issuable
               upon exercise of outstanding  stock options.  Unallocated  common
               shares held by the  Employee  Stock  Ownership  Plan are excluded
               from the weighted average shares outstanding.


                                        7

<PAGE>

                                ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 (Unaudited)

               In  accordance  with SFAS No.  128,  "Earnings  Per  Share,"  the
               calculation  of net  income  per share - basic and net income per
               share - diluted,  including the effect of  nonrecurring  charges,
               for the three and nine months  ended  September  30 is  presented
               below:

<TABLE>
<CAPTION>

                                                           Three months ended September 30,       Nine months ended September 30,
                                                         -------------------------------------  ------------------------------------
                                                               1999              1998                1999              1998
                                                         -------------------------------------  ------------------------------------
<S>                                                            <C>                   <C>            <C>                  <C>
Net income per share - basic computation
    Net income                                                 $3,932,026            $473,559       $10,332,582          $7,049,459
    Income available to common shareholders                    $3,932,026            $473,559       $10,332,582          $7,049,459
                                                         =====================================  ====================================
    Average common shares outstanding                           8,060,197           8,026,625         8,072,300           8,015,015
       Unallocated ESOP Shares                                    (59,717)            (62,910)          (59,717)            (62,910)
                                                         -------------------------------------  ------------------------------------
    Average common shares outstanding - basic                   8,000,480           7,963,715         8,012,583           7,952,105
                                                         -------------------------------------  ------------------------------------
    Net income per share - basic                                    $0.49               $0.06             $1.29               $0.89
                                                         =====================================  ====================================

Net income per share - diluted computation
    Income available to common shareholders                    $3,932,026            $473,559       $10,332,582          $7,049,459
                                                         =====================================  ====================================
    Average common shares outstanding - basic                   8,000,480           7,963,715         8,012,583           7,952,105
    Incremental shares from assumed conversions:
       Stock Options                                              273,288             364,794           276,710             323,687
                                                         -------------------------------------  ------------------------------------
    Average common shares outstanding -diluted                  8,273,768           8,328,509         8,289,293           8,275,792
                                                         -------------------------------------  ------------------------------------
    Net income per share - diluted                                  $0.48               $0.06             $1.25               $0.85
                                                         =====================================  ====================================
</TABLE>



NOTE 7:        OTHER MATTERS

               At September  30,  1999,  outstanding  standby  letters of credit
               totaled $3,977,074.

               For the nine  months  ended  September  30,  1999 and  1998,  the
               Corporation   paid  interest  of  $29,313,274   and   $32,618,851
               respectively.  The  Corporation  paid  $4,886,004 in income taxes
               during the nine months ended  September  30, 1999 and  $5,361,351
               during the same period in 1998.


                                       8

<PAGE>

ITEM 2.   Management's Discussion and Analysis


         Certain    information    included   in   this   discussion    contains
forward-looking  statements with respect to the financial condition,  results of
operations and business of the  Corporation,  based on  management's  belief and
information currently available to management.  Such forward-looking  statements
are subject to risks,  uncertainties  and  assumptions.  Actual results may vary
materially from those anticipated,  estimated, projected, or expected. Among the
factors  that may cause  variations  from such  forward-looking  statements  are
fluctuations  in the economy,  especially  in the  Corporation's  market  areas;
changes in the interest rate environment;  the Corporation's  ability to realize
anticipated cost savings  relating to recently completed mergers;  the
Corporation's success in assimilating  acquired operations  in the Corporation's
culture, including its ability to instill the Corporation's credit culture into
acquired operations;  the  continued  growth  of the markets in which the
Corporation operates; and the enactment of legislation impacting the
Corporation.


Net Income

         Net income for the third quarter of 1999 totaled  $3,937,140,  or $0.48
per  diluted  share,  before  pretax  charges  of $5,292  ($5,114  after  taxes)
associated   with  the   acquisition  of  Bailey   Financial.   Excluding  these
nonrecurring  charges, net income and earnings per diluted share for the quarter
ended September 30, 1999, increased 15.9% and 16.4% respectively, from the third
quarter  of 1998.  Including  the  effect of the  charges,  net  income  totaled
$3,932,026,  or $0.48 per diluted  share,  for the quarter  ended  September 30,
1999,  compared to net income of $473,559,  or $0.06 per diluted share earned in
the same period of 1998.

         The primary factors affecting net income,  before nonrecurring charges,
for the third quarter of 1999 were increases of $526,500 in net interest  income
and $26,382 in  noninterest  income,  and a decrease in the  provision  for loan
losses of $337,894. These positive factors were partially offset by increases in
noninterest expense of $286,621, and the provision for income taxes of $42,215.

         For the quarter ended September 30, 1999,  return on average assets and
return on average equity, excluding nonrecurring charges, were 1.28% and 16.86%,
respectively, compared to prior year ratios of 1.12% and 15.35%.

         Net  income  for the nine  months  ended  September  30,  1999  totaled
$11,608,286,  or $1.40 per diluted  share,  before pretax  charges of $1,651,282
($1,275,704  after taxes)  associated with the acquisition of Bailey  Financial.
Excluding these nonrecurring  charges, net income and earnings per diluted share
for the nine  months  ended  September  30,  1999,  increased  13.5%  and  12.9%
respectively, from the same period in 1998. Including the effect of the charges,
net income totaled $10,332,582,  or $1.25 per diluted share, for the nine months
ended  September 30, 1999,  compared to net income of  $7,049,459,  or $0.85 per
diluted share earned in the same period of 1998.


                                       9

<PAGE>

         The primary factors affecting net income,  before nonrecurring charges,
for the nine months ended September 30, 1999 were increases of $2,231,440 in net
interest  income and  $389,168  in  noninterest  income,  and a decrease  in the
provision for loan losses of $659,394.  These  positive  factors were  partially
offset by increases in noninterest expense of $1,196,145,  and the provision for
income taxes of $704,673.

         For the nine months ended September 30, 1999,  return on average assets
and return on average equity,  excluding  nonrecurring  charges,  were 1.30% and
17.04%, respectively, compared to prior year ratios of 1.17% and 15.91%.

         During the nine  months  ended  September  30,  1999,  the  Corporation
incurred  $1,043,272,  before tax effect,  in restructuring  charges,  $417,284,
before tax effect, in investment  banking fees and $166,997,  before tax effect,
in legal, accounting, and printed material expenses arising from the merger with
Bailey  Financial (See Note 2 to the unaudited  interim  consolidated  financial
statements).


Net Interest Income

         Net  interest  income,  the major  component of the  Corporation's  net
income,  was  $13,462,796 for the third quarter of 1999, an increase of $526,500
or 4.1% from the $12,936,296 reported for the same period in 1998. This increase
was attributed to the increased volume of earning assets and increased volume of
noninterest  bearing  sources,  since the increased tax  equivalent net yield on
earning  assets  decreased  during the period.  The tax  equivalent net yield on
earning  assets  increased from 4.67% in 1998 to 4.73% in 1999. The net interest
margin  widened from 1998 primarily  because of a lower cost of funding  earning
assets.

         Interest  income  was  down  $522,825  or 2.2%  for the  quarter  ended
September 30, 1999  compared with the same period in 1998.  The decrease was due
to the  decline in the yield on  earning  assets  since the  volume of  interest
earning  assets grew from the same period in 1998.  The yield on earning  assets
decreased from 8.55% in 1998 to 8.18% in 1999.  Average  interest earning assets
for the third  quarter  of 1999  increased  $22.9  million or 2.1% from the same
period in 1998.  Average  loans  increased  $43.8  million  or 5.4% and  average
investment  securities  increased $11.2 million or 4.1% for the third quarter of
1999  compared with the same period in 1998.  Average  interest  earning  assets
represented  94.0% of average  total  assets  during  the third  quarter of 1999
compared with 93.1% in 1998.  The yield on earning  assets  decreased  primarily
because the yield on loans  decreased  from 9.19% in 1998 to 8.63% in 1999.  The
composition  of average  interest-earning  assets  changed as the  percentage of
average loans to average interest-earning assets increased from 72.6% in 1998 to
75.0% in 1999.

         Interest  expense  decreased  $1,049,325  or 9.6% for the quarter ended
September  30,  1999  compared  with the same  period in 1998.  The  decrease in
interest expense was due to a decreased  rate paid on average  interest-bearing
liabilities since interest-bearing liabilities grew slightly from the second
quarter of 1998. The rate paid on average interest-bearing liabilities decreased
from

                                       10

<PAGE>

4.69% for the quarter ended September 30, 1998 to 4.22% for the same period
in 1999 due to the lower interest rate  environment  and a more favorable mix of
deposits.  Traditionally  lower-yielding  interest checking,  savings, and money
market deposit accounts as a group increased as a percentage of interest-bearing
liabilities  from  54.7%  for the third  quarter  of 1998 to 56.0% for the third
quarter of 1999.  Average  certificates of deposit  decreased as a percentage of
interest-bearing liabilities from 36.6% for the quarter ended September 30, 1998
to 27.8% for the third  quarter of 1999.  Average  interest-bearing  liabilities
increased  slightly for the third  quarter of 1999 compared with the same period
in 1998. Average noninterest bearing sources increased $17.7 million or 9.3% for
the  third  quarter  of 1999  compared  with the same  period  in 1998.  Average
interest-bearing  liabilities  represented  81.7% of funding  sources during the
third quarter of 1999 compared with 82.9% in 1998.

         Net interest income was $39,751,996 for the nine months ended September
30, 1999, an increase of $2,231,440  or 5.9% from the  $37,520,556  reported for
the same period in 1998. This increase was attributed to the increased volume of
earning assets and increased volume of noninterest  bearing  sources,  since the
tax equivalent net yield on earning assets decreased during the period.  The tax
equivalent net yield on earning assets  increased from 4.63% in 1998 to 4.81% in
1999.  The net  interest  margin  widened  from the  first  nine  months of 1998
primarily because of a lower cost of funding earning assets.

         Interest  income was down  $1,491,224 or 2.1% for the nine months ended
September 30, 1999  compared with the same period in 1998.  The decrease was due
to the  decline in the yield on  earning  assets  since the  volume of  interest
earning  assets grew from the same period in 1998.  The yield on earning  assets
decreased from 8.57% in 1998 to 8.21% in 1999.  Average  interest earning assets
for the nine months ended  September  30, 1999  increased  $24.8 million or 2.3%
from the same period in 1998.  Average loans increased $34.5 million or 4.3% and
average  investment  securities  increased  $20.4  million  or 8.1% for the nine
months ended  September 30, 1999 compared with the same period in 1998.  Average
interest  earning  assets  represented  93.8% of average total assets during the
nine months ended  September 30, 1999 compared with 93.2% in 1998.  The yield on
earning assets  decreased  primarily  because the yield on loans  decreased from
9.37% in 1998 to 8.88% in 1999.  The  composition  of  average  interest-earning
assets  changed as the  percentage of average loans to average  interest-earning
assets increased from 73.7% in 1998 to 75.2% in 1999.

         Interest  expense  decreased  $3,722,664  or 11.5% for the nine  months
ended  September 30, 1999 compared with the same period in 1998. The decrease in
interest  expense was due to a decreased  rate paid on average  interest-bearing
liabilities since  interest-bearing  liabilities  increased from the nine months
ended September 30, 1998. The rate paid on average interest-bearing  liabilities
decreased  from 4.72% for the nine months ended  September 30, 1998 to 4.15% for
the same period in 1999 due to the lower  interest rate  environment  and a more
favorable  mix of  deposits.  Traditionally  lower-yielding  interest  checking,
savings,  and money market deposit accounts as a group increased as a percentage
of  interest-bearing  liabilities from 52.8% for the nine months ended September
30, 1998 to 55.4% for the same period in 1999.  Average  certificates of deposit
decreased as a percentage  of  interest-bearing  liabilities  from 38.0% for the


                                       11

<PAGE>

first nine months of 1998 to 30.0% for the nine months ended September 30, 1999.
Average long-term debt and subordinated  notes for the first nine months of 1999
increased  22.7% from 1998.  Average  interest-bearing  liabilities for the nine
months  ended  September  30, 1999 only  increased  0.7% from the same period in
1998. Average  noninterest  bearing sources increased $18.7 million or 10.4% for
the nine months ended  September 30, 1999 compared with the same period in 1998.
Average interest-bearing liabilities represented 82.2% of funding sources during
the nine months ended September 30, 1999 compared with 83.5% in 1998.

Provision for Loan Losses

         A $375,750  provision for loan losses was made during the third quarter
of 1999 compared with a provision of $1,513,644 in 1998. A $1,227,250  provision
for loan  losses was made  during  the nine  months  ended  September  30,  1999
compared with a provision of  $2,686,644 in 1998.  The decrease in the provision
for loan  losses in 1999 was  primarily  due to  slowing  of loan  growth  and a
decrease in net  charge-offs.  The provision of $1,513,644 for the third quarter
of 1998 and  $2,686,644  for the nine months ended  September  30, 1998 includes
$800,000  necessitated  by third  quarter  charge-offs  at  acquired  banks in a
similar  amount.  At  September  30, 1999 and 1998 the ratio of  annualized  net
charge-offs to average loans was 0.08% and 0.26%  respectively.  The Corporation
charged off  approximately  $800,000 in the third quarter of 1998 as a result of
factors affecting the acquired banks' loan portfolios.

         Nonperforming  assets at September 30, 1999 totaled $3,549,707 compared
with  $2,907,834  reported  at  the  same  time  last  year.  The  Corporation's
nonperforming assets have historically  remained relatively low as the result of
conservative underwriting policies and favorable market conditions. The ratio of
nonperforming  assets to total  loans and other real  estate  owned was 0.41% at
September 30, 1999 compared with 0.36% at September 30, 1998.

         The reserve for loan losses at  September  30, 1999 and  September  30,
1998 represented 1.19% and 1.16% respectively of total loans outstanding.  Based
on the current evaluation of the loan portfolio, management believes the reserve
at September 30, 1999 is adequate to cover potential losses in the portfolio.


                                       12

<PAGE>

Noninterest Income

         Noninterest  income for the third quarter of 1999 was up $5,486 or 0.2%
from the same period in 1998. The primary factors  contributing to this increase
were  increases in  commissions  and fees of $32,969 or 4.4% and trust income of
$163,113 or 39.5%.  These positive  factors were offset by decreases in mortgage
banking income of $166,950 or 40.6% and service  charges on deposit  accounts of
$78,370 or 6.9%.

         Noninterest  income for the nine months ended September 30, 1999 was up
$389,168 or 4.6% from the same period in 1998. The primary factors  contributing
to this increase were increases in commissions and fees of $390,193 or 20.5% and
trust  income of  $351,031  or 28.2%.  These  positive  factors  were  offset by
decreases  in service  charges  on  deposit  accounts  of  $119,009  or 3.5% and
mortgage banking income of $176,430 or 15.4%.

         The growth in  commissions  and fees for the third quarter and the nine
months ended September 30, 1999 resulted  primarily from increases in investment
fee  income,  ATM  network  revenue,   and  credit  card-related  service  fees.
Investment fee income  benefited from increased  market  penetration in existing
markets and expansion into new markets.  Trust revenue continues to benefit from
increased sales efforts and favorable conditions in the Corporation's  expanding
markets.  Mortgage  banking  income  was down due to the  Corporation's  markets
experiencing  a less  favorable  interest  rate  environment.  Although  average
deposits  increased,  service charges on deposit account  revenues for the three
months and nine months ended  September 30, 1999  decreased.  During the quarter
and the nine months ended September 30, 1999,  management  continued to focus on
increasing noninterest income with revenue from the sales of new products rather
than increased pricing of existing services.


Noninterest Expense

         Noninterest  expense,  excluding pretax nonrecurring  charges,  for the
third quarter of 1999  increased  $286,621 or 2.9% from the same period in 1998.
The  primary  factors  contributing  to  this  increase  were  increases  in net
occupancy  expense of $198,886 or 35.2%,  other operating expense of $373,854 or
13.7%, and a slight increase in salaries and employee benefits.  These increases
were offset by a 33.5% decrease in equipment expense.

         The  increase in salaries and employee  benefits  resulted  from normal
merit  increases.  Net occupancy  expense  increased  largely due to higher rent
expense and building maintenance costs.

         Noninterest   expense,   excluding  pretax   nonrecurring   charges  of
$1,651,282 for the nine months ended September 30, 1999 increased  $1,196,145 or
4.2% from the same period in 1998.  The  primary  factors  contributing  to this
increase were  increases in salaries and employee  benefits of $639,017 or 4.0%,
net  occupancy  expense of  $139,333  or 6.6%,  and other  operating  expense of
$546,494 or 6.4%.  These increases were offset by a slight decrease in equipment
expense.


                                       13

<PAGE>

         The  Corporation's  overhead  efficiency  ratio was 60.4% for the first
nine  months of 1999,  an  improvement  from 61.4% for the same  period in 1998.
These  ratios  exclude   nonrecurring   charges.  The  more  favorable  overhead
efficiency ratio resulted from  management's  focus on controlling costs and the
Corporation beginning to realize efficiencies from its acquisitions in 1998.


Income Taxes

         The provision for income taxes,  excluding the tax benefits  associated
with  tax  deductible  nonrecurring  charges,  for  the  third  quarter  of 1999
increased $42,215 or 2.1% from the same period in 1998. The provision for income
taxes,  excluding the tax benefits  associated with tax deductible  nonrecurring
charges,  for the nine months ended  September  30, 1999  increased  $704,673 or
12.8% from the same period in 1998. The provision for income taxes  increased in
1999  primarily due to higher income before taxes and increased tax rates due to
the higher taxable income of the combined entity.


Financial Position

         For the nine months  ended  September  30, 1999,  average  total assets
increased 1.6% while average loans increased 4.3% and average deposits decreased
3.3% from the same period in 1998.  Loan growth slowed  considerably  during the
second  half of 1998 and the  first  nine  months  of 1999 in the  Corporation's
market  areas.  Some of this  slow  down was the  result  of  integrating  three
different  credit  cultures into one. At September 30, 1999,  the  Corporation's
loan  strategies are  integrated and better focused for future loan  production.
Core  deposits  continue to grow at a strong pace as previously  mentioned.  The
Corporation  decreased its reliance on higher priced  certificates of deposit as
loan growth slowed.

         Because  the  economy of the  Corporation's  coastal  market  areas are
seasonal in nature,  deposit  growth is strong during the summer months and loan
demand usually  reaches its peak during the winter months.  This  seasonality is
caused by the  economic  impact of a large number of tourists  visiting  coastal
South  Carolina  and  North  Carolina  during  the  summer  months.   Thus,  the
Corporation  historically  has a more favorable  liquidity  position  during the
summer.  To meet loan demand and liquidity  needs during the winter months,  the
Corporation  typically  invests sizable amounts of its deposit growth during the
summer months in temporary investments and short-term securities maturing in the
winter months. Additionally, the Corporation has access to other funding sources
including federal funds purchased from correspondent banks, and a line of credit
with the Federal Home Loan Bank ("FHLB") to meet its liquidity needs.

         The Corporation  utilizes  long-term  advances from the FHLB as part of
its funding strategy.  FHLB long-term advances totaled  $88,687,080 at September
30, 1999 compared with $45,683,511 at September 30, 1998.


                                       14
<PAGE>

         The Corporation continues to have a strong capital position by industry
standards with the ratio of average stockholders' equity to average total assets
at September 30, 1999 of 7.63% and September 30, 1998 of 7.34%. At September 30,
1999 and September 30, 1998, the total  risk-based  capital ratio was 12.30% and
12.05%, respectively, and the leverage ratio was 7.58% and 7.15%, respectively.



Year 2000

         The Year 2000 has posed a unique set of challenges to those  industries
reliant on information  technology.  As a result of methods  employed by earlier
programmers,  many software  applications and operational programs may be unable
to distinguish the Year 2000 from the Year 1900. If not  effectively  addressed,
this problem could result in the production of inaccurate data, or, in the worst
cases,  the  inability  of the  systems  to  continue  to  function  altogether.
Financial  institutions  are  particularly  vulnerable  due  to  the  industry's
dependence on electronic data processing systems.

         In February 1997, the Corporation developed its Year 2000 Project Plan,
following the guidelines  established by the FFIEC. An integral part of the plan
was to establish a Year 2000  Committee  comprised of  representatives  from key
areas throughout the organization. The Committee's mission is to identify issues
related to the Year 2000 and to initiate remedial measures designed to eliminate
any adverse effects on the Corporation's operations. The Committee has developed
a comprehensive,  prioritized inventory of all hardware,  software, and material
third  party  providers  that may be  adversely  affected  by the Year 2000 date
change,  and has contacted vendors  requesting their status as it relates to the
Year  2000.   This   inventory   includes  both   information   technology   and
non-information  technology systems, such as alarms, building access,  elevators
and heating and cooling systems,  which typically  contain  embedded  technology
such as micro controllers.  This inventory is periodically reevaluated to ensure
that previously  assigned  priorities  remain accurate and to track the progress
each vendor is making in resolving the problems  associated with the issue.  The
Corporation  relies on software  purchased from third-party  vendors rather than
internally-generated software.

         The Corporation has completed upgrading systems and testing to validate
Year 2000  compliance.  As of September 30, 1999,  testing was completed and the
Corporation  had  renovated  and  tested  all  mission  critical  systems.   The
Corporation is currently  operating on the Year 2000 compliant  release for core
systems supported by its third party software provider.

         The Year 2000  Committee has also developed a  communication  plan that
updates the Board of Directors,  management,  and employees on the Corporation's
Year 2000 status, and has developed a customer awareness program.  The Committee
has  developed  a separate  plan in order to manage the Year 2000 risks posed by


                                       15

<PAGE>

commercial  borrowing   customers.   This  plan  has  identified  material  loan
customers,  assessed  their  preparedness,  evaluated  their  credit risk to the
Corporation, and implemented appropriate controls to mitigate the risk.

         In accordance with regulatory guidelines, the Corporation has developed
a comprehensive  contingency  plan in the event that Year 2000 related  failures
are experienced.  The plan lists the various strategies and resources  available
to restore core business  processes.  The contingency plan was completed by June
30,  1999.  Testing and  validation  of the  contingency  plan was  completed in
August, 1999.

         As of September 30, 1999,  the  Corporation  incurred Year 2000 related
expenses  of  approximately  $170,000 and does not anticipate any material
additional expenses. Although  management feels confident that the  Corporation
has identified all necessary upgrades, and budgeted accordingly,  no assurance
can be made that Year 2000 compliance can be achieved without additional
unanticipated  expenditures.  It is not possible at this time to  quantify  the
estimated  future  costs due to possible business disruption caused by vendors,
suppliers, customers or even the possible loss of electric power or phone
service; however, such costs could be substantial.  As a result of the Year 2000
project,  the Corporation has not had any material delay regarding its
information systems projects.


Accounting and Regulatory Matters

         In June 1997 the FASB issued SFAS No. 131,  "Disclosures about Segments
of an Enterprise and Related  Information,"  ("SFAS No. 131"), which establishes
new  standards  for business  segment  reporting.  Requirements  of SFAS No. 131
include reporting of (a) financial and descriptive  information about reportable
operating  segments,  (b) a measure of segment profit or loss,  certain specific
revenue  and  expense  items and segment  assets  with  reconciliations  of such
amounts to the Corporation's financial statements, and (c) information regarding
revenues derived from the Corporation's products and services, information about
major customers and  information  related to geographic  areas.  SFAS No. 131 is
effective for fiscal years  beginning after December 15, 1997 and was adopted by
the Corporation on January 1, 1998.

         On June  15,  1998,  the FASB  issued  SFAS No.  133,  "Accounting  for
Derivative  Instruments and Hedging  Activities," ("SFAS No. 133"). SFAS No.
133, as amended by SFAS No. 137, is effective for all fiscal  quarters of all
fiscal years beginning  after June 15, 2000 (January 1, 2001 for the
Corporation).  SFAS No. 133 requires that all derivative  instruments be
recorded  on the balance  sheet at their fair value. Changes in the fair value
of  derivatives  are  recorded  each period in current earnings or other
comprehensive  income,  depending on whether a derivative  is designated  as
part of a hedge  transaction  and,  if it is,  the  type of hedge transaction.
Management of the Corporation anticipates that, due to its limited use of
derivative  instruments,  the  adoption  of SFAS No. 133 will not have a
significant  effect on the Corporation's  results of operations or its financial
position.


                                       16

<PAGE>

         In  October  1998,  the FASB  issued  SFAS  No.  134,  "Accounting  for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgages Held
for Sale by a  Mortgage  Banking  Enterprise,"  ("SFAS No.  134").  SFAS No. 134
requires that after an entity that is engaged in mortgage banking activities has
securitized  mortgage  loans  that are  held  for  sale,  it must  classify  the
mortgage-backed  securities or other retained interests based on its ability and
intent to sell or hold those  investments.  SFAS No. 134 is effective for fiscal
years  beginning  after December 15, 1998, and was adopted by the Corporation on
January 1, 1999. The effects of adoption were not material during the first nine
months of 1999.

         Management is not aware of any known trends, events, uncertainties,  or
current  recommendations  by regulatory  authorities  that will have or that are
reasonably  likely to have a  material  effect on the  Corporation's  liquidity,
capital resources, or other operations.


ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk


         There have been no  material  changes  in market  risk  exposures  that
affect the quantitative or qualitative disclosures presented as of the preceding
fiscal year end in the Corporation's Annual Report on Form 10-K.


                                       17

<PAGE>

         PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         There are no material legal proceedings.

ITEM 2.  CHANGES IN SECURITIES

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

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

         A report on Form 8-K dated July 20, 1999 was filed with the Securities
         and Exchange Commission on July 20, 1999. The financial  statements for
         Anchor Financial Corporation for the quarter ended March 31, 1999
         were restated to reflect the merger with Bailey Financial Corporation,
         which was completed on April 9,1999. The restated financial
         information for the first quarter of 1999 was filed as Exhibit 99 to
         this report and was provided for informational purposes only.


                                       18

<PAGE>

                                   SIGNATURES



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




                                   /s/ Stephen L. Chryst
                                   Stephen L. Chryst, Chairman,
                                   President and Chief Executive
                                     Officer



                                   /s/ Tommy E. Looper
                                   Tommy E. Looper, Executive Vice
                                   President and Chief Financial
                                     Officer


Date:  November 5, 1999