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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -------------------------------------------------------------------------------------

For the fiscal year ended June 30, 2006



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
|- | --------------------------------------------------------------------------------------

For the transition period from  to
.

Commission file number: 0-23521



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Great Pee Dee Bancorp, Inc.

(Name of Small Business Issuer in Its Charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 56-2050592                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|901 Chesterfield Highway Cheraw, South Carolina                |  | 29520                                  
|(Address of Principal Executive Offices)                       |  | (Zip Code)                             

(843) 537-7656

(Issuers Telephone Number, Including Area Code)



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Securities registered under Section 12(b) of the Exchange Act: Common Stock par value, $.01 per share



|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of each class                     |  | Name of each exchange on which registered
|                                        | 
|Common Stock, Par value $0.01 per share |  | Nasdaq StockMarket LLC                   

Securities registered under Section 12(g) of the Exchange Act: None

(Title of Class)



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Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act ̈

Check whether the issuer (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject
to such requirements for the past 90 days.    YES  x    NO ̈

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB.  x

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).    Yes ̈No  x

The Issuers revenues for the fiscal year ended June 30, 2006 were $13.7 million.

The aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the average of the closing bid and ask
price of such stock on the Nasdaq National Market on August 31, 2006 was approximately $20.6 million.

The number of shares
outstanding of the Issuers Common Stock, the issuers only class of outstanding capital stock, as of June 30, 2006 was 1,790,169.

Documents Incorporated by Reference

The following documents, in whole or in part, are specifically incorporated by
reference in the indicated Part of this Annual Report on Form 10-KSB:



|I. | Portions of the Great Pee Dee Bancorp, Inc. Proxy Statement for the 2006 Annual Meeting of Shareholders are incorporated by reference into certain items of Part III.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



|II. | Portions of the Great Pee Dee Bancorp, Inc. Annual Report for the 2006 Annual Meeting of Shareholders are incorporated by reference into certain items of Part II.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Transitional Small Business Disclosure Format:    YES ̈NO  x



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PART I

Item 1. Business

Great Pee Dee Bancorp, Inc. (the Company) was organized in September, 1997
at the direction of the Board of Directors of Sentry Bank & Trust, formerly First Federal Savings and Loan Association of Cheraw (the Bank), for the purpose of acquiring all of the capital stock to be issued by the Bank in the
conversion of the Bank from the mutual to the stock form of organization (the Conversion). The Company received approval from the Office of Thrift Supervision (OTS) to become a savings and loan holding company and as such is
subject to regulation by the OTS. The Conversion was completed as of December 31, 1997, the Company issued 2,182,125 shares of Common Stock, and received all of the proceeds of the offering, or $21.8 million ($10.6 million of the proceeds was
transferred to the Bank in exchange for the capital stock of the Bank). In connection with the Conversion, the Company loaned approximately $1,745,700 to the Great Pee Dee Bancorp, Inc. Employee Stock Ownership Plan and Trust (ESOP) to
enable the ESOP to purchase 174,570 shares of the Companys Common Stock. The primary business activity of the Company consists of the operations of its wholly-owned subsidiary, the Bank.

The Company is a savings and loan holding company and the owner of all of the issued and outstanding shares of capital stock of the Bank. At
June 30, 2006 the assets of the Company consisted of its ownership of the capital stock of the Bank, the loan to the ESOP, cash of $664,000, and investment securities with a carrying value of $494,000. The Bank is a member of the Federal Home
Loan Bank (FHLB) of Atlanta. At June 30, 2006, the Company had consolidated total assets of $212.7 million, total deposits of $151.3 million, and stockholders equity of $26.5 million.

The Bank maintains offices in Cheraw and Florence, South Carolina. The Bank conducts its primary business in Chesterfield, Marlboro and Florence
Counties, South Carolina. The Bank is primarily engaged in the business of attracting deposits from the general public and using such deposits to make mortgage loans secured by real estate located in its primary market area. The Bank also makes
commercial loans, consumer loans and loans secured by deposit accounts. The Bank has been and intends to continue to be a community-oriented financial institution offering a variety of financial services to meet the needs of the communities it
serves.

Lending Activities

The Bank
has historically concentrated lending activities on the origination of loans secured by first mortgage liens for the purchase, construction or refinancing of one- to four-family residential real property. The following table sets forth the
composition of loan portfolio by loan type and security type as of the dates indicated, including a reconciliation of gross loans receivable after consideration of the allowance for loan losses and deferred loan fees.



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|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|-------------------------------- |  | ---------------------- | ------- | ------- | ----- | - | ------ | ---- | ------- |  | ----- | ------ |  | ------- | ------- |  | ------ | - | ------- | - | ------- | ------ | ----- | ------- |  | - | ------- |  | ----- | -
|                                 |  | At June 30,            |        
|                                 |  | 2006                   |         |         | 2005  |   |        | 2004 |         |  | 2003  |        |  | 2002    |        
|                                 |  | Amount                 |         | Percent |       |   | Amount |      | Percent |  |       | Amount |  | Percent |         |  | Amount |   | Percent |   |         | Amount |       | Percent | 
|                                 |  | (Dollars in Thousands) |        
|Type of loan:                    |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Real estate loans:               |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|One- to four-family residential  |  | $                      | 65,418  |         | 36.9  | % |        | $    | 68,488  |  | 43.9  | %      |  | $       | 62,720  |  | 54.1   | % |         | $ | 63,845  |        | 58.3  | %       |  | $ | 68,296  |  | 61.5  | %
|Commercial                       |  |                        | 61,345  |         | 34.6  |   |        |      | 43,528  |  | 27.9  |        |  |         | 23,898  |  | 20.6   |   |         |   | 20,625  |        | 19.1  |         |  |   | 10,924  |  | 9.9   |  
|Construction and land            |  |                        | 27,570  |         | 15.5  |   |        |      | 20,619  |  | 13.2  |        |  |         | 7,331   |  | 6.3    |   |         |   | 2,318   |        | 2.1   |         |  |   | 8,702   |  | 7.9   |  
|Home improvement loans           |  |                        | 10,098  |         | 5.7   |   |        |      | 8,670   |  | 5.6   |        |  |         | 8,197   |  | 7.1    |   |         |   | 8,236   |        | 7.5   |         |  |   | 8,083   |  | 7.3   |  
|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total real estate loans          |  |                        | 164,431 |         | 92.7  |   |        |      | 141,305 |  | 90.6  |        |  |         | 102,146 |  | 88.1   |   |         |   | 95,024  |        | 86.7  |         |  |   | 96,005  |  | 86.6  |  
|                                 |  |                        |         |         |       |   |        |      |         | 
|Other loans:                     |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Commercial                       |  |                        | 7,770   |         | 4.4   |   |        |      | 10,075  |  | 6.5   |        |  |         | 9,167   |  | 7.9    |   |         |   | 6,015   |        | 5.5   |         |  |   | 6,550   |  | 5.9   |  
|Consumer                         |  |                        | 4,670   |         | 2.6   |   |        |      | 4,292   |  | 2.8   |        |  |         | 4,444   |  | 3.8    |   |         |   | 7,659   |        | 7.0   |         |  |   | 8,029   |  | 7.2   |  
|Loans secured by deposits        |  |                        | 553     |         | 0.3   |   |        |      | 232     |  | 0.1   |        |  |         | 238     |  | 0.2    |   |         |   | 873     |        | 0.8   |         |  |   | 335     |  | 0.3   |  
|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total other loans                |  |                        | 12,993  |         | 7.3   |   |        |      | 14,599  |  | 9.4   |        |  |         | 13,849  |  | 11.9   |   |         |   | 14,547  |        | 13.3  |         |  |   | 14,914  |  | 13.4  |  
|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total loans                      |  |                        | 177,424 |         | 100.0 | % |        |      | 155,904 |  | 100.0 | %      |  |         | 115,995 |  | 100.0  | % |         |   | 109,571 |        | 100.0 | %       |  |   | 110,919 |  | 100.0 | %
|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Less:                            |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Allowance for losses             |  |                        | 1,901   |         |       |   |        |      | 1,593   |  |       |        |  |         | 1,532   |  |        |   |         |   | 1,416   |        |       |         |  |   | 1,066   |  |       |  
|Deferred loan fees, net of costs |  |                        | 249     |         |       |   |        |      | 180     |  |       |        |  |         | 171     |  |        |   |         |   | 202     |        |       |         |  |   | 242     |  |       |  
|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  
|Total, net                       |  | $                      | 175,274 |         |       |   |        | $    | 154,131 |  |       |        |  | $       | 114,292 |  |        |   |         | $ | 107,954 |        |       |         |  | $ | 109,611 |  |       |  
|                                 |  |                        |         |         |       |   |        |      |         |  |       |        |  |         |         |  |        |   |         |   |         |        |       |         |  |   |         |  |       |  

The following table sets forth certain information at June 30, 2006, regarding the dollar
amount of loans maturing in the loan portfolio based on the earlier of their contractual terms to maturity or their repricing. Demand loans having no stated schedule of repayments and no stated maturity and overdrafts are reported as due in one year
or less. This schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses. The Bank expects that prepayments will cause actual maturities to be shorter.



|                          |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|------------------------- |  | ---------------- | ------ | -------------------------- | - | ---------------------------- |  | ----------------- | ------ | ----- | - | ------ |  | - | -------
|                          |  | At June 30, 2006
|                          |  | 1 Year or Less   |        | More Than1 Year to 3 Years |   | More Than 3 Years to 5
Years |  | More Than 5 Years |        | Total
|                          |  | (In Thousands)  
|Real estate loans:        |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|Adjustable                |  | $                | 20,200 |                            | $ | 7,198                        |  | $                 | 3,277  |       | $ | 33,143 |  | $ | 63,818 
|Fixed                     |  |                  | 14,397 |                            |   | 13,229                       |  |                   | 17,321 |       |   | 55,666 |  |   | 100,613
|                          |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|Total real estate loans   |  |                  | 34,597 |                            |   | 20,427                       |  |                   | 20,598 |       |   | 88,809 |  |   | 164,431
|                          |  |                  |        |                            |  
|Other loans               |  |                  | 5,668  |                            |   | 2,391                        |  |                   | 3,172  |       |   | 1,762  |  |   | 12,993 
|                          |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|Total loans               |  | $                | 40,265 |                            | $ | 22,818                       |  | $                 | 23,770 |       | $ | 90,571 |  |   | 177,424
|                          |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|Less:                     |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|Allowance for loan losses |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   | 1,901  
|                          |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        
|Total                     |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  | $ | 175,523
|                          |  |                  |        |                            |   |                              |  |                   |        |       |   |        |  |   |        



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As of June 30, 2006, the dollar amount of all loans due after one year that have fixed interest
rates was $86.6 million and the dollar amount of all loans due after one year that have adjustable interest rates was $50.5 million.

One to Four Family Residential Loans. The Banks primary lending activity consists of the origination of one- to four-family residential mortgage loans secured by property located in the primary market area. The Bank
generally originates one- to four-family residential mortgage loans in amounts up to 95% of the lesser of the appraised value or purchase price, with private mortgage insurance required on loans with a loan-to-value ratio in excess of 80%. The Bank
originates and retains fixed rate loans which provide for the payment of principal and interest for up to an 18-year period.

The Bank also
offers adjustable-rate mortgage (ARM) loans. The interest rate on the Banks ARM loans is indexed to the one-year Treasury bill. A substantial portion of the ARM loans in the portfolio at June 30, 2006 provide for maximum rate
adjustments per year and over the life of the loan of 1% and 5%, respectively. Residential ARMs are amortized for terms up to 30 years.

ARM loans decrease the risk associated with changes in interest rates by periodically repricing, but involve other risks because as interest rates increase, the underlying payments by the borrower increase, thus increasing the potential for
default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime
interest rate adjustment permitted by the loan documents, and, therefore, is potentially limited in effectiveness during periods of rapidly rising interest rates. At June 30, 2006, approximately 44.3% of one- to four-family residential loans
are adjustable-rate mortgages.

All of the one- to four-family residential mortgage loans that the Bank originate includes
due-on-sale clauses, which give the Bank the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is
not repaid. However, the Bank occasionally permits assumptions of existing residential mortgage loans on a case-by-case basis.

At
June 30, 2006, approximately $65.4 million, or 36.9% of the portfolio of loans, consisted of one- to four-family residential loans. Approximately $517,000, or 0.3% of total real estate loans (which were comprised of 10 loans secured by one- to
four-family properties), were included in non-performing assets as of that date.

Commercial Real Estate Loans.At June 30, 2006, $61.3 million, or 34.6% of the total loan portfolio, consisted of commercial real estate loans. Commercial real estate loans are secured by churches, office buildings, and other commercial properties. The Bank
generally originates fixed rate commercial real estate loans with maximum terms of 15 years. The Bank also will originate adjustable rate commercial real estate loans with terms of up to 30 years. The interest rate on adjustable rate commercial real
estate loans is indexed to the Wall Street Journal Prime with maximum loan-to-value ratios of 80%. At June 30, 2006, the largest commercial loan had a principal balance of $3.0 million and was secured by a hotel. On June 30, 2006, there
were no commercial real estate loans included in nonperforming assets.

Loans secured by commercial real estate generally are
larger than one- to four-family residential loans and involve a greater degree of risk. Commercial real estate loans often involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large
degree on results of operations and management of the properties and may be affected to a greater extent by adverse conditions in the real estate market or the economy in general. Accordingly, the nature of the loans makes them more difficult for
management to monitor and evaluate.

Construction Loans and Land.The Bank offers construction loans with respect to
residential and commercial real estate and, in certain cases, to builders or developers constructing such properties on a speculative basis (i.e., before the builder/developer obtains a commitment from a buyer). Funds are disbursed to borrowers upon
the successful completion of particular stages of construction. Typically, loans made to builders who do not have a commitment for the sale of the property under construction will be for a term of no more than six months. Except for construction
loans made on speculative basis, upon the successful completion of construction, the loan can be



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converted into permanent financing. At June 30, 2006, $11 million, or 6.2% of the total loan portfolio, consisted of
construction loans. The largest construction loan had a principal balance of $ 2.3 million on June 30, 2006 and was secured by a condominium development. None of our construction loans were included in non-performing assets on that date.

Construction loans generally match the term of the construction contract and are written with interest calculated on the amount disbursed
under the loan. The maximum loan-to-value ratio for a construction loan is based upon the nature of the construction project. For example, a construction loan for a one- to four-family residence may be written with a maximum loan-to-value ratio of
95% with mortgage insurance. Inspections are made prior to any disbursement under a construction loan.

While providing the Bank with a
comparable, and in some cases higher yield than a conventional mortgage loan, construction loans involve a higher level of risk. For example, if a project is not completed and the borrower defaults, the Bank may have to hire another contractor to
complete the project at a higher cost. Also, a project may be completed, but may not be salable, resulting in the borrower defaulting and the bank taking the title to the project.

Home Improvement Loans.At June 30, 2006, home improvement loans totaled $10.1 million, or 5.7% of total loans. Home improvement loans
are typically secured by second mortgages on the secured property. At June 30, 2006, no home improvement loans were included in non-performing assets.

Origination, Purchase and Sale of Loans.The Bank historically originated mortgage loans pursuant to its own underwriting standards, which did not conform with the standard criteria of Freddie Mac or
Fannie Mae because the Bank did not require current property surveys in most cases. Recently, the Bank began originating mortgage loans that conform to the standard criteria of Freddie Mac and Fannie Mae, and thus can be sold in the secondary market
after origination. Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value as determined by aggregate outstanding commitments from investors or current investor yield
requirements. Net unrealized losses are recognized through a valuation allowance by charges to income.

Mortgage loans held for sale are
generally sold with servicing rights released. The carrying value of mortgage loans sold is reduced by loan origination fees received from the borrower. Gains or losses on sales of mortgage loans are recognized based upon the difference between the
selling price (including investor yield requirements and servicing released premiums) and the carrying value of the related mortgage loans sold.

One- to four-family residential loan originations to be held in the Banks loan portfolio totaled $19.4 million during the year ended June 30, 2006, compared to $15.2 million during the year ended June 30, 2005. One- to
four-family residential loans originated for sale in the secondary market aggregated $12.1 million and $11.2 million for the years ended June 30, 2006 and 2005, respectively. Mortgage loans held for sale were $958,000 at June 30, 2006.

There were no purchases of loans during the fiscal years ended June 30, 2006 or 2005.



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Non-performing Assets

The following table sets forth, at the dates indicated, information with respect to the Companys non-accrual loans, restructured loans, total non-performing loans (non-accrual loans plus restructured loans), and
total non-performing assets.



|                                              |  |                        |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|--------------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | ----- | -
|                                              |  | At June 30,            |       
|                                              |  | 2006                   |        |   | 2005 |   |        | 2004 |  |   | 2003  |   |  | 2002 |      
|                                              |  | (Dollars in thousands) |       
|Non-accrual loans                             |  | $                      | 555    |   |      | $ | 1,106  |      |  | $ | 2,155 |   |  | $    | 2,252 |   |  | $ | 1,079 |  
|Restructured loans                            |  |                        |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |      |  
|                                              |  |                        |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total non-performing loans                    |  |                        | 555    |   |      |   | 1,106  |      |  |   | 2,155 |   |  |      | 2,252 |   |  |   | 1,079 |  
|Real estate owned                             |  |                        | 110    |   |      |   | 183    |      |  |   | 510   |   |  |      | 36    |   |  |   | 50    |  
|                                              |  |                        |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total non-performing assets                   |  | $                      | 665    |   |      | $ | 1,289  |      |  | $ | 2,665 |   |  | $    | 2,288 |   |  | $ | 1,129 |  
|                                              |  |                        |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Accruing loans past 90 days or more           |  | $                      |       |   |      | $ |       |      |  | $ |      |   |  | $    |      |   |  | $ |      |  
|Allowance for loan losses                     |  |                        | 1,901  |   |      |   | 1,593  |      |  |   | 1,532 |   |  |      | 1,416 |   |  |   | 1,066 |  
|Non-performing loans to period end loans      |  |                        | 0.31   | % |      |   | 0.71   | %    |  |   | 1.86  | % |  |      | 2.06  | % |  |   | 0.97  | %
|Allowance for loan losses to period end loans |  |                        | 1.07   | % |      |   | 1.02   | %    |  |   | 1.32  | % |  |      | 1.29  | % |  |   | 0.96  | %
|Allowance for loans to non-performing loans   |  |                        | 342.45 | % |      |   | 144.03 | %    |  |   | 71.09 | % |  |      | 62.86 | % |  |   | 98.81 | %
|Non-performing assets to total assets         |  |                        | 0.31   | % |      |   | 0.66   | %    |  |   | 1.70  | % |  |      | 1.60  | % |  |   | 0.86  | %

The accrual of interest on loans is discontinued at the time the loan is 90 days past due. Past
due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual status at an earlier date if collection of principal or interest is considered doubtful according to internal evaluation policies.

All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest income. The interest on these
loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are
reasonably assured.

Loans are also placed on non-accrual status in cases where it is uncertain as to whether the borrower can satisfy the
contractual terms of the loan agreement. Amounts received on non-accrual loans generally are applied first to interest and then to principal only after all past due interest has been collected. Restructured loans are those for which concessions,
including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal have been granted due to the borrowers weakened financial condition. Interest is accrued on restructured loans
at the restructured rates when it is anticipated that no loss of original principal will occur. Interest income on non-accrual loans that would have been recorded for the year ended June 30, 2006 and 2005 had the loans been current was
approximately $32,000 and $50,000, respectively.

Analysis of Allowance for Loan Losses

The provision for loan losses charged to operations is an amount sufficient to bring the allowance for loan losses to an estimated balance considered
adequate to absorb losses inherent in the portfolio.

Managements determination of the adequacy of the allowance is based primarily
on a mathematical model that estimates the appropriate allowance for loan losses. This model has two components. The first component involves the estimation of losses on loans defined as impaired loans. A loan is considered to be
impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The estimated valuation allowance is the difference, if any,
between the loan balance outstanding and the value of the impaired loan as determined by either 1) an estimate of the cash flows that the Company expects to receive from the borrower discounted at the loans effective rate, or 2) in the case of
a collateral-dependent loan, the fair value of the collateral.



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The second component of the allowance model is to estimate losses for all loans not considered to be
impaired loans. First, loans that have been risk graded by the Company as having more than standard risk but are not considered to be impaired are assigned estimated loss percentages generally accepted in the banking industry. These
classifications are either doubtful, substandard, or special mention. Loans that are classified by the Company as having standard credit risk are segregated by loan type, and estimated loss percentages are assigned to each loan type,
based on the historical losses, current economic conditions, and operational conditions specific to each loan type.

The reserve estimated
for impaired loans is then added to the reserve estimated for all other loans. This becomes the Companys allocated allowance. In addition to the allocated allowance derived from the model, management also evaluates other data such
as the ratio of the allowance for loan losses to total loans, net loan growth information, nonperforming asset levels and trends in such data. Based on this additional analysis, the Company may determine that an additional amount of allowance for
loan losses is necessary to reserve for probable losses. This additional amount, if any, is the Companys unallocated allowance. The sum of the allocated allowance and the unallocated allowance is compared to the actual allowance
for loan losses recorded on the books of the Company and any adjustment necessary for the recorded allowance to equal the computed allowance is recorded as a provision for loan losses. The provision for loan losses is a direct charge to earnings in
the period recorded.

As part of its ongoing review of the asset quality, the Company revised its allowance for loan loss model in August
of 2004 to better reflect the Companys experience, the nature of its loan portfolio and improvement in assigning risks to specific loans and loan types. This change resulted in a larger percentage of the allowance for loan loss reserve being
included in the allocated portion and a smaller percentage in the unallocated portion.

Although management uses the best information
available to make evaluations, future adjustments may be necessary if economic, operational, or other conditions change. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the
Companys allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on the examiners judgment about information available to them at the time of their examinations.

The following tables set forth an allocation of the allowance for loan losses as of the dates indicated.



|                                     |  |                        |       |                                                  |        |   |        |      |                                                  |  |        |        |  |                                                  |       |  |        |  
|------------------------------------ |  | ---------------------- | ----- | ------------------------------------------------ | ------ | - | ------ | ---- | ------------------------------------------------ |  | ------ | ------ |  | ------------------------------------------------ | ----- |  | ------ | -
|                                     |  | At June 30,            |      
|                                     |  | 2006                   |       |                                                  | 2005   |   |        | 2004 |                                                 
|                                     |  | Amount                 |       | Percent of loans in each category to total
loans |        |   | Amount |      | Percent of loans in each category to total
loans |  |        | Amount |  | Percent of loans in each category to total
loans |      
|                                     |  | (Dollars in Thousands) |      
|Commercial, Financial & Agricultural |  | $                      | 100   |                                                  | 4.38   | % |        | $    | 125                                              |  | 6.46   | %      |  | $                                                | 118   |  | 7.90   | %
|Real Estate  construction           |  |                        | 208   |                                                  | 15.54  | % |        |      | 59                                               |  | 13.23  | %      |  |                                                  | 31    |  | 6.32   | %
|Real Estate  mortgage               |  |                        | 1,225 |                                                  | 77.14  | % |        |      | 1,019                                            |  | 77.41  | %      |  |                                                  | 875   |  | 81.74  | %
|Installment loans to individuals     |  |                        | 89    |                                                  | 2.63   | % |        |      | 154                                              |  | 2.75   | %      |  |                                                  | 167   |  | 3.83   | %
|Other                                |  |                        | 51    |                                                  | 0.31   | % |        |      | 33                                               |  | 0.15   | %      |  |                                                  | 9     |  | 0.21   | %
|Unallocated                          |  |                        | 228   |                                                  | N/A    |   |        |      | 203                                              |  | N/A    |        |  |                                                  | 332   |  | N/A    |  
|                                     |  |                        |       |                                                  |        |   |        |      |                                                  |  |        |        |  |                                                  |       |  |        |  
|                                     |  | $                      | 1,901 |                                                  | 100.00 | % |        | $    | 1,593                                            |  | 100.00 | %      |  | $                                                | 1,532 |  | 100.00 | %
|                                     |  |                        |       |                                                  |        |   |        |      |                                                  |  |        |        |  |                                                  |       |  |        |  



7



---

|                                     |  |                        |       |                                                  |        |   |        |   |                                                  |  |        |  
|------------------------------------ |  | ---------------------- | ----- | ------------------------------------------------ | ------ | - | ------ | - | ------------------------------------------------ |  | ------ | -
|                                     |  | At June 30,            |      
|                                     |  | 2003                   |       |                                                  | 2002   |  
|                                     |  | Amount                 |       | Percent of loans in each category to total
loans |        |   | Amount |   | Percent of loans in each category to total
loans | 
|                                     |  | (Dollars in Thousands) |      
|Commercial, Financial & Agricultural |  | $                      | 339   |                                                  | 5.50   | % |        | $ | 229                                              |  | 6.08   | %
|Real Estate  construction           |  |                        |      |                                                  | 2.12   | % |        |   |                                                 |  | 5.91   | %
|Real Estate  mortgage               |  |                        | 824   |                                                  | 84.58  | % |        |   | 623                                              |  | 80.26  | %
|Installment loans to individuals     |  |                        | 86    |                                                  | 7.00   | % |        |   | 81                                               |  | 7.45   | %
|Other                                |  |                        | 29    |                                                  | 0.80   | % |        |   |                                                 |  | 0.30   | %
|Unallocated                          |  |                        | 138   |                                                  | N/A    |   |        |   | 133                                              |  | N/A    |  
|                                     |  |                        |       |                                                  |        |   |        |   |                                                  |  |        |  
|                                     |  | $                      | 1,416 |                                                  | 100.00 | % |        | $ | 1,066                                            |  | 100.00 | %
|                                     |  |                        |       |                                                  |        |   |        |   |                                                  |  |        |  

Summary of Loan Loss Experience.The following table analyzes changes in the
allowance during the fiscal years indicated.



|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|--------------------------------------------------------------------- |  | ----------------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | ----- | -
|                                                                      |  | For the Fiscal Years Ended June 30, |      
|                                                                      |  | 2006                                |       |   | 2005 |   |       | 2004 |  |   | 2003  |   |  | 2002 |      
|                                                                      |  | (Dollars in Thousands)              |      
|Balance at beginning of year                                          |  | $                                   | 1,593 |   |      | $ | 1,532 |      |  | $ | 1,416 |   |  | $    | 1,066 |   |  | $ | 570   |  
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Loans charged off:                                                    |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Real estate                                                           |  |                                     | (7    | ) |      |   | (49   | )    |  |   | (205  | ) |  |      | (15   | ) |  |   |      |  
|Other                                                                 |  |                                     | (78   | ) |      |   | (121  | )    |  |   | (85   | ) |  |      | (37   | ) |  |   | (4    | )
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total loans charged-off                                               |  |                                     | (85   | ) |      |   | 170   |      |  |   | 290   |   |  |      | (52   | ) |  |   | (4    | )
|                                                                      |  |                                     |       |   |     
|Recoveries:                                                           |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Real estate                                                           |  |                                     | 1     |   |      |   | 23    |      |  |   | 28    |   |  |      | 2     |   |  |   |      |  
|Other                                                                 |  |                                     | 29    |   |      |   | 16    |      |  |   | 3     |   |  |      |      |   |  |   |      |  
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total recoveries                                                      |  |                                     | 30    |   |      |   | 39    |      |  |   | 31    |   |  |      | 2     |   |  |   |      |  
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net loans charged-off                                                 |  |                                     | (55   | ) |      |   | (131  | )    |  |   | (259  | ) |  |      | (50   | ) |  |   | (4    | )
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Provision for loan losses                                             |  |                                     | 363   |   |      |   | 192   |      |  |   | 375   |   |  |      | 400   |   |  |   | 500   |  
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Balance at end of year                                                |  | $                                   | 1,901 |   |      | $ | 1,593 |      |  | $ | 1,532 |   |  | $    | 1,416 |   |  | $ | 1,066 |  
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Ratio of net charge-offs to average loans outstanding during the year |  |                                     | 0.03  | % |      |   | 0.10  | %    |  |   | 0.23  | % |  |      | 0.04  | % |  |   | 0.00  | %
|                                                                      |  |                                     |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  



8



---

Investments

The Companys investment portfolio consists of U. S. government agency securities (which are backed by the full faith and credit of the U.S. Government), mortgage backed securities, municipal securities, and trust preferred securities.
At June 30, 2006, approximately $20.5 million, or 9.6%, of total assets consisted of such investments.

The following table sets forth
the carrying value of the Companys investment portfolio at the dates indicated.



|                                                                                               |  |                |        |      |   |        |  |   |       
|---------------------------------------------------------------------------------------------- |  | -------------- | ------ | ---- | - | ------ |  | - | ------
|                                                                                               |  | At June 30,   
|                                                                                               |  | 2006           |        | 2005 |   | 2004  
|                                                                                               |  | (In Thousands)
|Securities available for sale:                                                                 |  |                |        |      |   |        |  |   |       
|Trust preferred securities                                                                     |  | $              | 494    |      | $ | 467    |  | $ | 466   
|U.S. government agency securities (backed by the full faith and credit of the U.S. Government) |  |                | 5,284  |      |   | 10,201 |  |   | 6,197 
|Municipal securities                                                                           |  |                | 1,007  |      |   | 758    |  |   | 1,069 
|Mortgage-backed securities                                                                     |  |                | 13,702 |      |   | 17,353 |  |   | 20,115
|                                                                                               |  |                |        |      |   |        |  |   |       
|Total securities available for sale                                                            |  | $              | 20,487 |      | $ | 28,779 |  | $ | 27,847
|                                                                                               |  |                |        |      |   |        |  |   |       

The following table provides costs, fair values, intervals of maturities or repricings, and
weighted average yields of our investment portfolio at June 30, 2006:



|                                                                                               |  |                |        |           |   |            |  |      |  
|---------------------------------------------------------------------------------------------- |  | -------------- | ------ | --------- | - | ---------- |  | ---- | -
|                                                                                               |  | Amortized Cost |        | FairValue |   | Book Yield | 
|                                                                                               |  | (In Thousands) |       
|Securities available for sale:                                                                 |  |                |        |           |   |            |  |      |  
|U.S. government agency securities (backed by the full faith and credit of the U.S. Government) |  |                |        |           |   |            |  |      |  
|Due within one year                                                                            |  | $              | 1,500  |           | $ | 1,488      |  | 4.11 | %
|Due after one but within five years                                                            |  |                | 3,900  |           |   | 3,796      |  | 4.00 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|                                                                                               |  |                | 5,400  |           |   | 5,284      |  | 4.03 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|Trust preferred securities                                                                     |  |                |        |           |   |            |  |      |  
|Due within one year                                                                            |  | $              | 119    |           | $ | 119        |  | 4.11 | %
|Due after ten years                                                                            |  |                | 400    |           |   | 375        |  | 4.31 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|                                                                                               |  |                | 519    |           |   | 494        |  | 4.26 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|Mortgage-backed securities available for sale:                                                 |  |                |        |           |   |            |  |      |  
|Due after one but within five years                                                            |  |                | 1,899  |           |   | 1,771      |  | 3.23 | %
|Due after five but within ten years                                                            |  |                | 5,379  |           |   | 5,067      |  | 3.51 | %
|Due after ten years                                                                            |  |                | 7,349  |           |   | 6,864      |  | 4.07 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|                                                                                               |  |                | 14,627 |           |   | 13,702     |  | 3.75 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|Municipal securities                                                                           |  |                |        |           |   |            |  |      |  
|Due after one but within five years                                                            |  |                | 200    |           |   | 195        |  | 5.68 | %
|Due after five but within ten years                                                            |  |                | 472    |           |   | 470        |  | 5.15 | %
|Due after ten years                                                                            |  |                | 349    |           |   | 342        |  | 5.43 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|                                                                                               |  |                | 1,021  |           |   | 1,007      |  | 5.35 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|Total securities available for sale                                                            |  |                |        |           |   |            |  |      |  
|Due within one year                                                                            |  | $              | 1,619  |           | $ | 1,607      |  | 4.12 | %
|Due after one but within five years                                                            |  |                | 5,999  |           |   | 5,762      |  | 3.81 | %
|Due after five but within ten years                                                            |  |                | 5,851  |           |   | 5,537      |  | 3.64 | %
|Due after ten years                                                                            |  |                | 8,098  |           |   | 7,581      |  | 4.14 | %
|                                                                                               |  |                |        |           |   |            |  |      |  
|Total                                                                                          |  | $              | 21,567 |           | $ | 20,487     |  | 3.91 | %
|                                                                                               |  |                |        |           |   |            |  |      |  

The book yield for tax-exempt securities included in the above table is not presented on
tax-equivalent basis.

At June 30, 2006, none of the Banks investment securities were classified as held to maturity.



9



---

Sources of Funds

General.Deposits have traditionally been the primary source of funds for use in lending and investment activities. In addition to deposits, the Bank derives funds from scheduled loan payments,
investment maturities, loan prepayments, retained earnings, income on earning assets and other borrowings. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary
widely and are influenced by prevailing interest rates, market conditions and levels of competition. Borrowings from the FHLB of Atlanta and federal funds purchased may be used in the short-term to compensate for reductions in deposits or deposit
inflows at less than projected levels.

Deposits.The Bank attracts deposits principally from within Chesterfield,
Marlboro and Florence Counties through the offering of a selection of deposit instruments, including passbook accounts, checking accounts, money market accounts, fixed term certificates of deposit, individual retirement accounts and savings
accounts. The Bank does not actively solicit or advertise for deposits outside of Chesterfield, Marlboro and Florence Counties, and substantially all of the depositors are residents of these Counties, except that in 2005, the Bank obtained
approximately $15.9 million in brokered certificates of deposits to augment our local deposits. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds remain on deposit and the
interest rate.

The following table sets forth our time deposits of $100,000 or more as of June 30, 2006.



|                           |  |                  |       
|-------------------------- |  | ---------------- | ------
|                           |  | At June 30, 2006
|                           |  | (In Thousands)  
|Maturity                   |  |                  |       
|Three months or less       |  | $                | 15,060
|Three through six months   |  |                  | 6,223 
|Six through twelve months  |  |                  | 26,785
|Greater than twelve months |  |                  | 16,790
|                           |  |                  |       
|Total                      |  | $                | 64,858
|                           |  |                  |       

The Bank establishes the interest rates paid, maturity terms, service fees and withdrawal
penalties on a periodic basis. Determination of rates and terms are predicated on funds acquisition and liquidity requirements, rates paid by competitors, growth goals, and applicable regulations. The Bank relies, in part, on customer service and
long-standing relationships with customers to attract and retain deposits. The Bank also closely prices deposits to the rates offered by competitors.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered has allowed the
Bank to be competitive in obtaining funds and to respond with flexibility to changes in consumer demand. The Bank has become more susceptible to short-term fluctuations in deposit flows as customers have become more interest rate conscious. The Bank
manages the pricing of deposits in keeping with asset/liability management and profitability objectives. Based on experience, the Bank believes that passbook and MMDAs are relatively stable sources of deposits. However, the ability to attract and
maintain certificates of deposit, and the rates paid on these deposits, have been and will continue to be significantly affected by market conditions. At June 30, 2006, 74.7% of deposit accounts were certificate of deposit accounts, of which
$83 million have maturities of one year or less.

Total deposits at June 30, 2006 were $151.3 million, compared to $136.6 million at
June 30, 2005. The Banks deposit base is somewhat dependent upon the manufacturing sector of the Banks market area. Although the manufacturing sector in the Banks market area is relatively diversified and not significantly
dependent upon any industry, a loss of a material portion of the manufacturing workforce could adversely affect the ability to attract deposits due to the loss of personal income attributable to the lost manufacturing jobs and the attendant loss in
service industry jobs.



10



---

The following table sets forth the deposits of the Company by category at the dates indicated.



|                     |  |                        |         |                    |        |   |        |      |                    |  |        |        |  |                    |         |  |        |  
|-------------------- |  | ---------------------- | ------- | ------------------ | ------ | - | ------ | ---- | ------------------ |  | ------ | ------ |  | ------------------ | ------- |  | ------ | -
|                     |  | At June 30,            |        
|                     |  | 2006                   |         |                    | 2005   |   |        | 2004 |                   
|                     |  | Amount                 |         | Percent ofDeposits |        |   | Amount |      | Percent ofDeposits |  |        | Amount |  | Percent ofDeposits |        
|                     |  | (Dollars in Thousands) |        
|Demand Deposit       |  | $                      | 8,841   |                    | 5.84   | % |        | $    | 7,414              |  | 5.43   | %      |  | $                  | 6,811   |  | 6.25   | %
|Savings              |  |                        | 2,865   |                    | 1.89   | % |        |      | 3,179              |  | 2.33   | %      |  |                    | 3,042   |  | 2.79   | %
|Money Market and NOW |  |                        | 26,638  |                    | 17.60  | % |        |      | 32,513             |  | 23.81  | %      |  |                    | 35,414  |  | 32.51  | %
|Time Less Than $100  |  |                        | 48,137  |                    | 31.81  | % |        |      | 39,654             |  | 29.03  | %      |  |                    | 34,866  |  | 32.00  | %
|Time More Than $100  |  |                        | 64,858  |                    | 42.86  | % |        |      | 53,813             |  | 39.40  | %      |  |                    | 28,812  |  | 26.45  | %
|                     |  |                        |         |                    |        |   |        |      |                    |  |        |        |  |                    |         |  |        |  
|                     |  | $                      | 151,339 |                    | 100.00 | % |        | $    | 136,573            |  | 100.00 | %      |  | $                  | 108,945 |  | 100.00 | %
|                     |  |                        |         |                    |        |   |        |      |                    |  |        |        |  |                    |         |  |        |  

The average amounts and average rates paid on deposits held by the Bank for the years indicated
are summarized below:



|                     |  |                              |         |                  |      |   |               |      |                  |  |      |               |  |                  |         |  |      |  
|-------------------- |  | ---------------------------- | ------- | ---------------- | ---- | - | ------------- | ---- | ---------------- |  | ---- | ------------- |  | ---------------- | ------- |  | ---- | -
|                     |  | For the Years Ended June 30, |        
|                     |  | 2006                         |         |                  | 2005 |   |               | 2004 |                 
|                     |  | AverageAmount                |         | AverageRate Paid |      |   | AverageAmount |      | AverageRate Paid |  |      | AverageAmount |  | AverageRate Paid |        
|                     |  | (Dollars in Thousands)       |        
|Demand Deposit       |  | $                            | 7,845   |                  | 0.00 | % |               | $    | 7,445            |  | 0.00 | %             |  | $                | 5,860   |  | 0.00 | %
|Savings              |  |                              | 2,878   |                  | 0.75 | % |               |      | 2,945            |  | 0.56 | %             |  |                  | 2,907   |  | 0.54 | %
|Money Market and NOW |  |                              | 29,858  |                  | 2.29 | % |               |      | 37,085           |  | 1.89 | %             |  |                  | 38,382  |  | 1.42 | %
|Time Less Than $100  |  |                              | 43,700  |                  | 3.59 | % |               |      | 38,245           |  | 2.93 | %             |  |                  | 35,118  |  | 2.92 | %
|Time More Than $100  |  |                              | 63,536  |                  | 3.88 | % |               |      | 37,866           |  | 3.41 | %             |  |                  | 26,541  |  | 3.35 | %
|                     |  |                              |         |                  |      |   |               |      |                  |  |      |               |  |                  |         |  |      |  
|                     |  | $                            | 147,817 |                  | 3.22 | % |               | $    | 123,586          |  | 2.57 | %             |  | $                | 108,808 |  | 2.36 | %
|                     |  |                              |         |                  |      |   |               |      |                  |  |      |               |  |                  |         |  |      |  

Borrowings.The Bank had total short-term borrowings of $9,500,000 at June 30,
2006. The borrowings consisted of advances from the Federal Home Loan Bank of Atlanta and federal funds purchased. The borrowings carried variable rates ranging from 3.97% to 5.45% at June 30, 2006.

The following table sets forth the maximum month-end balance, average balances and average interest rates for the Banks borrowings for the fiscal
years indicated.



|                                      |  |                            |           |   |      |   |           |      |  |   |           |  
|------------------------------------- |  | -------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                      |  | Fiscal Year Ended June 30, |          
|                                      |  | 2006                       |           |   | 2005 |   |           | 2004 | 
|Maximum Outstanding at any month end: |  |                            |           |   |      |   |           |      |  |   |           |  
|FHLB advances                         |  | $                          | 9,500,000 |   |      | $ | 5,000,000 |      |  | $ | 3,000,000 |  
|Federal Funds purchased               |  |                            | 2,667,000 |   |      |   | 3,448,000 |      |  |   |          |  
|                                      |  |                            |          
|Average Amount Outstanding:           |  |                            |           |   |      |   |           |      |  |   |           |  
|FHLB advances                         |  | $                          | 3,708,333 |   |      | $ | 4,500,000 |      |  | $ | 2,250,000 |  
|Federal Funds purchased               |  |                            | 419,227   |   |      |   | 196,242   |      |  |   |          |  
|                                      |  |                            |          
|Average interest rates:               |  |                            |           |   |      |   |           |      |  |   |           |  
|FHLB advances                         |  |                            | 4.25      | % |      |   | 2.48      | %    |  |   | 1.19      | %
|Federal Funds purchased               |  |                            | 4.70      | % |      |   | 2.08      | %    |  |   |          |  



11



---

Additional Risk Factors

In addition to factors discussed in the description of the business of the Company and Bank and elsewhere in this report, the following are factors that could adversely affect future results of operations and the
financial condition of the Company.

The Impact of Changes in Interest Rates

The Banks ability to make a profit, like that of most financial institutions, substantially depends upon net interest income, which is the
difference between the interest income earned on interest earning assets (such as mortgage loans) and the interest expense paid on interest-bearing liabilities (such as deposits). Approximately 61.2% of our real estate loans have rates of interest
which are fixed for the term of the loan (fixed rate), while deposit accounts have significantly shorter terms to maturity than real estate loans. Because interest-earning assets generally have fixed rates of interest and have longer
effective maturities than interest-bearing liabilities, the yield on the Banks interest earning assets generally will adjust more slowly to changes in interest rates than the cost of its interest-bearing liabilities. The slower adjustment of
interest earning assets as compared to interest-bearing liabilities results in the Bank having a negative gap. At June 30, 2006, our one year interest rate gap was negative 38.5%. As a result, our net interest income will be
adversely affected by material and prolonged increases in short-term interest rates. In addition, rising interest rates may adversely affect our earnings because there might be a lack of customer demand for loans. Changes in interest rates also can
affect the average life of loans and mortgage-backed securities.

Reliance on Certificate of Deposit Accounts

A significant percentage of our deposit accounts are certificates of deposit rather than passbook or money market accounts. At June 30, 2006, $113
million, or 74.7% of our total deposits were certificate of deposit accounts. $83 million of our certificates of deposit mature within one year. Certificates of deposit can be a more interest rate sensitive source of funds than passbook or money
market accounts. In the event that interest rates significantly increase, or if we do not offer competitive rates of interest on its certificates of deposit, the Bank may experience a significant decrease in its deposit accounts.

Competition

The Bank experiences strong competition
in its local market area in originating loans, primarily from mortgage brokers. There is also significant competition in attracting deposits, primarily from commercial banks, thrifts and money center banks. Such competition may limit our growth in
the future.

Geographic Concentration of our Loans

Substantially all of the Banks real estate mortgage loans are secured by properties located in South Carolina, mostly in Chesterfield, Marlboro and Florence Counties. A weakening in the local real estate market
or in the local or national economy, or a reduction in the workforce at the manufacturing facilities in the area could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral
securing the loans, which would reduce our earnings.

Financial Institution Regulation and Future of the Thrift Industry

The Bank and the Company are subject to extensive regulation, supervision, and examination by the Office of Thrift Supervision (OTS) and the
Federal Deposit Insurance Corporation (the FDIC). Such regulation and supervision govern the activities in which an institution can engage and are intended primarily for the protection of the insurance fund and depositors. Regulatory
authorities have been granted extensive discretion in connection with their supervisory and enforcement activities which are intended to strengthen the financial condition of the banking and thrift industries, including the imposition of
restrictions on the operation of an institution, the classification of assets by an institution and the adequacy of an institutions allowance for loan losses. Any change in such regulation and oversight, whether by the OTS, the FDIC or
Congress, could have a material impact on the Company, the Bank and their respective operations.



12



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REGULATION

The Bank is examined and supervised extensively by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. The Bank is a member of and owns stock in the Federal Home Loan Bank of Atlanta, which is one of the twelve
regional banks in the Federal Home Loan Bank System. This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and
depositors. The Bank also is regulated by the Board of Governors of the Federal Reserve System, governing reserves to be maintained against deposits and other matters. The Office of Thrift Supervision examines the Bank and prepares reports for the
consideration of the Banks Board of Directors on any deficiencies that they may find in the Banks operations. The Banks relationship with its depositors and borrowers also is regulated to a great extent by both federal and state
laws, especially in matters concerning the ownership of savings accounts and the form and content of the Banks mortgage documents. Any change in this regulation, whether by the Federal Deposit Insurance Corporation, Office of Thrift
Supervision, or Congress, could have a material adverse impact on the Company and the Bank and their operations.

Federal Regulation of Savings
Institutions

Business Activities.The activities of federal savings banks are subject to extensive regulation
including restrictions or requirements with respect to loans to one borrower, the percentage of non-mortgage loans or investments to total assets, capital distributions, permissible investments and lending activities, liquidity, transactions with
affiliates and community reinvestment. The description of statutory provisions and regulations applicable to savings banks set forth in this annual report does not purport to be a complete description of these statutes and regulations and their
effect on the Bank.

Loans to One Borrower. Federal savings banks generally may not make a loan
or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus on an unsecured basis. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily
marketable collateral, which is defined to include certain securities and bullion, but generally does not include real estate. As of June 30, 2006 the Bank was in compliance with its loans-to-one-borrower limitations.

Capital Distributions. Office of Thrift Supervision regulations govern capital distributions by savings institutions, which include cash
dividends, stock repurchases and other transactions charged to the capital account of a savings institution to make capital distributions. A savings institution must file an application for Office of Thrift Supervision approval of the capital
distribution if either (1) the total capital distributions for the applicable calendar year exceed the sum of the institutions net income for that year to date plus the institutions retained net income for the preceding two years,
(2) the institution would not be at least adequately capitalized following the distribution, (3) the distribution would violate any applicable statute, regulation, agreement or Office of Thrift Supervision-imposed condition, or
(4) the institution is not eligible for expedited treatment of its filings. If an application is not required to be filed, savings institutions which are a subsidiary of a holding company, as well as certain other institutions, must still file
a notice with the Office of Thrift Supervision at least 30 days before the board of directors declares a dividend or approves a capital distribution.

Any additional capital distributions would require prior regulatory approval. In the event the Banks capital fell below its fully phased-in requirement or the Office of Thrift Supervision notified it that it was
in need of more than normal supervision, the Banks ability to make capital distributions could be restricted. In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the Office of Thrift Supervision determines that the distribution would constitute an unsafe or unsound practice.

Community Reinvestment Act and Fair Lending Laws. Savings banks have a responsibility under the Community Reinvestment Act and related regulations of the Office of Thrift Supervision to help meet
the credit needs of their communities, including low- and moderate-income neighborhoods. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of
characteristics specified in those statutes. An institutions failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in regulatory restrictions on its activities, and failure to comply with the Equal
Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the



13



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Office of Thrift Supervision, as well as other federal regulatory agencies and the Department of Justice. The Bank
received a satisfactory Community Reinvestment Act rating under the current Community Reinvestment Act regulations in its most recent federal examination by the Office of Thrift Supervision.

Transactions with Related Parties. The Banks authority to engage in transactions with related parties or
affiliates or to make loans to specified insiders, is limited by Sections 23A and 23B of the Federal Reserve Act. The term affiliates for these purposes generally means any company that controls or is under common control
with an institution, including the Company and its non-savings institution subsidiaries. Section 23A limits the aggregate amount of certain covered transactions with any individual affiliate to 10% of the capital and surplus of the
savings institution and also limits the aggregate amount of covered transactions with all affiliates to 20% of the savings institutions capital and surplus. Covered transactions with affiliates are required to be secured by collateral in an
amount and of a type described in Section 23A and the purchase of low quality assets from affiliates is generally prohibited. Section 23B provides that covered transactions with affiliates, including loans and asset purchases, must be on
terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings
institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

The Banks authority to extend credit to executive officers, directors and 10% stockholders, as well as entities controlled by these
persons, is currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and also by Regulation O. Among other things, these regulations generally require these loans to be made on terms substantially the same as those
offered to unaffiliated individuals and do not involve more than the normal risk of repayment. However, regulations permit executive officers and directors to receive the same terms through benefit or compensation plans that are widely available to
other employees, as long as the director or executive officer is not given preferential treatment compared to other participating employees. Regulation O also places individual and aggregate limits on the amount of loans the Bank may make to
these persons based, in part, on the Banks capital position, and requires approval procedures to be followed. At June 30, 2006, the Bank was in compliance with these regulations.

Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over savings institutions and has the authority
to bring enforcement action against all institution-related parties, including stockholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institutions, receivership, conservatorship or the termination of deposit
insurance. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The Federal Deposit
Insurance Corporation also has the authority to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal
Deposit Insurance Corporation has authority to take action under specified circumstances.

Standards for Safety and
Soundness. Federal law requires each federal banking agency to prescribe for all insured depository institutions standards relating to, among other things, internal controls, information systems and audit systems, loan documentation,
credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines Prescribing Standards for
Safety and Soundness to implement the safety and soundness standards required under the Federal law. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The guidelines address internal controls and information systems; internal audit systems; credit underwriting; loan documentation; interest rate risk exposure; asset growth; and compensation,
fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve
compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to submit a compliance plan.



14



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Capital Requirements

Office of Thrift Supervision capital regulations require savings institutions to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for institutions receiving the highest
rating on the CAMELS rating system) and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions
receiving the highest rating on the CAMELS financial institution rating system), and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. Office of Thrift Supervision regulations also require that, in
meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard for savings institutions requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100%,
assigned by the Office of Thrift Supervision capital regulation based on the risks believed inherent in the type of asset. Core (Tier 1) capital is defined as common stockholders equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital
currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of
risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core
capital.

The capital regulations also incorporate an interest rate risk component. Savings institutions with above
normal interest rate risk exposure are subject to a deduction from total capital for purposes of calculating their risk-based capital requirements. For the present time, the Office of Thrift Supervision has deferred implementation of the
interest rate risk capital charge. At June 30, 2006, the Bank met each of its capital requirements.

Prompt Corrective Regulatory Action

Under the Office of Thrift Supervision Prompt Corrective Action regulations, the Office of Thrift Supervision is required to take
supervisory actions against undercapitalized institutions, the severity of which depends upon the institutions level of capital. Generally, a savings institution that has total risk-based capital of less than 8.0% or a leverage ratio or a
Tier 1 core capital ratio that is less than 4.0% is considered to be undercapitalized. A savings institution that has total risk-based capital less than 6.0%, a Tier 1 core risk-based capital ratio of less than 3.0% or a leverage ratio
that is less than 3.0% is considered to be significantly undercapitalized and a savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be critically undercapitalized.
Generally, the banking regulator is required to appoint a receiver or conservator for an institution that is critically undercapitalized. The regulation also provides that a capital restoration plan must be filed with the Office of
Thrift Supervision within 45 days of the date an institution receives notice that it is undercapitalized, significantly undercapitalized or critically undercapitalized. In addition, numerous mandatory supervisory
actions become immediately applicable to the institution, including, but not limited to, restrictions on growth, investment activities, capital distributions, and affiliate transactions. The Office of Thrift Supervision could also take any one of a
number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors.

Insurance of Deposit Accounts

The Banks
deposit accounts are insured by the Federal Deposit Insurance Corporation, generally up to a maximum of $100,000 per separately insured depositor. The Banks deposits, therefore, are subject to Federal Deposit Insurance Corporation deposit
insurance assessments. The Federal Deposit Insurance Corporation has adopted a risk-based system for determining deposit insurance assessments. The Federal Deposit Insurance Corporation is authorized to raise the assessment rates as necessary to
maintain the required ratio of reserves to insured deposits of 1.25%.



15



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On February 15, 2006, federal legislation to reform federal deposit insurance was enacted. This new
legislation requires, among other things, an increase in the amount of federal deposit insurance coverage from $100,000 to $130,000 (with a cost of living adjustment to become effective in five years). The Act also requires the reserve ratio to be
modified to provide for a range between 1.15% and 1.50% of estimated insured deposits. The new legislation requires the Federal Deposit Insurance Corporation to issue regulations implementing the law. The changes required by the law will not become
effective until final regulations have been issued, which must be no later than 270 days from the date of the enactment of the legislation.

Effective March 31, 2006, the Federal Deposit Insurance Corporation merged the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) into a single fund called the Deposit Insurance Fund. As
a result of the merger, the BIF and the SAIF were abolished. The merger of the BIF and the SAIF into the Deposit Insurance Fund does not affect the authority of the Financing Corporation (FICO) to impose and collect, with the approval of
the Federal Deposit Insurance Corporation, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation. The bonds issued by the
FICO are due to mature in 2017 through 2019. For the quarter ended June 30, 2006, the FICO assessment was equal to 1.28 basis points for each $100 in domestic deposits maintained at an institution.

Federal Home Loan Bank System

The Bank is a member
of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. The Bank, as a member of the Federal Home Loan Bank
of Atlanta, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning
of each year, or 1/20 of its borrowings from the Federal Home Loan Bank, whichever is greater. As of June 30, 2006, the Bank was in compliance with this requirement. The Federal Home Loan Banks are required to provide funds for the resolution
of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and could also result in the Federal Home Loan Banks imposing
a higher rate of interest on advances to their members.

Other Regulations

Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The
Banks operations are also subject to federal laws applicable to credit transactions, such as the:



| |  |  | Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution
is fulfilling its obligation to help meet the housing needs of the community it serves;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and
| | - |  | -------------------------------------------------------------------------------------------------------------------



16



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| |  |  | rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

The Banks operations also are subject to the:



| |  |  | Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas
of financial records;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers rights and
liabilities arising from the use of automated teller machines and other electronic banking services;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Check Clearing for the 21stCentury Act (also
known as Check 21), which gives substitute checks, such as digital check images and copies made from that image, the same legal standing as the original paper check;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the USA PATRIOT
Act), which significantly expanded the responsibilities of financial institutions, including savings and loan associations, in preventing the use of the U.S. financial system to fund terrorist activities. Among other provisions, the USA
PATRIOT Act and the related regulations of the Office of Thrift Supervision require savings associations operating in the United States to develop new anti-money laundering compliance programs, due diligence policies and controls to ensure the
detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets
Control Regulations; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Gramm-Leach-Bliley Act, which placed limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the
Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institutions privacy policy and provide such customers the opportunity to
opt out of the sharing of certain personal financial information with unaffiliated third parties.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Holding Company Regulation

The Company is a nondiversified unitary savings and loan holding company within the meaning of federal law. A unitary savings and loan
holding company, such as the Company, is not generally restricted as to the types of business activities in which it may engage, provided that the Bank continued to be a qualified thrift lender. A savings and loan holding company is prohibited from,
directly or indirectly, acquiring more than 5% of the voting stock of another savings institution or savings and loan holding company without prior written approval of the Office of Thrift Supervision and from acquiring or retaining control of a
depository institution that is not insured by the Federal Deposit Insurance Corporation. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision considers the financial and managerial
resources and future prospects of the holding company and institution involved, the effect of the acquisition on the risk to the deposit insurance funds, the convenience and needs of the community and competitive factors.

The Office of Thrift Supervision may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (1) the approval of interstate supervisory acquisitions by savings and loan holding companies and (2) the acquisition of a savings institution in another state if the laws of
the state of the target savings institution specifically permit the acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.



17



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Although savings and loan holding companies are not subject to specific capital requirements or specific
restrictions on the payment of dividends or other capital distributions, federal regulations do prescribe restrictions on subsidiary savings institutions as described below. The Bank must notify the Office of Thrift Supervision 30 days before
declaring any dividend to the Company. In addition, the financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the Office of Thrift Supervision and the agency has authority to order cessation of
activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation,
and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act of 2002, our Chief Executive Officer and Chief Financial Officer each will be required to certify that our quarterly and annual reports do not contain
any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002 have several requirements, including having these officers certify that: they are responsible for establishing,
maintaining and regularly evaluating the effectiveness of our internal controls; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal controls; and they have included information in
our quarterly and annual reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls.

Section of 404 of the Sarbanes-Oxley Act is expected to be applicable to the Company under proposed rules for the fiscal year ending June 30, 2009.
Implementation is scheduled to begin during fiscal 2008 and is anticipated to have an impact on earnings.

Federal Securities Laws

The Companys common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Company is
subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.



18



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Item 2. Properties

(a) The Company currently conducts its business through three full-service banking offices. The following table sets forth the Companys offices as of June 30, 2006:



|                                                      |  |                           |  |                                |  |                                                  
|----------------------------------------------------- |  | ------------------------- |  | ------------------------------ |  | -------------------------------------------------
|Location                                              |  | Leased or Owned           |  | OriginalYear Leased orAcquired |  | Date of LeaseExpiration                          
|2170 West Evans Street Florence, South Carolina 29505 |  | Owned                     |  | 2005                           |  |                                                 
|                                                      |  |                           | 
|901 Chesterfield Highway Cheraw, South Carolina 29520 |  | Owned                     |  | 2004                           |  |                                                 
|                                                      |  |                           | 
|515 Market Street Cheraw, South Carolina 29520        |  | Owned                     |  | 1981                           |  |                                                 
|                                                      |  |                           | 
|452 Second Loop Road Florence, South Carolina 29504   |  | Building OwnedLand Leased |  | 20022002                       |  | September 2017with extensionoptions through2041.

Item 3. Legal Proceedings

None.

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

Not applicable.

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities



| | (a) | None.
| | --- | -----



| | (b) | Not applicable.
| | --- | ---------------



| | (c) | Repurchases of registered common stock by the Company:
| | --- | ------------------------------------------------------



|           |  |                                  |  |                              |       |                                                                                  |       |                                                                                         |        |    
|---------- |  | -------------------------------- |  | ---------------------------- | ----- | -------------------------------------------------------------------------------- | ----- | --------------------------------------------------------------------------------------- | ------ | ---
|Period     |  | Total Number of Shares Purchased |  | Average Price Paid Per Share |       | Total Number of Shares Purchased as Part Of Publicly Announced Plans or Programs |       | Maximum Number of that May Shares that May Yet Be Purchased
Under the Plans or Programs |       
|April 2006 |  |                                 |  | $                            |      |                                                                                  |      |                                                                                         | 48,018 | (1)
|May 2006   |  |                                 |  | $                            |      |                                                                                  |      |                                                                                         | 48,018 | (1)
|June 2006  |  | 1,165                            |  | $                            | 15.50 |                                                                                  | 1,165 |                                                                                         | 46,853 | (1)

---

|(1) | The existing stock repurchase plan was announced on August 15, 2000 and approved the repurchase of up to 10% shares of outstanding common stock at that time (168,000 shares of
common stock). Subsequently, this plan was adjusted by the 10% stock dividend in November 2001. The program does not contain an expiration date. The Company does not intend to discontinue stock repurchases under this plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations

Information included in Great Pee Dee Bancorp, Inc.s 2006 Annual Report to Shareholders is herein incorporated by reference.

Item 7. Financial Statements

Information included in Great Pee Dee Bancorp, Inc.s 2006 Annual Report to Shareholders is herein incorporated by reference.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 8A. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this annual report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the
period covered by this annual report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.

There were no
changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 8B. Other Information

Not
applicable.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act

Information included in Great Pee Dee Bancorp, Inc.s Proxy Statement for its 2006 Annual Meeting of Shareholders is incorporated herein by reference.

Item 10. Executive Compensation

Information included in Great Pee Dee Bancorp, Inc.s Proxy Statement for its 2006 Annual Meeting of Shareholders is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information included in Great Pee Dee Bancorp, Inc.s Proxy Statement for its 2006 Annual Meeting of Shareholders is incorporated herein by reference.



20



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Item 12. Certain Relationships and Related Transactions

Information included in Great Pee Dee Bancorp, Inc.s Proxy Statement for its 2006 Annual Meeting of Shareholders is incorporated herein by
reference.

Item 13. Exhibits

The following exhibits are filed as part of this report.



| | 3.1 | Certificate of Incorporation of Great Pee Dee Bancorp, Inc.*
| | --- | ------------------------------------------------------------



| | 3.2 | Bylaws of Great Pee Dee Bancorp, Inc.*
| | --- | --------------------------------------



| | 4.0 | Stock Certificate of Great Pee Dee Bancorp, Inc.*
| | --- | -------------------------------------------------



| | 10.2 | Great Pee Dee Bancorp, Inc. Employee Stock Ownership Plan and Trust*
| | ---- | --------------------------------------------------------------------



| | 10.3 | Employee Agreement for John S. Long**
| | ---- | -------------------------------------



| | 10.4 | 2003 Long-Term Incentive Stock Benefit Plan ***
| | ---- | -----------------------------------------------



| | 13 | Great Pee Dee Bancorp, Inc. 2006 Annual Report to Shareholders
| | -- | --------------------------------------------------------------



| | 21 | Subsidiary List
| | -- | ---------------



| | 23 | Consent of Dixon Hughes PLLC
| | -- | ----------------------------



| | 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | --------------------------------------------------------------------------------------------------



| | 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | --------------------------------------------------------------------------------------------------



| | 32 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | -- | ----------------------------------------------------------------------------------------------------------------------

---

|* | Incorporated herein by reference into this document from the Exhibits to Form SB-2 Registration Statement, initially filed on September 26, 1997, Registration
No. 333-36489.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Incorporated herein by reference into this document from the Exhibits to the Annual Report on Form 10-KSB, filed on September 27, 2001.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------

|*** | Incorporated herein by reference into this document from the Companys Proxy Statement for the 2003 Annual Meeting of Stockholders, filed on September 17, 2003.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 14. Principal Accountant Fees and Services

Information required by this Item is incorporated by reference to the Proxy Statement under the caption Proposal 2-Ratification of The Appointment
of Independent Registered Public Accounting Firm.



21



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



|                         |  |                             |  |                                      
|------------------------ |  | --------------------------- |  | -------------------------------------
|                         |  | GREAT PEE DEE BANCORP, INC.
|                         |  |                            
|Date: September 25, 2006 |  | By:                         |  | /s/ John S. Long                     
|                         |  |                             |  | John S. Long                         
|                         |  |                             |  | President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                         |  |                                      |  |                          |  |     |  |                                                     
|------------------------ |  | ------------------------------------ |  | ------------------------ |  | --- |  | ----------------------------------------------------
|By:                      |  | /s/ John S. Long                     |  |                          |  | By: |  | /s/ John M. Digby                                   
|                         |  | John S. Long, President,             |  |                          |  |     |  | John M. Digby, Chief Financial Officer and Treasurer
|                         |  | Chief Executive Officer and Director |  |                          |  |     |  | (Principal Financial and Accounting Officer)        
|                         |  | (Principal Executive Officer)        |  |                          |  |     |  |                                                     
|                         |  |                                     
|Date: September 25, 2006 |  |                                      |  | Date: September 25, 2006
|                         |  |                                      |  |                         
|By:                      |  | /s/ Robert M. Bennett, Jr.           |  |                          |  | By: |  | /s/ William R. Butler                               
|                         |  | Robert M. Bennett, Jr., Director     |  |                          |  |     |  | William R. Butler, Director                         
|                         |  |                                     
|Date: September 25, 2006 |  |                                      |  | Date: September 25, 2006
|                         |  |                                      |  |                         
|By:                      |  | /s/ James C. Crawford                |  |                          |  | By: |  | /s/ Henry P. Duvall, IV                             
|                         |  | James C. Crawford, III, Chairman     |  |                          |  |     |  | Henry P. Duvall, IV, Director                       
|                         |  |                                     
|Date: September 25, 2006 |  |                                      |  | Date: September 25, 2006
|                         |  |                                      |  |                         
|By:                      |  | /s/ H. Malloy Evans, Jr.             |  |                          |  | By: |  | /s/ Herbert W. Watts                                
|                         |  | H. Malloy Evans, Jr., Director       |  |                          |  |     |  | Herbert W. Watts, Director                          
|                         |  |                                     
|Date: September 25, 2006 |  |                                      |  | Date: September 25, 2006



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