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 March 31, 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 April 30, 1999
---------------------------------------------     -----------------------------
      (Common stock, no par value)                          8,053,793

<PAGE>
                  ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES



                                      INDEX



                                                                   PAGE NO.

Part I - Financial Information

Item 1 - Financial Statements (Unaudited)

          Consolidated Balance Sheet - March 31, 1999
          and December 31, 1998                                        1

          Consolidated Statement of Income - Three months
          ended March 31, 1999 and 1998                                2

          Consolidated Statement of Changes in Stockholders' Equity
          and Comprehensive Income - Three months ended
          March 31, 1999 and 1998                                      3

          Consolidated Statement of Cash Flows -
          Three months ended March 31, 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                 9-15

Item 3 - Quantitative and Qualitative Disclosures about Market Risk    15


Part II - Other Information

Item 1 - Legal Proceedings                                             16
Item 2 - Changes in Securities                                         16
Item 3 - Defaults Upon Senior Securities                               16
Item 4 - Submission of Matters to a Vote of Security-Holders           16-17
Item 5 - Other Information                                             17
Item 6 - Exhibits and Reports on Form 8-K                              17

<PAGE>

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


                                                                         March 31,           December 31,
-----------------------------------------------------------------------------------------------------------
                                                                            1999                 1998
-----------------------------------------------------------------------------------------------------------
                                                                        (Unaudited)                *
ASSETS
  <S>                                                                <C>                   <C>            
  Cash and due from banks                                            $    34,893,029       $    43,743,583
  Interest-bearing balances due from banks                                 7,914,382             7,791,974
  Federal funds sold                                                      10,000,000                     0
  Investment securities:
    Held-to-maturity, at amortized cost (fair value of $14,289,892
      in 1999 and $16,798,854 in 1998)                                    14,136,712            16,545,655
    Available-for-sale, at fair value                                    204,688,958           215,025,562
-----------------------------------------------------------------------------------------------------------
  Total investment securities                                            218,825,670           231,571,217
-----------------------------------------------------------------------------------------------------------

  Loans                                                                  717,172,752           701,309,305
    Less - unearned income                                                  (142,481)             (151,712)
         - allowance for loan losses                                      (8,732,332)           (8,296,635)
-----------------------------------------------------------------------------------------------------------
  Net loans                                                              708,297,939           692,860,958
-----------------------------------------------------------------------------------------------------------

  Premises and equipment                                                  22,053,905            22,065,304
  Other assets                                                            17,541,249            16,774,179
-----------------------------------------------------------------------------------------------------------

Total assets                                                         $ 1,019,526,174      $  1,014,807,215
===========================================================================================================


LIABILITIES AND STOCKHOLDERS' EQUITY
  Liabilities:
    Deposits:
      Demand deposits                                                $   167,985,191       $   157,242,527
      NOW and money market accounts                                      384,369,284           360,933,245
      Time deposits $100,000 and over                                     75,239,641            75,993,814
      Other time and savings deposits                                    201,266,877           237,846,760
-----------------------------------------------------------------------------------------------------------
    Total deposits                                                       828,860,993           832,016,346
    Federal funds purchased and securities
      sold under agreements to repurchase                                 35,561,218            57,374,526
    Other short-term borrowings                                            1,924,642             1,396,927
    Long-term debt                                                        59,000,000            32,000,000
    Subordinated notes                                                    11,000,000            11,000,000
    Other liabilities                                                     10,589,556             8,123,716
-----------------------------------------------------------------------------------------------------------
  Total liabilities                                                      946,936,409           941,911,515
-----------------------------------------------------------------------------------------------------------

  Stockholders' Equity:
    Common stock, no par value; 50,000,000 shares
      authorized; shares issued and outstanding - 6,553,561
      in 1999 and 6,533,108 in 1998                                       47,315,208            47,151,149
    Retained earnings                                                     26,451,572            25,318,399
    Accumulated other comprehensive income (loss)                           (132,015)            1,521,152
    Unearned ESOP shares                                                  (1,045,000)           (1,095,000)
-----------------------------------------------------------------------------------------------------------
  Total stockholders' equity                                              72,589,765            72,895,700
-----------------------------------------------------------------------------------------------------------

Total liabilities and stockholders' equity                           $ 1,019,526,174      $  1,014,807,215
===========================================================================================================
<FN>

*  Obtained from audited financial statements.
</FN>
</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>

                                                              Three months ended March 31,
-----------------------------------------------------------------------------------------------
                                                             1999                  1998
-----------------------------------------------------------------------------------------------
INTEREST INCOME:
  <S>                                                <C>                   <C>                
  Interest and fees on loans                         $       15,640,957    $        15,922,692
  Interest on investment securities:
    Taxable                                                   3,287,008              2,909,603
    Non-taxable                                                 142,036                124,999
  Other interest income                                          30,820                291,887
-----------------------------------------------------------------------------------------------
                Total interest income                        19,100,821             19,249,181
-----------------------------------------------------------------------------------------------

INTEREST EXPENSE:
  Interest on deposits                                        6,626,824              7,976,097
  Interest on short-term borrowings                             557,006                204,321
  Interest on long-term borrowings                              476,532                574,445
  Interest on subordinated notes                                230,324                230,324
-----------------------------------------------------------------------------------------------
                Total interest expense                        7,890,686              8,985,187
-----------------------------------------------------------------------------------------------

Net interest income                                          11,210,135             10,263,994
Provision for loan losses                                       350,000                534,000
-----------------------------------------------------------------------------------------------

Net interest income after provision for loan losses          10,860,135              9,729,994
-----------------------------------------------------------------------------------------------

NONINTEREST INCOME:
  Service charges on deposit accounts                           918,487                955,236
  Commissions and fees                                          549,320                424,971
  Trust income                                                  155,142                 78,131
  Gains on sales of mortgage loans                              363,875                341,774
  Gains on sales of securities                                   56,300                      0
  Other operating income                                        181,371                147,376
-----------------------------------------------------------------------------------------------
                Total noninterest income                      2,224,495              1,947,488
-----------------------------------------------------------------------------------------------

NONINTEREST EXPENSE:
  Salaries and employee benefits                              4,596,795              4,454,022
  Net occupancy expense                                         615,982                587,372
  Equipment expense                                             518,861                524,727
  Other operating expense                                     2,377,025              2,122,661
-----------------------------------------------------------------------------------------------
                Total noninterest expense                     8,108,663              7,688,782
-----------------------------------------------------------------------------------------------

Income before income taxes                                    4,975,967              3,988,700
Provision for income taxes                                    1,801,777              1,376,388
-----------------------------------------------------------------------------------------------

Net income                                           $        3,174,190    $         2,612,312
===============================================================================================

Net income per share - basic                         $             0.49    $              0.41
===============================================================================================
Net income per share - diluted                       $             0.47    $              0.39
===============================================================================================

Weighted average common shares outstanding - basic            6,486,624              6,385,742
===============================================================================================

Weighted average common shares outstanding - diluted          6,766,446              6,687,611
===============================================================================================
</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
Three Months ended March 31, 1999 and March 31, 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               6,430,694   $46,153,141  $19,660,080      $813,809      ($526,625)   $66,100,405

Comprehensive Income
  Net income                                                          2,612,312                                   2,612,312
  Other comprehensive income, net of tax
    Unrealized gains on investment securities                                          31,560                        31,560
                                                                                                             ---------------
Total Comprehensive Income                                                                                        2,643,872
                                                                                                             ---------------
Common stock issued pursuant to:
  Dividend Reinvestment Plan                   4,313       160,341                                                  160,341
  Stock Option Plan                           27,753       186,912                                                  186,912
Change in unearned ESOP shares                              84,671        6,982                       27,000        118,653
Cash dividends ($0.12 per share)                                       (465,124)                                   (465,124)
                                         -----------------------------------------------------------------------------------
Balance at March 31, 1998                  6,462,760   $46,585,065  $21,814,250      $845,369      ($499,625)   $68,745,059
                                         ===================================================================================




Balance at December 31, 1998               6,533,108   $47,151,149  $25,318,399    $1,521,152    ($1,095,000)   $72,895,700

Comprehensive Income
  Net income                                                          3,174,190                                   3,174,190
  Other comprehensive income, net of tax
    Unrealized loss on investment securities                                       (1,653,167)                   (1,653,167)
                                                                                                             ---------------
Total Comprehensive Income                                                                                        1,521,023
                                                                                                             ---------------
Common stock issued pursuant to:
  Stock Option Plan                           20,453        80,498                                                   80,498
Tax benefit from exercised stock options                    30,250                                                   30,250
Change in unearned ESOP shares                              53,311        9,469                       50,000        112,780
Cash dividends ($0.14 per share)                                     (2,050,486)                                 (2,050,486)
                                         ===================================================================================
Balance at March 31, 1999                  6,553,561   $47,315,208  $26,451,572     ($132,015)   ($1,045,000)    $72,589,765
                                         ===================================================================================
</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>

                                                                              Three Months ended March 31,

                                                                                  1999               1998
---------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
  <S>                                                                       <C>               <C>             
  Net income                                                                $     3,174,190   $      2,612,312
  Adjustments to reconcile net income to net cash provided by 
  operating activities:    Accretion and amortization of investment securities        1,919           (102,567)
    Depreciation and amortization                                                   890,564            614,046
    Provision for loan losses                                                       350,000            534,000
    Gains on sales of investment securities, net                                    (56,300)                 0
    Gains on sales of mortgage loans                                               (363,875)          (220,324)
    (Gains) losses on sales of premises and equipment                                (3,955)               192
    Change in interest receivable                                                   104,204           (280,224)
    Change in other assets                                                          124,204           (873,965)
    Change in deferred taxes                                                     (1,376,135)           430,061
    Change in interest payable                                                     (596,509)           388,569
    Change in other liabilities                                                   2,779,106          1,489,829
    Origination of mortgage loans held for sale                                 (26,554,951)       (23,870,667)
    Proceeds from sales of mortgage loans held for sale                          27,247,801         23,388,538
    Net change in unearned ESOP shares                                              112,780            118,653
---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                         5,833,043          4,228,453
---------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Proceeds from maturities of investment securities held-to maturity              2,405,931          7,656,008
  Purchase of investment securities available-for-sale                          (22,301,126)       (20,745,185)
  Proceeds from sales of investment securities available-for-sale                12,235,829          1,563,100
  Proceeds from maturities of investment securities available-for-sale           17,954,496         20,051,336
  Net change in loans                                                           (16,115,956)       (33,615,357)
  Capital expenditures                                                             (494,553)          (721,665)
  Purchase of insurance policies related to Salary Continuation Plan                      0                250
  Other, net                                                                              0           (373,868)
---------------------------------------------------------------------------------------------------------------
Net cash used for investing activities                                           (6,315,379)       (26,185,381)
---------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Net change in deposits                                                         (3,155,353)        44,410,451
  Net change in federal funds purchased and securities sold under agreements    (21,813,308)         1,703,544
  to repurchase
  Net change in other short-term borrowings                                         527,715         (2,157,808)
  Net change in long-term debt                                                   27,000,000         13,919,167
  Proceeds from issuance of stock in accordance with:
    Stock Option Plan                                                                80,498            186,912
    Dividend Reinvestment Plan                                                            0            160,342
  Cash dividends paid                                                              (915,612)          (465,124)
  Other, net                                                                         30,250                  0
---------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                         1,754,190         57,757,484
---------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                                           1,271,854         35,800,556
Cash and cash equivalents at January 1                                           51,535,557         51,535,557
---------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at March 31                                       $    52,807,411   $     87,336,113
===============================================================================================================

</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 month period ended March
                31,  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  March  23,  1999,  the  Corporation  and  Bailey   Financial
                Corporation   ("Bailey   Financial")  held  special  shareholder
                meetings  and  received  shareholder  approval  for  the  merger
                between the  Corporation  and Bailey  Financial.  The merger was
                completed on April 9, 1999, and 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.


 
                                       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 three months 
                ended March 31, 1999 and 1998 is summarized as follows:
                <TABLE>
                <CAPTION>
                
                                                                                 1999              1998
                                                                       -------------------------------------
                <S>                                                          <C>                <C>       
                Balance, beginning of year                                   $8,296,635         $7,321,491
                Provision charged to operations                                 350,000            534,000
                Recoveries of charged off loans                                 192,954             33,123
                Loans charged off                                              (107,257)          (230,275)
                                                                       -------------------------------------
                Balance, end of period                                       $8,732,332         $7,658,339
                                                                       =====================================
                </TABLE>
                

NOTE 4:        NONPERFORMING ASSETS

               The  following  is a  summary  of  nonperforming  assets at March
               31,1999 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>

                                                                           3/31/99           12/31/98
                                                                      -------------------------------------
               <S>                                                            <C>               <C>       
               Nonaccrual loans                                               $1,986,180        $1,627,753
               Loans past due ninety days or more                                      0                 0
               Other real estate owned                                           158,536           212,912
                                                                      -------------------------------------
               Total nonperforming assets                                     $2,144,716        $1,840,665
                                                                      =====================================
               </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  March  31,  1999,  impaired  loans  had  a  related  specific
               allowance  for loan  losses  totaling  $1,349,425.  There were no
               material  commitments to lend additional funds to customers whose
               loans were classified as impaired at March 31, 1999.


                                       6

<PAGE>


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



NOTE 5:        LONG-TERM DEBT AND SUBORDINATED NOTES

               Long-term debt and subordinated notes are summarized as follows:
               <TABLE>
               <CAPTION>

                                                                                            3/31/99           12/31/98
                                                                                    -------------------------------------
               Parent Company:
                 <S>                                                                        <C>              <C>       
                 8.60% subordinated notes due in 2003 (a)                                    $5,000,000       $5,000,000
                 7.89% subordinated notes due in 2006 (a)                                     6,000,000        6,000,000
                                                                                    -------------------------------------
                    Total                                                                   $11,000,000      $11,000,000
                                                                                    -------------------------------------

               Subsidiaries:
                 5.48% Federal Home Loan Bank advance due in 1999                                     0        3,000,000
                 5.14% Federal Home Loan Bank advance due in 2002                             5,000,000                0
                 5.66% Federal Home Loan Bank advance due in 2002                             5,000,000        5,000,000
                 6.19% Federal Home Loan Bank advance due in 2002                             4,000,000        4,000,000
                 4.89% Federal Home Loan Bank advance due in 2003                            10,000,000       10,000,000
                 7.21% Federal Home Loan Bank advance due in 2005                             5,000,000        5,000,000
                 5.51% Federal Home Loan Bank advance due in 2008                             5,000,000        5,000,000
                 4.25% Federal Home Loan Bank advance due in 2009                            25,000,000                0
                                                                                    -------------------------------------
                    Total                                                                    59,000,000       32,000,000
                                                                                    -------------------------------------
                 Total long-term debt and subordinated notes                                $70,000,000      $43,000,000
                                                                                    =====================================
                <FN>

                (a)  Debt qualifies for inclusion in the  determination of total
                     capital under the Risk- Based Capital Guidelines.
                </FN>
               </TABLE>

               The principal  maturity of long-term debt and subordinated  notes
               for  the  next  five  years  subsequent  to  March  31,  1999  is
               $14,000,000 in 2002,  $15,000,000 in 2003, and $41,000,000  there
               after.


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

                                       7
<PAGE>


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



               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.

               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 months ended March 31 is presented below:
    <TABLE>
    <CAPTION>

                                                                           Three months ended March 31,
                                                                       -------------------------------------
                                                                             1999              1998
                                                                       -------------------------------------
    Net income per share - basic computation
         <S>                                                                 <C>                 <C>       
         Net income                                                          $3,174,190          $2,612,312
         Income available to common shareholders                             $3,174,190          $2,612,312
                                                                       =====================================
         Average common shares outstanding                                    6,546,341           6,448,652
           Unallocated ESOP Shares                                              (59,717)            (62,910)
                                                                       -------------------------------------
         Average common shares outstanding - basic                            6,486,624           6,385,742
                                                                       =====================================
         Net income per share - basic                                             $0.49               $0.41
                                                                       =====================================

    Net income per share - diluted computation
         Income available to common shareholders                             $3,174,190          $2,612,312
                                                                       =====================================
         Average common shares outstanding - basic                            6,486,624           6,385,742
         Incremental shares from assumed conversions:
           Stock Options                                                        279,822             301,869
                                                                       -------------------------------------
         Average common shares outstanding - diluted                          6,766,446           6,687,611
                                                                       =====================================
         Net income per share - diluted                                           $0.47               $0.39
                                                                       =====================================
    </TABLE>


NOTE 7:        OTHER MATTERS

               At March 31, 1999,  outstanding standby letters of credit totaled
               $7,043,385.

               For  the  three  months  ended  March  31,  1999  and  1998,  the
               Corporation   paid   interest  of   $8,487,195   and   $8,579,526
               respectively. The Corporation paid $55,000 in income taxes during
               the three  months  ended March 31, 1999 and  $147,644  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 pending  acquisitions;  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 first quarter of 1999 totaled  $3,248,062,  or $0.50
per diluted  share,  before  pretax  charges of $75,189  ($73,872  after  taxes)
associated   with  the   acquisition  of  Bailey   Financial.   Excluding  these
nonrecurring  charges, net income and earnings per diluted share for the quarter
ended March 31, 1999,  increased  24.3% and 22.9%  respectively,  from the first
quarter  of 1998.  Including  the  effect of the  charges,  net  income  totaled
$3,174,190,  or $0.47 per diluted  share,  for the quarter ended March 31, 1999,
compared to net income of  $2,612,312,  or $0.39 per diluted share earned in the
same period of 1998.

         The primary  factors  affecting  the  increase  in net  income,  before
nonrecurring  charges,  for the first quarter of 1999 were increases of $946,141
in net interest income and $277,007 in noninterest income, and a decrease in the
provision for loan losses of $184,000.  These  positive  factors were  partially
offset by increases in  noninterest  expense of $344,692,  and the provision for
income taxes of $426,706.

         For the quarter  ended  March 31,  1999,  return on average  assets and
return on average equity, excluding nonrecurring charges, were 1.32% and 17.99%,
respectively, compared to prior year ratios of 1.09% and 16.14%.

         During the three months ended March 31, 1999, the Corporation  incurred
$75,189, 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).


                                       9
<PAGE>



Net Interest Income

         Net  interest  income,  the major  component of the  Corporation's  net
income,  was  $11,210,135 for the first quarter of 1999, an increase of $946,141
or 9.2% from the $10,263,994 reported for the same period in 1998. This increase
was attributed to the increased  volume of earning assets,  increased  volume of
noninterest  bearing  sources,  and the  increased tax  equivalent  net yield on
earning assets during the period. The tax equivalent net yield on earning assets
increased from 4.64% in 1998 to 4.89% in 1999.  The net interest  margin widened
from the first  quarter  of 1998  primarily  because  of a lower cost of funding
earning assets.

         Interest  income was down  $148,360 or 0.8% for the quarter ended March
31, 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 8.69% in 1998 to 8.33% in 1999.  Average  interest  earning  assets for the
first  quarter of 1999  increased  $31.8 million or 3.5% from the same period in
1998.  Average  loans  increased  $26.7  million or 3.9% and average  investment
securities  increased  $28.9  million  or 15.0%  for the first  quarter  of 1999
compared  with  the  same  period  in  1998.  Average  interest  earning  assets
represented  93.5% of average  total  assets  during  the first  quarter of 1999
compared with 92.3% in 1998.  The yield on earning  assets  decreased  primarily
because the yield on loans  decreased  from 9.27% in 1998 to 8.67% in 1999.  The
composition  of average  interest-earning  assets  changed as the  percentage of
average loans to average interest-earning assets increased from 75.8% in 1998 to
76.1% in 1999.

         Interest  expense  decreased  $1,094,501 or 12.2% for the quarter ended
March 31, 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 from the first quarter of 1998. The rate
paid on  average  interest-bearing  liabilities  decreased  from  4.86%  for the
quarter  ended  March 31,  1998 to 4.20% 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  37.8%  for the first  quarter  of 1998 to 57.3% for the first
quarter of 1999.  Average  certificates of deposit  decreased as a percentage of
interest-bearing  liabilities from 37.8% for the quarter ended March 31, 1998 to
30.1% for the first quarter of 1999.  Average  long-term  debt and  subordinated
notes  decreased as a percentage of  interest-bearing  liabilities  from 7.0% in
1998 to 5.7% in  1999.  Average  interest-bearing  liabilities  increased  $11.5
million or 1.5% for the first  quarter of 1999  compared with the same period in
1998. Average  noninterest  bearing sources increased $20.3 million or 13.5% for
the  first  quarter  of 1999  compared  with the same  period  in 1998.  Average
interest-bearing  liabilities  represented  81.7% of funding  sources during the
first quarter of 1999 compared with 83.3% in 1998.

                                       10
<PAGE>

Provision for Loan Losses

         A $350,000  provision for loan losses was made during the first quarter
of 1999  compared  with a provision  of $534,000  in 1998.  The  decrease in the
provision  for loan  losses  for the  three  months  ended  March  31,  1999 was
primarily  due to  slowing  of loan  growth and a  significant  decrease  in net
charge-offs.  At March 31, 1999 and 1998 the ratio of annualized net charge-offs
(recoveries) to average loans was (0.05)% and 0.12% respectively.

         Nonperforming assets at March 31, 1999 totaled $2,144,716 compared with
$1,186,519  reported at the same time last year.  The increase was primarily due
to two loans of one of the entities acquired by the Corporation in 1998 totaling
$901,000 placed on nonaccrual prior to the merger.  Appropriate write-downs have
been taken on these  loans and no further  losses are  anticipated.  A payoff of
$392,000  was  received  on one of these  nonaccrual  loans in April  1999.  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 0.30% at March 31, 1999 compared with 0.17% at March 31, 1998.

         The  reserve  for loan  losses  at March 31,  1999 and  March 31,  1998
represented 1.22% and 1.09%  respectively of total loans  outstanding.  Based on
the current evaluation of the loan portfolio, management believes the reserve at
March 31, 1999 is adequate to cover potential losses in the portfolio.


Noninterest Income

         Noninterest  income for the first  quarter of 1999 was up  $277,007  or
14.2% from the same period in 1998.  The primary  factors  contributing  to this
increase  were  increases in  commissions  and fees of $124,349 or 29.3%,  trust
income of  $77,011 or 98.6%,  other  operating  income of $33,995 or 23.1%,  and
mortgage  banking income of $22,101 or 6.5%.  These positive factors were offset
by a slight decrease in service charges on deposit accounts of $36,749 or 3.9%.

         The growth in commissions and fees resulted  primarily from ATM network
revenue,  credit  card-related  service fees, and  investment fee income.  Trust
revenue  continues  to  benefit  from  increased  sales  efforts  and  favorable
conditions  in the  Corporation's  expanding  markets.  The increase in mortgage
banking income resulted from increased  volume of loan  originations  due to the
favorable  interest  rate  environment  and the  Corporation's  expansion of its
mortgage  origination  program.  Although  average deposits  increased,  service
charges on deposit  account  revenues  for the three months ended March 31, 1999
decreased.  During the first quarter of 1999,  management  continued to focus on
increasing noninterest income with revenue from the sales of new products rather
than increased pricing of existing services.

                                       11
<PAGE>

Noninterest Expense

         Noninterest expense,  excluding pretax nonrecurring charges of $75,189,
for the first quarter of 1999 increased $344,692 or 4.5% from the same period in
1998. The primary factors  contributing to this increase were increases in other
operating  expense of  $179,175  or 8.4%,  salaries  and  employee  benefits  of
$142,773 or 3.2%, and net occupancy  expense of $28,610 or 4.9%. These increases
were offset by a slight decrease in equipment expense.

         Increases  in  advertising  expense,  primarily  due  to  a  new  image
campaign,  and courier  expense  contributed to the increase in other  operating
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.

         The  Corporation's  overhead  efficiency  ratio was 59.7% for the first
quarter of 1999, an  improvement  from 62.6% 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 benefit of $1,317
associated with tax deductible  nonrecurring  charges,  for the first quarter of
1999  increased  $426,706 or 31% from the same period in 1998. The provision for
income taxes increased in 1999 primarily due to higher income before taxes since
tax rates remained approximately the same as 1998.


Financial Position

         For the  three  months  ended  March 31,  1999,  average  total  assets
increased 2.3% while average loans increased 3.9% and average deposits increased
2.4% from the same period in 1998.

         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 

  
                                     12
<PAGE>

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  $59,000,000 at March 31,
1999 compared with $46,000,000 at March 31, 1998.

         The Corporation continues to have a strong capital position by industry
standards with the ratio of average stockholders' equity to average total assets
at March 31,  1999 of 7.36% and March 31,  1998 of 6.74%.  At March 31, 1999 and
March 31,  1998,  the total  risk-based  capital  ratio was 11.95%  and  11.87%,
respectively, and the leverage ratio was 7.29% and 7.06%, 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  is currently in the process of upgrading  systems and
testing to validate Year 2000 compliance.  As of March 31, 1999, testing was 97%
complete and the Corporation had renovated and tested all but one of the mission
critical  systems.  The  remaining  mission  critical  system is scheduled to be
tested for Year 2000  compliance by April 30, 1999. The 

                                       13
<PAGE>


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
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  is
developing 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 is scheduled
to be completed by June 30, 1999.

         As of March 31,  1999,  the  Corporation  incurred  Year  2000  related
expenses  of  approximately  $113,000.  Management  anticipates  that the  total
additional  out-of-pocket  expenditures  required  for bringing the systems into
compliance for the Year 2000 will not exceed $250,000.  Management believes that
these  required  expenditures  will  not  have  a  material  adverse  impact  on
operations,   cashflow,  or  financial  condition.   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
is effective for all fiscal  quarters of all fiscal years  beginning  after June
15, 1999 (January 1, 2000 for the  

                                       14
<PAGE>

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.

         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 quarter 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.

                                       15
<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

          On March 23,1999, the Corporation held a Special Meeting of 
          Shareholders. The following is a brief  description of matters voted 
          upon at the Special Meeting  and the  number of votes cast for and 
          withheld,  as well as, the number of abstentions.

          Proposal to ratify and approve the Agreement and Plan of Merger, dated
          as of September 24, 1999, (the "Bailey  Agreement"), by and between 
          the Corporation and Bailey Financial Corporation. ("Bailey") pursuant 
          to which Bailey will merge with and into the  Corporation and each 
          share of common stock (except for certain shares held by the
          Corporation) will be converted into 16.32 shares of Anchor common 
          stock,  and such other terms and conditions as are set forth in the 
          Bailey Agreement.

          For -  4,491,323         Withheld - 28,979        Abstain - 26,732


          On April 27, 1999,  the Corporation  held its 1999 Annual  Meeting of
          Shareholders.  At the 1999 Annual Meeting, the following  individuals
          were elected as Directors with the votes indicated.

          <TABLE>
          <CAPTION>

                            Director                              For                     Withheld
          -----------------------------------------    ----------------------     ----------------------
          <S>                                                <C>                        <C>    
          C. Jason Ammons, Jr.                               4,653,449                  221,097
          Mason R. Chrisman                                  4,856,268                   18,278
          Robin H. Dial                                      4,853,919                   20,627
          Chester A. Duke                                    4,836,667                   37,879
          Tommy E. Looper                                    4,855,807                   18,739
          Charles B. McElveen                                4,855,444                   19,102
          W. Gairy Nichols, III                              4,856,000                   18,546
          Thomas J. Rogers                                   4,857,496                   17,050
          John C. B. Smith, Jr.                              4,855,719                   18,827
          Arthur P. Swanson                                  4,854,544                   20,002
     
          </TABLE>


                                       16

<PAGE>

          Howell V. Bellamy, Jr., W. Cecil Brandon, Jr., James E. Burroughs, C. 
          Donald Cameron, Stephen L. Chryst, J. Bryan Floyd, Ruppert L. Piver, 
          Albert A. Springs, III, J. Roddy Swaim, and Harry A. Thomas continued 
          in their terms of office as directors of the Corporation.

          The following is a brief description of other matters voted upon at 
          the 1999 Annual Meeting and the number of votes cast for and withheld,
          as well as, the number of abstentions.

          Proposal to adopt the Anchor Financial Corporation 1999 Long Term 
          Incentive Plan.

          For - 4,464,322        Withheld - 326,374        Abstain - 83,850


ITEM 5.   OTHER INFORMATION

          None.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          A report on Form 8-K dated January 27, 1999 was filed with the 
          Securities and Exchange Commission on January 29, 1999.  Anchor 
          Financial Corporation's December 31, 1997 Financial  Statements were  
          restated to reflect the mergers with M&M Financial Corporation and 
          ComSouth Bankshares,  Inc. The mergers were  accounted for as poolings
          of interests and were completed August 31, 1998.

          A report on Form 8-K dated April 12, 1999 was filed with the 
          Securities and Exchange Commission on April 16, 1999. Due to the
          significant growth of Anchor Financial Corporation and the level of 
          merger and acquisition activity experienced by the Corporation over  
          the  last  two  years, management determined the need to evaluate its
          relationship with its independent  accountants, PricewaterhouseCoopers
          LLP.  Anchor  Financial Corporation dismissed PricewaterhouseCoopers  
          LLP as its independent certified public accountants and engaged Arthur
          Andersen LLP as its new independent certified public accountants 
          effective April 12, 1999.



                                       17
<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



                                           /s/ John J. Moran  
                                           John J. Moran, Senior Vice President
                                             and Comptroller




Date:  May 14, 1999


                                       18